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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum 5 Executive Summary 7 Introduction11 Information and methodology used for the peer review of Luxembourg11 Compliance with the Standards 19 A. Availability of Information 19 Overview 19 A.1. Ownership and identity information 21 A.2. Accounting records 54 A.3. Banking information 59 B. Access to Information 65 Overview 65 B.1. Competent Authoritys ability to obtain and provide information 67 B.2. Notification requirements and rights and safeguards 84 C. Exchanging Information 89 Overview 89 C.1. Exchange of information mechanisms 92 C.2. Exchange of information mechanisms with all relevant partners103 C.3. Confidentiality 107 C.4. Rights and safeguards of taxpayers and third parties 109 C.5. Timeliness of responses to requests for information112 Summary of Determinations and Factors UnderlyingRecommendations119
4 TABLE OF CONTENTS Annex 1:Jurisdictions Response to the Review Report 125 Annex 2:List of all Exchange-of-Information Mechanisms inForce 126 Annex3: List of all agreements signed, allowing for the exchange of banking information, to the standard and in force, including jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation (2011/16/EU)132 Annex 4:List of Laws, Regulations and OtherMaterialReceived 136 Annex 5:People Interviewed During the On-Site Visit 139
EXECUTIVE SUMMARY 7
Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information for tax purposes in Luxembourg as well as the practical implementation of that framework. The assessment of exchange of information in practice covers the three year period 2009 to 2011. The international standard laid down in the Terms of Reference of the Global Forum for monitoring and reviewing progress towards transparency and exchange of information, considers the availability of relevant information within a given jurisdiction, the ability of the competent authority to access it swiftly, and whether the information may be exchanged effectively with its partners in information exchange. 2. Since its commitment to the international standard of transparency and exchange of information, in March 2009, Luxembourg has been very active and quick in negotiating EOI mechanisms that incorporate the full version of article26 of the OECD Model Tax Convention1. Luxembourgs network of bilateral information exchange mechanisms now comprises 752 agreements, 45 of which contain article26 allowing for the exchange of banking information and 43 of which are to the standard. Of the 43 agreements to the standard 23 are in force. Luxembourg is also party to the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/ EU. This Directive has been in effect since 1January 2013. As a result, Luxembourg has EOI relationships to the standard with 54 jurisdictions and can already exchange information with 40 of them (arrangements in force). 3. In two cases Austria and Panama the obligations stipulated in the recently negotiated protocols are more restrictive than those established by the international standard. However, since 2013, Austria has been covered by the EU Council Directive on Administrative Cooperation in the Field
1. 2. The 2005 revised version. See Annex3 for the agreements signed, allowing for the exchange of banking information, to the standard and in force, including the jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU.
8 EXECUTIVE SUMMARY
of Taxation (2011/16/EU). Luxembourg has proposed to its treaty partners to update the treaties still not meeting the standard and is in negotiations with 24 jurisdictions. A total of 18 new agreements or protocols3 have been signed since 2011, all of which should be ratified shortly. The two draft laws ratifying 154 of these new agreements or protocols have been enacted by Parliament on 7June 2013 and the laws are expected to be published by the end of June 2013. Luxembourg needs to continue updating of its network of tax treaties so that all its partners can access the information held by financial institutions. 4. In order to conform to the international transparency standard, Luxembourg introduced, legislation, in 2010, governing access to banking information or information protected by secrecy rules. This legislation implements Luxembourgs international commitments into domestic law. 5. Banking information is available due to the anti-money laundering (AML) legislation, amongst other things. The rules according to which information relating to numbered accounts must be kept derive from a grand ducal regulation adopted on 1February 2010. This regulation was complemented by a new CSSF (Financial Sector Supervisory Commission Commission de Surveillance du Secteur Financier) regulation adopted on 14December 2012, which clarifies that these rules are applicable to numbered accounts opened prior to the regulation of February 2010, and addresses concerns expressed in the Phase1 review. 6. Luxembourg law generally guarantees the availability of information on companies and partnerships. All companies and partnerships must register with the Register of Commerce and Companies (Registre du commerce et des socits, RCS) within a month of their creation. The law usually requires the provision of information to the RCS relating to the shareholders and partners of these companies and partnerships as well as updates to this information. However socits anonymes (SAs, or public limited companies), socits en commandite par actions (Se.c.as, or partnerships limited by shares), and socits europennes (SE, European companies) are themselves required to keep information on the holders of registered shares, through a register of shares. Comments received from peers confirm that ownership information has been provided in those cases where it has been requested. 7. Luxembourg law authorises the issuance of bearer securities by SAs, S.e.c.as, and SEs, but there are no mechanisms in place to ensure the
3. 4. Canada, Czech Republic, FYROM, Isle of Man, Italy, Jersey, Kazakhstan, Laos, Malta, Poland, Romania, the Seychelles, South Korea, Sri Lanka, Switzerland, Tajikistan, Chinese Taipei and Russia. Canada, FYROM, Italy, Kazakhstan, Laos, Malta, Poland, Romania, Russia, the Seychelles, South Korea, Sri Lanka, Switzerland, Tajikistan and Chinese Taipei.
EXECUTIVE SUMMARY 9
availability of information on holder of bearer shares in all circumstances. The fact that investment companies (in particular SICAV and SICAF5) are authorised to issue shares in bearer form constitutes a loophole in the legal and regulatory framework in Luxembourg. Therefore, element A.1 is assessed as not being in place. Luxembourg is working on a preliminary draft bill to immobilise bearer shares. It is expected that the law will be adopted in 2013. 8. Information on other relevant entities and arrangements is generally available when the information exchange takes place under a revised treaty. Lastly, Luxembourg legislation guarantees the availability of accounting information. In fact, there are legal obligations applicable to any business entity as well as to trusts, fiducies and foundations. These legal obligations are respected by the legal entities in Luxembourg and information from other relevant entities and arrangements as well as accounting information is provided when requested, although sometimes after delays. 9. The new procedure to access banking information has already been tested in practice in many instances and Luxembourgs treaty partners have indicated that they have obtained the requested banking information in the majority of the cases. 10. With the entry into force of the agreements concluded or updated after 2009 and which are in line with the standard, Luxembourg has been able to collect banking information as well as ownership information and accounting records. For the period under review (2009 to 2011), Luxembourg received 832 EOI requests (242 requests in 2009, 234 in 2010 and 356 in 2011), from more than 30 treaty partners, the most significant being Belgium, France, Germany, Italy, the Netherlands, Russia, Spain and Sweden. Luxembourgs response timeframe improved during the period under review. In 2009, only 18% of the requests were answered in less than 90 days and a further 2% within a period of between 90 days and 180 days. In 2011, Luxembourg answered EOI requests within 90 days in 45% of the cases, in a further 30% of the cases the answer was provided within 90 to 180 days. In 18% of the cases the answer was provided within 180 days to a year and the answer was provided after a period of more than a year in 4% of the cases. 11. However, a peer reported that in certain cases Luxembourgs authorities have not used their information gathering and enforcement powers to gather information in all instances where the holder (the bank) has provided incomplete information. Furthermore in some instances, peers reported that they were unable to receive banking information in relation to individuals resident in Luxembourg as a result of a restrictive interpretation of the foreseeably relevant standard by Luxembourgs authorities. Further, Luxembourg does not allow exchange of banking information that precedes the effective
5. SICAV: open-end investment company; SICAF: close-end investment company.
10 EXECUTIVE SUMMARY
date of a treaty, even where it relates to a taxable period or chargeable event following the effective date. Luxembourg should conform its practices in these areas to the international standard. 12. Finally, in some cases Luxembourg only provided the information directly available to the tax authorities and did not request information from any other person concerned to substantiate its answers, on the basis that the requested information related to the substance of business activities of entities that generally had no substantive presence in Luxembourg. 13. Since 2009, Luxembourg has reorganised its EOI system with the creation of a division dedicated to EOI (DIVECHR de lAdministration des contributions directes, ACD) in order to improve the handling of requests. This division has been granted new access powers to collect on request all types of information, including banking information. However, some issues remain in relation to the practices of Luxembourgs authorities, in particular as regards the use of its enforcement powers to gather all requested information, a disagreement with a treaty partner on its obligation to exchange bank information in certain cases, its ability to maintain the confidentiality of information received, and the provision of status reports to treaty partners. Further, the procedures to collect information have not always been communicated clearly to treaty partners and may not always have been consistently followed. 14. A follow up report on the steps undertaken by Luxembourg to answer the recommendations made in this report should be provided to the PRG within six months after the adoption of this report.
INTRODUCTION 11
Introduction
12 INTRODUCTION
17. In addition, to reflect the Phase2 component, an assessment is also made concerning Luxembourgs practical application of each of the essential elements. As outlined in the Note on Assessment Criteria, following a jurisdictions Phase2 review, a rating will be applied to each of the essential elements to reflect the overall position of a jurisdiction. However, this rating will only be published at such time as a representative subset of Phase2 review is completed. This report therefore includes recommendations in respect of Luxembourgs legal and regulatory framework and the actual implementation of the essential elements, as well as a determination on the legal and regulatory framework, but it does not include a rating of the elements (see Summary of Determinations and Factors Underlying Recommendations at the end of this report). 18. The Phase1 assessment was conducted by a team which consisted of two expert assessors and one representative of the Global Forum Secretariat: Ms Shauna Pittman, Counsel, Canada Revenue Agency and Ms Silvia Allegrucci civil servant in the Department of Finance for Italy and Mr. Rmi Verneau from the Secretariat of the Global Forum. The assessment team assessed the Luxembourg legal and regulatory framework in the field of transparency and exchange of information and its relevant exchange of information mechanisms. 19. The Phase2 assessment was conducted by a team consisting of two assessors and one representative of the Global Forum Secretariat: Ms Shauna Pittman, Counsel, Canada Revenue Agency and Ms Silvia Allegrucci civil servant in the Department of Finance for Italy; and Mlanie Robert for the Global Forum Secretariat. The team evaluated the implementation and effectiveness of Luxembourgs legal and regulatory framework for transparency and exchange of information and its relevant information exchange mechanisms.
Overview of Luxembourg
20. Landlocked between Germany, Belgium, and France, Luxembourg is one of the smallest states of Western Europe in terms of area (2600 km) and population (525000). With a total GDP of nearly EUR40billion and a per capita GDP of nearly EUR80000, it has one of the highest standard of living amongst the OECD member countries. 21. Formerly dependent on the steel industry, the Luxembourg economy is today characterised by the importance of its financial sector, which in 2010 represented 38% of GDP, 11% of employment and 25% of tax revenues. Other features of the Luxembourg labour market are its low unemployment rate (6.2%), its high employment rate (with a workforce of 370000) and its openness, with 150000 cross-border workers. Belgium, Germany and France account for 56% of Luxembourgs exports and more than 75% of its imports. The European Union (EU) as a whole accounts for 80% of Luxembourgs exports and 90% of its imports.
INTRODUCTION 13
22. Luxembourg is a founding member of the EU and the Economic and Monetary Union of countries forming the euro area. The capital city of Luxembourg is also the seat of the Court of Justice of the European Union, the European Court of Auditors and several European administrations. Luxembourg is a founding member of the OECD and the UN. It is also a member of other international organisations such as the IMF and the WTO. As a member of the OECD, Luxembourg takes part in the Global Forum and its Peer Review Group.
14 INTRODUCTION
for the matters relating to direct taxations, judicial jurisdictions deal with indirect taxations as well as recovery litigations (whether relating to direct or indirect taxations). There is also a Council of State, an advisory body comprising 21 members appointed by the Grand Duke, which renders its opinion on legislative bills and proposals as well as on draft grand ducal regulations.
Taxation system
27. One feature of the Luxembourg tax system is that it embraces three tax administrations: The Direct Tax Administration (Administration des contributions directes, ACD), which assesses and collects individual income tax, corporate income tax (impt sur les collectivits) and the municipal business tax. The Indirect Tax Administration (Administration de lenregistrement et des domaines, AED) is responsible for assessing and collecting VAT, stamp duties and succession taxes. The Customs and Excise Administration (Administration des Douanes et des Accises, ADA) is responsible for excise duties, consumption taxes on alcohol, and the vehicle tax.
