VAT group in Luxembourg: conditions and effects

What is a VAT group in Luxembourg and who can belong to one?

A VAT group in Luxembourg allows persons established inside the country and closely bound to one another by financial, economic and organisational links to opt to be treated as a single taxable person. The regime sits in article 60ter of the amended law of 12 February 1979 on value added tax, introduced by the law of 6 August 2018.

Three features govern everything else. The regime is optional: no group forms automatically, and its constitution is subject to the condition that every person meeting the legal conditions for membership opts for the regime. One person can belong to only one VAT group. And the three required links are cumulative, not alternative: the preparatory work on bill 7278 states that the three types of relationship must be met cumulatively.

The regime is not a national invention. It implements the option opened to Member States by article 11 of Directive 2006/112/EC of 28 November 2006: regarding as a single taxable person persons established in its territory who are closely linked. Luxembourg took it up late, in 2018, against the background of Court of Justice of the European Union case law that narrowed the independent group of persons regime, including case C-274/15, Commission v Luxembourg.

The difference in scope between the two regimes drives the choice. According to the Council of State opinion in file 7278, the scope of the VAT group is broader than that of the independent group of persons: it covers supplies of goods as well as supplies of services, where the independent group only covers support services. The VAT registration of each entity remains the starting point of the analysis: the group sits on top of existing taxable persons, it does not create them.

What are the three links required between members?

A VAT group in Luxembourg requires three links met simultaneously between its members: a financial link, an economic link and an organisational link. The absence of a single one bars the group from being formed, however strong the other two are.

The financial link is the most formal of the three, and the only one whose proof is organised. It arises from control relationships, direct or indirect, established under article 1711-1 to which the text refers; Guichet.lu gives as an example a holding of at least half of the capital. That link must be certified by a réviseur d'entreprises or by a member of the Ordre des Experts-Comptables, and the certification is renewed every year, with the annual VAT return.

The economic link comes in three alternative forms, and meeting one is enough. The members' main activities are of the same nature; or they complement one another or pursue a common economic objective; or one member's activity benefits the others, wholly or in part. It is the third branch that opens the regime to the most common group structures, where one entity carries the support functions and recharges them to the others.

The organisational link is the most factual: common management, in law or in fact, or a concerted organisation of activities. In the files we take over, this link is rarely the one that is missing, but it is often the one that is not documented, while the constitution file calls for a group organisation chart and a list of members stating the nature of the links.

How is the group formed and when does the option take effect?

Forming a VAT group in Luxembourg goes through a declaration filed with the Administration de l'enregistrement, des domaines et de la TVA by the group representative, together with the supporting file. The effective date depends on when in the month the administration receives that declaration.

The representative is not freely chosen. It is the member that controls the other members or, failing that, the one with the highest turnover or income; the members may nonetheless designate another of them under certain conditions. The indirect tax portal publishes the VAT group forms, including the declaration of option for the regime provided for in article 60ter, under a heading of their own.

The effective dates, as described by the preparatory work on bill 7278, follow a simple mechanism. The constitution declaration takes effect on the first day of the month following its receipt, if the administration received it at least fifteen days before the end of the month; filed in the second half of the month, it only takes effect on the first day of the second month following. A member joining an existing group joins on the date of receipt. These timing rules come from the parliamentary file, not the consolidated text, which could not be accessed.

Two administrative consequences are worth anticipating. The group receives an individual VAT identification number, used in its dealings with the administration. And members already identified individually are deemed by operation of law to have ceased activity for their own filing obligations: the group's VAT returns take over, which means reconfiguring invoicing, invoice wording and data flows before the effective date, not after it.

What are the effects on internal operations and on input VAT?

Inside a VAT group in Luxembourg, operations between members are treated as operations internal to a single legal person: they therefore carry no VAT. That is the effect sought by groups where one entity carries the support functions and recharges them to the others.

VAT disappearing from internal flows does not make the information disappear. The group must state, as an annex to the annual VAT return, the total amount of the operations carried out by each member for each of the other members. Intra-group recharges leave the scope of the tax but remain tracked, flow by flow. A group that neglects that tracking because those operations are no longer taxed ends up rebuilding it at the year-end close.

On input VAT, the regime creates no rule of its own: the general rule of the VAT law applies to the group taken as a single taxable person. Where goods and services serve both operations giving rise to a right of deduction and others that do not, deduction is allowed only for the share of the tax proportionate to the former (see input VAT deduction and the pro rata). The preparatory work puts it the other way round: where the group's downstream operations give rise to a right of deduction, the group recovers in full the tax borne by a member.

That neutrality makes the economics less obvious than they look. A group whose entities all have a full right of deduction gains, in VAT terms, only a simplification of flows and of cash. The gain becomes real where one member has no right of deduction, or only a partial one, and the VAT charged by another member had been irrecoverable. That is the first calculation we run, before any question of form, and it meets the analysis on our SOPARFI taxation page where holding companies sit inside the perimeter.

