Luxembourg court decision clarifies discretionary review of tax assessments under Section 100a

On August 6 2025, the Luxembourg Administrative Court (CA) issued its decision in case No. 52321C, emphasising the importance of taxpayer adherence to procedural deadlines and confirming the discretionary power of the Luxembourg tax authorities (LTA) to further review tax assessments issued under Section 100a of the Abgabenordnung (the General Tax Law, or AO). This means that taxpayers cannot force the LTA to conduct such a review.

The CA maintains that this discretionary power does not violate the principles of fairness and expediency, nor the principle that mandates the LTA to act impartially under Section 204(1) of the AO. This is because Section 100a establishes a tax regime that, by definition, cannot disadvantage taxpayers as it is based entirely on their tax return.

A Luxembourg company (the Company) filed its 2016 tax returns, requesting the Luxembourg participation exemption regime (LPER) be applied for net wealth tax (NWT), but not for corporate income tax (CIT) or municipal business tax (MBT) purposes on dividends received that year. Those dividends were thus considered taxable in Form 506A.

On November 2 2017, the LTA issued the relevant tax assessments under Section 100a of the AO for NWT and CIT/MBT purposes, in line with the taxpayer’s tax return. On February 12, 2018 (more than three months after the tax assessment was issued), the Company filed an amended tax return, requesting that the LPER be applied for CIT and MBT purposes for a dividend received in 2016. A week later, the tax office declined to consider the amendment as the three-month deadline had lapsed. Three years later, before the expiry of the five-year statute of limitations, the Company asked the LTA director to reconsider the amended return. This request, treated as a “formal hierarchical appeal”, was deemed inadmissible due to tardiness.

The CA exclusively considered the LTA’s refusal to issue final tax assessments based on a “subsequent review” under Section 100a of the AO.

Section 100a of the AO allows the LTA to issue initial tax assessments based solely on taxpayers’ returns. The LTA then has the discretion to review the returns at a later date or allow them to become final when the statute of limitations expires.

The CA held that this discretionary power not only applies to the decision to issue a tax assessment under Section 100a of the AO but also to a subsequent review of the tax return. The decision is based on legislative history, which states the tax office can – but is not required to – perform a subsequent review of the taxpayer’s file. This means that taxpayers cannot force the LTA to conduct such a review if they made a mistake in their tax return and the three-month deadline to appeal the tax assessment has lapsed.

Under Section 2 of the Steueranpassungsgesetz (the Tax Adaptation Law), all discretionary decisions of the LTA remain subject to tax procedural rules, which require the decisions of the LTA to uphold the principles of fairness and expediency:

· Under the fairness principle, the LTA’s decisions must avoid imposing an unreasonable burden based on a taxpayer’s specific circumstances. The CA determined that allowing taxpayers to force the LTA to review tax returns after the expiry of the three-month deadline would convert a discretionary power into an obligation, thereby defeating the purpose of Section 100a of the AO. Consequently, the LTA’s refusal to review the amended returns was held to be in line with the fairness principle.

· Under the expediency principle, an “external” limit is set on the actions of the LTA in that the measure must be (i) consistent with the purpose of the law and the intention of the legislator, and (ii) the best way to achieve the intended objective. The LTA’s decision not to review the tax returns was held to be consistent with the purpose of Section 100a of the AO as the Company was taxed according to its tax return.

The CA also held that the LTA did not violate Section 204(1) of the AO when refusing to review the Company’s amended returns. While Section 204(1) of the AO requires the LTA to act impartially when reviewing a tax return, the regime of Section 100a of the AO cannot, by definition, disadvantage taxpayers as it is based entirely on their tax return. As such, Section 204(1) of the AO could not be invoked to require the LTA to review the amended tax returns.

The CA confirmed the discretionary power granted to the LTA under Section 100a of the AO, emphasising that taxpayers cannot compel the LTA to conduct a subsequent review of tax assessments once procedural deadlines have lapsed while also reinforcing the importance of adhering to statutory deadlines for appeals and amendments to tax returns.