On 30 July 2026, the Luxembourg Government submitted Draft Law No. 8812 (Draft Law) to the Parliament. The Draft Law would transpose Article 2 of Council Directive (EU) 2025/516, which forms part of the European Union's Value-Added Tax (VAT) in the Digital Age (ViDA) package. The proposed legislation covers the ViDA measures scheduled to enter into force on 1 January 2027 and would introduce targeted amendments to the Luxembourg VAT Law.

The Draft Law focuses primarily on:

• Expanding and clarifying the scope of the One-Stop Shop (OSS) schemes, including for certain non-European Union (EU) suppliers and suppliers of electricity, gas, heating and cooling
• Clarifying the €10,000 threshold for certain cross-border business-to-consumer (B2C) services and intra-community distance sales of goods
• Amending the rules governing the determination of the VAT chargeability applicable to OSS transactions, to further harmonize the rules throughout the EU
• Phasing out the call-off stock simplification regime in anticipation of the future OSS mechanism for transfer of own goods
• Introducing targeted amendments to deemed supplier rules, Import OSS (IOSS), the exemption regime for cross-border small and medium-sized enterprises and related administrative procedures

The proposed amendments are intended to reduce administrative obligations, improve VAT compliance and adapt Luxembourg's VAT system to increasing digitalization and cross-border business activities within the EU.

All measures covered by the Draft Law would enter into force on 1 January 2027, in line with the implementation timetable established by the ViDA Directive.

Background

Council Directive (EU) 2025/516 of 11 March 2025, amending Directive 2006/112/EC on VAT rules for the digital age (ViDA Directive), seeks to modernize the EU VAT system, adapt it to the digital economy and strengthen the fight against VAT fraud. (See EY Global Tax Alert, EU Council approves VAT in the Digital Age (ViDA) package, dated 12 March 2025). Luxembourg has opted for a phased implementation approach and, through the Draft Law, would transpose only the ViDA provisions that become applicable on 1 January 2027. The explanatory memorandum expressly states that the Draft Law does not cover the other ViDA developments foreseen for a later stage.

The proposed amendments build upon the 2021 e-commerce VAT package, which introduced VAT and customs-related reforms to modernize and simplify the collection of tax on e-commerce transactions and is intended to further simplify cross-border VAT compliance across the EU.

E-invoicing and digital reporting requirements

While the Draft Law focuses on the first ViDA measures applicable from 1 January 2027, broader digital transformation agendas are embedded in the ViDA package. The explanatory memorandum expressly confirms that the current Draft Law does not cover the other reforms introduced by the ViDA Directive, which will be implemented through future legislation.

Among the future developments, the ViDA Directive foresees the introduction of EU-wide digital reporting requirements and enhanced e-invoicing obligations. The ViDA Directive highlights the role of structured electronic invoicing, real-time transaction reporting and digital tax controls in improving VAT compliance, increasing transparency and reducing VAT fraud across the EU.

From a business perspective, these forthcoming requirements represent more than simply tax-compliance obligations. The move toward e-invoicing can also represent an opportunity to modernize finance and tax functions, increase process automation, enhance data quality and governance and provide real-time visibility over transactional data. Businesses that begin reviewing their Enterprise Resource Planning (ERP) systems, invoicing processes and tax data architecture early could be better positioned to manage future compliance obligations while potentially unlocking operational efficiencies across the organization.

Implications

The Draft Law constitutes Luxembourg's first legislative step in implementing the ViDA package and confirms the EU trend toward greater digitalization and centralization of VAT compliance.

For multinational groups, the progressive implementation of ViDA reinforces the importance of adopting a coordinated strategy that addresses both the tax and technology dimensions of transformation, particularly where cross-border transactions, shared service centers and future digital reporting obligations are concerned. Businesses engaged in cross-border transactions, e-commerce activities, energy supplies, marketplace operations or intra-EU supply chain arrangements may wish to assess the potential impact of the proposed measures on their VAT processes, ERP systems and reporting frameworks.

More specifically, depending on their particular circumstances, businesses should consider:

• Assessing the impact of the proposed Luxembourg measures on existing VAT compliance obligations
• Reviewing OSS, IOSS and cross-border transaction flows
• Identifying the implications of the withdrawal of call-off stock arrangements
• Evaluating ERP and tax-technology readiness for future ViDA developments
• Preparing for upcoming EU digital reporting and e-invoicing requirements
• Leveraging e-invoicing initiatives as part of broader finance and tax-transformation programs