In brief
On 19 April 2024, a Grand Ducal Decree was published in the Official Gazette to update the list of jurisdictions considered as Reportable Jurisdictions (in French: “Juridictions soumises à déclaration”) and Participating Jurisdictions (in French “Juridictions partenaires”) for the year 2023 for the purpose of the Common Reporting Standard (CRS) in Luxembourg.
In detail
On 19 April 2024, a Grand Ducal Decree on CRS was published in the Official Gazette. The Grand Ducal Decree dated 18 April 2024 amends the previous Grand Ducal Decree dated 23 December 2022 and modifies the list of CRS Participating and Reportable Jurisdictions for the year 2023.
More precisely, Liberia, Uganda, Moldova, Montenegro and Morocco were removed from the list of Participating Jurisdictions for the year 2023. This means that entities tax resident in those jurisdictions that qualify as Investment Entities managed by other Financial Institutions, will need to be re-classified as Passive Non-Financial Entities (“NFEs”) and have to disclose their Controlling Persons. If one of their Controlling Persons is tax resident in a Reportable Jurisdiction, financial accounts held by these entities have to be considered for the CRS reporting for the year 2023 as well.
In addition, Georgia and Ukraine have been added to the list of Reportable Jurisdictions for the reporting year 2023. Account holders and Controlling Persons resident in those jurisdictions will consequently have to be reported for the year 2023 and need to be notified before the reporting on the personal information that will be subject to the exchange of information in the context of CRS.
The mismatch between the list of Participating Jurisdictions and the list of Reportable Jurisdictions may also impact your DAC 6 reporting obligation and more importantly your AML tax risk assessment. For instance, a client tax resident in Morocco is not currently effectively reported by the Luxembourg tax authorities to his country of tax residence. Therefore, it is difficult to mitigate a risk of non-tax transparency of his account by considering that the latter will be known by the Morocco tax authorities.
What's next?
The publication of the Reportable and Participating Jurisdictions lists allows Luxembourg Reporting Financial Institutions to determine the clients or investors (the “Account Holders”) that should be included in the 2023 CRS report.
Reportable individuals (including Controlling Persons) should be notified in a reasonable amount of time before the submission of the CRS reports (i.e., at least one month before filing). As the deadline to report information related to accounts maintained in 2023 is set on 1 July 2024, reportable individuals will need to be notified by the end of May at the latest.
As notified persons may have questions or request change of their personal data, operational processes should be adapted to handle proper communication with those clients and determine which requested changes affect the reportability of the person and the effective date of that change. Therefore, we usually recommend sending the notification as soon as possible to provide sufficient time to treat the information, obtain new supporting documents, and update your systems accordingly.
Luxembourg Financial Institutions should ensure that written procedures and policies are also updated accordingly to take into account this new obligation.
We also expect the Luxembourg tax authorities to perform more controls and audits in the future based on the developments that we see currently at an OECD level as well as in other European countries. In February 2024, the Global Forum Secretariat launched a new tool “Model Manual for CRS Compliance Audits” which is available to tax authorities upon request.
In addition, with the implementation of DAC 8 in 2026, additional information will have to be included in the CRS reports that will allow the tax authorities to perform further controls.
Apart from data quality checks, based on our experience, tax authorities focus on written procedures, register of actions, IT system(s), FATCA/CRS self-certification form templates, internal and/or external controls process(es) and any other measures put in place to comply with FATCA/CRS obligations. Therefore, in the frame of the preparation of your reporting, it is important to document how the population has been reconciled with fund register or client listing and with previous year reporting. It is also crucial that the reportable status of a given Account Holder is assessed and documented not only based on the FATCA/CRS self-certification obtained but also based on the KYC documentation as well as publicly available information.
Our subject matter experts are available to discuss the above updates in more detail and help you to implement sound governance if needed. Our expert team can assist you with:
- Drafting or reviewing procedures and your control matrix;
- Reviewing self-certifications (incl. IRS Forms) obtained from clients or investors;
- Preparing and filing FATCA and CRS reports via our dedicated and collaborative online platform;
- Generating notification letters for your reportable clients/investors & Controlling Persons;
- Performing due diligence on service providers (e.g., transfer agents for the fund industry);
- Providing dedicated training sessions.
Contact us
Pierre Kirsch
Tax Partner and Authorised Manager of the PSF, PwC Regulated Solutions S.à r.l.
Tel: +352 62133 40 31
Frauke Anna Maria Ortmann
Tax Director, PwC Regulated Solutions S.à r.l.
Tel: +352 62133 37 62