Answer ... Based on the Luxembourg tax law, corporate taxpayers must file an annual tax return for corporate income tax, municipal business tax and net wealth tax before 31 March of the year following the tax year in respect of which the tax returns are being filed. However, in practice, the deadline is automatically extended until 31 May. Additional deadline extensions may be granted upon request. The electronic filing of the corporate tax returns has been mandatory since 2017.
Companies must pay quarterly tax advances, fixed by the tax administration based on the tax assessed for the preceding tax year or based on an estimate (for the first tax year).
The final tax assessed by the tax authorities must be paid by the corporate entity before the end of the month that follows the month of receipt of the tax assessment. The following additional tax returns may also have to be filed:
- dividend withholding tax return and directors’ fees withholding tax return, which must be filed within eight days of the income being put at the disposal of the beneficiary; the tax must be paid at the same time;
- withholding tax return for interest on savings paid to resident individuals, which must be filed before the 10th of the month following payment of the income;
- withholding tax return for income from independent literary or artistic activities and professional sports activities, where these activities are or were carried out in Luxembourg. The withholding tax must be paid before the 10th of the month in which the income was paid and the tax return must be filed before the 10th of the month following the quarter in which the payment was made; and
- withholding tax return on salaries, which must be filed before the 10th of the subsequent month if done on a monthly basis; however, a quarterly or yearly filing may also be required, depending on the amounts of tax involved.
Answer ... In case of late filing, a 10% fine calculated based on the assessed tax may be levied. The late filing of tax returns may also trigger a penalty of up to €25,000; while the deliberate filing of incorrect or incomplete tax returns shall trigger an administrative penalty of between 5% and 25% of the unduly reimbursed or understated tax.
Omission or late payment of taxes triggers a penalty of 0.6% per month on the difference between the tax due and the advance payments made. In case an extension of the payment deadline has been granted to the taxpayer, penalties for late payment are computed as from the 5th month following the initial payment deadline as follows: 0.1 % per month in case of payments between 5 months and 1 year overdue; 0.2 % per month for payments between 1 and 3 years overdue; 0.6 % per month, for payments more than 3 years overdue.
A penalty of 10% (maximum €25,000) of the tax will be due in case of repeated violation.
Additional penalties and sanctions may apply in case of tax fraud.
Answer ... Luxembourg has implemented the EU Directive on Country-by-Country Reporting, which extends administrative cooperation in tax matters to country-by-country (CbC) reporting. Multinational (MNE) groups with a consolidated revenue exceeding €750 million are required to prepare a CbC report and file it with the Luxembourg tax authorities within 12 months of the last day of their reporting fiscal year. In addition, each Luxembourg constituent entity of an MNE group falling within the scope of the directive must notify the tax authorities of its role in the group (ie, whether it is the reporting entity of the group and if not, which entity of the group is the reporting entity), and must provide all the information required to identify the reporting entity and verify the submission of the CbC report no later than the last day of the reporting fiscal year for the MNE group.
Luxembourg financial institutions falling within the scope of mandatory reporting under the common reporting standard, EU Directive 2014/107/EU amending Directive 2011/16/EU as regards the mandatory automatic exchange of information in the field of taxation (DAC 2) ensuring that information on holders of financial accounts is reported to their EU member state of residence, and the US Foreign Account Tax Compliance Act must file their reports by the end of June of the year following the calendar year to which the reporting relates. From a practical point of view, it is possible for the financial institution to report directly through some IT applications, as Luxembourg authorities identify the official service providers each year. It is also possible to delegate this task to a third party or service provider.
Luxembourg taxpayers may also be subject to other reporting obligations which are based on tax treaty provisions on the exchange of information upon request, the Directive on Administrative Cooperation in the Field of Taxation, as amended, or the anti-money laundering rules. ‘Fishing expeditions’ by foreign authorities are precluded under Luxembourg law.
Non-compliant taxpayers may incur a fine of up to €250,000.