Occasional and temporary provision and notification of services in Luxembourg 

Companies established in a country of the European Union may undertake occasional and temporary activities in Luxembourg. Though such activities do not constitute a permanent establishment in Luxembourg, there are still certain formalities that need to be complied with such as:   

• Notification of services to be addressed to the Ministry of Economy before the start of the activities 

• VAT registration towards VAT authorities (if required) 

• Notification of employees to the labour law authorities 

The notification of services is valid for 12 months and can be renewed every year. 

The same requirements apply to companies established outside the European Union that are operating in Luxembourg on the same basis, but additionally they must be the owner of a business license in order to carry out activities in Luxembourg. 

While this article does not discuss the boundary of what is or is not a permanent establishment, this is an issue that will require attention, and where relevant the terms of any relevant double tax agreement on this topic.  There may be particular issues to consider for different activities, for example construction, storage or sales activities. 

It is also important to note that the company operating in Luxembourg must respect the Luxembourg labour law requirements when posting workers on Luxembourg worksite (minimum social wage, working time, overtime, public holiday etc.). 

In addition, a “social badge” must be obtained for each employee that will be posted to the Luxembourg worksite. This will trigger formalities to be fulfilled mainly the monthly upload of supporting payroll documentation for the Labour law  Authorities on a dedicated platform  

If the above requirements are not respected,  the company exposes itself to fines and penalties. 

The establishment of temporary activities in Luxembourg by a foreign company also requires close consideration from a corporate tax perspective. The presence of the foreign company’s workers on Luxembourg soil can trigger categorisation as a permanent establishment, depending on the duration of the work, the responsibilities of the company’s workers in Luxembourg, the type of activities, and the terms of a double tax treaty.   

If the foreign company does have a permanent establishment in Luxembourg, it will be subject to Luxembourg tax compliance requirements as the entity will have to file a Luxembourg tax return determining the taxable profits in Luxembourg.  

It is also crucial to monitor the Luxembourg VAT implications by determining how the supply of any services are dealt with in Luxembourg, whether in the construction sector or any other sector,.  VAT principles do not follow direct tax principles, so there will be Luxemburg VAT issues to consider whether there is a Luxembourg permanent establishment or not. 

For example for construction services provided by a non-Luxembourg construction business operating in Luxembourg, the company would be located at the building site location triggering the following Luxembourg VAT obligations: 

• Luxembourg VAT registration ; 

• Submission of Luxembourg VAT returns ; 

• Application of Luxembourg VAT on the supplies. 

In conclusion, a review of the precise nature of the supplies performed in Luxembourg by the workers / the company is necessary to assess the exact Luxembourg tax obligations (if any) of the company. 

Our Forvis Mazars in Luxembourg team remain entirely available should you have any question or need of assistance related to this topic.