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Input volume 10, issue 8

October 2010


FAIA – The authorities in the digital age?

The Luxembourg VAT authorities (AED) have made significant progress toward the digital age, or at least toward the electronic age.

Since 1 January 2010, submitting monthly European Sales Lists for goods and services (as well as the relevant VAT returns) has become mandatory. Filing refund requests for VAT paid in another Member State of the European Union has also become mandatory.

As mentioned in our previous edition, the AED has also just announced that starting from 2011, it will no longer send paper VAT return forms to persons liable for this tax.

It therefore seems certain that in the medium term, all returns will have to be filed electronically.

However, the authorities are not stopping there. After sending VAT returns electronically, for the purposes of their audit, the AED will also soon require that proof of the amounts stated in these returns also be sent electronically, through a standard file called FAIA (Fichier Audit Informatisé AED).

As with the transmission of VAT returns, the aim of this measure is to modernise administrative practices, notably to make it possible for the tax authorities to conduct inspections more rapidly, efficiently, accurately, and inexpensively.

According to the FAIA norms, all taxable persons will have to be able to use their accounting software to automatically generate a standard file containing all the information required for the AED to audit VAT returns.

This standard file will then be entered in specific AED audit software, which will process the data received almost automatically.

The authorities have mentioned the year 2011 as a starting point for the application of FAIA, but have not specified the exact date.

As this is a new norm, it is not yet incorporated into the accounting software used by operators.

Establishing this norm will require operators to make a significant investment, whether it be acquiring software that can generate a file that meets the authority's requirements, or modifying their existing system.
Will it be possible for the taxable persons to make these investments at such short notice, given that, for the year 2011, many of them have already allocated resources, and set budgets, particularly IT budgets?
This is a very important question, particularly because the standard proposed by the OECD (SAF-T, Standard Audit File – Tax) - and that the AED has reworked to create the FAIA system - seems more suited to industrial companies than to players in the financial sector, of which there are many in Luxembourg, who will have to plan for a more significant modification of their systems.

For the financial sector, there are also other questions regarding the use of such a file and the automatic transmission of data between the taxable persons and the AED, notably concerning the guarantees that the AED would be able to provide concerning the secure transmission and use of data.

It is therefore important to start addressing the issue now, so that there will be adequate time to update internal systems and procedures, and to ensure that information can be provided to the authorities in the required format and within the specified time limits.

Even if it is better late than never, prevention is better than cure. Implementing such a standard at the last minute,when it becomes mandatory, would actually be more difficult and costly.




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