VAT fines and penalties
Failure to comply with VAT obligations may result in the application of fines or tax and criminal penalties, as defined in Article 77 to 80 of the Luxembourg VAT law. The main penalties are described here below.
A fine ranging from EUR 250 to EUR 10,000 per infringement may be imposed for failure to comply with the following obligations:
- application of the special scheme for taxing the profit margin applicable concerning second-hand goods, works of art, collectors' items and antiques
- application of the special scheme (declarations by VAT MOSS system) for companies not established in the European Union (EU) providing electronic services to individuals residing in a Member State of the EU
- application of the special scheme (declarations by VAT MOSS system) for companies established in the European Union (EU) providing electronic services to individuals residing in a Member State of the EU
- implementation of tax representation for imported goods
- implementation of tax representation for goods in suspensive VAT arrangement
- obligations linked to registration
- obligations linked to invoicing
- obligations linked to filing VAT returns and filing recapitulative statements
- obligations linked to maintaining detailed accounting and specific registers
- obligations for storing invoices and other documents that must be retained
- obligations linked to the application of the VAT rate of 3% applicable concerning the creation and renovation of residential buildings
- putting in place of a guarantee by a company not established in the EU territory
- obligation to provide invoices, documents and all accountings items in the case of a tax audit, including items in electronic format
- obligation of access to the operator's professional premises.
It should be noted that if the intent or result of any failure to comply with these obligations is to avoid payment of VAT or obtain illegal reimbursement of it, a penalty tax of 10% to 50% of the amount of VAT in question may apply.
A penalty tax in the maximum amount of EUR 25,000 per day of delay, which cannot be accumulated with the previous fine of EUR 250 to EUR 10,000, may also apply, after a warning, in the case of failure to provide invoices, documents and any accounting items, in the case of a tax audit, including items in electronic format.
A penalty tax in the amount of 10% per year of the amount of VAT due may apply in the case of a delay in paying the VAT.
These tax penalties may be accompanied by criminal penalties for aggravated tax fraud and tax swindle, as determined by the judge. Depending on the amount of the fraud, criminal penalties are for one month to five years of imprisonment, and a tax penalty ranging between EUR 25,000 and ten times the amount of the VAT in question. A person guilty of fraud may moreover be stripped of certain civil rights for a period of time that can vary between five and ten years.
The establishment of a false certificate intended to compromise the interests of the Treasury is also punishable by a criminal fine between EUR 251 and EUR 12,500.
Non-criminal fines must be paid within one month following their notification, even in the case of an appeal.
Remedies against a correction or taxation of a VAT return
Infringements to the law are demonstrated by the Luxembourg Registration Duties, Estates and VAT Authority (AED) in official minutes that are applicable unless otherwise demonstrated. Such minutes may be prepared by AED agents, officers of the judicial police or customs officers.
Any errors thus noted shall be subject to correction or taxation by the AED, which is notified to the operator by registered post.
A correction or taxation may be contested within three months of their date of notification by filing a claim against it. Claims must be duly motivated and submitted in writing to the operator's local tax office.
In the case of the total or partial dismissal of a complaint, the claim is automatically referred to the Director of the AED. The taxation in question will be re-examined and confirmed or corrected. The Director's decision will be notified to the operator in a letter sent by registered post.
The Director's decision may be contested by a summons to appear before the chamber of the District Court of Luxembourg hearing civil cases. The summons must be notified to the Director of the AED within three months following the notification of their decision to the operator.
It should be noted that if a complaint against a correction or taxation filed with the tax office remains without response after six months, the complaint is considered to have been dismissed. The operator may contest this dismissal by a summons before the chamber of the District Court of Luxembourg hearing civil cases, and must notify the summons to the Director of the AED.
Remedies against a tax fine
Tax fines are sentenced and notified to operators in a written decision of the Director of the AED or their assistant.
A decision may be contested within three months of its notification, by filing a complaint. Complaints must be duly motivated and submitted in writing to the Director of the AED. The Director of the AED will re-examine their decision and confirm, reduce, or nullify it. The Director's decision will be notified to the operator in a letter sent by registered post.
The Director's decision may be contested by a summons to appear before the chamber of the District Court of Luxembourg hearing civil cases. The summons must be notified to the Director of the AED within three months following the notification of their decision to the operator.
If there is no response to a complaint notified to the Director within six months, the complaint is considered as dismissed. The operator may contest this dismissal by a summons before the chamber of the District Court of Luxembourg hearing civil cases, and must notify the summons to the Director of the AED.
Remedies in criminal matters
The main remedies in criminal matters are the appeal and the objection.