Who is concerned
The franchise regime is laid down in Article 57bis of the VAT Law of 12 February 1979, rewritten by the law of 20 December 2024 which transposes EU Directive 2020/285. It is open to any taxable person whose place of business is in Luxembourg and whose annual Luxembourg turnover does not exceed €50,000 excluding VAT. The legal form does not matter: a self-employed person, a liberal professional, a SARL or a SARL-S, an association carrying on an economic activity can all qualify. The threshold was €35,000 until 31 December 2024.
A first misconception to set aside: a franchised business is not "outside VAT". It is a taxable person in its own right, subject to special rules. It registers with the Registration Duties, Estates and VAT Authority (AED) within fifteen days of starting its activity, it receives an identification number, it issues invoices and it keeps its records for ten years. It simply does not charge VAT on its Luxembourg transactions and does not file periodic returns.
The following are excluded from the regime:
- taxable persons who have opted for another special scheme: VAT group, flat-rate scheme for farmers and foresters, option to charge VAT on rents;
- persons who occasionally sell a new means of transport;
- persons who occasionally allocate a dwelling to use as a main residence.
The €50,000 threshold and the 10% tolerance
The threshold is assessed per calendar year, excluding VAT, on turnover generated in Luxembourg. It includes supplies of goods and services that would be taxable in Luxembourg if carried out by an ordinary taxable person, as well as certain exempt transactions (notably financial and insurance services and lettings of immovable property, unless they are ancillary). It does not include transactions taxable abroad, for instance consulting fees invoiced to a German company or work on a building located in France.
The 2024 law introduced a 10% tolerance, which makes a real difference for growing businesses. Three situations can arise during a year:
| Luxembourg turnover for the year | Current year | Following year |
|---|---|---|
| €50,000 or less | Franchise maintained | Franchise maintained |
| Between €50,000.01 and €55,000 (excess of 10% at most) | Franchise maintained until 31 December | Normal regime compulsory from 1 January |
| More than €55,000 | The franchise ends the day after the threshold is exceeded: subsequent transactions are subject to VAT | Normal regime compulsory |
Three examples to fix ideas. A consulting SARL-S reaches €49,000 on 31 December 2025: nothing changes for it in 2026. A self-employed graphic designer reaches €51,000 on 31 October 2025: she stays under the franchise until 31 December, provided she does not cross €55,000 in the meantime, then moves to the normal regime on 1 January 2026. A craft SARL crosses €56,000 on 1 July 2025: its invoices are subject to VAT from 2 July, and it stays under the normal regime for the whole of 2026.
The immediate exit deserves attention, because it leaves no time at all: the transaction that crosses €55,000 is still under the franchise, those of the following day carry VAT. A business approaching the threshold must therefore track its turnover month by month, have its invoice templates ready and have warned its customers of the change in price.
Test your situation
Enter the Luxembourg turnover you expect for the calendar year; the tool applies the rules above and tells you where you stand this year, next year and, if you also sell in other EU countries, under the cross-border scheme (it adds up Luxembourg and the rest of the Union itself).
The tool applies Article 57bis at month level. It assumes that the turnover entered only includes transactions that count towards the threshold, and it does not check the national thresholds of other EU countries, which apply on top of the €100,000 ceiling. It does not replace a review of your situation.
Opting in, opting out, coming back
Contrary to what many people imagine, the franchise does not apply automatically to a small business: without an option, the normal regime applies. The choice can be made at three points in time.
On incorporation. The initial VAT declaration, to be filed within fifteen days of the start of the activity, asks you to estimate annual turnover and choose the regime. That is where everything is decided, which is why we discuss it with every founder before filing the form.
Joining the franchise later on. A business under the normal regime whose turnover is, or falls, below €50,000 can apply for the franchise in writing to its tax office (an e-mail request is enough in practice). The change takes effect on 1 January of the year following receipt of the request. Beware of the tax treatment of the switch: the business is treated as a taxable person ceasing its activity, with an annual cessation return, and VAT deducted on recent investments may have to be partly repaid. The calculation is worth doing before applying.
Leaving the franchise voluntarily. A franchised business may opt for the normal regime by written declaration to the tax office. The option takes effect on the first day of the month following receipt of the request and binds the business to the normal regime for at least one calendar year.
That leaves the forced exit, when the threshold is exceeded, described above. After a year under the normal regime because of an excess, returning to the franchise is not automatic: turnover must have fallen back below €50,000 and a request must be made, with effect on the following 1 January.
Your sales under the franchise
For transactions taxable in Luxembourg, the rule is simple: no VAT on the invoice, and the compulsory mention "TVA non applicable – Article 57bis de la loi modifiée du 12 février 1979". A franchised business may issue a simplified invoice, which must include at least:
- the date of issue;
- the identification of the supplier;
- the nature of the goods supplied or services rendered;
- the amount of VAT or the data needed to calculate it, here the mention that sets it aside;
- for a corrective invoice, a reference to the initial invoice.