These three administrations have jurisdiction in the field of EOI regarding taxes for which they are responsible. The Ministry of Finance is the competent authority, and the ACD is the central authority for managing EOI requests based on agreements with an updated EOI provision, which means that the ACD receives all EOI requests and transfers them to the appropriate tax administration. 28. Individuals and legal persons resident in Luxembourg are taxable on their worldwide income. All natural persons who have their domicile or habitual abode in Luxembourg are considered residents. Legal persons are considered to be residents if they have their statutory headquarters or their central administration (effective place of management) in Luxembourg. Non-resident individuals or legal persons are taxed on their income from Luxembourg sources. 29. As a member of the European Union, Luxembourg participates in the common VAT system. The normal rate of tax is 15%, and the reduced rate is 6%. The taxation of occupational incomes of individuals is progressive, with a maximum rate of 40%. Corporations (collectivits, i.e.companies and legal persons) are subject to profit tax at a rate of 20% on profits up to EUR15000, and 21% above this amount. They are also subject to the municipal business tax at a rate of 3% multiplied by the municipal rate (200-400%).
INTRODUCTION 15
30. In 2011, total tax revenues amounted to 37% of GDP, with the VAT representing 23% of tax revenues, the personal income tax 30%, and the corporation tax 22%. As indicated above, the financial system alone produces 25% of tax revenues in Luxembourg. 31. Luxembourgs network of bilateral mechanisms for EOI today covers 75 jurisdictions, all of which are covered by double taxation treaties. Since March 2009, when it gave its formal commitment to implement international standards of transparency and exchange of information, Luxembourg has only concluded agreements and protocols that include the full version of article26 of the OECD Model Tax convention, particularly as it concerns the EOI held by banks. 32. As a member of the European Union, Luxembourg also exchanges information in accordance with the EU Council Directive on Administrative Cooperation in the Field of Taxation (2011/16/EU), in effect since 1January 2013 and replacing Directive 77/799/EEC concerning mutual assistance in the field of direct taxation. 33. For the period under review (2009 to 2011), Luxembourg received 832 EOI requests (242 requests in 2009, 234 in 2010 and 356 in 2011), from more than 30 treaty partners, the most significant being Belgium, France, Germany, Italy, the Netherlands, Russia, Spain and Sweden.
Overview of commercial laws and other relevant factors for exchange of information
34. At the end of 2012, the Luxembourg financial sector included 143 banks with balance sheets totalling nearly EUR757.7billion; 114 investment companies, with balance sheets totalling EUR3.4billion; 210 other financial sector professionals with balance sheets totalling EUR11.6billion; 3863 undertakings for collective investment managing assets of EUR2329billion; 281 venture capital/private equity companies (SICAR); 32 securitisation organisms, and 15 pension funds. 35. The financial sector is regulated by the Financial Sector Act of 5April 1993 and various specific laws regarding each category of professionals concerned. The Financial Sector Supervisory Commission (CSSF), which operates under the authority of the Minister of Finance, is the competent authority for the prudential supervision of credit institutions, other financial sector professionals, undertakings for collective investment, pension funds taking the form of SEPCAV8 and ASSEP9, approved securitisation organisms, SICARs, paying institutions, postal financial services proposed
8. 9. Open-end Pension Savings Company. Pension Savings Association.
16 INTRODUCTION
by the mail and telecommunications company, financial instruments markets, including its operators, and auditors. The CSSF also vets the license applications of banks and other financial sector professionals prior to approval by the Minister of Finance. 36. The insurance sector is governed by the Insurance Sector Act of 6December 1991 and regulated by the Insurance Commission (CAA), which conducts prudential supervision. The CAA examines license applications for insurance companies, for granting by the Minister of Finance. At the end of 2011, the Luxembourg insurance sector included 93 direct insurance companies and 242 reinsurance companies, with balance sheets totalling EUR157.9billion. 37. Notaries (limited in number to 36), bailiffs, attorneys (nearly 2000), auditors (nearly 440), accountants (nearly 1400) and real estate agents (nearly 1000) in Luxembourg are all regarded as constituting non-financial professions and enterprises under anti-money laundering legislation and are required, pursuant to this legislation, to perform customer due diligence. 38. Luxembourgs anti-money laundering (AML) legislation is based primarily on the instruments provided by the European Union. The FATF (Financial Action Task Force) evaluation published in February 2010 indicated that Luxembourg legislation could be improved in terms of how professionals covered by AML legislation identify their customers. As well, the simplified due diligence obligations stipulated by legislation were found not compliant with FATF standards. In response to these observations, Luxembourg has amended its AML regulatory framework with publication, on 1February 2010, of a grand ducal regulation and adoption, on 27October 2010, of a law strengthening the legal framework for combating money laundering and the financing of terrorism. In particular, the definition of beneficial ownership has now been amended and rules regulating the opening and holding of numbered accounts are now included in Luxembourg law (see below further developments under section A.1.3). Recent developments 39. A new CSSF regulation was adopted on 14December 2012, which, inter alia clarifies the rules applicable to the opening of numbered accounts and specifies that these rules are applicable to numbered accounts opened before 2010. 40. A draft bill requiring SICARs taking the form of a S.e.c.s. (Socit en commandite simple, limited partnership), to disclose the identity of the partners, has been tabled with the Parliament. 41. Since the Phase1 review, Luxembourg has signed 18 agreements containing EOI provisions consistent with the standard. Two draft laws ratifying
INTRODUCTION 17
15 of these new agreements and protocols have been enacted by Parliament on 7June 2013 and the laws are expected to be published by the end of June 2013. Luxembourg has also signed the multilateral Convention on Mutual Administrative Assistance in Tax Matters on 29May 2013 which, following its entry into force in Luxembourg, will allow for the exchange of information to the standard with 21 more partners.
A. Availability of Information
Overview
42. Effective EOI requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as accounting information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If information is not kept or the information is not maintained for a reasonable period of time, a jurisdictions competent authority may not be able to obtain and provide it when requested. This section of the report assesses the adequacy of Luxembourgs legal and regulatory framework on availability of information. It also assesses the implementation and effectiveness of these frameworks in practice. 43. Luxembourg has a legal and regulatory framework according to which information on the identity of shareholders of companies and partnerships must generally be available. 44. All companies and partnerships are required to register themselves with the Register of Commerce and Companies (RCS) in the month following their incorporation (cf. Law of 19December 2002). The articles of incorporation must be provided for registration and are published either totally or in the form of extracts. Cooperative companies (socits coopratives) are required to disclose in their statutes the names of their members and must provide to the RCS any amendment made to these statutes. The law requires limited liability companies (socits responsabilit limite,
the supervision of compliance with AML obligations by lawyers and chartered accountants is recent and that experience of the supervisory authorities in this respect is limited, Luxembourg should monitor the respect of AML obligations by lawyers and chartered accountants and therefore, the availability of ownership information kept by these professionals. 50. Luxembourgs legal and regulatory framework, as well as the practices of Luxembourgs authorities generally ensure the availability of ownership and identity information, accounting records and banking information, except for information on the owners of bearer shares and information on the owners of some SICARs. Luxembourgs peers have not identified problems with respect to the availability of ownership, accounting or banking information in relation to any particular type of entity although the provision of the information has sometimes been delayed.
10.
Terms of Reference to Monitor and Review Progress towards Transparency and Exchange of Information.
53. The procedures for registering companies in Luxembourg are stipulated by the law of 19December 2002. Article1 provides that all companies, as well as the branches of foreign companies, must be registered with the Register of Commerce and Companies (RCS). The RCS is a single registry operating under the authority of the Minister of Justice. It can be consulted by the public, and this can be done via Internet. All documentation deposited with the RCS is kept for a period of 20 years after the persons registration is deleted (cf. article23 of the grand ducal regulation of 23January 2003). 54. Pursuant to article6 of the law of 19December 2002, any commercial company must apply for registration, for which it must produce its deed of incorporation and indicate its corporate name, its legal form, the exact address of its headquarters, and the amount of its capital. All companies must also indicate the name of the persons authorised to manage, administer and sign for the company as its legal agents. SAs, SEs and S.e.c.as are not required to provide the names of their members for registration. On the other hand, S..r.ls must report the identity of all their members: full name, date and place of birth in the case of natural persons, and name, legal form and address of legal persons. 55. Registration in the RCS, pursuant to article15 of the law of 19December 2002, and provision of the statutes to the RCS, pursuant to article9 (1) of the law of 10August 1915, must take place within the month after the date of the finalised statutes. This Article also provides that any person may inspect the documents deposited with the RCS. Furthermore, within two months following their deposit with the RCS, those documents are published in section C of the Mmorial, the official gazette of Luxembourg (article9 (3) of the law). 56. Article11 of the law of 10August 1915 provides that, to be valid, any amendment to company instruments must be made in the form required by its constitutive instrument. Thus, amendments to the deeds of SA, S.e.c.a, SE and S..r.l must be notarised. Article11bis 2 requires that any deeds amending provisions that by law must be deposited and published be deposited with the RCS and published in the MemorialC. 57. The instruments of SA, SE and S.e.c.a do not necessarily contain information on their shareholders. This information is not required for registration and consequently is not updated in the RCS. Information on the members of cooperative companies is an integral part of their constitutive instrument. It must therefore be updated in the RCS under the same conditions as those for deposit of the original deed. 58. Article11bis (2) 3 of the law of 10August 1915 provides that all changes relating to S..r.ls shareholders must also be disclosed and published. These changes must be reported to registration authorities in the
64. The RCS must be informed of any amendments made to the statutes of a company within one month. When the statutes are modified by a notary11, the notary will be responsible for providing the information to the RCS. For cooperative companies, if the changes are not made by a notary, the company itself will be responsible for providing the changes to the RCS. These modifications are generally provided to the RCS as the information will not be legally valid and will not have any legal impact if it is not registered with the RCS. Since the information almost always comes through a notary, the information is of a very good quality and filed on time (see below for more information on supervision to which notaries are subject). 65. If the RCS is aware that information concerning a company is not accurate, it will notify the company to make the appropriate correction. If the information is not modified by the company, the RCS will refer the case to the State Prosecutor who can apply judicial penalties. The State Prosecutor can also require the judicial liquidation of a company that does not comply with its obligation. For 2010 and 2011, 707 entities were dissolved following a decision of the Court for not complying with their obligations. The most common reasons for judicial liquidation are the absence of financial statements, the resignation of the board of directors, the failure to file annual accounts and/or the absence of a head office (generally resulting from the cessation of business). 66. Over the past two years, the RCS has undertaken a process of verification of all entries made in the RCS before 2002. All companies have received a letter asking them to verify the information maintained in the RCS and to correct it without charge, if necessary. This process was intended to verify the integrity and quality of the RCS. Statistics on corrections made following this update process are not available as the process is not yet completed. Up to now, approximately 50% of the files have been completed. However, responses received so far have shown that the information kept at the RCS was generally up to date and of very good quality. 67. Currently, to apply sanctions for non compliance with registration requirements, the RCS must refer the case to the State Prosecutor. Luxembourgs authorities are working on a preliminary draft law to introduce administrative penalties that could be applied directly by the RCS.
11.
Which is mandatory for all companies except cooperative companies since a notarial deed can only be modified by another notarial deed, except for cooperative companies that do not need to be created by notary.
