TAX PROCEEDINGS IN LUXEMBOURG
Tax disputes in Luxembourg
Due to the heterogeneity of the origins of Luxembourg tax law, tax claims are tried under two branches of the Luxembourg court system: administrative courts and judiciary courts. Direct taxation falls under the administrative courts. Indirect taxation (such as VAT and registration duties) falls under judiciary courts.
Please note that in Luxembourg, mediation, although not mandatory, precedes litigation as a general practice.
Claims on direct taxes
There are three possible ways to bring claims before the Direct Tax Administration: claims, formal appeals and requests for a tax waiver.
To challenge to a taxation, the claim must be reported to the Director of the Direct Tax Administration within three months from the notification statement.
The claim must adhere to certain conditions: il must be a written document indicating the contested act, including the parties involved and must contain the facts of the case, the grounds on which the complaint is being made and the objective of the complaint. The claim is made by the interested party or a procedural representative (lawyer or chartered accountant with a written proxy).
The claim is either accepted or rejected within a period of 6 months. If it is rejected, the taxpayer can appeal for a reversal (appeal on the merits of the judgment of the Director of the Direct Tax Administration) before the Administrative Court within a deadline of 3 months, through a lawyer or a chartered accountant as the intermediary. If there is no response in 6 months, it is possible to appeal before the Administrative Court with no deadline in this case.
Appealing for a decision by the Administrative Court must be presented within 40 days of the judgment notification from the Administrative Court of Appeals which finds the final decision.
Formal hierarchical claims
Formal appeals can be made in the same manner and within the same timelines explained above before the Director of the Direct Tax Administration against all discretionary decisions made by the tax bureau, like for example, refusing payment terms. The avenues of appeals are identical to those in an ordinary claim.
Without challenging the legality of the taxation, the taxpayer can apply for remission if he considers the tax to be unfair (unjust taxation or inability to pay due to special circumstances).
Tax disputes on indirect taxes
This sections deals with tax appeals against the VAT tax office.
In contrast to other taxes on income, the VAT tax system is a self-assessed. The tax bureau has only one role in verifying it and if they find the filing to be incorrectly filled out, they send a correction in the form of a discretionary assessment.
It is this discretionary assessment that can be appealed before the Civil Court. The document with the assignation of the VAT Department must be served within 3 months from the notification date of the receipt of the tax office statement.
Nevertheless, it is customary in Luxembourg to begin with mediation. The 3 month deadline indicated above can be suspended through a claim against the tax office bulletin. A reasoned written claim must be sent in to the Tax Administration bureau that sent out the notification. If it is rejected, the claim is automatically sent to the Director of the Tax Administration. After reviewing it, the Director sends either a confirmation or a corrective statement. The decision of the Director of the Administration can be challenged before the Civil Court within the amount of time remaining in the deadline. This deadline will normally be included in the confirmative statement by the administration.
Example of a claims process for direct or VAT taxes
A taxpayer that receives a tax income return statement and a VAT return statement from the tax office on January 15.
February 15, he issues a written claim for both returns.
From this moment the deadlines and precautions to be taken are different depending on if it is an income tax or VAT tax.
In the case of direct taxes, the Director of the Administration has a time span of 6 months (until August 15) to respond or not.
If the response is a rejection and arrives on April 15, the taxpayer has until July 15 to appeal before the Administrative Court.
If the Director of the Tax Department for VAT responds with a rejection on April 15, the taxpayer has 2 months (subtracting the one month it took to file the initial claim from the total 3 months) to appeal before the Civil Court or June 15 at the latest.