On 6 March 2015, the Council of Government adopted the long awaited bill of law on FATCA.
The Foreign Account Tax Compliance Act (“FATCA”) was signed into law in the United States (“U.S.”) on 18 March 2010. Its purpose is to identify U.S. persons who may be evading U.S. taxes by investing through non-U.S. financial institutions or other non-U.S. entities. To accomplish this goal, FATCA creates a new information reporting and withholding regime, in addition to existing U.S. information reporting and withholding rules.
As the compliance to the U.S. FATCA regulations would have been contrary to legal restrictions in some countries, the U.S. entered into a series of intergovernmental agreements (“IGA”) with interested jurisdictions. These IGAs should address legal impediments and simplify the practical implementation of FATCA.
FATCA in Luxembourg
On 28 March 2014, Luxembourg signed a Model 1 IGA with the U.S. Treasury.
The announcement made by the Council of Government on 6 March 2015 is a decisive step forward since it opens the door to an actual ratification of the Luxembourg IGA.
As a next step, the bill of law will be submitted to the Parliament.
It is expected that the Luxembourg Tax Authorities will then review and finalise the two draft circular letters published earlier this year.
Projet de-circulaire-ECHA-2---FATCA.pdf (PDF, 265 KB)
Projet-de-circulaireECHA-n_-3---FATCA.pdf (PDF, 2.14 MB)
After completion of these last two steps, Luxembourg should be fully FATCA compliant and ready to proceed with the first automatic exchange of information on FATCA (expected to take place on 30 June 2015 from Luxembourg reporting financial institutions to Luxembourg Tax Authorities and then on 30 September 2015 from the Luxembourg Tax Authorities to the U.S. Tax Authorities).
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