How does a member leave the group and when is the group dissolved?

Any participation in a VAT group in Luxembourg must cover a minimum period of two calendar years. Leaving before that term is therefore not a simple management choice, and a withdrawal takes effect in two distinct ways depending on whether it is suffered or chosen.

The withdrawal of a member takes effect either on the day it no longer meets the membership conditions or, in case of renunciation, on the date the withdrawal declaration is received. Where the conditions cease to be met, the representative must declare the withdrawal within fifteen days counted from that day. The deadline runs without any formal notice: it is for the group to monitor its own links, in particular the financial link, which a share transfer breaks overnight.

What happens to the departing member is prepared in the withdrawal declaration itself. A person that leaves the group and continues its activity stays identified individually if it expressly asks for this in that declaration, or in a request filed before the withdrawal takes effect. Otherwise an identification has to be reopened: the difference is procedural, but it decides the continuity of the VAT number and therefore of invoicing.

The group itself disappears when only one member is left, that is, when the second-to-last member departs. We regularly see a reorganisation decided for reasons unrelated to VAT — a disposal, a merger, a simplification of the group chart — mechanically produce that dissolution, because nobody checked how many members would remain once the transaction completed. The order of magnitude of the work remains that of an addition to the compliance monitoring described on our pricing page, not that of a structuring study.

What risks and incompatibilities does the regime carry?

The main risk of a VAT group in Luxembourg is not fiscal in terms of rate, it is joint: members are jointly liable for the VAT, late-payment interest, tax penalties and costs arising from the operations of the period during which they belonged to the group.

That joint liability is measured in time, and that is what makes it a trap. It covers the period of membership: a member that has left the group remains exposed for operations predating its departure, including where an audit reopens them years later. In a share disposal, the question therefore belongs to the warranty and indemnity package, not to the withdrawal declaration alone, and the buyer inherits an exposure that cannot be read in the target's own accounts.

One incompatibility also has to be known. The small enterprise franchise regime of article 57bis, whose national threshold was raised to fifty thousand euros with a ten per cent overrun tolerance from 1 January 2025, is closed to taxable persons who opt for other special regimes, among them the VAT group and the flat-rate scheme for agricultural producers. The law of 20 December 2024, stemming from bill 8406, amended article 60ter, paragraph 7, so that it refers to article 57bis. An entity with a low turnover that joins a group therefore loses the franchise.

That leaves the simplest obligation, and the one most often missed: the annual renewal of the financial-link certificates, to be sent with the annual VAT return. The benefit of the regime is permanent, its proof is periodic. We put it on the closing calendar at the same rank as the return itself, because a regime whose condition is no longer certified is a regime whose condition can be argued.

Sources and verification

Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, licensed accountant (authorisation 10077274). Sources verified on 12 October 2026: every condition, deadline, effective date, article number and legal reference in this article was checked that day against an official Luxembourg or European source, and no value was taken from memory.

The sources consulted fall into three sets, all read on 12 October 2026.

The administration first: the « Groupe TVA » page of Guichet.lu, for the single taxable person, the designation of the representative, the constitution file, the annual certification of the financial link, the annex to the annual return, the joint liability, the two-calendar-year duration, the withdrawal arrangements and the dissolution; the VAT group forms section of the indirect tax portal, including the declaration of option provided for in article 60ter; the page on the same portal on the small enterprise franchise regime.

The legal texts next: article 60ter of the amended law of 12 February 1979 on value added tax, introduced by the law of 6 August 2018; article 11 of Directive 2006/112/EC; the law of 20 December 2024 on Legilux. The parliamentary record last: the consolidated file of bill 7278, filed on 13 April 2018 and carrying the Council of State opinion of 4 July 2018, for the cumulative nature of the links, the effective dates and the compared scope of the independent group of persons; file 8406, for the exclusion from the franchise; case C-274/15 on EUR-Lex.

Four points could not be verified and are flagged as such in the body of the article. The consolidated text of article 60ter itself, whose file published by the indirect tax portal could not be opened: the effective dates and the detail of the links therefore come from the preparatory work on bill 7278, which may differ from the version in force. The entry-into-force date of the law of 6 August 2018.

The law to which article 1711-1, referred to for control relationships, belongs. And the position of a Luxembourg branch of a foreign company under the condition of establishment inside the country. A reader can check them independently on the « Groupe TVA » page of Guichet.lu, on the coordinated text of the VAT law published by the indirect tax portal, on Legilux and in file 7278 on the Chamber of Deputies website.

This article states the law as it stands at the date of publication and does not constitute personalised tax or legal advice: a specific situation calls for its own review, in particular to establish that the three links are met and to measure the joint liability being accepted. Report an error to contact@financialservices.lu: the correction is dated in the article.