Tax requirements
72. Companies are required to register with the (ACD, pursuant to paragraph165d of the General Taxation Act (LGI). This provision requires persons others than natural persons to report to the competent local taxation office facts that, in tax matters, create, modify or end a personal obligation to pay taxes. For this reason, in practice, once a companys statutes have been published in MemorialC, the local taxation office registers the company and sends it an opening declaration. 73. On this occasion, companies may be asked to provide, on request, information concerning the company headquarters, its mailing address, the names and addresses of recent directors and managers and of members or shareholders. However, as this information is already publicly available in
MemorialC, it is requested by ACD only to the extent that there are remaining uncertainties as regards its accuracy. 74. Companies subject to the VAT must also register with the indirect taxation administration (AED) and file a declaration with the local tax office when they begin business, or when there is a change or cessation in activity in the manner and form prescribed by the administration (article61 of the VAT law). The registration form requires that the information include the company name, its legal form, the date of publication in MemorialC, the type of activity or the names and addresses of shareholders and members. 75. As persons subject to corporate income tax, companies are required to submit an annual return to the ACD by 31May of each year (articles116 and 162 of the Income Tax Act) in the manner provided for by the grand ducal regulation of 13March 1970 and on the form established by the administration (article7 of the regulation). Tax form No.500 (resident companies) requires communication of information including the names of shareholders holding at least 10 % of the companys capital. Companies are required to disclose such information which is necessary for the application of some fiscal provisions, in particular the exemption of withholding tax on dividends from Luxembourg sources (article166 of the income tax law) and the taxation of the benefits granted to their shareholders as hidden distributions of benefits (article164 of the law). In addition, the tax return indicates that, amongst others, the information that must be submitted upon the filing of this declaration includes the attendance list and the minutes of the general meeting of shareholders. 76. In practice, a legal entity is automatically registered by the ACD for tax purposes once the entry in the RCS and the statutes of incorporation (for SAs, S.e.c.a.s, S..r.l.s, cooperative companies and partnerships under civil law) or an excerpt of the statutes (for general partnerships and limited partnerships) are published in the MemorialC. When the new legal entity is registered with the RCS and this information becomes publicly available, the ACD sends the entity an opening declaration (a questionnaire requesting specific information, such as the expected turnover that will be used to apply instalment payments). The legal entity has one month to complete and return the questionnaire. Once registered, the legal entity receives a tax identification number from the ACD, which is different from the number given by the RCS. The ACD authorities verify the information during the registration process and periodically. Information provided in tax returns filed by legal entities is checked against information available in files maintained by the ACD. 77. With regard to the filing of tax returns, the follow up and sanction process by the ACD is very strict. Automatic reminders are sent for late filing and fines are applied for information missing or for late filing. For 2009,
12.
83. Pursuant to articles8 to 14 of this law, any natural person or legal entity that directly or indirectly acquires securities conferring on it a voting rights percentage of 5% or more of all voting rights must advise the issuer and the CSSF. Such notification is also required when the percentage of voting rights reaches or exceeds 10%, 15%, 20%, 33 2/3%, 50% and 66 2/3%. The issuing company must immediately publish any change in the voting rights attached to the different categories of shares. 84. The effect of this obligation is that all shareholdings in excess of 5% in listed Luxembourg companies must be publicly disclosed.
Foreign companies
88. Foreign companies that have their principal establishment in Luxembourg (effective seat of management) are subject to the same formalities as companies established under Luxembourg law (cf. article158 of the law of 10August 1915). 89. These companies are required to register with the RCS in Luxembourg, following the same rules as those that apply to Luxembourg companies; they must register with the ACD, and they must submit annual tax returns to the ACD (model No 500, resident companies). They are also required to keep a register of shares in the same conditions as those that apply to Luxembourg companies. Further, they can issue bearer shares, if so allowed pursuant to the legislation under which they are incorporated. 90. Consequently, information on these companies is available under the same conditions as those described above for Luxembourg companies. 91. There were 1335 foreign companies registered with the RCS as of 30September 2012. Luxembourgs authorities have confirmed that the information on foreign companies is available to the same extent as information on companies incorporated in Luxembourg, as foreign companies need to be registered with the RCS and the ACD (and for VAT if applicable). In practice, Luxembourg has never experienced any problem in accessing information on foreign companies, and no issues in relation to such companies were identified by Luxembourgs treaty partners.
Investment companies, financial holding companies (SOPARFIS) and family wealth management companies (SPFs) Investment companies (SICAV, SICAF, and SICAR)
92. A SICAV, according to the law of 17December 2010, is an openended (i.e.share capital not fixed) investment company which may, in principle, issue new shares at any time, and shareholders may redeem their shares. This type of company must adopt the form of an SA or an SE (art.25 and 32 of the law) and be approved by the CSSF. The minimum capital upon formation is EUR31000 but a threshold of EUR1250000 must be reached six months after the approval by the CSSF at the latest. A SICAV is subject to the rules that apply to SAs, unless the law provides otherwise (art.25). There were almost 2000 SICAVs registered on 30September 2012. 93. SICAFs are also governed by the law of 17December 2010. These are closed-ended (i.e.share capital is fixed) investment companies. This type of investment company can take the form of an SA, an SE, a S.e.c.a, a S..r.l, an S.e.c.s (limited partnership, see below section A.1.3 of this report),
an S.e.c.n (general partnership, see below section A.1.3 of this report) or a cooperative company and be approved by the CSSF. The minimum capital upon formation is EUR31000 but a threshold of EUR1250000 must be reached six months after the agreement by the CSSF, at the latest. The rules that apply to SAs, SEs, S.e.c.as, S..r.ls, S.e.c.s, S.e.c.ns and cooperative companies apply to a SICAF in the absence of any contrary requirements in the law. There were 4 SICAFs registered on 30September 2012. 94. A SICAR (investment company in risk capital) is, according to the law of 15June 2004, an investment company taking the form of an SA, a S..r.l, a S.e.c.a or an S.e.c.s (limited partnership, see below section A.1.3 of this report), the purpose of which is to invest in private equity. Before operating, a SICAR must be approved by the CSSF. Only institutional and professional investors can invest in a SICAR (minimum investment: EUR125000). The minimum capital is EUR1000000 and must be reached in the 12 months following the approval granted to the investment company. Unless otherwise provided by the Law of 15June 2004, SICARs are subject to the rules that apply to companies after which they are modelled. There were 274 SICARs registered in Luxembourg on 30September 2012. 95. The rules regarding the establishment of companies under the company law of 10August 1915 apply to SICAVs, SICAFs and SICARs. Accord ingly, investment companies must be registered in the RCS and provide their deeds of incorporation including the identity of the natural or legal persons signing the deed as well as the identity of their representatives. For SICARs taking the form of an S.e.c.s, there is no obligation to disclose the identity of the partners (art.4 of the law of 15June 2004). These investment companies can issue bearer shares when they take the form of an SA, an SE, or a S.e.c.a. Luxembourg has nevertheless advised that SICARs mainly issue registered shares since SICARs securities can only be held by some specific categories of investors whose legal status must be checked systematically. 96. A draft bill requiring SICARs taking the form of an S.e.c.s., to disclose the identity of the partners (partners of SICARs in the form of S.e.c.s will be subject to the same general legal requirements as partners of S.e.c.s not taking the form of a SICAR), was tabled at the Parliament. It is expected to be adopted shortly. 97. For tax purposes, SICAFs and SICAVs are not subject to corporate income tax (art.173 of the law of 17December 2010) but to an annual subscription tax of 0.05% or in specific cases 0.01%, of the companys assets. These companies are therefore required to submit a declaration for payment of this tax to the AED, but are not subject to other tax requirements in terms of registration by tax authorities or declaration of income. Dividends paid by investment companies, when paid to foreign investors, are exempt from withholding tax.
is subject to corporate and communal taxes at the normal rate on its income. It can, under conditions, be tax exempt on the dividends received from companies in which it has a substantial interest (article166 LIR); is not taxed on the capital gains resulting from the disposition of holdings; is subject to a 15 % withholding tax on the dividends paid subject to double taxation conventions concluded by Luxembourg and the EU Parent Companies Directive; is subject to corporate, communal and wealth taxes and VAT for all its commercial activities.
104. SOPARFIs must register with the ACD and file an annual tax return with this administration. 105. Given the fact that SOPARFIs are not a specific type of legal entity, they are subject to the same legal obligations as all other legal entities with regard to the availability of information. A large number of EOI requests received by Luxembourg in the last three years were in relation to SOPARFIs, mainly for information on ownership. In practice, all SOPARFIs are registered and handled by the same tax office (Bureau dimpt des Socits 6 ), which facilitates the treatment of incoming requests pertaining to these companies since the information is centralised. Luxembourgs authorities have stated that when requested, this information is available either internally or from the companies themselves although a peer indicated that in certain cases, substantive information was not available or could not be provided (see section B.1.2 below).
2720 SPFs were registered on 1st January 2012. 107. The rules for registering an SPF are the same as those for the type of company after which it is modelled. Therefore, SPFs must be registered in the RCS and provide, to this extent, the deed of incorporation, the identity of the natural or legal person or persons signing the deed as well as the identity of their representatives and, when these companies take the form of an S..r.l the identity of all members (information which is required to be updated). These companies, when they take the form of an SA or an S.e.c.a can issue bearer shares. They are also required to keep a register of registered shares under the same conditions as those applicable to SAs, S.e.c.as and S..r.ls. 108. On the other hand, there are special tax rules applicable to these companies. It is specified that SPFs are not subject to corporate income tax but to an annual subscription tax of 0.25% of the companys capital, with a minimum of EUR100 and a maximum of EUR125000. The SPF is therefore required to submit a declaration for payment of this tax, but it is not subject to other tax requirements in terms of registration or declaration of income. Controls to which an SPF is subject are designed to search for and audit facts concerning the fiscal status and elements necessary to ensure and validate the correct and precise collection of taxes owed by the company (article6 (2) of the law of 11May 2007 concerning the creation of an SPF). 109. SPFs, like SICAVs, SICAFs, SICARs and SOPARFIs have to be created under one of the legal forms available for legal entities in Luxembourg. Availability of ownership information is ensured under the conditions applicable to the legal form they take. They have to be registered with the AED and file a quarterly return for the payment of the subscription tax. The AED verifies that all the conditions required for the creation of an SPF are met; otherwise, the entity loses its SPF qualification and special tax treatment. The AED also performs audits in order to control the payment of the annual subscription tax and sanctions can be applied in case of default. In 2009, 44 SPFs were subject to sanctions for default, 193 in 2010 and 149 in 2011. 110. Given that a large number of SPFs use a professional providing a registered office and given that these professionals are subject to AML obligations, ownership information in relation to SPFs is also maintained by these professionals to comply with the AML requirements. For the period 2009-11, six requests for information in relation to SPFs were received by Luxembourg. They were answered by the AED within 90 day and the information was available in all cases. Luxembourgs treaty partners have not made any comments on the availability of information in relation to SPFs.
Anti-money laundering legislation and information held by nominees Anti-money laundering legislation
111. The anti-money laundering rules are set out in the law of 12November 2004 as most recently amended by the law of 27October 2010.13 For the bodies and persons to whom the law applies, these rules include obligations regarding the identification of customers and verification of their identities. 112. Pursuant to article2 of the law, the persons and entities subject to the obligation concerning customer identification are, amongst others: Credit institutions and financial institutions authorised to exercise their activities in Luxembourg; Insurance companies authorised to exercise their activities in Luxembourg; Undertakings for collective investment (including SICAV) and investment companies (which covers SICAF, SICAR and other securitisation companies); Notaries; Tax advisors, accountants, accounting professionals and statutory auditors; and Attorneys, when acting as trust and company service providers14, when assisting their clients in preparing or conducting transactions involving the purchase and sale of real properties or businesses, the opening or management of bank accounts, the constitution, domiciliation, management or direction of fiducies, companies or similar structures, or where they are involved on behalf of their clients in any financial or real estate transaction.
113. The identification obligations deriving from article3 of the law apply when: A customer wishes to enter into business relationships;
13. The current AML/CFT legislation mainly derives from Directive 2005/60/ EC of the European Parliament and of the Council of 26October 2005 on the Prevention of the use of the Financial System for the Purpose of Money Laundering and Terrorist Financing. 14. According to article1 of the law of 12November 2004, these services include forming companies, serving as director or in a similar capacity, providing a registered office or a business address, serving as a trustee, acting as a nominee (proxy) shareholder for another person.
