Last Call For Tax Amnesty Regularisations!

With the introduction of a temporary tax amnesty regime in 2016, taxpayers have been given the possibility to file corrective tax returns by 31 December this year. Part of the Law of 23 December 2016's fight against tax fraud and money laundering, this regime represents an opportunity to report previously undeclared income without certain sanctions. The remaining three months are the last call for concerned taxpayers to report undeclared income (and related assets) that have not been previously disclosed to the Luxembourg tax authorities.

Why should I file?

As part of the tax reform 2017 package, the legislator has reinforced the fight against tax fraud and money laundering. Going forward, so-called "aggravated" and "serious" tax frauds will constitute predicate offenses of money laundering. Therefore, Luxembourg banks will be obliged to review their entire client population in light of fraud risk. Where banks have reasonable suspicion that failure to declare income is an [aggravated or serious] tax fraud, they will have to report those taxpayers to the State Prosecutor's Office. Therefore, concerned taxpayers that do not regularise their documentation will face an increased risk of being reported and may face criminal charges in court.

Conversely, the tax amnesty regime provides that "normal" sanctions, i.e. those sanctions which apply to tax fraud and non-intentional tax evasion, will not apply to taxpayers who duly regularise their situations.

Who is concerned?

Put simply, the tax amnesty regime targets all taxpayers that have failed to report taxable income or who have otherwise obtained undue tax advantages or reduced tax revenues within the past 10 years. It is irrelevant whether these taxpayers are individuals or companies, Luxembourg resident or non-resident.

What does it cost?

The tax amnesty provides protection against sanctions which would otherwise apply to the relevant tax offences. In the case of aggravated (serious) tax fraud, this can be imprisonment of up to 3-5 years and a fine of between €25,000 and 6-10 times the tax evaded or reimbursement unduly received.

The flip side is the §396 General Tax Law, which states that a...