Important updates of the Luxembourg FATCA/CRS landscape

The Luxembourg Tax authorities have recently been informed by the US Internal Revenue Service (IRS) that Luxembourg Financial Institutions should use, in their upcoming FATCA report, new codes in case some reportable clients or investors have not provided their US TINs.

The new codes, which are not yet mandatory, but highly recommended, should enable the IRS to efficiently identify the reasons for the  absence of a US TIN. As an example, the code “222222222” should correspond to an individual pre-existing account holder whose sole US indicia is a US place of birth. The code #NTA001# remains applicable and mandatory in case of missing US TINs not reported under the new codes.

Even if such codes are used, the absence of a US TIN should generate a notification from the IRS as from which the Luxembourg Financial Institutions should have 120 days to communicate the missing information. If Luxembourg Financial Institutions are unable to provide such information, they should provide the IRS with evidence that they exercised best efforts to collect that missing information to avoid the risk of being assessed as non-compliant and have their GIIN removed.

The IRS is not the sole tax authority exercising more and more scrutiny on the quality of the information exchanged. The Luxembourg tax authorities with the new FATCA/CRS governance law applicable since 1 January 2021 are also likely to enhance their controls. It is thus paramount for a Financial Institution to document how its related procedures are complied with on a day-to-day basis. When client/investor on-boarding and reporting processes are carried out by third-party providers, it is also important to evidence that an oversight has been made on those delegated functions.

The 2020 FATCA/CRS reporting season is approaching and should be impacted by the recent important updates of the Luxembourg FATCA/CRS landscape. The Financial Institutions should initiate their reporting process and document how they ensure data quality and exhaustivity. These required reconciliation and control actions should also be described in their FATCA/CRS procedures that are mandatory since the beginning of the year.

For the upcoming CRS reporting season, Luxembourg Financial Institutions should also consider the new Reportable Jurisdictions set by the Grand Ducal Decree dated 22 January 2021, i.e. Brunei Darussalam, Morocco, New Caledonia and Peru.

Our subject-matter experts are available to further discuss the above updates and help you implement sound governance if needed. In particular, our expert team can assist you with:

• The drafting or review of procedures and control matrix;
• The reporting through our online dedicated and collaborative platform;
• The review of self-certifications obtained from clients or investors;
• The due diligence on service providers (e.g. on Transfer Agents for the Fund industry); and
• The organisation of dedicated training.