FATCA reporting regime was implemented to prevent and detect tax evasion by persons having United States tax residency together with Common Reporting Standard (CRS) that was initiated by the OECD. Luxembourg signed an agreement with the United States on 28 March 2014. The agreement was ratified by the Luxembourg Parliament and implemented in Luxembourg on 24 July 2015.
FATCA and CRS obligations Luxembourg financial institutions
Based on the FATCA Law, Luxembourg financial institutions are obliged to comply with due diligence obligation and registration duties. Additionally, they have to report on FATCA to the Luxembourg tax authorities by 30 June each following year for previous year financial accounts even though they do not have any US reportable accounts (in this case, a Zero Reporting is required). The Luxembourg tax authorities will then automatically exchange this information with the US Internal Revenue Service (IRS).
There following regulations in force in Luxembourg regarding FATCA:
- Mémorial A – N° 145 du 29 juillet 2015,
- Mémorial A – N° 158 du 12 août 2015,
- Mémorial A – N° 156 du 10 août 2015).
Sanctions for failing to report FATCA/CRS in Luxembourg
On 18 June 2020, the Luxembourg Parliament passed bill 7527 on the modification of the Common Reporting Standard (CRS) Law and the FATCA Law into Luxembourg domestic tax law. The new FATCA and CRS law:
- makes CRS zero returns mandatory and increases the penalties for failing to report or late reporting up to EUR 10,000 in addition to the existing penalties
- additionally it requires Financial Institutions to document adequately due diligence performed and procedures in place,
- authorises the tax authorities to undertake audit within a 10-years time frame.
FATCA and CRS reporting deadlines for 2019 due to Covid-19
Due to Covid-19 crisis for the reporting year 2019, the Luxembourg government has introduced a bill to extend the CRS and FATCA reporting deadlines by 3 months to 30 September 2020.