A new law amendment has restored the right of Luxembourg taxpayers in the exchange of information.
Taxpayers are increasingly confronted with orders from the Luxembourg tax authority to provide information under the threat of a penalty of up to €250,000. These often request the full disclosure of confidential documents, such as board minutes, employment contracts or bank statements.
Typically, this exchange of information is requested by foreign tax authorities for tax administration and tax enforcement purposes and Luxembourg is obliged to comply with these information requests under the international framework of administrative cooperation. However, a law amendment has restored the right of Luxembourg taxpayers to defend themselves against these information orders.
In 2013, Luxembourg was criticised by the Global Forum on Transparency and Exchange of Information for Tax Purposes for not engaging in effective exchange of information in line with international standards. Consequently, in 2014, the Grand Duchy adapted its legislative framework. By abolishing the right of taxpayers to claim against information orders, Luxembourg sped up the procedure for exchange of information on request.
However, in 2017, the Court of Justice of the European Union reinstalled the taxpayer’s right to claim against information orders. In response, Luxembourg amended the law on exchange of information on request. The new law obliges the Luxembourg tax authority to review the information requests in more detail and it restores the taxpayer's right to file a claim against information orders thus seeking judicial review of the underlying request.
The law amendment now gives back the procedural right to the information holder to file a claim with the Luxembourg courts against information orders. Any statement of claim must be submitted within one month of notification of the information order and the claim will automatically suspend the execution of the order so that the information holder does not have to provide the information until the case is decided in court.
The court`s review is limited to verification whether the requested information manifestly has no foreseeable relevance to the tax purpose stated by the foreign authority. This tax purpose must be disclosed during the fast-track litigation by the authorities in their statement of defence. Given that each party can initially file only one statement, the court may order the submission of additional statements. The court must render its decision within one month of the filing of the last statement. In general, this may be within the third month after the filing of the claim.
This information was provided by KPMG Luxembourg.