114. Pursuant to article3 of the law, the identification and verification of the customer are to be done on the basis of documents, data or information from reliable and independent sources. CSSF Regulation 12-02 of 14December 2012 provides for specific measures to be taken in order to verify this information. In addition, it requires professionals to take complementary measures of verification in accordance with the assessment of the AML/CFT risk profile of the customer. The CSSF Regulation 12-02 of 14December 2012 specifies the documents on which the identification must be based. It provides in particular that: the identification and verification of customers who are natural persons shall be made in principle on the basis of an official identification paper established by a public authority which carries the signature and a photograph of the client (e.g.passport, identity card, residence permit). Additional verification measures shall be taken in accordance with the professionals risk assessment of the client. the identification and verification of customers who are legal persons or other legal arrangements shall be made on the basis of (1)articles of incorporation (or equivalent), (2)recent extract from the trade register (or equivalent). In addition, identification and verification of the identity of the representatives (agents) of legal persons or persons delegated by those bodies is to be done on the basis of the same rules as those for natural persons. Furthermore, additional verification measures shall be taken in accordance with the professionals risk assessment of the client.
115. Moreover, the organisations and persons targeted by AML legislation must identify any beneficial owner of the customer as defined in article1 of the law of 12November 2004 and take reasonable steps to verify the customers identity.15 Following the assessment conducted by the FATF as it results
15. Directive 2005/60/EC of the European Parliament and of the Council of 26October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. The Directive defines beneficial owner as the natural person(s) who ultimately owns or controls the customer and/or the natural person on whose behalf a transaction or activity is being conducted: In the case of corporate entities, it include (i)the natural
from the report adopted in 2010, Luxembourg has adopted the grand ducal regulation of 1February 2010 which provides in article1(2) more detailed obligations to identify and verify the identity of beneficial owners. For all customers, the obligation to identify the beneficial owner requires determining whether the client is acting on behalf of another person and then taking all reasonable measures to obtain sufficient identification data to ascertain the identity of that other person. For customers that are legal persons or arrangements, the obligation requires taking all reasonable steps to: understand the ownership and control structure of the client; determine the individuals who ultimately own or control the customer.
CSSF Regulation 12-02 of 14December 2012 specifies professionals obligations with regard to beneficial ownership, e.g.by requiring professionals to obtain information on the name, first name, nationality, date of birth and address of the beneficial owner and by making clear that beneficial ownership is also possible where the 25% threshold referred to in Directive 2005/60/EC is not reached. 116. The entities and professionals covered by the law of 12November 2004 must retain all information relating to identification and transactions for five years after the business relationship has ceased or after the transaction has been carried out (article3.6 of the law). They must also inform, without delay, the financial information unit located in the prosecutor office of the local Luxembourg district court (tribunal darrondissement de Luxembourg) in case of any suspicion of money laundering (art 5 of the law). 117. The number of notaries is limited to 36 in Luxembourg. They are all supervised by la Chambre des notaires du Grand Duch du Luxembourg. Amongst its functions, the Chambre des notaires ensures that AML obligations are respected (AML obligations were strengthened by the law of 27October 2010 amending the law of 2004). 118. The Chambre des notaires launched a program of audits in mid-2011 that was completed at the end of 2012. During this period, all notaries were audited by a team of two persons, which had access to all documents and notarial acts of the notary under audit. Verifications were performed on a
person(s) who ultimately owns or controls a legal entity through direct or indirect ownership or control over a sufficient percentage of the shares or voting rights in that legal entity, including through bearer share holdings, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Community legislation or subject to equivalent international standards; a percentage of 25 % plus one share shall be deemed sufficient to meet this criterion; (ii)the natural person(s) who otherwise exercises control over the management of a legal entity.
123. Sanctions that can be applied range from a warning, to disciplinary sanctions through the disciplinary council such as fines, temporary suspension and even permanent suspension. The first round of audits has helped to raise and achieve a high level of awareness amongst lawyers and the second round that will start soon will check whether these requirements are carefully applied and will sanction defaults. 124. There are 1400 chartered accountants in Luxembourg that are subject to AML obligations on all their activities and that are supervised by LOrdre des Experts-Comptables (OEC). The verification of respect for AML obligations, including those in relation to identity information, is made through samples. The audit team has access to all the documents and files. In case of default, sanctions can be applied, such as warnings, fines and even suspension of the professional. When a sanction is applied, verification is scheduled shortly afterwards to ensure that the appropriate corrective measures have been implemented. The OEC has initiated controls in recent years the process began in 2007 and was strengthened in 2012 in order to ensure that its members are fully aware of and comply with AML obligations. 125. Since the new audit process is recent, no official results are available, although the preliminary results show good compliance of chartered accountants with the AML obligations and no major breaches have been identified so far. 126. Statutory auditors have the same legal obligations in relation to AML obligations. The nearly 440 members are under the supervision of lInstitut des Rviseurs dEntreprise du Luxembourg (IRE). The obligations of the members, including AML obligations, are subject to an audit process. Each professional is audited at least once every six years. The verification is based on a questionnaire filed by the members and the on-site verification is made by samples to control whether processes are applied, such as the client identification process. 127. Sanctions for breaches include a simple warning, a reprimand, a fine, the removal of the right to vote in the general assembly with a prohibition on being a member of the Council of the IRE for a maximum of six years, the suspension from or the definitive prohibition on exercising some activities, and the suspension of or the definitive prohibition on the right to practice the profession. The audit process has shown that knowledge and compliance of the professionals with these AML obligations are very high. Very few sanctions were applied, and those were mainly warnings for non-serious breaches. 128. In conclusion, given that in Luxembourg, supervision of compliance with AML obligations by lawyers and chartered accountants is recent the respect of AML obligations by lawyers and chartered accountants should be monitored by Luxembourg on an on-going basis.
Nominees
129. Anti-money laundering legislation establishes an obligation regarding identification of customers for a whole series of service providers. Thus, article1 of the law of 12November 2004, as amended, provides that any professional serving as nominee shareholder for another person is considered to be providing services to companies and fiducies. This professional is furthermore subject to due diligence obligations with respect to the customer. 130. Moreover, the Luxembourg tax authorities have the power to require any person, including attorneys and financial institutions, to provide any information for purposes of the EOI, provided that such exchange takes place under the aegis of a treaty that contains an article26 consistent with the standard (see section B.1 below). Thus, any person acting as nominee must disclose the identity of the person for whose account the shares are held. 131. In practice, given that the professionals acting as nominees (lawyers, accountants, notaries and service providers) are subject to the AML obligations, ownership and identity information in cases of professionals acting as a nominee is available. Luxembourgs authorities, including the ACD and the AML authorities, have confirmed that the number of professionals acting as nominees is limited and that their experience in relation to nominees is strictly limited. They do not have knowledge of any non-professional nominees that would have acted in such capacity in Luxembourg and consider any potential gap to be very limited.
Conclusion
132. In light of the obligations imposed by the various regulations in force in Luxembourg: SAs, SEs and S.e.c.as must keep a register of registered shares and, if they are listed, they must know the identity of shareholders who own more than 5% of their capital. However, these companies are also authorised to issue bearer securities (see section A.1.2 below). The names of the members of a cooperative company are indicated in its statutes and are reported to the RCS. This information must be kept up-to-date in the statutes and in the RCS. The names of S..r.ls shareholders are disclosed to the RCS upon initial registration and all changes must be reported to registration authorities. Moreover, these companies are required to keep an upto-date register identifying their shareholders. Foreign companies are subject to the same obligations as Luxembourg companies when they have their place of effective management in
Luxembourg (including maintaining a register of shares or issuing bearer shares if also allowed pursuant to the legislation under which they are incorporated). The branches of foreign companies are required to register with the RCS and must at that time provide information that includes the name of the country in which they have their principal registration. All these companies are required to register with the tax administration and are subject to reporting and filing obligations that include the identity of their members under certain circumstances. There is however no clear requirement to provide the identity of shareholders or members in companies in all situations. Investment companies, SPFs and SOPARFIs are subject to the same registration and record keeping requirements as companies after which they are modelled (registration in the RCS, share register, bearer securities). SICAVs, SICAFs and SPFs have specific tax obligations which can limit, for tax administrations, the availability of their information.
133. Approximately 20% of EOI requests received are in relation to ownership and identity information. Given the various sources of information that exist in Luxembourg and based on the legal and regulatory framework, the practices of the Luxembourg authorities and the experience of its peers, it is concluded that, ownership and identity information with regard to companies is available in Luxembourg.
Partnerships (ToRA.1.3)
138. Under the Luxembourg legislation (law of 10August 1915 and Civil Code), three types of partnerships can be created in Luxembourg: The Socit en Nom Collectif (S.e.n.c, general partnership or unlimited company), articles14 and 15 of the law of 10August 1915, is one formed by at least two partners who are jointly and severally liable without limitation for the companys obligations. The shares of an S.e.n.c cannot, in principle, be transferred. No minimum capital is required to form an S.e.n.c. The partnership may be formed by notarial or private deed. On 30September 2012 there were 442 S.e.n.cs registered in Luxembourg. The Socit en Commandite Simple (S.e.c.s, limited partnership), article16 of the law of 10August 1915, is a partnership formed by one or several partners who are jointly and severally liable without limit (the active or general partners), and one or more limited partners (the silent partners) whose liability is limited to the level of their contribution. Limited partners cannot engage in management activity, even through a power of attorney. No minimum capital is required to form such a partnership. An S.e.c.s may be formed by notarial deed but this is not mandatory. On 30September 2012 there were more than 900 S.e.c.ss registered in Luxembourg. It is also possible to create a Socit civile (partnership under civil law), articles1832 et seq. of the Civil Code, which is partnership the
purpose of which can only be civil (not commercial). This partnership comprises two or more members that decide to pool something with a view to sharing the benefit that may result from this pooling or, in the cases provided by the law, by one person that allocate goods to a non-commercial activity. A partnership under civil law may be formed by notarial deed but this is not mandatory. On 30September 2012, 3889 such partnerships were registered in Luxembourg.
Tax requirements
144. Partnerships are required to register with the ACD, pursuant to 165d of the General Taxation Act (LGI). This provision requires persons others than natural persons to report to the competent local taxation office facts that, in tax matters, create, modify or end a personal obligation to pay taxes. For this reason, in practice, once an extract relating to a partnership has been published in Memorial C, the local taxation office registers the partnership and sends it an opening declaration. 145. On this occasion, partnerships may be asked to provide, on request of the ACD, information concerning the partnership headquarters, its mailing address, the names and addresses of recent directors and managers, and of members or partners. Indeed, as this information is already publicly available in MemorialC, additional information is requested by ACD only in case of uncertainty. 146. Partnerships subject to the VAT must also register with the indirect taxation administration (AED) and file a tax declaration with the local tax office when they begin business, or when there is a change or cessation in activity in the manner and form prescribed by the administration (article61 of the VAT law). The registration form requires that the information include the entity name, its legal form, the date of publication in Memorial C, the type of activity or the names and addresses of members. 147. Although the income of partnerships is taxable in the hands of their members, such entities are required to submit an annual declaration to the ACD in their own name (articles116 and 162 of the Income Tax Act) in the manner provided for by the grand ducal regulation of 13 Mach 1970 and on the return established by the administration (article7 of the regulation). Declaration No.300 requires communication of information including the names of partners. As this information is necessary for the calculation of the personal income tax of all of the partnerships members, its provision is mandatory, and failure to provide it can lead to the application of sanctions by the local taxation office pursuant to 166 and 202 of the LGI. 148. In practice, information is also held at the ACD because partnerships need to register with the ACD (for this registration they need to complete an
opening declaration, in the same manner as do companies) and file an annual declaration. Thus, the information is verified upon registration and every year, when the tax return is filed. VAT registration and declaration may also be needed if the activities performed by the partnership are subject to VAT. Again, in such a case, the information is verified upon registration with the VAT authorities and every year when the VAT return is filed. Hence, identity information on partnerships is verified in various contexts (upon creation, registration with the RCS, registration for direct taxes and VAT, and each year, when tax and VAT returns are filed) and is therefore available through various sources to the relevant authorities.
