Luxembourg: Final version of FATCA guidance

Final FATCA guidance issued in Luxembourg

The Luxembourg tax authorities released a final version of an administrative circular and an updated administrative circular to implement provisions under the FATCA (Foreign Account Tax Compliance Act) regime concerning the automatic exchange of information between Luxembourg and the United States.

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An intergovernmental agreement (IGA), that follows the Model 1 IGA, was signed by Luxembourg and the United States in March 2014, and the terms of the IGA provide that Luxembourg financial institutions are to exchange information concerning the assets held by U.S. citizens or residents with the Luxembourg tax authorities (Administration des Contributions Directes) which then transfers the information provided to the U.S. tax administration, the Internal Revenue Service (IRS).

The 33-page circular (ECHA n°2) concerns the legal requirements of Luxembourg financial institutions under the Model 1 IGA with the United States. Specifically, the circular provides some clarifications with respect to a number of areas, including the following:

  • Alignment with common reporting standard (CRS)
  • Definitions of terms including “investment entity” and “financial institutions” under the IGA
  • Clarifications and indicia as to when an account is to be treated as a “U.S. reportable account” along with examples to illustrate these provisions
  • Confirmation that there is no prescribed form, and that IRS forms (e.g., Form W-8 or Form W-9) may be used to determine the FATCA status of an account holder 
  • Currency conversion / translation provisions
  • Measures addressing when there is a change of circumstance after year-end, along with examples
  • Provisions for “nil” reporting
  • Treatment of account balances for accounts closed during the year
  • Application of the “most favored nation” clause

Along with the ECHA n°2, the Luxembourg tax authorities issued a final update of the ECHA n°3 defining the technical aspects of the exchange of information.

 

Read a 2015 report [PDF 134 KB] prepared by the KPMG member firm in Luxembourg: Final administrative circulars on FATCA released

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