Tax return: is the myTax digital assistant the ideal solution to ensure you pay the right amount of tax?
1. Mr. Marroyen, what is the problem with the completion of the tax return today and how has your team resolved it?
The Grand Duchy of Luxembourg is a country that is constantly looking for new solutions to contribute to the well-being of citizens and the prosperity of companies. This has been illustrated, in particular, by the Government with measures such as free transport or, more recently, the launch of a “GovTechLab” intended to support innovation in public services. However, there are numerous projects and the Administration cannot be everywhere at the same time. And this is where the innovators can come into play.
Taxation is one of the many issues that merit the attention of innovators. The complexity of taxation poses several problems for taxpayers and professionals in the sector are not immune. Most taxpayers today are lost when it comes to completing their tax return. Some taxpayers take no action whereas they could recover excess tax deducted at source from their income, others are not aware that their situation obliges them to complete a return, others again complete the return themselves without having the certainty that they have not overlooked the latest news and specific tax features. One error that is very often made is also to retrieve data from a previous return to copy it each year. It is not because you have reported income or expenditure in a certain manner that it has to be reported identically the following year. And many subjects change every year. Expenses for domestic services/employed domestic workers, sustainable mobility, the specific provisions related to COVID-19, the property reform or the taxation of homeworking post-COVID are the most recent examples.
Admittedly, solutions exist such as tax guides and simulators that assist with the completion of straightforward situations. Unfortunately, for most residents and non-residents, their situation is more complex than they imagine (foreign income, individual or joint taxation, etc.). And the tools currently on the market, although they sometimes claim the contrary, do not reach the level necessary to ensure that taxpayers pay the right amount of tax.
This is the main challenge that VIREO set itself to resolve three years ago now.
Regardless of the complexity of their situation, we wanted each citizen, whether they are a resident, whether they become a resident during the year or whether they are a non-resident, to be able to determine firstly without any tax knowledge whether filing a return is advantageous or mandatory in their case. If this is the case, the final objective is to generate their return entirely filled in, optimised and ready to be sent. Our team has therefore entirely digitised the taxation of natural persons to transcribe it into small, very simple questions. It is from there that the myTax digital assistant was born. Our challenge has therefore been met and even validated by several employers who have already been using myTax for two years as an employee benefit or by accounting firms who use it to generate their clients’ return.
2. Who is myTax intended for and how does it work in practice?
As a bank that listens to its customers, Spuerkeess has decided to join forces with VIREO to offer the myTax assistant to its customers. Each customer can therefore benefit from myTax in their new S-Net Desktop Tax Area, available in French, English and German.
With regard to how it works, it is very simple. The user begins by answering questions on their personal situation and their household situation. Based on their answers, the myTax algorithms automatically calculate the tax benefits (relief, reductions, exemptions, etc.) to which they and their household are entitled. They are then asked to pay 40 euros to unblock their access to a tax report. According to myTax internal usage statistics, users can, on average, recover or pay 984 euros less per year. And this amount can add up to several hundred or even thousands of euros depending on the household’s situation. (*)
Once the payment has been made, the tax report shows the user firstly an explanation indicating whether or not they and any spouse have an obligation or an advantage in taking action with the Luxembourg tax authority. If so, they can find the various taxation methods to which they are entitled. Several taxation regimes may be available since the 2017 tax reform. For example, a married couple may choose to be taxed individually rather than jointly. Non-residents may choose to be taxed like residents (assimilation) or not. And for each of these taxation methods, myTax indicates the exact amount that the user has to recover from or pay to the Luxembourg tax authority. Once the taxation method has been chosen, all that remains is to download the appropriate form(s) and any appendices (rental income from built properties, income from investments, sale of a property, etc.) entirely filled in, optimised and ready to be sent.
In addition, myTax also offers the user a very practical overview of the opportunities made available by the Luxembourg state to reduce their household's tax burden. Thanks to an optimisation cursor, they can simulate an amount to be invested and directly discover their tax savings.
Gone are the days when each person had to find out about the latest applicable tax features. Gone also are the days when taxation was inaccessible and complex for the large majority of the population. Today, Spuerkeess customers can easily file their tax return.
3. Does VIREO’s digital assistant really deal with the most complex situations?
Yes, absolutely. And always with the greatest simplicity for the user. Let's take, for example, the case of rental income from a property, a subject separate from the main form since it requires an appendix. Depreciation of the property, depreciation of capital expenditure, these are some of the subjects that the taxpayer had to be extremely familiar with if they wanted to complete their return themselves. In addition there are the maintenance and repair costs, that may be either deducted during the same year, spread over a maximum period of five years or be amortised throughout the rental period. Moreover, if the property has several owners or was let while it serves or served at the same time as the main home, completion becomes more complex again. And we have not even spoken about the reform applicable since 1 January 2021 impacting mainly investors …
This complexity applies to all sorts of subjects that citizens may encounter in their life. Having children, living as a couple (partnership, civil union, cohabitation, marriage), not working throughout the year, having a disability, receiving investment income, homeworking, having insurance expenditure, assuming the expenses of the death of a loved one,… Basically, you get the picture, even the tax experts often spend a long time dealing with these cases, which are anything but rare.
4. How is it that a taxpayer can recover excess tax or, at least, repay less to the tax authority?
This is an excellent question that many taxpayers raise, and the answer is not so complex.
Most taxpayers generate one or several incomes. Let's take the example of an employee who works in a grocery shop. If they look at their annual salary certificate, the document that shows the salary they have received during the year, they will see, among other things, that tax has been deducted from this salary. This is tax deducted at source. On the other hand, the State enables them to deduct a certain amount of expenditure specific to their household. Since the list is very long, I will only provide a few common examples such as the deduction of mortgage interest for the financing of a main home, childcare costs, insurance costs, a premium paid for a retirement provision aimed at preparing their pension, … All these deductible expenses will enable our employee to reduce the tax that they must ultimately pay.
Very often, the difference is significant between the tax deducted at source and the tax actually due. This is why many taxpayers benefit from a tax refund from the Luxembourg tax authority. Unfortunately, an impressive number of taxpayers are not aware of this procedure or do not carry it out correctly, and it is the same principle for taxpayers who have to repay. Thanks to the deductible expenses, they can reduce the amount that they repay or even begin to obtain a refund.
At any rate, there is no longer any need to know all these expenses and their subtleties given that myTax deals with them for you.
5. Taxation is a subject that is personally important to you. Why?
Although I am an industrial engineer by training, taxation has always interested me. Before setting up VIREO with Jean-Noël Didrich and Bernard Felten, the co-founders of the company, together with my team I advised more than 1.000 taxpayers with various incomes and situations. During this experience, one fact was blatantly obvious to me: often taxation is only really fair for those who are able to afford the services of an expert. It was from this fact that VIREO was born with a very practical desire: to make taxation accessible and fair for everyone.
We often forget, but taxation is one of the main pillars of society. It is mainly due to taxes that we benefit from high level public services. Given that any legislation may change from one year to another, in favour or against the taxpayer according to the policies applied and the State’s income / expenditure, making taxation accessible can only be beneficial for all the parties. By understanding taxation and its usefulness, citizens will regain more trust in the institutions, trust that has sometimes been undermined during recent years. It is our way of putting digitalisation at the service of the community while creating new economic opportunities.