Key takeaways
On 6 August 2025, the Luxembourg Higher Administrative Court (Cour administrative) handed down a decision (n°52321C) whereby taxpayers cannot themselves request an ex-post review following the filing of an inaccurate tax return. From the Court’s perspective, the decision to carry out a subsequent tax audit is indeed a discretionary decision that can only be undertaken by the tax administration, and which must be assessed based on the criteria of fairness and appropriateness set out in § 2 of Steueranpassungsgesetz (hereafter “StAnpG”).
Facts of the case
In 2018, a Luxembourg-tax-resident company (hereafter the “Company” or the “Taxpayer”) filed a claim against the Luxembourg Tax Administration (hereafter the “LTA”) by application of § 228 Abgabenordnung (hereafter “AO”) and submitted an amended tax return challenging a provisional 2016 tax assessment issued under § 100a Abgabenordnung (hereafter the “Provisional Tax Assessment”). The correction concerned the omission of a tax-exempt dividend under the Luxembourg participation exemption regime, despite correct treatment (retained in the 2016 inaccurate tax return) of the related qualifying participation for 2017 net wealth tax purposes (as being accepted by the LTA under the Provisional Tax Assessment). By way of reminder, a tax assessment issued under § 100a AO is considered provisional because it is automatically generated based on the taxpayer’s filed return, without prior examination by the tax office. As a result, said tax assessment does not represent a final position, and during a five-year statute of limitation, the LTA retain full discretion to review the return, request further information, and issue a revised or final assessment (on the grounds of § 210 AO).
In the present case, the Director of the LTA rejected the claim as time-barred under the three-month deadline by application of § 228 AO. In 2020, bankruptcy proceedings were initiated against the Company for unpaid taxes related to the fully taxable dividend incurred in 2016.
In December 2021, the Company submitted a formal request to the Director of the LTA to consider the 2018 amended tax return for 2016, attaching both the amended return and a voluntary waiver of the 5-year statute of limitations. The Director of the LTA treated such request as a formal hierarchical appeal (recours hiérarchique formel) which was however rejected and dismissed in October 2022 by the latter on the grounds of the following: the request was considered (i) inadmissible due to being late when contesting the tax office’s refusal to issue amended assessments under § 94(1) AO and (ii) unfounded when challenging the refusal to issue final assessments under the discretionary post-audit procedure of §100a AO.
In October 2022, the Taxpayer brought legal action against the rejection of the formal hierarchical appeal filed in December 2021 (hereafter the “Formal Hierarchical Appeal”), seeking a court order compelling the LTA to carry out a post-assessment review of the amended tax return for the 2016 fiscal year by virtue of § 94 (1) AO. The Taxpayer mainly argued that the Provisional Tax Assessment had not acquired the force of a final administrative decision before the expiry of the five-year statute of limitations. Nonetheless, the Taxpayer was dismissed at first instance and subsequently appealed the decision.
Outcome of the Higher Administrative Court’s ruling
The main argument brought by the Taxpayer in front of the Higher Administrative Court is that the LTA does not have discretionary power, when it comes to reviewing an amended return still submitted within the 5-year limitation period by application of the provisions foreseen under § 94 (1) AO), and such a decision to proceed with a subsequent tax review should be necessarily conducted in line with the principles of fairness and appropriateness set out in § 2 of the StAnpG.
Overview of § 100a AO & § 94 AO
Given the arguments raised by the taxpayer, the Higher Administrative Court recalls the key provisions set forth in § 100a AO, which are as follows:
- The tax office may, subject to a subsequent review, determine the tax based solely on the tax return, without the need to state the reasons.
- The issuance of a tax assessment notice within the meaning of § 210 constitutes the lifting of the reservation for subsequent review.
- Upon expiration of the five-year limitation period, the reservation for subsequent review lapses, and the tax assessment becomes final.
Additionally, the Court reminds that provisions under § 94 (1) AO foresee the following: “Tax assessment (§§ 211, 212, 212a para. 1, 214, 215 and 215a) and individual administrative decisions (§ 235) may only be withdrawn or amended on the dual condition that the taxpayer expressly consents to this and that they are not barred from doing so in the context of a contentious appeal”.
The Administrative Higher Court affirms LTA's full discretionary power in tax returns’ investigations under §§ 100a and 94 (1) AO
The Administrative Higher Court reminds that LTA can exercise its discretionary power in issuing an administrative decision, such as the refusal of proceeding a subsequent tax audit by application of § 94 (1) AO, by fulfilling two main principles which are set out in § 2 StanpG which are the principles of fairness and appropriateness. In the present case, the Court explains that none of the principles of fairness and appropriateness were infringed since it is clearly the legislator’s intention and willingness to allow the LTA to undertake, by its own initiative, any subsequent tax audit following the issuance of a Provisional Tax Assessment by virtue of § 100a AO. As a result, the Court confirms the LTA are not legally bound by any strict obligation to (i) conduct such a tax audit, or (ii) consider a rectified tax return, when requested by a taxpayer and even if such a procedure could potentially reduce the taxpayer’s tax burden.
Deadline to undertake a legal remedy against a Tax Provisional Assessment and a Formal Hierarchical Appeal
The Administrative Higher Court specifies that the Provisional Tax Assessment shall have the same qualification of a definitive tax assessment with the meaning of § 211 AO (Draft law n°5757, p. 15). As a result, the correction of a Provisional Tax Assessment by way of filing of a rectified tax return shall be sought by virtue of the provisions under § 228 AO and within the 3-month delay following the notification of said tax assessment.
The same conclusion applies to a request filed by the taxpayer, by way of a formal hierarchical appeal, for a subsequent tax audit aimed at amending the Provisional Tax Assessment on the grounds of provisions set out in § 94(1) AO, regardless of the fact that the 5-year tax statute of limitations has not yet expired. In this particular instance and considering that the Company lodged a Formal Hierarchical Appeal against the Director’s LTA years after the issuance of the Tax Provisional Assessment, such a claim was time-barred according to the Administrative Higher Court.
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