Luxembourg’s traditionally “Solden” or annual winter sales kick off in January (2nd to 31st of January). Discounts of 30, 50 or even 70% are on the tips of every bargain hunters tongue. However, January 1st 2015 brings with it a rise in TVA (VAT, value added tax). What exactly is going on with the sales tax increase and which products will be affected by this rise?
Luxembourg maintains the lowest standard VAT rate in Europe
News flash: There’s no reason to panic or engage in frantic stockpiling since an attractive price-quality ratio is guaranteed even after 1 January. While the standard VAT rate of 15% shall move to 17%, Luxembourg still retains the lowest VAT rate within the European Union.
Super reduced tax rate on many products
A variety of day-to-day products will remain unaffected by the VAT increase. For instance, all food and non-alcoholic beverages continue to fall under the uniquely favorable tax rate of only 3%. Therefore, roughly two-thirds of a supermarket’s product range will be unaffected by the increase in VAT. Children’s clothing, books, as well as public transport, medication and cultural events will be subject to 3% VAT that is to be paid to the state.
Many retailers wish to absorb differences
Many retailers are aware of the competitive local trade environment and they have already announced that they do not intend to pass on the price increase of the remaining products affected by the increase in VAT, to the customers. So there is a light of hope shining upon us, since in other countries (i.e. Italy, France, Spain), who were affected by VAT increases in recent years, retailers have absorbed up to 80% of the initial cost. As a result, shopping in Luxembourg will surely remain a “Good Idea” in 2015. Save the date: Luxembourg’s “Solden” kicks off in January!
PS: What are economists saying about Luxembourg’s VAT increase? Luxembourg’s Trade Association (clc) gives you more information.