Publication of an updated administrative circular: ECHA n°3
On 18 February 2016, the Luxembourg tax authorities published a revised version of the administrative circular ECHA n°3 initially published on 31 July 2015.
The circular ECHA n§3 / n°3bis clarifies the file format applicable in Luxembourg for the purposes of FATCA reporting.
The new circular ECHA n°3bis provides, in particular, that:
Account balances or values need to be strictly above 0. This is an issue for negative balances that, according to circular ECHA n°2, should be reported as 0. Separately, there is a course of action to take for accounts that have a 0 or nil value at year-end but on which there were some movements during the applicable period. Do not hesitate to contact us if you are in this situation to discuss how to proceed.
In the absence of US TIN for their US clients and US Controlling Persons, Luxembourg Reporting Financial Institutions should indicate 000000000 (nine zeroes) in the TIN section of the report. This derogation is only valid during the reporting period ending 31 December 2016.
Publication of grand ducal decree containing the list of Excluded Accounts and Participating Jurisdictions
On 15 March 2016, the grand ducal decree containing the list of Excluded Accounts under the Luxembourg law of 18 December 2015 was published, as per a previous announcement to the European Commission. The grand ducal decree also confirms the list of Participating Jurisdictions for the purpose of the implementation of the OECD Common Reporting Standard (“CRS”) in Luxembourg.
The grand ducal decree contains the list of specific Excluded Accounts under the Luxembourg law of 18 December 2015, which confirms what was previously announced by Luxembourg to the European Commission (and published in the Official Journal). The list includes:
pension schemes referred to in article 111bis of the Luxembourg income tax law, home savings schemes referred to in article 111, al. 1 of the Luxembourg income tax law, and complementary pension schemes referred to in article 110 of the Luxembourg income tax law.
The purpose of this list is to explicitly name a number of products that can be considered as out of scope of the automatic exchange of information for CRS purposes. Additional products meeting the relevant generic requirements defined in Directive 2014/107/EU, as transposed into Luxembourg law, may benefit from a similar exemption. However, regarding the latter, a separate analysis may still be required to determine whether any of the other exemptions at hand are effectively applicable.
Participating Jurisdictions and relevance of the list
Luxembourg considers the effective signatories of the OECD Multilateral Competent Authority Agreement dated 29 October 2014 (“MCAA”) as Participating Jurisdictions. The list contains 78 MCAA signatories (i.e. the current list of 80 signatories except, naturally, Luxembourg, as well as Saint Kitts and Nevis which was included in the list of signatories to the MCAA after the adoption of the aforementioned decree).
Interesting to highlight is the fact that the list also includes the United States of America. Regarding the terms of the FATCA Model 1 IGA signed between Luxembourg and the US on 28 March 2014, the Luxembourg authorities have considered the US as a Participating Jurisdiction for CRS purposes despite the fact that the US has not signed the MCAA nor (yet?) committed itself to implementing the CRS.
The list of Participating Jurisdictions is relevant in the context of the CRS classification of, and due diligence on, entities holding a Financial Account with a Luxembourg Financial Institution. For this reason the inclusion of the United States of America in the list of the Participating Jurisdictions from a Luxembourg standpoint is particularly important.
List of Reportable Jurisdictions still to be published
The list of Reportable Jurisdictions still needs to be published. This list will provide Financial Institutions with certainty with respect to countries’ automatic exchange of information, and will be activated by Luxembourg under the Common Reporting Standard.
This list, which is of relevance for classification and due diligence purposes, may be shorter than the list of Participating Jurisdictions. Indeed, jurisdictions have the option to be willing to participate in the automatic exchange of information (i.e. to provide the other jurisdictions with information regarding their tax residents) but not to receive equivalent information on its own tax residents. In this case, the jurisdiction concerned should actually be a Participating Jurisdiction, but not a Reportable Jurisdiction.
Regular updates expected
The lists of Participating Jurisdictions and Reportable Jurisdictions are variable in nature, and will most likely be updated on a regular basis, in particular if and when a new Jurisdiction will sign the MCAA and engage in the current trend for global tax transparency.
For further information, please do not hesitate to contact us.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.