AML legislation
149. The obligations described under section A.1.1 for companies apply as well to partnerships. Attorneys and tax advisors as well as all professionals deemed to be company service providers fall specifically within the scope of application of the AML law when they assist their clients in the preparation or conduct of transactions concerning the establishment, management or direction of companies (article2 of the law of 12November 2004). By article3 of that law, these service providers must identify their clients and retain information on the identity of their clients and the beneficial owners of partnerships, as well as all information regarding transactions conducted, for five years.
Conclusion
150. Information that Luxembourg partnerships must provide upon registration includes the identity of their members. This information must be updated in the RCS. The tax administration also receives this information on an annual basis, through the compulsory declarations that partnerships must file. 151. For the period under review, approximately 1% of the requests received related to information on partnerships. Incorporation and registration requirements for partnerships in Luxembourg are the same as those applicable to companies, as confirmed by Luxembourgs authorities. Considering these multiple requirements for registration (with the RCS, the direct taxes and VAT authorities upon creation and when a change is made) and the practices of the Luxembourg authorities, the availability of information (including identity and ownership information), is verified and available through different means and hence, is in line with the standard set out in the Terms of Reference.
on the nature of the settlor (natural or legal person). Then as well, section164 of the LGI provides that any person holding an asset in the capacity of fiduciary must be able, upon demand, to identify the real owner of the property, and this implies the availability of such information. In practice, the use of fiducies in Luxembourg is rather limited. In any case, the fiduciary must be able to identify the settlor to the tax authorities.
AML legislation
157. The obligations described under section A.1.1 for companies apply as well to fiducies. Attorneys, notaries, tax advisors, credit institutions and financial intermediaries are covered by the AML law and must perform CDD in all situations. In addition, all other professionals providing services to companies and fiducies fall specifically within the scope of application of the AML law when they assist their client in the preparation or conduct of transactions concerning the establishment, management, provision of registered offices or direction of fiducies (article2 of the law of 12November 2004). By article3 of that law and the grand ducal regulation of 1February 2010, these service providers must identify their clients and retain information on the identity of their clients and beneficial owners, as well as all information regarding transactions conducted, for five years. For customers that are legal persons or arrangements, the obligation requires taking all reasonable steps to: understand the ownership and control structure of the client; determine the individuals who ultimately own or control the customer.
158. As previously mentioned, it is impossible by law for a non-professional to act as a fiduciary of fiducies created in Luxembourg. Moreover all professionals legally allowed to act as a fiduciary in Luxembourg are subject to AML obligations in all cases. Considering AML obligations applicable to professionals and other financial institutions in Luxembourg, it appears that information on fiducies will be available if requested, although no EOI requests in relation to a fiducie have been received from Luxembourgs treaty partners so far. In addition, notaries have confirmed that although fiducies exist this is not a widely used tool.
Foreign trusts
159. There is no provision in Luxembourg law that would prohibit a resident from acting as trustee, administrator or manager or from having the responsibility to distribute profits or to administer a trust that is constituted under foreign legislation. The law of 27July 2003 merely ratifies the Hague Convention without creating a legal framework covering trusts created under foreign law.
AML legislation
164. The obligations described above for fiducies apply to trusts under the same conditions. Professionals acting as trust service providers are required to identify their clients and the beneficial owners of trusts. 165. Trustees of foreign trusts may be professionals to which AML obligations apply. It is also conceivable that non-professionals act as trustees of a foreign trust but overall the number of trustees of foreign trusts is limited, and the business is handled mainly by financial institutions. Further, Luxembourg authorities have stated that non-professional trustees are extremely rare and that no request of information concerning trusts (either trusts with a professional trustee or trusts with a non-professional trustee) has ever been received by Luxembourg.
Conclusion
166. Luxembourg law provides mechanisms ensuring that: the tax authorities have available information on trusts and fiducies when the deeds governing those entities have been registered (this is the case when real estate, aircraft and boats registered in Luxembourg are transferred to a trustee or a fiduciary); the tax authorities may require any fiduciary or trustee to disclose the identity of the settlors of trusts and fiducies; under all circumstances, clients and the beneficial owners of trusts administered by professional trustees and fiducies will be identified pursuant to the obligations flowing from AML legislation.
167. These multiple requirements, taken together, ensure the availability of information on the settlors and beneficiaries of fiducies and trusts administered by professional trustees in Luxembourg. In practice, the number of fiducies is very limited in Luxembourg and the number of foreign trusts that may be managed from Luxembourg is not known, but is thought to be limited. Nevertheless, considering AML obligations for professional trustees and considering information which must be made available to the tax authorities when requested, information on trusts and fiducies is available in Luxembourg.
Foundations (ToRA.1.5)
168. In Luxembourg, foundations are non-profit entities established for purely philanthropic purposes. 169. Pursuant to article27 of the law on associations and foundations of 21April 1928, as amended, any person may, by means of a notarial will or testament, subject to approval by grand ducal decree, assign all or part of his property to the creation of a foundation which shall enjoy civil personality. Foundations are deemed to be establishments that, with the income from the capital allocated at their creation or received thereafter, and excluding the pursuit of material gain, assist in the realisation of a work of philanthropic, social, religious, scientific, artistic, pedagogic, sporting or tourism-related nature. As at 30September 2012 there were 201foundations registered in Luxembourg. 170. A foundation may possess, in ownership or otherwise, only the properties needed to fulfil its purposes. All bequests to a foundation must, pursuant to article36 of the law, be authorised by the authorities responsible for supervising foundations (Ministry of Justice). For the duration of its existence, a foundation is subject to supervision by the authorities, who must in
172. The deed creating the foundation must be notarised, and is thus subject to AML obligations, including identification of the founder. The beneficiaries, of which there may be only a class of persons, are known through the purpose for which the foundation is created. 173. Any deed creating a foundation must be reported to the Minister of Justice for approval (article28 of the law) and the statutes of the foundation must be approved by grand ducal decree. After such approval, the statutes and any amendments thereto must be published in Memorial C. Lastly, the foundation (although it cannot pursue a commercial activity) must be registered with the RCS. All the foundations statutes must be submitted with the application for registration (article32 of the law). 174. Information relating to foundations including information required upon creation is verified by the notary in charge of drafting the articles of association (see above CDD requirements to which notaries are subject) as well as by the Ministry of Justice that approves the creation of the foundation. In addition, all changes in the deed of creation must be notarised, meaning that information will again be verified by the notary and by the Ministry of Justice which must approve the changes. Given that a foundation must be registered with the RCS, information is also verified at this step of the registration process. Foundations are also subject to annual filing with the Ministry of Justice, which verifies their annual accounts. If a foundation does not respect its legal obligations, the case is referred to the State Prosecutor for the dissolution of the foundation. In general compliance is very good and over the past years there has been only one case of dissolution of a foundation for breach of its obligations. 175. As a non-commercial entity, a foundation is not subject to corporate tax. Thus, foundations do not have to be registered with the ACD. However, as a relevant entity within the meaning of Luxembourg tax legislation, a foundation is subject to supervision by the Luxembourg administration in order to
ensure, in particular, that the conditions under which it is administered make it indeed a non-commercial entity. To this end, the foundation must keep all the records needed to demonstrate that the funds collected have been used in accordance with the stated purpose of the foundation.
Conclusion
176. Given the philanthropic nature of Luxembourg foundations, the obligations concerning their registration and recognition, and the obligations for reporting information to the supervisory authorities, Luxembourg legislation ensures conservation of the necessary information with respect to the founders, directors and beneficiaries of foundations. 177. Luxembourgs authorities have mentioned that they have not faced any difficulty in relation to the availability of information on foundations. In addition, no requests for information concerning foundations have been received by Luxembourg. Given the legal requirements and practices of Luxembourg upon registration of foundations, information on foundations is available.
Enforcement provisions to ensure the availability of information (ToRA.1.6) Penalties for failure to legally document the establishment of bodies, to register them, or to keep information
178. Failure to register with the RCS within the time limit prescribed by the law of 10August 1915 entails liability for a fine of EUR25 to 250 (article10). A fine of EUR500 to 25000 applies to those who fail to include the information required by law in the instruments, draft constituent instruments, or notices published in MemorialC or deposited with the RCS (article163 (8) of the law) and to the managers of S..r.ls who have not published changes in their membership. The persons responsible for managing Luxembourg branches are also liable to a fine of EUR500 to 25000 if they fail to perform the publicity formalities (article163 (8) of the law). In addition, any persons having omitted to ask for registrations required under the law of 19December 2002 (article21 (5) of the law) are liable to a fine from EUR251 to 5000. In 2009, 934 cases were referred by the RCS to the State Prosecutor for sanctions (for failure to register with the RCS or for failure to provide modifications or corrections to the register). In 2010, 809 cases were referred to the State Prosecutor and in 2011, 694. Of these cases, 707 entities have been dissolved following a decision of the Court, but the precise number of these cases that relate to filing of identity and ownership information is unknown. 179. In the case of foundations, the law of 21April 1928 provides that, if it fails to produce the publications required by law, the foundation may not
183. Moreover, according to the same Article, where the voting rights of the company incorporated in Luxembourg have been exercised notwithstanding their suspension provided for by the law, the district court (Tribunal darrondissement) in the district in which the companys registered office is located, sitting in commercial matters, may, on request of the company or one of its shareholders holding voting rights or any other person having a justifiable interest, pronounce the nullity of part or all of the decisions of the general meeting if, without the voting rights exercised unlawfully, the quorum or majority requirements for the decision in question had not been reached. The nullity action shall [expire] five years [after] the date on which the voting rights were exercised. Luxembourg authorities have confirmed that this has never happened in practice.
AML legislation
184. Failure to respect AML obligations is punished with a criminal penalty ranging from EUR1250 to EUR1250000, depending on the severity of the violation (article9 of the Law of 12November 2004). The CSSF may also impose administrative sanctions (see below). In 2010, there were two cases (concerning three persons in total) where sanctions were applied in this respect, there were no cases in 2011, and there was one case in 2012.
Conclusion
185. Luxembourg legislation provides for sanctions in situations in which the information required by law is not kept. There is a variety of possible sanctions provided by Luxembourg law depending of the level of the infraction. Each requirement to maintain ownership information is complemented by sanctions. Luxembourgs authorities have confirmed that the application of sanctions, when necessary, has a deterrent effect and rarely needs to be repeated. The enforcement provisions to ensure the availability of ownership information appear to be dissuasive enough to ensure the legal requirements are respected.
Luxembourg should ensure that ownership information relating to SICARs which take the form of an S.e.c.s is available in all circumstances
187. Pursuant to articles8 to 21 of the Commercial Code, as well as articles24 et seqq of the law of 19December 2002, all companies and partnerships (SA, SE, S.e.c.a, S..r.l, S.e.n.c, and S.e.c.s) must keep accounting records (article8 of the commercial code). These obligations also apply to investment companies such as SICAVs, SICAFs, SICARs or SPFs. Foreign companies having their place of effective management in Luxembourg as well as the branches of foreign companies are subject to the same obligations. 188. The accounts must cover all operations, assets and obligations of any kind, debts, obligations and commitments of any kind (article10 of the code). All accounting is based on a system of books and accounts and conducted in line with the customary regulations for double entry bookkeeping (article11). All transactions are recorded promptly, reliably and fully, in chronological order (article11). 189. All enterprises must conduct a complete annual inventory of assets and entitlements of any kind, and their debts, obligations and commitments of any kind (article16 of the code). These accounts must be filed annually with the RCS in the month following their approval, and no later than seven months after the close of the calendar year (article75 ff of the law of 19December 2002). These annual accounts must provide a fair picture of the net worth, the financial situation and the earnings of the enterprise (article26 of the law). 190. S.e.n.c and S.e.c.s whose turnover in the most recent financial year, excluding value-added tax, is no more than EUR100000 before taxes may keep simplified accounting records. This simplification allows for such firms to keep their books without reference to a specific chart of accounts, and to avoid having to file their accounts on an annual basis with the RCS. Nevertheless, these two types of partnerships must submit an annual tax return to the tax authorities (see below). 191. Fiduciaries, who must be professionals, are subject as such to the same obligations as those described above. In addition, the law of 27July 2003 on trusts and fiduciary contracts provides specifically that fiduciaries must keep separate accounts of fiduciary properties. Lastly, professional trustees are required to observe general accounting obligations applicable to all professionals established in Luxembourg. 192. Foundations are required to deposit their annual accounts and budget with the Ministry of Justice, as the supervisory authority, within two months after the close of the year (article34 of the law of 21April 1928 on foundations). These accounts must be published in MemorialC. They must contain data to demonstrate that the foundation is operating in accordance with its objectives, for purposes of supervision.
