The procedure in direct tax matters requires the taxpayer to first file an appeal against a tax assessment or any other administrative decision in tax matters with the Director of the Luxembourg direct tax authorities. If the Director does not respond to the appeal within six months, the taxpayer can bring a claim in front of the administrative tribunal. Currently, there is no deadline within which the taxpayer must initiate proceedings.
A recent draft law intends to modify the procedure by introducing a time limit of 12 months, starting at the end of the aforementioned six-month period, to submit a claim in front of the administrative tribunal. This would then be extended by six months (i.e., to a total of 18 months) in case of an audit by the tax administration.
Once adopted, taxpayers will have to react much faster in order to defend their positions towards tax administration.
How to adapt to changing tax risks?
Considering the acceleration in the number of tax disputes and the upcoming legislative changes, the need for strong tax governance has emerged as a necessity for the effective management of tax risk and tax controversy. To avoid and, where required, to efficiently manage tax disputes, taxpayers must have a thorough understanding of the tax controversy process, should diligently review their tax assessments, monitor deadlines and establish robust tax litigation management strategies that cover all stages of dispute resolution, including prevention, management and resolution.