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March 12, 2020
Luxembourg issues Draft Law amending CRS and FATCA laws
The Luxembourg Government submitted to Parliament, on 20 February 2020, a Draft Law amending the amended Common Reporting Standard (CRS) Law of 18 December 2015 and the amended Foreign Account Tax Compliance Act (FATCA) Law of 24 July 2015.
The Draft Law introduces some new obligations for Luxembourg Reporting Financial Institutions (RFIs), clarifies other obligations, adapts the rules concerning the application of fines, and clarifies aspects of the Luxembourg Tax Authorities’ (LTA) powers of investigation.
New CRS and FATCA obligations for Luxembourg RFIs
The Draft Law will require every Luxembourg RFI to:
The Government’s comments to the Draft Law indicate that the above does not preclude RFIs from using service providers to enable them to fulfil their obligations. However, RFIs remain responsible for the fulfilment of such obligations and should ensure that service providers relied upon have policies, controls, procedures and IT systems sufficient to meet the RFIs’ compliance responsibilities.
RFIs are explicitly prohibited from adopting practices whose intent is the circumvention of CRS or FATCA reporting.
Clarification of the LTA’s CRS and FATCA powers of investigation
The LTA’s duty and powers of investigation are more explicitly extended to cover the RFI’s compliance with all the RFI’s obligations under the CRS Law and the FATCA Law, except for the RFI’s private data protection duties.
The LTA will have access, upon request, to the above policies, controls, procedures and IT systems, set up to ensure the RFI’s CRS and FATCA compliance, and to the above registers of actions undertaken and of evidence relied upon.
The LTA’s powers of investigation will remain for ten years after the end of the year during which the RFI was required to report information under CRS and/or FATCA.
CRS and FATCA penalties
The Draft Law introduces changes to the fines set by the CRS Law and the FATCA Law:
Fines of the same amounts may apply to any RFI for corresponding breaches of the FATCA Law.
Entry into force
If adopted, enacted and published in 2020 as currently worded, the above changes introduced by the Draft Law will apply from 1 January 2021.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Tax Advisory Services Sàrl, Luxembourg City
Ernst & Young Business Advisory Services Sarl, Luxembourg City
Ernst & Young LLP (United States), Financial Services International Tax Desks – Luxembourg, New York
Ernst & Young LLP (United States), Luxembourg Tax Desk, Chicago