FAIA - e-VAT audits in Luxembourg

The Luxembourg VAT Authorities may require taxpayers to provide all the information necessary for their audit on an electronic structured audit file (the so-called "Fichier d'Audit Informatisé de l'Administration de l'enregistrement et des domaines" - "FAIA"). These requests are more and more frequent since beginning 2015. Failure to comply with this obligation could trigger penalties either on a lump sum basis (up to EUR 5 000 per infraction) or as daily penalties ranging from EUR 50 to EUR 1.000. Taxpayers should check whether there are in the scope of the "FAIA". If they are temporarily released from this obligation, taxpayers should monitor their position towards the "FAIA" requirements on a regular basis.

We have brought together a dedicated team which helps clients to generate FAIA files (FAIA generation). We have also developed a testing tool, which reads FAIA files and detects possible errors and risks linked to the structure or content of the files (FAIA assessment). Our experience encompasses several levels of assistance around FAIA. It allows us to propose tailor made services depending on the needs and on the characteristics of each client and business.

At the end of 2009, the Luxembourg VAT Authorities published on their website a first recommendation about the implementation of the "Fichier d'audit informatisé AED" (FAIA) designed to carry out efficient dematerialised VAT audits.

The FAIA is designed to be a standard file. It is an interface between the systems of taxable persons and the systems used by the VAT Authorities for performing audits. It takes the form of a structured file through which information on the business is exported from the systems of the taxable person. This file is based on the Standard Audit File for Tax (SAF-T) developed at the OECD level.

The legal basis for this new requirement is the law of 19 December 2008 concerning the assistance between tax administrations (read more), which amends among others article 70.3, 2nd paragraph of the Luxembourg VAT law. This article provides now that when books, documents and, generally, all information which must be provided upon request to the authorities, are available electronically, they must be communicated in any form and following any technical specifications as the authorities will require.

Therefore, any taxpayer who uses an electronic accounting system is required to deliver the relevant data electronically upon request of the VAT office. As long as the taxpayer cannot provide a compliant FAIA file, the law provides penalties ranging from 50 to 1,000 EUR per day.

Luxembourg VAT Authorities published a second recommendation, taking into account observations and questions raised from businesses working in collaboration with PwC. This new guidance paper essentially introduced categories of businesses exempt to meet the FAIA requirements, for the time being.

The VAT authorities also published the list of fields (obligatory and facultative) on their website on October 2011 (FAIA version 2.0). On February 2013, the VAT authorities have communicated a new recommendation concerning FAIA (FAIA version 2.01) and added FAQs.

The technical description of the file structure defined in the .xsd file as well as the recommendations and FAQs can be found here.

The introduction of the FAIA clearly intends to bring VAT audits in Luxembourg to a new era. Until 2014, the VAT authorities requested a limited number of FAIA files from selected businesses as they were in testing mode. Beginning of 2015, those requests become widespread. Businesses which are in the scope of these new requirements must now consider them as a matter of priority. Please take note that the FAIA may be requested to verify VAT returns relating to 2011 and following years. The applicability of the rules to your company / companies may change from one year to another (e.g. the periodicity of the filing is one of the criteria).

How can PwC help?

PwC Luxembourg has brought together a dedicated team of accounting, IT and VAT experts to help you understand your obligations in respect of FAIA and implement the new requirements. Our assistance is always customised to your specific needs and consists of the following services, which we may provide separately:

  • Assessing the impact of the new requirements from an accounting and VAT standpoint;
  • Reviewing the company's IT environment and data available in the systems with regard to the data requested;
  • Assist in elaborating a data mapping between the Information System and the FAIA with regard to the data requested using our fit-for-use "data mapping template";
  • Identify the best extraction and consolidation strategy from the different financial and operational systems;
  • Assist in generating the FAIA files;
  • Test the format and structure of the FAIA files with a view to making it readable by the authorities;
  • Take care of day-to-day project management and coordination activities.

  • Test the content of the FAIA files: run a series of consistency checks and pre-fiscal tests on the content of the files with a view to identifying possible errors or mismatches;
  • Issue a report listing the errors by categories, and commenting the errors to allow the IT and finance department to rework the files or the source documents, where appropriate or necessary, before the FAIA is sent out to the authorities.

Our experience encompasses several levels of assistance around FAIA. It allows us to propose tailor made services depending on the needs and on the characteristics of each client and business.

We are regularly assisting the IT, finance and tax departments of Luxembourg-based companies to complete the data mapping, extract the relevant information from their information systems (accounting, billing) and build up a compliant FAIA file. Those companies are active in various sectors: entities owning real estate, industrial companies, retail stores, buyer-reseller and principals in the supply of various types of products, as well as service providers. We also work with financial institutions and asset managers, which are currently relieved from the obligation to produce a FAIA file. However, some of those businesses already anticipate this future requirement. Moreover, the VAT authorities can request any business to provide the VAT relevant data electronically and in another structured way. Being able to produce a FAIA would thus meet the maximum technical requirements the VAT authorities can currently impose.

In addition to helping generate a FAIA file, most of our clients ask us to test and assess the format, structure and content of the file. Our Assessment Tool is unique on the market and provides a real added value: a confirmation to our clients that the produced file should be readable and an additional comfort that the data contained in the FAIA is consistent and would not lead to material adjustments.