Covid-19 – Support for Luxembourg taxpayers

19/03/20

In Brief

The Luxembourg Government has acknowledged the complexity of the current Covid-19 pandemic situation, and has already acted to take strong measures to stop the coronavirus from spreading further. Recognising that these measures could adversely impact the Luxembourg economy, the Government has also moved rapidly to adopt measures to support Luxembourg businesses and individuals. 
Tax compliance obligations, costs and liabilities are one particular area of concern. The Luxembourg direct tax authorities, the Administration des Contributions Directes (“ACD”) have announced, in their newsletter of 17 March 2020, that they are taking exceptional steps, offering relief to taxpayers facing liquidity/solvency issues that might potentially arise from the payment of certain taxes/advances, and also in allowing a deferral of certain tax return filing obligations. 
The relevant authorities have also announced that fines for late submission of VAT returns will, until further notice, not be levied, and that the VAT authorities will automatically pay back, starting from this week, all VAT credit balances of up to EUR 10,000.

In detail

Direct taxes

Please find here the link to the ACD newsletter (in French):

https://impotsdirects.public.lu/fr/archive/newsletter/2020/nl17032020.html 

Taxpayers in scope

The measures apply to companies subject to Corporate Income Tax (CIT), Municipal Business Tax (MBT) and Net Wealth Tax (NWT); and to legal and natural persons deriving business income, or agricultural and forestry income profits, or non-commercial income (i.e. "professions libérales"). 

Measures

These taxpayers may request all or any of the following reliefs:

  • Non-payment of tax advances normally due in relation to the first and second quarters of 2020. In practice, for taxpayers subject to CIT and MBT, this means the cancellation of CIT advances normally due on 10 March 2020, and 10 June 2020, and of MBT advances normally due on 10 February 2020 and 10 May 2020. Here is a link to the request form: https://impotsdirects.public.lu/dam-assets/fr/formulaires/covid/annulationavances.pdf 

  • Deferred payment of CIT, MBT and NWT liabilities due. For any CIT, MBT and NWT due as from 1 March 2020, taxpayers may request a 4-month deferral, starting as from the due date of the tax concerned (this is not the date of the tax assessment itself, but rather the date on which those taxes should be paid as per the "décompte d'impôt"). Here is the link to the request form: https://impotsdirects.public.lu/dam-assets/fr/formulaires/covid/delaipaiement.pdf

  • Deferral of the filing date for tax returns. Tax returns for the 2019 tax year for both personal taxpayers and corporate taxpayers now do not need to be filed until 30 June 2020. 

The ACD newsletter notes that any cancellation of tax advances, or deferred payment, requests should be accepted automatically, to the extent that the above conditions are met. Please note however that the forms provided by the ACD do require a short justification for the cancellation of advances, or deferred payment. The ACD provides no further guidance in this respect. Given that the form provides only two lines for the justification, we would however expect that a rather straightforward statement (for example; "the company is facing liquidity issues") should be satisfactory. 

A few additional clarifications are made, as follows:

  • The above requests should be completed, signed, and sent via regular mail, or by email, to the relevant tax office. 

  • Obligations to pay over taxes withheld on salaries cannot benefit from the deferral. 

  • A deferral request is possible only for CIT, MBT, or NWT that is otherwise due on or after 1 March 2020, and not before. 

  • NWT advances do not benefit from the cancellation of advances measure foreseen above. 

  • It is also possible to request a reduction of the CIT and MBT advances, instead of cancellation. To do so, the taxpayer should send a letter to its relevant tax office detailing the amount of the reduction requested, and the reason for requesting such a reduction. 

Value Added Tax

The Luxembourg VAT Administration have stated, in a brief news bulletin posted on their website on 18 March 2020, that, until further notice, as a matter of administrative tolerance, no fines will be levied when VAT returns are filed late. Normally, such fines are system-generated as soon any deadline elapses, and can range between EUR 250 and EUR 10,000.

Also on 18 March 2020, the Luxembourg Ministry of Finance announced that the authorities will automatically pay back, starting from this week, all VAT credit balances of up to EUR 10,000, in order to help some 20,000 businesses in Luxembourg cope with possible initial liquidity issues. Here is a link to the announcement (in French).

https://mfin.gouvernement.lu/fr/actualites.gouvernement%2Bfr%2Bactualites%2Btoutes_actualites%2Bcommuniques%2B2020%2B03-mars%2B17-mesures-fiscales-covid19.html

In Conclusion

This Flash News outlines the position on 19 March 2020. The situation is still evolving, and further measures might be announced in the coming days. 

Nevertheless, the reliefs outlined above will be welcome news for many businesses and other taxpayers at this difficult time. 

We also take this opportunity to refer you to our PwC Snapshot, detailing many wider measures currently being taken in Luxembourg. This webpage details, within a wide-ranging review of business and HR aspects, other measures concerning the personal tax and social security issues that can arise for employees having to work at home.

1. PwC Luxembourg (www.pwc.lu) is the largest professional services firm in Luxembourg with 2,870 people employed from 76 different countries. PwC Luxembourg provides audit, tax and advisory services including management consulting, transaction, financing and regulatory advice. The firm provides advice to a wide variety of clients from local and middle market entrepreneurs to large multinational companies operating from Luxembourg and the Greater Region. The firm helps its clients create the value they are looking for by contributing to the smooth operation of the capital markets and providing advice through an industry-focused approach.

2. The PwC global network is the largest provider of professional services in the audit, tax and management consultancy sectors. We are a network of independent firms based in 158 countries and employing over 250,000 people. Talk to us about your concerns and find out more by visiting us at www.pwc.com and www.pwc.lu.

Contact us

Gerard Cops

Tax Services Leader, PwC Luxembourg

Tel: +352 49 48 48 2032

Murielle Filipucci

Partner

Tel: +352 49 48 48 3118

Sami Douénias

Tax Partner, PwC Luxembourg

Tel: +352 49 48 48 3060

Christophe Loly

Partner

Tel: +352 49 48 48 5114

Julien Treffort

Partner, Personal tax department, PwC Luxembourg

Tel: +352 49 48 48 3349

Frédéric Wersand

VAT Partner, PwC Luxembourg

Tel: +352 49 48 48 3111

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