When it comes to taxes for purchasing and registering a car, Luxembourg stands out as a country offering numerous benefits. One of the key reasons why Luxembourg registration is highly sought after is the remarkably low taxation imposed on vehicles. From a fiscal perspective, this translates into substantial savings when compared to neighboring countries.
In countries like France, it is quite common to spot many individuals driving with Luxembourg license plates. The allure of buying a car in the Grand Duchy lies not only in the reduced prices of vehicles, typically around 10% cheaper than in France and Belgium but also in the cost of Value Added Tax.
What taxes are paid for cars in Luxembourg in general
When purchasing a new or used vehicle, certain administrative procedures must be carried out in Luxembourg and three taxes need to be paid as part of this process:
These three taxes play a crucial role in the car purchase process in Luxembourg, in the following sections we will examine them one by one.
You can find detailed information about the taxation of cars in the European Automobile Manufacturers’ Association (ACEA) 2022 Tax Guide.
Car registration taxes
When it comes to registering your car in Luxembourg, obtaining a registration tax stamp is a crucial step, demonstrating that you have successfully requested and acquired a plate number while fulfilling the required payment.
The specific amount for the tax stamp depends on the type of registration number plate you choose. There are several options available, each with its associated tax:
- Current series numbers will cost 50 euros;
- Personalized numbers will cost 100 euros (50 euros tax + 50 euros extra fee);
- Using personalized numbers you already bought will cost 74 euros (50 euros tax + 24 euros extra fee).
It is important to note that obtaining the plate numbers is only one part of the car registration process. This does not imply that the vehicle has been registered or that it has been automatically granted registration authorization. It simply reserves the selected number for future use.
Once you have the tax stamp you need to complete all the formalities to obtain the necessary documents for registration. When you have them all, take them to the SNCA to start the registration process.
Read further about registering a car in the Grand Duchy in our dedicated guide: How to register a car in Luxembourg.
VAT for car purchase in Luxembourg
In this section, we will explore important aspects related to the Value Added Tax (VAT) when purchasing or importing a vehicle in Luxembourg. We will discuss when the VAT should be paid, and which country holds the responsibility for VAT payment. Additionally, we will highlight the specific office where individuals should go to pay the VAT and obtain the necessary compliance documentation.
When to pay the tax and what is the amount
When purchasing a new or used vehicle in Luxembourg or another European Union member state, there are different cases regarding the payment of VAT. There are a few specific scenarios:
Buying a used vehicle from a private individual
No VAT is due in this case
Buying a used vehicle from a professional dealer
The VAT is payable in the country where the vehicle is purchased. If the vehicle is bought outside of Luxembourg, no VAT is due in Luxembourg.
Buying a new vehicle
In this case, whether you buy the vehicle from another private individual or a professional dealer, the VAT becomes due in the country where the vehicle will be registered. Consequently, when registering a vehicle in Luxembourg, the Luxembourgish VAT will be applied upon registration.
The VAT in Luxembourg is 16% and the calculation should be based on the total price of the vehicle, including any accessories and associated costs, such as delivery fees.
Where to pay VAT for a car in Luxembourg
When purchasing a new vehicle in Luxembourg, you will typically pay the VAT directly to the dealer at the time of purchase. However, in addition to this, you will need to visit the Customs and Excise Agency to obtain a 705 sticker. This sticker serves as proof of VAT compliance and is necessary for vehicle registration.
In which country to pay VAT when buying a car abroad
The VAT should be paid in the country where you intend to register the vehicle. For importing a vehicle from another EU country, you must inform the dealer that you plan to register the vehicle in a different country to avoid paying the VAT in the country of purchase.
Once you have imported the car, you will need to bring the purchased vehicle to one of the Customs and Excise Agencies to pay the Luxembourg VAT and obtain the 705 sticker, needed for further registration.
