COVID-19: New deadline extensions in fiscal matters

Further to the Luxembourg government’s decision to introduce several tax measures in favour of legal and natural persons, as announced on 17 March 2020, the Luxembourg Minister of Finance, Pierre Gramegna, submitted a bill of law N°7555 to the Luxembourg Parliament intending to extend deadlines during the state of crisis in fiscal, financial and budgetary matters.

In addition, the Luxembourg indirect tax authorities published a newsletter on 7 April 2020 informing taxpayers that they could grant payment deadlines for VAT on request.

On March 17, 2020, the government announced a first series of tax measures supporting companies and self-employed persons in relation to direct and indirect taxes in response to the crisis linked to the spread of COVID-19.

Some of these measures along with new ones are included in the Bill of law n° 7555 published on 7 April 2020 which aims at providing deadline extensions in fiscal, financial and budgetary matters (the “Bill”). The main measures directly affecting the taxpayer are outlined below.

• Direct taxes

1. - As already announced by the Luxembourg tax authorities in their newsletter of 17 March 2020, the Bill foresees an extension of the deadline to file the 2019 tax return to 30 June 2020 (instead of 31 March 2020) for both individual taxpayers and corporate taxpayers.
2. Cross-border workers may need to monitor the timing for the filing of their tax returns respectively in Luxembourg and in their country of residence as it may be more convenient to file the Luxembourg tax return first.
3. - Under normal circumstances, Article 167 (4) of the general tax law of 22 May 1931 ("Abgabenordnung" or “AO”) provides that in certain cases, the Luxembourg tax authorities can grant deadline extensions for filing the tax return up to 30 June. Under the Bill, the Luxembourg tax authorities may allow individual taxpayers  to file their 2019 tax return up until 31 December 2020.
4. - Since 1 January 2018, married resident taxpayers have been able to opt for separate taxation triggering the application of Tax Class 1 for both spouses. For the tax year 2019, the request for separate taxation must in principle have been filed with the Luxembourg tax authorities before 31 March 2020. According to the Bill, the deadline for choosing this option is extended to 30 June 2020. The same extension applies in favour of civil partners electing to file jointly.
5. - Resident taxpayers receiving certain interest income from paying agents located in another EU or EEA Member State, who apply to benefit from the 20% flat rate taxation, as provided under the Law of 23 December 2005, could file their applications up to 30 June 2020 (instead of 31 march 2020 under normal circumstances) for tax year 2019.

• Tax dispute

In principle, a claim against the decisions of the tax inspector (réclamation) based on section 228 AO must be filed within three months of notification of the assessment (section 245 AO). However, it is proposed under the Bill to interrupt the three-month period up until 30 June 2020. This interruption also applies to claims made under section 237 of the AO (recours hiérarchique).

• Statutes of limitation in tax matters

1. - Treasury claims (as well as any claim whose recovery is entrusted to the Luxembourg tax authorities) that would expire before 31 December 2020 under normal circumstances, will survive until 31 December 2021 according to the Bill.
2. - This time extension also applies to claims entrusted to the Grand Duchy of Luxembourg based on the Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures or on a bilateral or multilateral tax convention.

• Privilege

1. - The privileges and guarantees provided for by the Law of 27 November 1933 concerning the collection of direct contributions whose effects cease in principle before 31 December 2020, are extended to December 31, 2021 under the Bill.
2. - The deadlines for registration of the seller's and lender's privilege, as provided for in Articles 2 and 4 of the Law of 18 April 1910 on the mortgage scheme, as well as the deadline for registering the general privilege of creditor, are extended from 45 to 90 days. Furthermore, the deadline for registering the privilege of the co-heir or the co-sharer, is extended from 60 to 120 days.

Interestingly, it was clarified in the Bill that the measures provided therein will not have a direct financial impact on the State’s budget.

The Bill should be voted shortly and if approved, the law will be effective on the day of its publication in the Luxembourg official gazette.

In addition to the Bill, the Luxembourg indirect tax authorities published a newsletter on 7 April 2020 informing taxpayers that they could grant payment deadlines for VAT on request. This measure is intended for persons subject to VAT (individual and legal persons) as well as to persons not subject to VAT but with a VAT identification number who:

1. - are exposed to financial difficulties due to having a direct link with the Covid-19 crisis;
2. - wish to benefit from the fiscal measures decided by the Government to deal with the spread of the coronavirus.

Persons willing to benefit from this measure must submit their request online via MyGuichet.lu.