In practice
198. All enterprises and fiduciaries are required to file annual accounts with the RCS. In practice the accounts are filed electronically and the follow up by the RCS for late filing is automatic and based on the same electronic system. Penalties through the State Prosecutor are applicable for failure to file
the accounts as required. SPFs are required to file their accounting records with the RCS, and the AED has direct access to the RCS database. 199. Banks and other financial institutions are subject to the same requirements with regard to the filing of their accounts with the RCS on an annual basis, but with a specific filing format for security reasons. The follow up from the RCS on banks and financial institution is more rigorous than for other types of enterprises and for these entities, the level of compliance is higher. 200. Simplification measures have recently been introduced and legal entities that are under the obligation to file accounting records with the RCS are no longer required to file them with the ACD along with their tax returns. Accounting records can now be filed with the RCS only and the ACD has direct access to them. In any event, a tax return has to be filed with the ACD by all legal entities (unless an exception applies). If accounting records are neither filed with the RCS nor with the ACD, the ACD will consider the tax return to be incomplete and will impose fines and a tax surcharge. 201. Luxembourgs authorities have confirmed that in practice, accounting information is available for all types of legal entities and they have always been able to respond to requests for accounting records. Considering the record keeping requirements provided by law, accounting records kept by relevant entities correctly explain all transactions, enable the financial position to be determined with reasonable accuracy at any time and allow financial statements to be prepared, Information received from partner jurisdictions with an EOI relationship with Luxembourg, supports this, although the provision of information has sometimes been delayed.
Conclusion
202. Given both the accounting and the tax legislation, Luxembourg ensures the availability of accounting data from which it is possible to accurately review all transactions, to assess the financial position of all entities, and to prepare financial statements.
213. By article3 of the AML law, the situations in which bodies and persons subject to the law are required to identify their customers are as follows: the customer wishes to enter into business relationships; the customer wishes to carry out a transaction of which the amount reaches or exceeds EUR15000, whether the transaction is carried out in one or several operations that appear to be related; money laundering or the financing of terrorism is suspected;
214. In particular, a professional who is unable to identify the customer and determine the purpose for which the business relationship is established may not carry out a transaction through a bank account, establish a business relationship, or carry out a transaction. 215. Article3.6 of the law requires that all financial institutions preserve all documents necessary to reconstitute transactions. The law requires that substantiating documentation and records concerning transactions conducted under a business relationship shall be kept for at least five years. 216. The Financial Sector Supervisory Commission (CSSF) is the supervisory authority for banks and other financial institutions (other financial sector professionals, undertakings for collective investment, pension funds taking the form of SEPCAV17 and ASSEP18, approved securitisation entities, SICARs, paying institutions and electronic money institutions, financial services proposed by the mail and telecommunications companies (Entreprise des Postes et Tlcommunication), financial securities markets, including their operators, and auditors). The CSSF is also the competent authority in Luxembourg for the purposes of applying Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16September 2009 on credit rating agencies, as amended. 217. The CSSF supervises, amongst other things, compliance with AML obligations by entities under its authority. To carry out this mission, the CSSF systematically analyses the information received from banks and other financial institutions, such as the annual internal report that must be provided by each institution, the report from the compliance officer, the report from the external auditors and information received by other authorities, if any. In addition, a programme of specific AML controls is put in place on an annual basis and follows a risk based approach. These specific AML audits are performed by way of on-site visits and the audit team comprises staff specifically dedicated to AML obligations who have powers to access all documents. Institutions that will be subject to a specific AML audit during the year are chosen on the basis of information collected, for example from the aforementioned reports but also on the basis of the types of activities they perform (e.g.private banking, fiduciary services) and other relevant information such as the number and quality of STRs. Random/ad hoc AML audits can also be conducted.
17. 18.
218. An audit will be conducted through (1) interviews with the management about specific questions on AML; (2) analysis of the institutions AML processes; (3) the opening of files to make sure all information is available including information on identity of clients, nominees, and beneficial ownership; (4)verification of the institutions process to detect unusual or suspicious transactions; (5) verification of record keeping requirements i.e.whether documents are available for at least 5 years after the closing of the account and (6) verification of the requirements on cooperation with authorities competent for AML.
Numbered accounts
219. A numbered account is a bank account where the identity of the holder is not known to all staff of the bank but is limited to a very restricted number of persons within that bank. Most staff of the institution where this account is held cannot contact a specific customer and have access to its data. Transactions relating to a numbered account are conducted with the number of the account and not the identity of its holder. 220. Recent Luxembourg legislation grand ducal regulation of 1February 2010 explicitly and in a general manner prohibits the keeping of accounts under fictitious names with the exception of numbered accounts. The purpose of the new grand ducal regulation, the publication of which followed the 2009 FATF evaluation, clarifies that the holding of these accounts is subject to the same customer due diligence requirements as is the holding of nominal accounts. 221. Article5 of the regulation provides that the holding of numbered accounts is allowed to credit and financial institutions, but in strict compliance with specific rules adopted by establishments that use this type of accounts. These rules should determine the conditions under which such accounts can be opened and should clarify their operation. These rules should provide adequate administration of these accounts so as to fully comply with the provisions of the law (i.e.: the law to combat money laundering of 2004) and in particular the provisions concerning the customer due diligence requirements, the recording and storage of data, and the unrestricted access to these data both internally by the people responsible for the fight against money laundering and financing of terrorism and other appropriate staff and by the competent authorities. A circular19 of the CSSF published in 2008 already provided that when numbered accounts or saving books are opened, professionals must manage them in a way allowing them to always fully respect the requirements they are subject to according to the amended Law of 12November 2004 and this circular (see paragraph30 of this circular).
19. Whose value is different from a law or a grand ducal regulation.
in only one case, where the bank had not performed one of the controls on time. In addition and due also to the new CSSF regulation that clarifies the application of CDD rules to all numbered accounts, including accounts that were opened before the 2010 regulation, it is concluded that the framework in relation to numbered accounts has been clarified and is in line with the Terms of Reference.
Sanctions
227. If an institution covered by the financial sector law is in breach of the obligations under the law of 12November 2004, the CSSF may impose sanctions ranging from a notification to a warning, followed by a fine of EUR250 to 250000, and finally a ban on operations. Any violation of the obligations provided for by the law on the fight against money laundering is punished with a criminal penalty under section9 of the Act of 12November 2004 (sanctions from EUR1250 to 1250000). 228. In case a breach of the AML obligations by a bank is detected, the institution faced with the findings of the CSSF, is required to explain its position pursuant to the application of the applicable administrative procedure. If the breach is minor, the bank will need to communicate to the CSSF the improvement and/or correction measures that have been implemented. In such a case, if it is considered sufficient by the CSSF, no additional visit will be required. If the breach is more serious, the bank will have to communicate its corrections and improvements to the CSSF and an on-site visit will also be performed to check the implementation and effectiveness of the corrective measures taken. The bank always has a deadline to report on this. 229. Prudential measures and sanctions will be based on the seriousness of the breach and can take the form of a letter of observation, an injunction to correct the situation within a certain timeframe or the application of administrative fines. More than one measures/sanction can be applied at once and sanctions can be made public. The sanctions are decided upon by an enforcement committee. In the case of a serious breach or if the corrective measures are not implemented, sanctions can be applied on a daily basis. For very serious breaches, the institution can ultimately be prohibited from continuing its activities (which has never happened in practice). In general, a simple letter of observation is sufficient as the institution in most cases will implement corrective measures as requested. An injunction letter will be issued to order corrective measures if the breach is serious. If the injunction letter is not complied with, an administrative fine will be automatically applied. When a sanction is applied, a new audit will be made shortly afterwards to make sure it is respected.
B. Access to Information
Overview
232. A variety of information may be needed in respect of the administration and enforcement of relevant tax laws and jurisdictions should have the authority to access all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities. This section of the report assesses Luxembourgs legal and regulatory framework and the effectiveness of its practice and whether it gives to the authorities access powers that cover the right types of persons and information, and whether the rights and safeguards that are in place would be compatible with effective EOI. 233. Luxembourg legislation provides two different procedures for access to information: In the context of treaties concluded before March 2009 and not updated, the Luxembourg authorities use, to comply with the EOI provisions contained in non-updated treaties, the information gathering powers conferred on them by domestic legislation. Under those powers, they may require taxpayers and third parties to provide information of all kinds, except banking information or information held by insurance companies and SPFs, and may request information from other Luxembourg administrations. These powers are backed by provisions to compel the production of the information requested. For new conventions and protocols updating existing conventions that have been concluded since March 2009 and are covered by the Law of 31March 2010 and for the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/ EU replacing the Mutual Assistance Directive 77/799/EEC, specific information gathering measures have been introduced by Luxembourg. These measures allow for the gathering of information of all kinds, including banking information, regardless whether it is
238. Furthermore it has been reported by a peer that Luxembourg refused to supply information on the grounds that it was covered by commercial secrecy. However, Luxembourg did not provide an adequate explanation of the legal basis for this decision. 239. Finally, in some cases Luxembourg only provided the information directly available to the tax authorities and did not request information from any other person concerned to substantiate its answers, on the basis that the requested information related to the substance of business activities of entities that generally had no substantive presence in Luxembourg.
245. The AED and ADA are only allowed to exchange information under the new procedure provided by the Law of 31March 2010 (see below for more details). Since the introduction of this new procedure, the AED has received 23 requests for EOI and three persons are in charge of answering them. Although the ADA has not received any request for EOI so far, two persons have been designated to handle incoming requests for EOI. All other requests are processed by the ACD. 246. Luxembourg has a total of 7520 bilateral agreements providing for EOI. Of these 75 agreements, 45 allow for the exchange of banking information and 43 are in line with the standard. Of the 43 agreements signed and in line with the standard, 23 are currently in force. Luxembourg is also party to the EU Council Directive on Administrative Cooperation 2011/16/ EU. As a result, Luxembourg has EOI relationships to the standard with 54 jurisdictions and can already exchange information with 40 of them, due to the arrangements being in force and having taken effect.
20. See Annex3 for the agreements signed, allowing for the exchange of banking information, to the standard and in force, including the jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU.
247. When an incoming request relates to more than one year: a year covered by an agreement concluded before 2009 and not updated, and another year covered by the updated version of the agreement (after 2009), recent case law21 has confirmed that the request should be dealt with using the information gathering powers applicable to the years in question. This means that the ordinary domestic information gathering procedure is applicable for the old agreements and the new procedure stated in the Law of 31March 2010 is applicable for the updated agreements, given that updated agreements are only effective for the future, the old agreements remaining applicable for the years preceding the update of the agreement. This means that a request including years covered by two different agreements (the original one and the updated one) will be handled under the two information gathering procedures that exist in Luxembourg. The new procedure is applicable only to a request concerning a tax year that is after the effective date of the new or updated agreement. Luxembourgs authorities have adapted their processes to answer requests in compliance with the case law.
