Luxembourg makes one more move towards FATCA compliance

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Luxembourg makes one more move towards FATCA compliance

Luxemburg, Nationalflagge

Luxembourg's compliance with the Foreign Account Tax Compliance Act (FATCA) moved a step closer on March 6 after the government adopted draft legislation to ratify its bilateral intergovernmental agreement with the US.

The draft legislation will now be submitted to parliament, paving the way for the ratification of the bilateral Model 1 intergovernmental agreement (IGA), which Luxembourg and the US signed almost a year ago on March 28 2014.

"This is just the next logical step," said Gerard Laures, a partner of KPMG in Luxembourg. "The signing of the IGA - indeed, the start of negotiations on it - was the clear message that Luxembourg would apply FATCA and full transparency. This is just a technical step to move the process forward."

"Luxembourg is fully committed to the fight against tax fraud and tax evasion and continues to make a series of concrete commitments to this end, not only vis-à-vis the United States," said Philipp von Restorff, a spokesman for the Luxembourg Bankers' Association (ABBL). A firm supporter of this policy, the ABBL was – and remains – one of the main proponents for the conclusion of a FATCA intergovernmental agreement between Luxembourg and the United States. In this context, the adoption by the Luxembourg Government of a draft law ratifying the Luxembourg IGA is undoubtedly a positive development."

The IGA will allow Luxembourg financial institutions fully comply with FATCA by sending certain information about payments to their US account holders to the Luxembourg tax authorities, who will then send it on to the US authorities.

After the Luxembourg parliament has ratified the legislation, it is thought the tax authorities will finalise two draft circulars  it released earlier this year relating to administrative aspects (in French) of compliance with FATCA, such as:

  • the accounts that have to be reported;

  • the definition of an investment entity;

  • the euro-dollar currency conversion to be used by reporting Luxembourg financial institutions; and

  • the technical aspects of how the information will be transmitted.

As soon as this is done, automatic exchange of information under FATCA can take place. It is expected the first transmission of information from reporting Luxembourg financial institutions to the Luxembourg tax authorities will take place on June 30 next and the first such transmission from Luxembourg to the US will occur three months later, on September 30.

Automatic exchange of information will come as nothing new to Luxembourg financial institutions, Laures explained. "Exchanging information automatically has already been the reality since January this year under the EU Savings Directive as the withholding tax option does not apply anymore and next year we will have the Common Reporting Standard (CRS) and the EU Directive on Administrative Cooperation [which implements the CRS in the EU]. This is the new normal."

Von Restorff said that as well as guidance from the tax authorities, the ABBL and other bodies that represent different parts of Luxembourg's financial industry had issued handbooks to help their members fulfil their obligations under FATCA.

"We also think that the reliability and efficiency of the reporting tools available to Luxembourg financial institutions is a key element," he added. "In this respect, we welcome the draft technical specifications issued  by the Luxembourg tax authorities earlier this year."




more across site & shared bottom lb ros

More from across our site

While pillar one is still alive, it will apply to a smaller group of companies, Brian Foley also told ITR
Tax teams that centralise and automate their pillar two data will have a much easier time during reporting season, says Hank Moonen, CEO of TaxModel
While GCCs drive efficiency for multinationals, they also present a host of TP risks that should be considered carefully
PwC Ireland has also called for simplifying Ireland’s tax code and a reduction in its capital gains tax in a pre-budget submission
Effective audit management requires more than documentation; it’s the way taxpayers engage that can shape audit direction, manage procedural ambiguity, and preserve options for appeal or litigation
American advisers are falling short of client expectations when it comes to providing value-added services, but remaining tight-lipped won’t make the problem go away
Awards
The Social Impact Awards unveil new categories to reflect a changing legal and social landscape
Australia's approach to tax policy has undergone significant shifts in recent years, reflecting global trends and unique domestic considerations. These developments merit close attention from tax professionals
The UK has temporarily dodged the 50% rate due to a trade deal signed with the US in May; in other news, Ryan acquired a Northern Irish tax firm
Following a $28 million funding round, Aibidia wants to ‘double down’ on the US market via partnerships with the ‘big four’, the Finnish TP tech provider’s CEO tells ITR
Gift this article