The aim of the common reporting standard
- Much like FATCA provisions, the CRS makes FIs (Financial Institutions) review and collect information on their clients/investors, in order to identify their tax residence, as well as to provide certain account information to relevant foreign tax authorities (via the Luxembourg tax authorities) on an annual basis.
- The CRS will enhance the automatic exchange of information and will establish a common standard for all participating jurisdictions. This will strengthen the fight against tax evasion and will facilitate identification of beneficial owners.
New Account holders
- Luxembourg FI's have to obtain a self-certification mentioning the name, address, tax residence, tax identification number (TIN) and place and date of birth (for individuals) of the account holder upon account opening.
- All account holders subject to CRS review have to issue a self-certification form in which they state their residence for tax purposes and provide their TIN. Without a self-certification, the FI is legally bound to consider the account holder as a reportable person and act accordingly towards the relevant tax authorities.
Due diligence regarding preexisting Accounts
- The law clarifies that Luxembourg FIs must apply their due diligence procedures to all their non-Luxembourg resident clients and investors. It allows Luxembourg FIs to apply the procedures governing new accounts to preexisting accounts.
- Keep in mind that a Reporting Financial Institution may not rely on a self-certification or Documentary Evidence if it knows or suspects that the self-certification or Documentary Evidence is incorrect or unreliable.
- Luxembourg FIs have to submit their first reports to the Luxembourg tax authorities no later than 30 June 2017.
- Luxembourg reporting FIs have can file a nil report with the Luxembourg tax authorities even if they haven’t identified any reportable accounts (it is however not required).
Control and penalties
- A reporting Luxembourg FI's omitting to comply with due diligence rules or to introduce procedures in view of reporting are liable to a penalty up to EUR 250,000.
- A reporting Luxembourg FI's omitting to file the required report or if it files a late, incomplete or inaccurate report, it may be liable to a penalty of 0, 5% of the amounts that should have been reported, with a minimum of EUR 1,500.
Data protection rules
- Reporting Luxembourg FIs can't invoke any professional secrecy rules to refuse the reporting of required information.
- Reporting Luxembourg FIs should inform each individual that information will be collected and possibly reported.
- Reporting Luxembourg FIs must communicate to individuals the following:
- The Luxembourg FI is responsible for personal data processing.
- The personal data is intended to be used for the purpose of the CRS.
- The data will be reported to the Luxembourg tax authorities and the tax authorities of the jurisdiction(s) of residence of the Account Holders or Controlling Persons of a Passive NFE.
- The reported individual has the right to access the data/financial information reported to the Luxembourg tax authorities and to rectify it.
- Reported individuals have to reply to each information request sent to them. The Reporting Luxembourg FI must also inform them what may happen if the fail to answer.