Access to information powers provided by Luxembourg domestic tax legislation (pre-2010 position)
248. As regards access to information for purposes of international EOI, the Luxembourg competent authoritys information gathering powers are set out in domestic legislation (LGI, the general taxation act). In the context of treaties that do not provide for the exchange of banking information, it is these provisions that are applicable for responding to requests for information. 249. The Luxembourg administration has broad powers of access to information held by taxpayers and third parties. It may summon taxpayers and require them to provide any information and to present all their accounting documents (cf. LGI 204 ff). If the request for information from the taxpayer does not produce the expected results, the Luxembourg authorities may require third parties to produce the information requested or to submit their own accounts. 250. The LGI empowers the ACD to request information from other administrations, including tax administrations and financial intelligence unit, for purposes of responding to information requests received (LGI 188). A cooperation agreement between tax administrations was in fact adopted on 19December 2008 to organise such exchanges.
21. Administrative Court N28742 of 12December 2011, Administrative Court N 28728 of 25January 2012, Administrative Court N30630 of 3March 2012 and Appeal Court N 29655C of 9February 2012.
22. Armenia, Austria, Bahrain, Belgium, Denmark, Finland, France, Germany, Iceland, Liechtenstein, Mexico, Monaco, Netherlands, Norway, Qatar, Spain, Switzerland, Turkey, United Kingdom and United States. 23. Barbados, Hong-Kong (China), Japan, Portugal, San Marino and Sweden.
255. These applications will be examined on a priority basis against the requirements set forth in the exchanges of letters annexed to the treaties. These exchanges of letters specify how the foreseeable relevance of requests must be understood (see section C.1.1 below). The Luxembourg authorities have explicitly confirmed that the identification of the person who is the subject of the request can be made by disclosure of the name and address of that person. All other forms of identification are accepted, where they allow the identification of the person with sufficient precision, such as by the disclosure of a bank account number. 256. When it is established that the request can be favourably received, article3 of the law authorises the tax administrations (that is the ACD, AED, or ADA) to requisition the requested information from the holder of that information. That person has one month as of notification of the requisition decision to communicate the information to the ACD. 257. This new procedure applies in principle to all requests for information made under a treaty concluded or updated after March 2009 and that has entered into force. 258. Luxembourg has also indicated that the new rules do not prevent the ACD from using tax information held on the file of the taxpayer or another taxpayer, when responding to a request for information. Such information can be transmitted to the requesting jurisdiction without notice to the person who is the subject of the request in Luxembourg. 259. Similarly, it has been indicated that the ACD will also be able to consult other public authorities if they hold the information requested. The ACD will pursue this route whenever it would facilitate the EOI. In this situation the person who is the subject of the request does not have to be informed of the transmission of the information.
31March 2010. With regard to requests for banking information, in 2011, 36% of such requests were answered in less than 90 days, 58% were answered between 90 and 180 days, 3% were answered in less than a year and 3% in more than a year. For 2012, 46% of such requests were answered in less than 90 days, 39% between 90 and 180 days, 4% in less than a year and 11% have not yet been answered. 269. If a bank does not provide the information requested within the allocated timeframe (one month), a first reminder is sent and the bank is given an additional two weeks to answer. Banks are also advised of the sanctions that can be applied in case of default. If the bank does not answer after the reminder, penalties of up to EUR250000 can be applied, although this has not happened yet. Penalties are cumulative (with a maximum of EUR250000) and ultimately, the case can be transmitted to the State Prosecutor for criminal sanctions. 270. Notwithstanding the new law, a number of peers continue to point to problems in obtaining banking information from Luxembourg. These relate to a range of issues, including the issue of foreseeable relevance, the date of entry into effect of the provisions of the agreements and the extent to which Luxembourg uses the full range of its laws and practices to obtain and provide bank information for its treaty partners. Cases involving the standard of foreseeably relevance and the date of entry into effect of the agreements are examined in SectionC.1 below. 271. One peer reported that a request for banking information that was foreseeably relevant for the levying of taxes in the requesting jurisdiction was refused on the basis that the information had an illegal origin. This issue is discussed further in SectionC.4. 272. Concerning the exercise of its powers to obtain information, one peer reported that it received in several instances bank statements where information was partly unreadable, which prevented its authorities from using the information. In answer to a follow-up question from the treaty partner, Luxembourg responded that the requesting authorities cannot undertake a fishing expedition or ask for information which is probably not relevant to clarify the tax position of the taxpayer who is the subject of the request. During the on-site visit, Luxembourg indicated that the information was rendered unreadable because it related to a taxpayer that was not implicated in the request and therefore the information was not relevant for the requesting jurisdiction. Luxembourg stated that the information had been blacked out directly by the banks and the Luxembourg tax authorities had never received the complete documents, implying that the Luxembourg tax authorities accepted the decision of the banks on the relevance of the information without having seen the information.
entities that is available in the Register of Commerce and Companies (RCS) such as deeds of incorporation, the address of headquarters, the amount of capital, the names of the persons authorised to manage, administer and sign for the entity as its legal agents and the identity of the shareholders or members of certain legal entities. The ACD also has access to accounting records through the RCS or with tax returns. 278. The CLO also has access to the RPNI (Registre National des Personnes Physiques, National Register of Natural Persons) which provides information on natural persons including name, address, date of birth, civil status, name of spouse, date of arrival in Luxembourg (if applicable), and name and date of birth of children. This register indicates whether the taxpayer (resident or non-resident of Luxembourg) holds real estate in Luxembourg. Information on real estate, including date and acquisition price, date of construction and percentage of holding is available to the CLO through KOBI, a database storing information on real estate in Luxembourg which is shared with the AED. 279. Tax returns of individuals and legal entities are also available at the local tax office, including income tax due and accounting records. Various IT programs exist to access the information by specific search (such as NRCO a database of information on non-resident individuals and QF08 a database of information from employers including information such as salary paid and date of employment). Information available through other administrative authorities 280. Additional information can be obtained from other services such as the social security office. VAT, real estate information and information on family wealth management companies (socits de gestion de patrimoine familial, SPFs) is available to the AED and information on excise duties, consumption taxes on alcohol, and the vehicle tax are available from the ADA. Ownership information and accounting records directly available to tax administrations 281. When an EOI request dealing with ownership information or accounting records is received and the CLO does not have the information available itself, the information can be requested from the local tax office of the relevant tax administration (addressed to the Director of the local tax office) that has access to the tax file of the person concerned, including tax returns. All information directly available to a local tax office of one of the three tax administrations can be provided to the treaty partner without informing the person concerned. 282. No specific deadline is provided when the CLO requests information from another tax administration in Luxembourg but cooperation between the
month deadline to provide the information. If the third party does not answer within the one month deadline, a first reminder will be sent, granting an additional two weeks. After the expiration of the second deadline, sanctions can be applied (fine and administrative penalties). For the years 2009-11, 832 requests for EOI were received by Luxembourg. 660 of which were dealt with under the old process. Luxembourgs tax authorities indicated that, when requested, the person concerned or the third party provided the information in almost all cases. Default in providing the requested information occurred in 2 to 3% of the cases. Approximately 1% of the cases have led to a fine. Process for handling requests based on new agreements concluded or updated after March 2009 covered by the Law of 31March 2010 (new process). 289. If the request for EOI received by the CLO is based on an agreement that was concluded after March 2009 the collection of specific information to respond to the incoming request is directly handled by the CLO. 172 incoming requests were processed under this procedure over the years 2009-11. 290. The CLO will send an injunction letter to the taxpayer, based on the proportionality principle as explained above unless the person is a non-resident of Luxembourg or the requesting jurisdiction asks for the information to be kept confidential (see SectionB.2 below). As provided by the law of 31March 2010, injunction letters provide a 30-day deadline to answer. In general, the information is received within this timeframe, unless the person asks for an extension (generally one week or two), or when an appeal right is exercised. 291. If the person concerned fails to answer in due time or after the agreed extension, fines (up to EUR250000) will be applied, although this has not yet been the case, as all injunction letters sent under the new procedure have been answered in due time. An injunction letter requesting the information can be sent to a third party in possession of the information, if the person concerned has not provided the requested information. 292. Luxembourg confirmed that under the new procedure, the persons requested to provide information generally respond within the allocated timeframe. Luxembourgs authorities have confirmed that so far, no penalties for failure to provide the information have been applied under the new procedure. However, some partners pointed to difficulties in obtaining information in certain circumstances. 293. One peer reported that it asked Luxembourg to provide information in relation to the activity of certain companies in Luxembourg to justify the deduction of fees paid to Luxembourg-based entities for tax purposes. According to the peer, in its answers, Luxembourg only provided information directly available to the tax authorities and did not request information (such as underlying documents, invoices) from any other persons or from the
communicate with the requesting partner in cases where it has refused to provide the information requested. It is recommended that Luxembourg exercise its powers to compel production of information and apply sanctions as appropriate. The exercise of these powers and application of sanctions should be carefully monitored.
Enforcement provisions to compel production and access to information (ToRB.1.4) Law of 31March 2010
301. In the context of the new procedure for access to information, article5 of the law of 31March 2010 provides that if the information requested is not supplied within a month after notification of the decision to requisition it, an administrative fine of up to EUR250000 may be imposed on the holder of the information. The amount is set by the director of the competent tax administration or the person delegated to this effect. Luxembourgs authorities have clarified that in practice, the fine can be cumulated over days until the information is provided (up to a maximum of EUR250000), which means that the impact can be significant. 302. The Luxembourg tax authorities have also confirmed that, beyond this fine, there are no other means to compel communication of the documents sought by the requesting jurisdiction. The Luxembourg authorities have no power to seize documents, in particular banking documents, in connection with the international exchange of banking information. 303. Luxembourgs authorities have indicated that no official guidelines exist for the application of sanctions and that it has no experience in applying these fines. If the need arose, certain principles would be respected in the determination of the amount of the fine, such as the size of the entity concerned or its usual compliance with tax requirements e.g.for the same
309. For the years 2009-11, 832 requests for EOI were received by Luxembourg. 660 of which were dealt with under the old process. Luxembourgs tax authorities indicated that when requested, the person concerned or the third party provided the information in almost all cases. Default in providing the requested information occurred in 2 to 3% of the cases. Approximately 1% of the cases have led to a fine. In practice, Luxembourg has not experienced any situation where information could not be obtained because of inadequate sanctions.
320. Therefore, Luxembourg legislation provides that information received by an attorney during communications the purpose of which was to seek or provide legal advice is covered by confidentiality rules. However, any other information, and in particular factual information, acquired in the course of counsel must be disclosed on request of the revenue authorities. The
24. Pursuant to the most favoured nation clause.
attorney-client privilege provided for by Luxembourg law is consistent with the Terms of Reference. In addition, there are no other professional secrecy rules that would prevent the access to information for EOI purposes.
Other rules
321. Luxembourgs domestic legislation does not allow access to information held by SPFs under the treaties that have not yet been updated.
Conclusion
322. While the law of 31March 2010 has removed restrictions relating to professional secrecy rules, those restrictions remain in place for treaties that are not covered by the rules set forth in that law. Luxembourg should ensure an EOI in accordance with the standard with all its relevant partners. 323. Luxembourgs authorities have confirmed that although lawyers are protected by standard confidentiality rules with regard to criminal matters, the professional secrecy of lawyers has never been invoked against an EOI request in Luxembourg.
Determination and factors underlying recommendations
Phase1 Determination The element is place but certain aspects of the legal implementation of the element need improvements Factors underlying recommendations Limitations in access to information provided for by Luxembourgs domestic legislation are currently overridden in respect of only 45 of the 75 bilateral agreements. Only these new rules allow for access to information held by financial institutions, insurance companies, and SPFs. Recommendations Luxembourg should ensure access to information held by financial institutions, insurance companies, and SPFs for all its relevant partners.
