FATCA & CRS Alert 2020-03
FATCA & CRS Alert 2020-03
New draft law on FATCA and CRS published
On 20 February 2020, the draft law no. 7527 was published amending the legislations related to the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) in Luxembourg. It can be viewed here.
We have summarized the essential features of the new draft law below.
- The draft law adds the following clarifications regarding Luxembourg reporting financial institutions (FIs):
- They must not engage in practices designed to circumvent FATCA and CRS reporting.
- They must keep records of any action taken and evidence of reporting and due diligence procedures carried out for 10 years.
- They must put policies, controls, procedures and IT systems in place — proportionate to the FIs’ nature, particularities and size — to ensure they fulfill their reporting and due diligence obligations.
- Currently, in the absence of reportable accounts, CRS nil reporting is optional but recommended by the Luxembourg tax authorities. If this draft law is adopted, CRS nil reporting would be mandatory from the 2020 reporting year onwards, with the legal reporting deadline of 30 June also applying.
- The draft law replaces the previous penalty for late, incomplete or wrong reporting — i.e. a maximum of 0.5% of the amount not reported and a minimum penalty of EUR€1,500 — by a fixed penalty of EUR€10,000. This new fixed penalty applies if a Luxembourg reporting FI has not filed a CRS or FATCA return within the legal reporting deadline. This also includes a nil return.
- The draft law introduces a new provision that explicitly authorizes the Luxembourg tax authorities to access, upon request, records of action taken and evidence of compliance, policies, controls, procedures and IT systems. These audits must be carried out within a 10-year time limit.
- If a CRS or FATCA audit by the Luxembourg tax authorities finds non-compliance with due diligence procedures, the maximum penalty of EUR€250,000 could apply. And, if reportable accounts are found to be non-reported or under-reported, an additional penalty of a maximum of 0.5% of the non-reported amount could apply.
- The draft law clarifies that the Luxembourg tax authorities may use the information gathered from reports submitted by Luxembourg reporting FIs, or collected during audits, for CRS purposes only.
As a reminder, the reporting deadline is 30 June 2020 for the 2019 reporting year.
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