In some cases, even if you inform the dealer that you plan to export the vehicle, they may require upfront VAT payment assuring you of a later refund. If this occurs, ensure that the dealer provides a clear document outlining the conditions for reimbursement.
If you accidentally paid VAT twice (for example, once in the country of purchase and again in Luxembourg to obtain the 705 sticker), you are entitled to a refund. In such cases, you should contact the seller and the tax authorities of the country where the vehicle was purchased to initiate the refund process.
Luxury car taxes in Luxembourg
Good news for lovers of retro and luxury cars: Luxembourg does not impose any specific taxes on luxury goods and objects. The luxury car brought in Luxembourg will be taxed similarly to the ordinary car: VAT, registration tax, and road tax depending on the emissions. And that is all.
Luxembourg has no luxury car taxes for individuals.
Road taxes in Luxembourg
All vehicles registered in Luxembourg are subject to the road vehicle tax, which must be paid annually to the Customs and Excise Agency. The tax amount varies based on the vehicle's fuel system, either petrol or diesel.
Keep in mind, that the Luxembourg road taxminimum amount stands at 30 euros annually.
For cars registered for the first time in the European Economic Area after the 1st of January 2021, the tax is calculated based on the CO2 emissions value. You can find this information on your certificate of conformity.
The road tax calculation formula: emissions value multiplied by fuel coefficient (0.9 for diesel vehicles and 0.6 for other types) and multiplied by an exponential factor (for CO2 emissions below 90g/km is 0.5, and it increases by 0.1 for every additional 10g/km).
You can calculate the road tax for yourself using one of the Luxembourg car tax calculators available online for convenience and accuracy.
To give you an idea of the Luxembourg road tax value, here is a small table with some examples of popular cars. Keep in mind, that we calculated the yearly tax according to the mean value of the interval in the previous column:
|Car model||Body type||Energy type||CO2 emissions (g/km)||Tax|
|PORSCHE 718 BOXSTER||Convertible||Essence||196 - 210||207.06 euros|
|Ford FOCUS EcoBoost||Sedan||Essence||180 to 189||166.05 euros|
|RENAULT SCENIC||Minivan||Essence||143 - 154||98.34 euros|
|AUDI A3 Sportback||Sedan||Diesel||106 - 135||98.01 euros|
|FORD FIESTA Flexifuel (95ch)||Sedan||E85||116 - 138||68.58 euros|
|TOYOTA Prius Hybride Rechargeable||Sedan||Hybrid||94 - 107||42.42 euros|
|TESLA MODEL 3||SUV||Electric||0||30 euros|
Keep in mind, that we calculated the yearly tax according to the mean value of the interval in the previous column.
Tax deductions for eco-friendly cars in Luxembourg
To encourage individuals to use electric cars and promote cleaner transportation, the Luxembourg government has introduced a tax incentive program for the purchase of pure electric or hydrogen fuel cell vehicles.
For hydrogen fuel cell vehicles a deduction of 8,000 euros is provided by the state. This type of vehicle is relatively new, but we have covered a few initiatives connected to it.
For 100% electric vehicles a deduction of 8,000 euros is applicable if one of the following conditions is met:
- Energy consumption of less than 18 kWh/100km.
- Energy consumption of less than 20 kWh/100km, with a maximum net power of the propulsion system not exceeding 150 kW.
- The vehicle has 7 or more seats, and the applicant is part of a household consisting of at least 5 people.
A deduction of 3,000 euros is available for other electric vehicles with energy consumption exceeding 18 kWh/100km.
Frequently Asked Questions (FAQ)
What are the advantages of buying a car in Luxembourg in terms of taxes
What taxes do I need to pay when purchasing a car in Luxembourg
Are there any tax deductions available for eco-friendly cars in Luxembourg
Do I have to pay Luxembourg VAT if I purchase a car in Luxembourg but register it in another country
We took photos from these sources: Daniele Buso for Unsplash, Viktor Bystrov for Unsplash, Chuttersnap for Unsplash