This applies to a shop sale to a private individual as much as to a consulting service to a Luxembourg company, which obviously cannot deduct any VAT since there is none.
Things become more complicated as soon as the customer is abroad, because the Luxembourg franchise only covers transactions taxable in Luxembourg. A transaction whose place of taxation is another country falls outside the franchise and is governed by that country's rules.
| Transaction | Place of taxation | On your invoice | Who pays and who reports |
|---|---|---|---|
| Sale of goods or services to a customer in Luxembourg | Luxembourg | No VAT, Article 57bis mention | Nobody |
| Distance sales or electronic services to private individuals in the EU, below €10,000 per year for the EU as a whole | Luxembourg | No VAT, Article 57bis mention | Nobody |
| The same sales, above €10,000 per year | Customer's country | VAT of the customer's country | You, by registering there or through the OSS one-stop shop (unless under the cross-border scheme) |
| Supply of goods to a business in another Member State | Luxembourg | No VAT, Article 57bis mention | Nobody |
| Service to a business in another Member State (general rule: consulting, IT, marketing…) | Customer's country | No VAT, "Reverse charge" mention, customer's VAT number | Your customer, under the reverse charge; you file a recapitulative statement (unless under the cross-border scheme) |
| Service to a private individual in another Member State (general rule: consulting, coaching, remote training) | Luxembourg | No VAT, Article 57bis mention | Nobody |
| Work or services connected with a building located abroad | Country where the building is | VAT of that country | Your customer, under the reverse charge, if it is VAT-registered in that country and that country provides for it (France, Belgium and Germany in particular); otherwise you, by registering there (unless under the cross-border scheme) |
The table says it all: the national franchise is a Luxembourg regime for a Luxembourg customer base. As soon as the activity goes abroad, obligations remain in other countries, sometimes heavy ones for a very small structure. That is precisely the gap the cross-border scheme has filled since 2025.
Your purchases under the franchise
A franchised business has no right to deduct. The VAT charged by its Luxembourg suppliers (rent, equipment, subcontracting, fees) is a final cost, generally 17% of the net price. That is the price of simplicity, and it can be measured: a business planning €20,000 of purchases and investments subject to VAT in the year leaves €3,400 with the tax authority by staying under the franchise.
Purchases from abroad hold two surprises. For goods bought in another Member State, the franchised business is treated like a private individual: its supplier charges it VAT, and it has nothing to report, as long as its intra-Community acquisitions stay below the annual threshold of €10,000. Above that, they become taxable in Luxembourg and it is the business itself that must pay Luxembourg VAT.
For services bought from a foreign supplier under the general rule (software and online subscriptions, advertising, consulting, platforms), Luxembourg VAT is due by the franchised business itself, under the reverse charge, and it cannot deduct it. A subscription invoiced at €100 excluding VAT by an Irish publisher therefore costs €117, and those €17 must be reported and paid to the AED. Many franchised businesses are unaware of this and discover the rule during an audit. Imports of goods from outside the EU follow the same logic: import VAT is paid and stays paid.
Returns and invoices
A franchised business is exempt from periodic VAT returns and from the ordinary annual return. Three obligations remain, depending on its activity.
Informing the AED of turnover. Each year, before 1 March, the franchised business reports to the authority the turnover generated in the previous year, by any means: post, e-mail or the simplified annual return form. That is how the authority checks the threshold. A business registered under the cross-border scheme is exempt from this, as its Luxembourg turnover already appears in its quarterly reports.
Filing a simplified annual return when it supplies services under the general rule to businesses in other Member States, or when it receives services from abroad that are taxable in Luxembourg. It is filed before 1 March through the eCDF platform and serves to report, on the one hand, services supplied within the Union and, on the other, VAT due under the reverse charge on services received. Services supplied to EU businesses also require a recapitulative statement, monthly or quarterly.
Invoicing correctly. An invoice is compulsory for any sale to a business or a legal person, and for distance sales to private individuals unless the OSS option is used. A franchised business may limit itself to a simplified invoice, but the Article 57bis mention must appear on it, together with the customer's VAT number and the reverse charge mention when it invoices a service to an EU business. Invoices and supporting documents are kept for ten years, as for any taxable person. Finally, if the activity ceases, the authority is informed within fifteen days.
The cross-border scheme
Until 31 December 2024, a small Luxembourg business carrying out transactions taxable in another Member State had to register there and file returns, whatever its size. Since 1 January 2025, Articles 57ter and 57quater of the VAT Law allow it, on option, to benefit from the franchise of other Member States, and symmetrically allow small European businesses to benefit from the Luxembourg franchise.
