Luxembourg’s Parliament is currently considering proposed amendments to its existing FATCA and CRS laws. The proposed changes would take effect in 2021.
Nil reporting will be required for both FATCA and CRS whereas currently nil reporting is only mandated for FATCA.
Luxembourg Financial Institutions (FIs) must maintain a record of the specific compliance steps taken and any evidence relied upon in undertaking their reporting and due diligence obligations. This record must be retained for ten years.
If the FI engages a third party service provider to undertake the FIs due diligence obligations, the FI must ensure the service provider has the required policies and procedures in place.
There is a proposed flat penalty of EUR 10,000 for failure to timely submit a nil report. Additionally, the application of the maximum EUR 250,000 fine would be expanded to include non-compliance with any of the FI obligations provided by the Luxembourg FATCA or CRS laws. The EUR 250,000 can be increased by a maximum of 0.5% of the amounts not reported.
Penalties will also be imposed on an FI that adopts avoidance practices to circumvent FATCA and CRS obligations. [See my June 6, 2017 post: CRS: Anti-Avoidance & The Disgruntled Employee].
The Luxembourg tax authority may demand access to ten years of records related to the records of the steps undertaken, evidence relied upon for the performance of the reporting and due diligence procedures, policies and procedures and IT systems. The ten year period would run from the end of the calendar year in which FI is required to disclose information.
Monitor the progress of the proposed law in the Luxembourg Parliament.
Ensure you have policies, procedures, controls and an IT system in place that are proportionate to the size of your organization and tailored to your specific situation.
Prepare for examinations: even if there are amendments to the proposed legislation, Luxembourg has shown its cards that it is preparing for enforcement.