Introducing automatic exchange of information in Luxembourg

Financial institutions (mostly banks) in Luxembourg will transmit the information foreseen in the EU Savings Directive 2003/48/EC to the Administration des Contributions Directes which is the Luxembourg Revenue Service for direct taxation.

This administration will then confidentially transmit the information to the corresponding revenue service in the EU Member State in which the beneficial owner is a resident.

Automatic exchange of information in tax matters is limited to an exchange of information among competent government tax authorities. Professional secrecy will continue to be applicable.

However, and although the Luxembourg Government still considers the withholding tax to be a most effective instrument to guarantee effective taxation and client privacy, dialogue with its partners has shown that international developments, such as FATCA and the failure of the Rubik agreement between Germany and Switzerland, point to a broader use of automatic exchange of information in tax matters.

Hence, ten years after the adoption of the EU Savings Directive and given these developments in tax transparency, the Luxembourg Government has therefore decided to end the transitional period foreseen in the EU Savings Directive and to introduce automatic exchange of information on 1 January 2015.

Luxembourg will effectively apply the following mechanisms as of fiscal year 2015:

  • Automatic exchange of information as defined in EU the Savings Directive within the EU and applicable to interest paid to individuals resident in an EU Member State other than the one where interest is paid;
  • Exchange of information upon request as agreed in double-tax treaties with third countries;
  • Other bilateral arrangements with third countries, i.e. as currently negotiated with the US with respect to the implementation of FATCA;
  • Withholding tax for Luxembourg residents as currently applicable.

The date of 1 January 2015 coincides with the date of entry into force of the Council Directive 2011/16/EU on administrative cooperation in the field of taxation and Council Directive 2010/24/EU concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures.

The information to be exchanged is defined in article 6 of the EU Savings Directive and is limited to information regarding savings income in the form of interest payments on debt claims.

Considering these impending strengthening of the Luxemburg Law especially individuals residing in Germany should carefully consider whether or not they take the opportunity to make their way into tax honesty by making a subsequent tax declaration (Nacherklärung) , so called “Selbstanzeige”.

We would be pleased to explain our approach and conduct of such a subsequent tax declaration in an initial consultation.

In this context we would also like to draw your attention to our news about the Family Wealth Management Company - SPF on our website.

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