Did you know: VAT authorities to increase scrutiny in 2017

The Luxembourg VAT authorities have just released their 2016 annual activity report. While this document discloses last year’s milestone figures, it also sets their objectives for 2017. In the light of the tax reform, VAT authorities will particularly beef up penalties and introduce personal liability of directors while intensifying electronic audits. Here’s what you can expect in the coming months.

 

2016 was about consolidation

 

• broader scope of duties

In 2016, the Luxembourg VAT authorities broadened their duties. Case in point: they embraced anti-money laundering, automated sanctions and included impôt dans l’intérêt des services de secours. The VAT authorities have to take on these new responsibilities and face these challenges, while at the same time deal with the scarcity of human resources. And this turns out to be a significant issue for them now.

• more transparency

The Luxembourg VAT authorities made a point in increasing their transparency towards the public, e.g. publishing brochures, issuing Frequently Asked Questions, sending newsletters or creating a dedicated helpdesk.

• e-audits on the rise

The number of audits performed in 2016 decreased compared to last year. Conversely, e-audits based on FAIA files increased by 21%. In particular, the VAT authorities focused their audits on high-risk profiles. This reads in conjunction with the limited number of inspectors to perform manual audits. We can, therefore, expect an increase of FAIA-based controls.

 

2017 will be tougher

 

The VAT authorities intend to:

• improve the criteria leading to automatic assessments of the VAT returns;
• progressively extend the electronic file of each VAT taxable person and gradually include in it all the documents and relevant data collected through VAT audits;
• continue the automation of the VAT collection procedures;
• improve risk analysis;
• introduce a sectoral risk analysis, strategic study and exploration of new data mining technics.

The mission of the authorities and the recent changes to the law point to the same direction: to enforce the right collection of tax. What’s more, the legal arsenal is broader than ever and IT tools are increasingly efficient. Any VAT underpayments, breaches of compliance, wrong returns or missing registrations will lead to severe penalties. So, we strongly recommend having sanity checks and VAT management processes.

Thirsty for more? Read the 5 main VAT changes in 2017.