By an order of 13 January 2023, the President of the Lower Administrative Court (Tribunal administratif) granted a request for a stay of execution on net wealth tax assessments. The case concerned a Luxembourg company which held a participation in a Swiss company. On the basis of the tax treaty between Switzerland and Luxembourg, the Luxembourg company considered that the participation was exempt for net wealth tax purposes. The tax office considered that the participation should not benefit from such an exemption and issued a net wealth tax assessment, which indicated a considerable tax liability. The company filed a complaint against the wealth tax statement with the director of the Direct Tax Administration (Administration des contributions directes) (“DTA”). Despite the absence of a suspensive effect of a complaint, the company did not pay the disputed tax debt. As the director of the DTA did not respond within the legal deadline, the company brought the case before the Lower Administrative Court. Together with its application, the company asked the President of the Lower Administrative Court to grant a stay of execution in order to suspend the enforceability of the disputed tax debt.
In his role as interim relief judge (juge référé), the President of the Lower Administrative Court is called upon to examine whether the conditions for a stay of execution are fulfilled without being able to assess the merits of the case:
- The first condition is that the arguments put forward by the applicant are sufficiently serious for the appeal on the merits to have a serious chance of success. If the President finds, after a summary examination of the arguments presented, that there are substantial doubts as to the legality of the administrative act, the first condition is met. In the case in question, the President noted that the Director of the DTA had not replied to the complaint lodged by the company even though he is legally obliged to reply. The President, acknowledging that the case involved a complex tax matter, deduced from the lack of a reply of the Director that the DTA did not have good arguments to invalidate the detailed arguments put forward by the company. The President therefore came to the conclusion that the arguments were serious enough to have a real doubt about the legality of the disputed net wealth tax assessments.
- The second condition for a stay of execution to be granted requires that the administrative act lead to a serious and definitive damage for the claimant. In the present case, the President considered that despite the fact that the company could not prove the harmful consequences that the payment of the tax debt would have for it, the significance of the amount was sufficient for him to conclude that the condition was met.
As both conditions for a stay of execution were met, the President of the Lower Administrative Court granted it to the company.
This decision can be seen as a clear sign by the Lower Administrative Court that it expects the DTA to follow its legal obligation to process all claims filed by taxpayers instead of letting the six-month period lapse, after which the taxpayer can directly file the complaint in front of the Lower Administrative Court. Indeed, the purpose of filing a claim in front of the Director of the DTA is not only to avoid having to litigate in front of the courts if the cases can be solved at the level of the administration, but also to preserve the taxpayer's right of defence, which needs to know the position of the Administration in order to adequately assess the opportunity to litigate in front of the courts or not.
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