Luxembourg Tax Alert 2019-13

Luxembourg Tax Alert 2019-13



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The Protocol amending the US-Luxembourg tax treaty is approved

On 17 July 2019, the US Senate ratified the Protocol [PDF | 0.1MB] amending the US-Luxembourg income tax treaty. This Protocol replaces the existing treaty’s exchange of information article with one that follows the approach of the US model income tax treaty and the Organization for Economic Cooperation and Development (OECD) Model Tax Convention on Income and Capital.


The Protocol, accompanied by an exchange of notes between both countries, was originally signed in 2009 and sent to the US Senate for ratification advice and consent in 2010. The Senate Foreign Relations Committee approved it in 2011, but approval by the full Senate was blocked until this year. The existing treaty was signed in 1996 and entered into force on 20 December 2000.

Impact on exchange of information under FATCA

The revisions to the exchange of information article are an added impetus to comply with the Foreign Account Tax Compliance Act (FATCA) filing requirements. In particular, the Protocol’s new exchange of information article is modeled on corresponding provisions in the US and OECD model income tax treaties. It provides for, “more robust exchange of information between tax authorities in the two countries to facilitate the administration of each country’s tax laws.” [1]

The Protocol introduces a provision whereby a country may not refuse to provide information solely because it is held by financial institutions, nominees, or persons acting in a nominee or fiduciary capacity. Therefore, a country cannot claim that its domestic bank secrecy laws or similar legislation override its duty to provide information under this treaty provision. The provision also requires disclosure of information concerning the beneficial ownership of interests in entities and assets such as bearer shares. [2]

In this respect, the Luxembourg FATCA Law of 24 July 2014 already provided Luxembourg Financial Institutions with a legal basis to exchange financial information with the US without breaching local bank secrecy laws. Although FATCA reporting should not be affected, the Protocol strengthens the legal basis for the current exchange.

Effective date

The Protocol will enter into force once the US and Luxembourg have notified each other that their respective ratification procedures are completed. It will become effective for requests for information made on or after the date of entry into force for tax years on or after 1 January 2009.

Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.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.

© 2021 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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