VAT in Luxembourg

The most salient feature of Luxembourg VAT is its rate (15% - and 12% on certain intangible services) - one of the lowest in the EU. This has attracted numerous companies, such as A.O.L., Time Warner, AMAZON and Microsoft, to establish their administrative headquarters in Luxembourg either by establishing an actual headquarters there or by locating website servers on its territory. This has allowed these companies to obtain services previously based in high-tax jurisdictions, such as sales and marketing, treasury management, the supply of financial services, and most of all, the supply of digital goods. Businesses can take advantage of low taxes for a growing number of operations.

The following questions have been addressed in this article:

Why is Luxembourg the preferred location of non-EU on-line service providers?
Why was it so important to extend this EU Directive?

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