Luxembourg knows how to play the EU tax game to its advantage. For years Luxemburg has done very well by getting a VAT slice off the top of VAT that, morally and economically, belonged to sales in other countries. The advantage to non-EU online retailers was that they could avoid paying out the higher rates of VAT in the countries they were actually selling in by claiming the transaction went through low-VAT Luxembourg. That changed for e-services in January 2015 to the place of supply, and so accounting for the VAT taken, now being the customer’s EU country where the transaction really took place. But as a sweetener, so as to get the changes voted through with Luxembourg’s agreement, it is to receive parachute payments of €1 billion, perhaps more, over the next few years.
Tax Barrister, Accountant