The Luxembourg Parliament has introduced new rules relating to the penalties which can be imposed for errors in a VAT return. These are as follows:

Fixed penalties

These can apply when there has been non-compliance with VAT obligations (i.e. VAT returns not submitted, payments are late, etc). Previously, fixed penalties were limited to a maximum of EUR 5,000 but this will increase to EUR 25,000.

Evasion of VAT

If a person evades the payment of VAT or obtains a refund of the VAT in a non-regular manner the penalty will increase from 10% of the relevant amount to 50%.

Penalty for aggravated fraud

If fraudulent actions to avoid paying VAT or to unlawfully obtain reimbursement of VAT are identified and confirmed, the penalty can consist of 1-3 months imprisonment together with a penalty of between EUR 25,000 and six times the eluded or wrongly reimbursed amount.

The Luxembourg Parliament aims to minimise the VAT gap with these measures and hence the purpose of these provisions is to introduce stronger measures that will help fight VAT fraud and reduce tax evasion.