A draft law amending the Luxembourg Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA) legislation was submitted at the end of February to the Chamber of Representatives. This draft law follows the formal requests of the Luxembourg Tax Administration (LTA) which were sent to several Luxembourg financial institutions last year. It is intended to bring the law into line with the evaluation of the Global Forum on Transparency and Exchange of Information for Tax Purposes.
The main amendments proposed are summarized below:
OBLIGATIONS
- In order to comply with CRS, the draft law introduces an explicit reporting obligation for Luxembourg financial institutions to keep records of actions taken and supporting evidence used to ensure the due diligence and reporting obligations, for a period of ten years.
- Luxembourg reporting financial institutions are required to establish policies, controls, procedures, and IT systems to ensure the fulfilment of FACTA and CRS due diligence and reporting obligations.
NIL REPORT
- The draft law will align FATCA and CRS reporting requirements by introducing an obligation to send a nil report for CRS in the absence of reportable accounts.
- If a Luxembourg reporting financial institution fails to comply with this obligation within the legal reporting deadline, it could suffer a lump sum fine of €10,000.
AUDITS
- The draft law further specifies that the Luxembourg Tax Administration may have access, upon request, to records of actions taken, supporting evidence, policies, controls, procedures, and IT systems. The powers of investigation of the Luxembourg Tax Administration shall expire ten years after the end of the calendar year in which the Luxembourg reporting financial institution is required to communicate the information.
PENALITIES
- A Luxembourg Reporting Financial Institution may incur a fine of up to €250,000 if it is found to have not complied with its obligations under FATCA/CRS, which can be increased by a maximum of 0.5% of the amounts not disclosed. Before the modification, the €250,000 fine was applicable only in the event of non-compliance under due diligence obligations.
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