Although the Government still claims to be working at a widely called-for tax reform, and despite acknowledging the shortfalls of the antiquated Abgabenordnung in terms of balance between the taxpayer’s rights and administrative might, a newly filed-in Bill 8186, which is presented by the Government as a simplification and modernisation of the tax procedures, aims at further affecting the rights of said taxpayer.
Reinforced prerogatives of the tax authorities
The Direct Tax Administration will be authorised to outsource “informatic works” to the Centre des technologies de l’Etat, to its contractors and sub-contractors, irrespective of the principle of tax secrecy. Likewise, the cooperation between the Tax Authorities and the CSSF(Financial Sector Regulator) and the CAA(Insurance Sector Regulator) will be enhanced further.
Communication of documentation
All data and documents existing in electronic format will have to be communicated to the Tax Authorities upon request.
Documentation relating to Transfer Pricing policy will also have to be provided on request and a Grand-ducal Decree should further specify the content of such documentation.
Cleaning up (a bit of) the 1931 tax law
While the formal abrogation of some obsolete provisions of the Abgabenordnung are certainly welcome, the proposed Bill also intends to (i) formalize the Advance Pricing Agreement procedure deriving from a mutual agreement provided for by a Double Tax Agreement, (ii) prevent the use against the Treasury of annual accounts that would not have been timely filed in with the Companies Register and (iii) restrict the appeal against ex officio tax assessments to situations whereby the difference between the real income and the income assumed (by lack of a timely tax return) exceeds 10%.
The taxpayer may also request deferral of payment of tax due in case of “considerable hardship”. Interest will accrue and a Grand-ducal decree should further detail the procedure.
Forclosure of right to exemption
The Bill envisages to deprive the taxpayer from any right to claim a tax exemption “subject to formal request” by way of a tax appeal.
The concept of “formal request”only refers to provisions (exemption or tax rebate) conditional to a formal request and should, in our view, not apply to provisions independent from such (e.g. article 166 LIT on the exemption of eligible dividends).
Appeal procedures further formalised
In case of a disagreement, the taxpayer might appeal to the Director of the Tax Administration by way of an (until now) rather informal request. The Bill intends at formalising the form of such appeal, requesting that:
- The appeal is signed by the claimant or her/his/its representative;
- The appeal contains the name, surname and address of the claimant;
- The appeal refers to the appealed decision;
- The appeal mentions the object of the challenge;
- The appeal describes the facts and the legal means;
- A power of attorney is attached in case of representation;
- A list of evidence pieces is attached.
In the absence of a decision of the Director after six months, the taxpayer is entitled to go to court.
The Bill provides for a delay of 12 months (as from the lapse of the previous 6 months period) after which the decision appealed will become final.