Navigating corporate and partnership tax in Luxembourg

It is not intended to provide extensive analysis of the different aspects of tax procedure, but rather a pragmatic summary of the basics.

Taxpayer registration

Direct tax

A company, whether corporate or partnership, will be automatically registered with the Luxembourg tax authority after filing its articles of incorporation to the Luxembourg Business Register, which includes the Luxembourg Trade and Companies Register, for publication purposes.
The Centre des technologies de l’information de l’État (CTIE) automatically assigns a national registration number to the company which is sent to its registered office. The process usually takes a few weeks but could take a few months depending on the period of the registration. The taxpayer can contact the tax authorities if it has any questions regarding the process or if it has not yet received its tax number.

VAT

Registration of a taxpayer for value added tax (VAT) purposes is not always required. A preliminary analysis should be done to determine whether the taxpayer is subject to VAT and, if so, if VAT exemptions are available. The law of 12 February 1979 on value added tax as amended (VAT Law) also provides the possibility to opt into VAT in specific cases.
If a taxpayer needs to register for VAT purposes, it must submit an initial declaration or a declaration of option to the competent VAT office. The forms are available online and the registration process should also be done online. When the registration is required, it must take place within 15 days of the start of the activity for taxable persons.
In addition, some taxable persons have to register for VAT purposes even though they are otherwise exempt from registration or not liable for VAT. For example, registration should be done before the provision of services in another EU member state for which only the buyer is liable for VAT; or intra-community acquisitions of goods subject to VAT in Luxembourg subject to the reverse charge mechanism; or purchase of services from providers established outside Luxembourg and where the buyer is liable for VAT (reverse charge mechanism).

Assessing tax due

Direct tax

Luxembourg company should file their corporate tax returns for a given year before the 31 December of the following year. In practice, Luxembourg tax authorities do not grant any extension of deadline anymore.

WHT tax returns should be filed within 8 days of the disposal of the fund (i.e. dividend or director fees) without possibility to request an extension of deadline.

Tax assessments are frequently issued automatically after the filing of a corporate tax returns in line with section 100a of the Abgabenordnung Vom 22 May 1931 (AO). The taxpayer has three months to challenge this assessment. After this period, no claim can be filed against the tax due.
However, §100a AO tax assessments are temporary and the tax authorities can proceed to further verification within a five year prescribed period, including by requesting any additional information or documents that seem necessary from the taxpayer. After the prescribed period, the tax becomes definitive, and no further investigation or amendments can be conducted by the tax authorities. The five-year prescribed period is extended to 10 years “in the event of non-declaration or in the event of additional taxation for incomplete or inaccurate declaration, with or without fraudulent intent”, under article 10 of the law of 27 November 1933 on the collection of direct contributions, excise duties on spirits and social insurance contributions.

VAT

The frequency of VAT returns depends on the taxpayer’s annual global turnover excluding tax.

For VAT, unlike direct taxes, a system of self-assessment is applied. The taxable person declares the output VAT that they have charged and, after deducting the input VAT, pays the balance spontaneously to the registration authority. Usually, no tax assessment is issued. A tax assessment is issued only in exceptional cases, such as if there is an automatic correction under article 73 of the VAT Law, or automatic taxation under article 74.
Upon receipt of a completed VAT return, the tax office is, in principle, supposed to inform the taxable person that their return is provisionally accepted and that it does not appear to give rise to an automatic correction or assessment.

Amending a tax return

A taxpayer can amend their corporate tax return if they realise that it includes a material mistake or a mistake regarding the tax qualification of the revenue or expenses. If the mistake is in favour of the taxpayer, the taxpayer can choose to file a rectified tax return or leave the return as it is for the review of the tax authorities until the tax assessment is issued. If the tax authorities see the mistake, they will rectify it. Otherwise, if the tax authorities did not fix the error, once the tax assessment is issued, a rectified tax return can no longer be filed. The taxpayer must therefore file a claim on the tax assessment to rectify the mistake.
If the mistake is not in favour of the taxpayer, they must file a rectified return before the prescribed period elapses, no matter whether the tax assessment has been issued or not. The tax authorities will then issue a new tax assessment. The additional tax liability resulting from the rectified return should be paid within the timeframe indicated in such tax assessment.
Regarding VAT, in practice, authorities accept corrective tax returns filed within the prescribed period.

Tax authority challenges to assessment of tax due

The tax authorities may request additional information from the taxpayer after it has filed a tax return to gather elements to support tax to be paid. For example, if a taxpayer has been engaged in transactions with related companies located in non-cooperative jurisdictions for tax purposes on the EU list – which should be notified in the corporate tax returns – the tax authorities will usually request more information on those transactions. The taxpayer has a duty to cooperate with the tax authorities and should give them the requested information. The tax authorities can apply penalties if the taxpayer does not provide the necessary information on time, however, they can grant an extension of the deadline to the taxpayer on request if needed to collect the requested information. Based on that information, the tax authorities determine the opportunity to go further and to reassess the tax due.
A second approach could be for the tax authorities to directly reassess the amount of tax due by issuing a tax assessment that differs from what the taxpayer has reported in its tax returns. The taxpayer has three months to contest this new assessment. A dialogue starts with the tax authorities and if no agreement is found, the case could be brought to the court.
The tax authorities in Luxembourg always provide the taxpayer with the opportunity to explain the position it took in its corporate tax returns. A dialogue is established between the tax authorities and the taxpayer which could be smoother than in other jurisdictions.
Ultimately, the tax authorities can issue an automatic taxation (‘taxation d’office’), particularly if the taxpayer does not respond to their requests for information after several reminders. Automatic taxation is not always in line with the real tax base the taxpayer should have been subject to as it is based on the information available to the tax authorities.
In principle, once the tax authorities have issued the tax assessment and the taxpayer has received it, the tax assessment cannot be further modified by the tax authorities. Likewise, the taxpayer cannot claim for modification of a tax assessment if the claim is not introduced on time. This derives from the “authorité de la chose jugée”, however, in case of “new elements” as set out in various case law, the tax authorities can issue a corrective tax assessment before the prescribed period has elapsed. The taxpayer must have the opportunity to be heard by the tax authorities before a corrective tax assessment can be issued.

Time limits

For corporate income tax, municipal business tax and net worth tax, the limitation period expires at the end of the fifth year term following the date of origination of the claim, under article 10 paragraph 1 and 3 of the law of 27 November 1933, and at the end of the tenth year term in cases of incomplete or inaccurate returns, with or without fraudulent intention of the taxpayer. The limitation period can be interrupted or suspended in certain cases.
For VAT the limitation period expires five years from 31 December of the year in which the sum of money to be collected has fallen due under article 81 paragraph 1 of the VAT Law.

Tax fraud in Luxembourg

Criminal tax offenses include tax evasion (‘fraude fiscale’), aggravated tax evasion, tax fraud (‘escroquerie fiscal’) and attempts to commit those offenses.

For more on criminal tax offences in Luxembourg, see our separate Out-Law guide.

Litigation of tax disputes

For more on tax dispute resolution in Luxembourg, see our separate Out-Law guide.

A version of this guide was originally published by Legal500.