Taxpayers who refuse to settle their tax liability with the Luxembourg Inland Revenue may, where applicable, be subject to enforced collection. Using escalating measures of enforcement, tax collection can be enforced in two different ways:
- by issuing the taxpayer with a tax recovery notification (contrainte);
- through third party debt orders.
These recovery procedures involve different stages and must comply with a certain number of conditions in terms of substance and form in order to be valid.
Who is concernedThey apply to resident or non-resident Luxembourg taxpayers who fail to settle their direct tax liabilities (for example, income tax) with the Luxembourg Inland Revenue by the required deadlines.
How to proceed
In the first instance, the administrative phase involves the taxpayer being sent a warning by post demanding that the tax liability to be settled within 5 days. The warning is sent by an officer at the relevant revenue office.
If payment has not been made within 5 days, the taxpayer then receives a second and final warning to pay within 5 days. If the taxpayer still fails to settle the tax liability, the judicial phase commences and the delinquent taxpayer can be pursued via all legal channels.
If the warnings issued during the administrative phase fail to have any effect, the judicial phase can commence:
Administrative recovery notifications (contrainte) and orders to pay
The official from the revenue office to which the tax arrears are owed initiates the enforced collection procedure by issuing a recovery notification.
The recovery notification is a document stating that the taxpayer owes the government a specific sum by way of taxes. This recovery notification is enforced by the director of the Luxembourg Inland Revenue or their deputy.
The taxpayer is served with the recovery notification by means of an order to pay.
The order gives the taxpayer notice to pay the amount of tax stated in the recovery notification, failing which, a compulsory enforcement procedure will be instituted under common law.
If the order to pay is ignored, the tax authorities may go on to seize assets (e.g., expropriation of property, seizure of furniture for sale by public auction) in order to pay the debt owing by the taxpayer.
Third party debt order
In order to recover their debts, the tax authorities also have the option of seizing the taxpayer's funds held by third parties (e.g., notaries, banks, employers, etc.). This attachment procedure order can be applied to all types of assets, with the exception transferable securities and the percentage of wages needed to cover the basic living costs of a middle-income taxpayer.
Should the third party not wish to repay the debt, it will become personally liable for the debt in respect of the Luxembourg tax authorities.
In the event of joint taxation, both taxpayers are jointly and severally liable.
Community assistance in relation to the recovery of claims
Through a European directive on mutual assistance for the recovery of claims in respect of taxes, duties and other measures transposed into Luxembourg law, the Luxembourg tax authorities can recover taxes and duties outside of Luxembourg within a clearly defined legal framework. The legal provisions do not prejudice the enforcement of any obligation to provide more extensive assistance that may result from bilateral or multilateral agreements or arrangements.