The glossary to understand and take action

Right to deduct VAT

The right to deduct allows, subject to conditions, the deduction of input VAT incurred in connection with transactions giving rise to that right.

Notion comptable, fiscale ou juridique · Luxembourg Fiduciaries Editorial Team · Reviewed on

Understand the scope

Definition and points to distinguish

It depends in particular on use, activity and supporting documents. VAT shown on an invoice is not automatically recoverable in full; limitations, mixed activities and adjustments must be reviewed.

In your file

What this changes in practice

The deduction allows VAT incurred on certain expenses to be recovered when the conditions are met. The presence of VAT on an invoice is not sufficient: the allocation of the expense, the activity carried out and exclusions must be reviewed. An activity combining transactions that give and do not give entitlement to deduction may require an allocation. Supporting documents and adjustments form part of the monitoring.

A scenario to help you understand

Educational example

A company uses an asset for several activities. It reviews the actual use and its right to deduct rather than automatically recovering all VAT.

Fictitious situation, presented to illustrate the concept.

Prepare for what comes next

Points to check

  • Vérifier la facture et l’affectation
  • Examiner les limitations applicables
  • Suivre les régularisations nécessaires

The practical question

Find out more

Une dépense payée par la société ouvre-t-elle toujours droit à déduction ?

Le paiement ne suffit pas. Il faut examiner la nature de l’achat, son affectation à l’activité, les conditions documentaires et les limitations applicables. Certaines dépenses peuvent nécessiter une ventilation ou être exclues. Conservez l’explication retenue, surtout pour les usages mixtes, afin de pouvoir relier le montant déduit à une situation réelle et justifiable.

Connecting concepts

Terms to know as well

Continue with the concepts, contacts and procedures related to this topic.

VATValue added tax (VAT) is a consumption tax applied to transactions falling within its scope according to their own rules.VAT deduction pro rataA proportion used, under the applicable conditions, to determine the portion of VAT deductible on expenses common to transactions that do and do not give rise to this right.Purchase invoiceA purchase invoice describes the goods or services invoiced to the company by a supplier.VAT reverse chargeVAT reverse charge refers to a mechanism under which the customer is liable for the tax according to the conditions applicable to the transaction.Doubtful receivableA receivable whose recovery involves uncertainty that must be examined and documented.VAT exemption schemeA scheme subject to conditions that exempts covered transactions from charging VAT, without granting the right to deduct the corresponding VAT on purchases.

Put it into practice

Explore further with our guides

Practical guideVAT returns in Luxembourg: frequency, preparation and checksPractical guideCompany car in Luxembourg: preparing the calculation of the benefit in kindPractical guideVAT in Luxembourg: rates and checks before invoicingPractical guideBusiness expenses: checking their deductibility in Luxembourg

Sources and verification

References consulted on 20 September 2026. Official procedures specify the applicable conditions and exceptions.

This guide explains a general process. The applicable rules depend on your situation; it does not constitute personalised advice. Report a correction.

A definition gives you a reference point. To examine your situation, clarify your question with a professional.