For a Luxembourg business (Article 57quater), four cumulative conditions apply:
- being under the franchise in Luxembourg, hence below €50,000;
- generating, across the Union as a whole, Luxembourg included, an annual turnover that does not exceed €100,000, in the current year as in the previous year;
- complying with the national threshold of each country in which it wants to benefit from the franchise;
- having notified the AED beforehand.
The business then receives an individual number with the suffix "EX" (in the form LU12345678-EX), which it shows on its invoices. With that number, it sells in the declared countries without charging VAT there, without registering there and without filing returns there.
Two limits temper the enthusiasm. The 10% tolerance does not apply here: exceeding the €100,000 ceiling, or the national threshold of a country, ends the franchise in that country from the following day, and exceeding €100,000 excludes the business from the scheme for the following calendar year. In addition, national thresholds vary widely, and some countries set different thresholds depending on the sector of activity. Here are the main ones, as at 18 September 2026:
| Country | National franchise threshold |
|---|---|
| Luxembourg | €50,000 |
| France | €85,000 for sales of goods and €37,500 for services (increased thresholds of €93,500 and €41,250 for the current year). The reform introducing a single €25,000 threshold was abandoned by the law of 3 November 2025. |
| Belgium | €25,000 |
| Germany | €25,000 in the previous year and €100,000 in the current year |
| Netherlands | €20,000 |
| Other Member States | See the European Commission's SME VAT rules portal, which lists the thresholds and rules of each country |
The procedure runs through MyGuichet.lu, with a LuxTrust product or an electronic identity card, in four steps:
- Prior notification: the business describes its activity, the Member States targeted and the turnover generated in each of them, Luxembourg included, for the current year and the previous year.
- Confirmation: the AED forwards the request to the countries concerned and confirms the "EX" number, in principle within 35 working days. The franchise only applies in a country from that confirmation.
- Quarterly report of the turnover generated in each Member State, Luxembourg included, through the same portal, by the end of the month following the quarter at the latest: 30 April, 31 July, 31 October and 31 January.
- Update of the notification whenever the situation changes.
The notification is updated in four cases:
- to add a Member State: the franchise starts there on confirmation by the AED;
- to stop benefiting from it voluntarily in a country: effective on the first day of the following quarter if the request arrives in the first two months of a quarter, otherwise on the first day of the second month of the following quarter;
- where the national threshold of a country or the €100,000 ceiling is exceeded: end of the franchise from the following day;
- where the activity ceases.
Once the "EX" number is deactivated, a business that continues its activity registers for VAT in the country where the threshold was exceeded or, for its sales to private individuals, joins the OSS one-stop shop in Luxembourg.
In the other direction (Article 57ter), a small business established in another Member State, holding an "EX" number issued by its own country, can carry out transactions in Luxembourg without Luxembourg VAT if it complies with the €50,000 threshold in Luxembourg and the €100,000 ceiling in the Union. For the Luxembourg business buying its services, the consequence is concrete: no reverse charge, the transaction is reported as exempt. It is prudent to check the validity of the supplier's "EX" number on the European portal before relying on it.
Should you opt in?
The franchise is neither a gift nor a trap: it is a regime that suits some activities and not others. Three questions are usually enough to decide.
Other, finer questions come on top of these three: the trajectory of the business (a company that will reach €50,000 within eighteen months changes regime in full growth, with prices to revise), the share of foreign customers, the amount of start-up investment, or the way some principals read the situation, for whom a "full" VAT number remains a sign of an established business. That overall reading is what we do with every founder before ticking a box on the initial declaration, and what we do again with our franchised clients as soon as their turnover approaches the threshold. The question fits in one meeting; the answer commits several years.
The essentials in one table
| Point | Rule |
|---|---|
| National threshold | €50,000 excluding VAT per calendar year, Luxembourg turnover |
| Tolerance | Up to €55,000: franchise maintained until 31 December, normal regime the following year. Above that: exit from the day after the excess |
| Opting in | On the initial declaration, or by written request with effect on the following 1 January |
| Voluntary exit | Written declaration, effective on the 1st of the following month, at least one calendar year under the normal regime |
| Sales | No VAT on transactions taxable in Luxembourg; mention "TVA non applicable – Article 57bis de la loi modifiée du 12 février 1979" |
| Purchases | No deduction; VAT due under the reverse charge on services received from abroad |
| Returns | Previous year's turnover to be reported before 1 March; simplified annual return and recapitulative statement where services are supplied to EU businesses or received from abroad |
| Cross-border scheme | On notification through MyGuichet.lu, "EX" number, €100,000 ceiling in the EU with no tolerance, national thresholds to comply with, quarterly report of turnover per country |
| Record keeping | Invoices and documents kept for ten years |
These are the rules in force on the date of publication, 18 September 2026; foreign thresholds in particular change regularly, and we update this page when they do. If your business is approaching one of the thresholds, if you sell in another EU country or if you are hesitating over which regime to choose on incorporation, the simplest thing is to talk to us: we look at your figures, your customers and your plans, then we handle the formalities.