On May 18th 2018 (Case No. 00136), the Luxembourg Constitutional Court (hereinafter the “Court”) decided on a referral for preliminary ruling by the Luxembourg City District Court in a case regarding valued added tax (hereinafter “VAT”). The dispute concerned an action taken by a taxpayer against the Luxembourg tax authorities regarding the possibility to benefit from a tax remission (remise gracieuse) for VAT. The Luxembourg general tax code offers the possibility for a taxpayer to benefit from such remission in direct tax matters only, excluding de facto VAT from the benefit of said remission.
In its decision, based on the principles of equality before the law and equality in tax matters, the Court first examined the comparability of the situations of a taxpayer liable for VAT and the situation of a taxpayer liable for direct taxes. Analysing the general characteristics of both taxes, the Court recalled that direct taxation impacts the taxpayer’s financial situation, income and wealth, whereas for VAT, the taxpayer only plays the role of an agent, collecting VAT from its clients in order to subsequently continue the collected VAT to the authorities, without however economically bearing the burden of the tax. The Court concluded that both situations are not sufficiently comparable for the principle of equality to apply and thus declared the current rules governing remission constitutional.