On January 6, 2016 Luxembourg’ Direct Taxation Authority issued a draft administrative circular regarding compliance in the grand duchy with the US Foreign Account Tax Compliance Act and the implementation of automatic exchange of information between Luxembourg and the United States in line with the Model 1 FATCA Intergovernmental Agreement signed by the two countries on March 28 last year.
The agreement, which has yet to be transposed into national law, requires Luxembourg ‘financial institutions’ to provide information regarding assets held by US citizens or residents with the Direct Taxation Authority, which will transfer it to the US Internal Revenue Service. The technical aspects of the exchange of information process will be set out in a future circular.
Information must be provided by financial institutions as defined by the agreement by June 30 for the previous calendar year. Late, missing, incomplete or inaccurate reporting risks a penalty of up to 0.5% of the amounts affected. It appears that institutions will still have to file a report even if they have no US-related accounts. A secure system will control access to the information provided, whose use is limited to the purposes set out in the IGA. Reporting can be delegated to a service provider.
Accounts excluded from the FATCA compliance requirements include pension savings accounts, certain fixed-term life assurance contracts, and real estate co-ownership accounts. The draft circular also sets out compliance rules for investment providers and entities including sponsored investment entities, controlled foreign companies, private investment advisers and investment managers and regulated collective investment funds. It also stipulates that an entity should not qualify as non-financial foreign entity if it operates as an investment fund.
The draft circular may be subject to amendment before it is finalised and put into effect. It can be consulted at http://www.impotsdirects.public.lu/echanges_electroniques/FATCA/Projet-de-circulaire-ECHA-2—FATCA.pdf
