On 3 June 2020, the Committee on Finance and Budget in Luxembourg published their report on the bill to amend the Luxembourg Common Reporting Standard (“CRS”) and Foreign Account Tax Compliance Act (“FATCA”) legislation (Link-French).
As previously reported (Link-Blog) Luxembourg deposited a bill to amend those Exchange of Information legislation in February 2020 as a result of the Organisation for Economic Co-operation and Development (“OECD”) Global Forum’s review.
In its review of the step-by-step approach regarding the legislative framework, the Global Forum found that Luxembourg is not compliant with all aspects of CRS, as the amended law of 18 December 2015, on the Common Reporting Standard does not contain any provision requiring Luxembourg reporting Financial Institutions to keep records of actions taken and evidence used to ensure the reporting and due diligence obligations under the CRS.
Accordingly, the present draft law intends, inter alia, to amend the CRS Law and the amended law of 24 July 2015 relating to FATCA in this respect by introducing an explicit obligation for Luxembourg reporting Financial Institutions to keep records of actions taken and evidence used to ensure the reporting and due diligence obligations under CRS.
In addition, it is proposed to clarify the investigative powers of the Direct Tax Administration in order to enhance legal certainty.
In the PwC U.S. Insights “Luxembourg and Cayman Islands release guidance on FATCA and CRS” (Link), it is presented that the Luxembourg draft law would require all Luxembourg Financial Institutions to establish a compliance framework related to FATCA and CRS due diligence and reporting obligations. The commentary related to the draft law indicates that this obligation was inspired by similar anti-money laundering requirements. It is expected that the compliance framework will provide for:
- Written policies and procedures regarding compliance with FATCA and CRS due diligence and reporting obligations,
- The implementation of an information technology infrastructure necessary to comply with FATCA and CRS due diligence and reporting obligations, and
- A set of proportionate effective controls around FATCA and CRS due diligence and reporting obligations.
- Requirement to file CRS reports even in the absence of any reportable clients or investors (i.e., nil reports).
If enacted, the provisions related to the compliance framework will be effective January 1, 2021, and the reporting changes will be effective for 2020 reporting occurring in 2021.
Changes to the implemented website to view the legislation history and related insights (Link-French) concern the following:
- 20 February 2020 – Submission of the bill (Link-French)
- 28 February 2020 – PwC Luxembourg Insights “FATCA and CRS governance and controls mechanisms: obligation to have a compliance program” (Link)
- 5 March 2020 – PwC U.S. Insights “Luxembourg and Cayman Islands release guidance on FATCA and CRS” (Link)
- 12 March 2020 – Referral of the bill to the Committee on Finance and Budget
- 14 April 2020 – Opinion of the Chamber of Commerce (Link-French)
- 20 April 2020 – Discussion within Committee on Finance and Budget (Link-French)
- 24 April 2020 – Appointment of the Committee on Finance and Budget’s rapporteur
- 24 April 2020 – Report of the appointment of the rapporteur within Committee on Finance and Budget (Link-French)
- 12 May 2020 – Opinion of the Council of State (Link-French)
- 14 May 2020 – Opinion of the Chamber of Civil Servants and Public Employees (Link-French)
- 29 May 2020 – Change of title to “Draft law amending 1° the amended law of 18 December 2015 on the Common Reporting Standard (CRN); 2° the amended law of 24 July and 2015 on FATCA”
- 3 June 2020 – Report of Committee on Finance and Budget (Link-French)
In addition, on 11 May 2020, PwC Luxembourg released Tax Insights “DAC 6, CRS, FATCA: deadline extensions for Automatic Exchange of Information regimes” (Link) with the following takeaway for FATCA and CRS:
“Luxembourg tax authorities have yet to communicate on a similar extension of the FATCA and CRS internal reporting deadlines (i.e. the deadlines to file with the Luxembourg tax authorities), currently set at 30 June 2020. The Luxembourg tax authorities are in the meantime processing the 2019 reports that a number of Financial Institutions have already filed. Therefore, if reporting has not already been done, and the relevant financial data is already finalized and human resources are available to handle the process, we would recommend to file FATCA and CRS reports as soon as is practicable, in order to free resources for more critical projects once the crisis is over.”