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FATCA: notification from the Luxembourg tax authorities in case of missing US TIN

15/10/21

In brief

The Luxembourg tax authorities are currently sending notifications letters to Financial Institutions in order to obtain missing or invalid US Tax Identification Numbers in FATCA reports.

In detail

Following some automatic controls on the 2020 FATCA reports, the Internal Revenue Service (“IRS”) notified the Luxembourg tax authorities (“LTA”) for each report containing missing or invalid Tax Identification Numbers (“TINs”). The LTA are currently sending letters to all concerned Luxembourg Reporting Financial Institutions (“FIs”) including those having used the required explanation codes.

At this stage, those FIs should continue their best efforts to obtain the missing TINs or a proof that their clients or investors are not Specified US Persons (or ceased to be). Based on the results of such on-going due diligence, they would then need to amend their 2020 FATCA reports by 31 December 2021 accordingly.

A notification has also been sent for Passive Non-Financial Foreign Entities (“NFFEs”) with US Controlling Person(s) for which only the Passive NFFE had a missing US TIN. While most of them have valid reasons not to have such number (as they are not US entities), the current reporting schema did not allow to not include a US TIN or replace it with a foreign TIN which triggered this error message. As from next year, following an adaptation of the IT systems of the LTA, those entities will be reported with their foreign TIN (normally collected under CRS).

At this stage, the LTA are not asking for any explanations or justifications. However, it is best practice for the FI to keep evidence of the best efforts undertaken to obtain those missing TINs (e.g. annual reminders, blocking of the account, etc.). The LTA also recommend that those efforts are described in the FI’s operational procedure.

Even though those compliance steps should help in the case of further requests from the IRS, it remains unclear at this point of time what approach will be taken by the latter in the absence of amended reports as well as the potential consequences if they would consider that the absence of US TIN results from a major non-compliance issue (e.g. treat the entity as a Nonparticipating FFI, request a review of the policies and procedures, ask for an audit of the FI processes, etc.).

What's next?

This automatic notification is the result of a stricter approach by tax authorities worldwide with respect to the quality of the information exchanged via the FATCA and/or CRS reports. As a result, it is strongly recommended that FIs:

  • review their current operating model;
  • document how their related procedures are complied with on a day-to-day basis and are tailored to their operational processes;
  • ensure relevant employees are regularly trained; and
  • strengthen their controls including when client/investor on-boarding and reporting processes are carried out by third-party providers.

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

1. PwC Luxembourg (www.pwc.lu) is the largest professional services firm in Luxembourg with 2,800 people employed from 77 different countries. PwC Luxembourg provides audit, tax and advisory services including management consulting, transaction, financing and regulatory advice. The firm provides advice to a wide variety of clients from local and middle market entrepreneurs to large multinational companies operating from Luxembourg and the Greater Region. The firm helps its clients create the value they are looking for by contributing to the smooth operation of the capital markets and providing advice through an industry-focused approach.

2. The PwC global network is the largest provider of professional services in the audit, tax and management consultancy sectors. We are a network of independent firms based in 155 countries and employing over 284,000 people. Talk to us about your concerns and find out more by visiting us at www.pwc.com and www.pwc.lu.

Contact us

Pierre Kirsch

Partner, PwC Tax Information reporting Sàrl, PwC Luxembourg

Tel: +352 49 48 48 4031

Camille Perez

Director, PwC Tax Information reporting Sàrl, PwC Luxembourg

Tel: +352 49 48 48 4618

Frauke Anna Maria Ortmann

Director, PwC Tax Information Reporting Sàrl, PwC Luxembourg

Tel: +352 49 48 48 3762

Robin Bernard

Senior Manager, PwC Luxembourg

Tel: 352 49 48 48 3726

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