A draft bill (no. 7527) was proposed by the Luxembourg tax authorities on 20 February 2020. Thisbillaimedtoamendthelawinrelationto the FATCA and Common Reporting Standard (the “CRS”) regime and would have as its purpose to require of financial institutions to:
• avoid engaging in any practices with the aim of circumventing FATCA or CRS reporting,
• keep records of actions taken and evidence used to prove that due diligence procedures are adhered to for a period of 10 years after the
year in which the information is required to be reported,
• have policies, monitoring, procedures and IT systems that would be proportionate to the financial institution’s operations, particularities and size, in order to fulfil their obligations in terms of reporting and due diligence.
In the event that there are no reportable accounts, financial institutions would be required to file a “nil report” by the 30th of June.
A financial institution could be penalised up to €10,000 if it fails to submit either the necessary information related to a reportable account or a nil report.
If it fails to comply with its obligations, a financial institution could be liable to pay a penalty of €250,000. Furthermore, a penalty of up to 0.5% could be levied on the total amount not communicated for a reportable account if a financial institution neglects to provide information about that account or communicates an amount lower than the reportable amount.
The Luxembourg tax authorities’ ability to use the information collected during audits or gathered from reports submitted by Luxembourg reporting financial institutions, solely for FATCA or CRS purposes, is clarified in the draft legislation.
The amendments were introduced to the CRS legislation in order for the Luxembourg’s legislative framework to comply to the main aspects of CRS regime and be applicable from 1 January 2021.
The amendments to FATCA legislation were introduced with the objective of preserving consistency in the overall approach of FATCA and CRS.