327. If the person concerned by the request is a resident of Luxembourg, an injunction letter to request the information is sent directly to this person. If the person concerned by the request is a non-resident of Luxembourg, the injunction letter requesting the information is sent to the holder of the information (for banking information, this injunction letter is sent directly to the bank). 328. Whether the person concerned by the request is a resident of Luxembourg or not, if the requesting jurisdiction asks that the person concerned not be notified, the Luxembourg authorities first inform the requesting jurisdiction that they will not inform the person concerned but they cannot guarantee that the person concerned will not be informed by the holder of the information (since there is no anti-tipping off provision). It then asks the requesting jurisdiction whether it wants them to proceed to request the information, generally from the bank. 329. If the requesting jurisdiction does not want to proceed with the request under these conditions, the request is not dealt with further. If the requesting jurisdiction agrees to proceed with the request, the Luxembourg authorities send the injunction letter directly to the holder of the information, and the person concerned by the request is not notified by the Luxembourg tax authorities. 330. However, one peer mentioned that in some cases in response to requests for banking information about a resident of Luxembourg, Luxembourg answered that because the taxpayer is a resident of Luxembourg, requests for banking information cannot be made directly to the bank. 331. In addition, requests for banking information had been systematically declined when the person concerned was a non-resident of Luxembourg and where the requesting jurisdiction had asked that the request be kept confidential from the taxpayer and that the person concerned not be notified. The Luxembourg authorities have informed the peer that in order to process the request, the peer should withdraw its stipulation that the request be kept confidential from the taxpayer. When the peer accepts to proceed with the request, in some cases, the person concerned by the request was then informed of the request by the holder of the information and appealed the administrative decision to collect and exchange the information. In practice these procedures created additional delays in obtaining the information. 332. Luxembourg should ensure that in all cases its process and procedures to collect information are clearly communicated to all of its treaty partners and these processes are followed in all cases. 333. With regard to appeals, the law of 31March 2010 provides (last sentence of article4) that the notification of the decision to the holder of the requested information constitutes notification to any other person
and to accelerate the judicial procedure, cases in relation to EOI are always prioritised over any other cases. It generally takes approximately six months to complete the judicial process up to the decision of the Administrative Tribunal. The complete procedure including an appeal to the Administrative Court to overturn the decision of the Administrative Tribunal can take up to one year. 338. Once the final decision is reached, and if so decided by the Administrative Tribunal (if there is no appeal in the 15 days following the decision) or by the Administrative Court, the information is collected and exchanged. 339. Luxembourg has reported that since the introduction of the new procedure and out of 172 requests received under the new procedure, 23 injunction letters sent under the new procedure have been appealed (of which 5 are related), 12 decisions have been rendered and only four decisions of the Administrative Tribunal on EOI have been appealed to the Administrative Court for cancellation. Whilst an appeal has been made in 13% of the incoming requests received, Luxembourg expects this percentage to decrease in the future, in conjunction with the process becoming better known.
Determination and factors underlying recommendations
Phase1 Determination The element is place Phase2 Rating To be finalised as soon as a representative subset of Phase2 reviews is completed. The practices and procedures used to collect information in Luxembourg have not always been clear to its treaty partners and may not always have been followed in practice. Luxembourg should ensure that in all cases its processes and procedures to collect information are clearly communicated to all of its treaty partners and that these processes are followed in all cases.
C. Exchanging Information
Overview
340. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. In Luxembourg, the legal authority to exchange information is derived from double tax conventions (DTCs) and tax information exchange agreements (TIEAs) once they become part of Luxembourgs domestic law. This section of the report examines whether Luxembourg has a network of information exchange agreements that would allow it to achieve effective EOI in practice. 341. Luxembourg today has a network of bilateral information exchange mechanisms covering 7525 jurisdictions. Of these 75 agreements, 45 allow for the exchange of banking information and 43 are in line with the standard. Of the 43 agreements signed and in line with the standard, 23 are currently in force. Luxembourg may also exchange information with its EU partners under the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU replacing the Mutual Assistance Directive 77/799/ EEC. 342. Luxembourg has concluded 40 protocols or conventions for the exchange of banking information since March 2009, to which should be added the convention negotiated with India, by application of the most favoured nation clause. All these agreements contain a complete article26, supplemented by an exchange of letters. Three of the information exchange arrangements negotiated by Luxembourg with Austria, Panama and Switzerland include in their exchange of letters restrictions that are not consistent with the international standard. Those agreements require communication of the name and address of the person covered by the request and the person in possession of
25. See Annex3 for the agreements signed, allowing for the exchange of banking information, to the standard and in force, including the jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU.
provisions are also accompanied by domestic legal rules with equivalent effects. Similarly, all treaties concluded by Luxembourg contain provisions ensuring that the rights and safeguards of taxpayers and third parties are preserved. 347. Since the end of 2010, Luxembourgs authorities have completely reorganised their EOI division, hiring new staff and reviewing their processes to better follow the incoming requests, improve their collection process and reduce the answering timeframe. In 2009, only 18% of the requests were answered in less than 90 days and only a further 2% in less than 180 days. In 2011, Luxembourg answered EOI requests within 90 days in 45% of the cases, and in a further 30% of the cases the answer was provided in 180 days. However, in response to comments, Luxembourg has agreed to provide more targeted responses to requests and to make efforts to provide answers and comments to each of the individual issues raised in the requests. 348. Some peers have noted that status updates are not provided notwithstanding that answers cannot be provided within 90 days. It is recommended that Luxembourg establish a process to update requesting authorities on the progress of their requests where a full response cannot be provided within 90 days. 349. Nevertheless, some peers have reported that in certain cases they were unable to receive banking information from Luxembourg when it pertained to individuals who were resident in Luxembourg. This is the result of an interpretation by Luxembourg of the foreseeably relevant requirement which is not in line with the standard. It is recommended that Luxembourg amend its practice in this regard to bring it into line with the international standard. 350. In addition, in relation to the failure to supply a client list in the case outlined in SectionB.1 a claim by Luxembourg that the information was not foreseeably relevant was not in accordance with the standard. 351. Luxembourg has also stated that it does not exchange banking information that precedes the effective date of the agreement but which relates to a taxable period or chargeable event following the effective date, even if the information is available. This limitation is not consistent with the international standard, which provides that such information preceding the effective date of the agreement must be exchanged if available. A recommendation is therefore included in this regard. 352. Finally, the unnecessary disclosure of information, in injunction letters, which is not otherwise public information, is not in accordance with the principle that the information contained in an EOI request should be kept confidential and accordingly a recommendation is included.
353. Luxembourg has signed a total of 7528 agreements providing for EOI. Of these 75 agreements, 45 allow for the exchange of banking information and 43 are in line with the standard. Of the 43 agreements signed and in line with the standard, 23 are currently in force. Luxembourg is also party to the EU Council Directive on Administrative Cooperation, which came into effect on 1January 2013. As a result, Luxembourg has an EOI relationship to the standard with 54 jurisdictions and can already exchange information with 40 of them. 354. In sum, Luxembourg has signed 45 agreements that allow exchange of banking information and with the EU Council Directive on Administrative Cooperation, Luxembourg can exchange banking information with a total of 55 jurisdictions29. 355. Luxembourg has also started to negotiate new agreements for EOI with 24 jurisdictions, including 5 TIEAs, and 12 of these agreements are already initialled.30
28. See Annex3 for the agreements signed, allowing for the exchange of banking information, to the standard and in force, including the jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU. 29. See Annex3 for the agreements allowing for the exchange of banking information, including the jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU. 30. Initialled: Botswana, Brunei, Croatia, Estonia, Guernsey, Hungary, Kyrgyzstan, Mauritius, Oman, Saudi Arabia, Singapore and South Africa; in negotiation: Burkina Faso (TIEA), Chile (DTC), Cyprus (DTC), Egypt (DTC), Kenya (TIEA), Ireland (DTC), Latvia (DTC), Lebanon, (DTC), Lithuania (DTC), Malaysia (DTC), Mongolia (DTC), Morocco (DTC), Niger (TIAE), New Zealand (DTC), Pakistan (DTC), Senegal (DTC), Serbia (DTC), Slovenia (DTC), Syria (DTC), Thailand (DTC) Turks and Caicos (TIEA) Ukraine (DTC), Uruguay (DTC), Vietnam (DTC). Footnote from Turkey: the information contained in this document refers to Cyprus, meaning the southern portion of the island. There is no single authority representing both Turkish and Greek Cypriots on the island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until such time as a lasting and equitable solution is found in the United Nations context, Turkey will maintain its position on the Cyprus question. Footnote from all European Union states members of the OECD and the European Union: The Republic of Cyprus is recognised by all members of the United Nations except Turkey. The information shown in this document concerns the zone under the effective control of the Government of the Republic of Cyprus.
356. For the three years under review (2009 to 2011), Luxembourg received more than 800 EOI requests from more than 30 different jurisdictions. Its main EOI partners are France and Belgium, two of its neighbouring jurisdictions. During this period the other main EOI partners were Germany, Italy, the Netherlands, Russia, Spain and Sweden. 357. Beyond the EOI on request in direct tax matters Luxembourg, as a member of the European Union, is party to the Community VAT system and consequently to the EOI in VAT matters under EC regulation 1798/2003. In 2010 and 2011, Luxembourg answered more than 689 incoming VAT requests. 358. Luxembourg is also involved in spontaneous EOI. Between 2009 and 2011, Luxembourg exchanged 217 pieces of data spontaneously, mainly to Belgium, Denmark, France, Germany, Portugal and the United Kingdom. Moreover, Luxembourg is also party to the EU Council Directive on Administrative Cooperation applicable since 1January 2013 and is currently implementing measures to meet the requirements of the Directive, which provides, amongst other, for automatic EOI. 359. Finally, as part of its co-operation program, Luxembourg is also involved in multilateral audits for VAT under the EU Council regulation (No 904/2010) of 7October 2010 on Administrative Cooperation and Combating Fraud in the Field of Value Added Tax.
363. Luxembourgs authorities confirmed that these provisions were interpreted in light of the commentaries on paragraph1 of article26 of the model tax convention and on paragraph5 of article5 of the model information exchange agreement published by the OECD. 364. It is, however, noted that the provisions of the exchanges of letters concluded by Luxembourg deviate from the wording of article5 (5) of the OECD model TIEA in the case of the protocols concluded with Austria, Panama and Switzerland. These three protocols require communication of the name of the person under examination in the requesting state as well as the name and address of the person in possession of the information in the requested state. In requiring the communication of this information, these three protocols are not up to the standard. Nevertheless, since 1January 2013, Luxembourg can exchange information to the standard with Austria on the basis of the EU Council Directive on Administrative Cooperation 2011/16/EU.
31. See Annex3 for the agreements signed, allowing for the exchange of banking information, to the standard and in force, including the jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU.
365. Luxembourg has also approached Austria, Switzerland and Panama with a view to making, as quickly as possible, the agreements signed with these countries consistent with the standard. The modifications proposed in the agreement with Panama have been provided to Panama and Luxembourg is awaiting Panamas answer. For Austria, the new version is being considered by the Austrian authorities and for Switzerland, the new protocol has been signed and ratification is under way. 366. The 32 agreements concluded by Luxembourg before its commitment to the standard, and which have not yet been updated, contain no reference to the notion of foreseeable relevance, but instead use the terms necessary or relevant. The commentary on article26 of the OECD Model Convention considers that the terms necessary or relevant mean the same thing for the EOI as the expression foreseeably relevant. Thus, these treaties may be recognised as conforming to the standard with respect to foreseeable relevance. 367. In practice, however, a number of issues have arisen regarding Luxembourgs interpretation of the foreseeably relevant standard. A peer reported that banking information cannot be obtained when the account holder is a resident of Luxembourg given that Luxembourgs authorities are not allowed to obtain information from the banking institutions regarding their own residents for their own purposes and that they consider the information requested as being not foreseeably relevant for the requesting jurisdiction. Two examples were provided by the partner jurisdiction to illustrate this issue. In the first case, the answer provided by Luxembourg to the requesting jurisdiction stated: Since [the taxpayer] is a resident of Luxembourg, the banking information cannot be requested from the bank. However, Luxembourgs authorities have now clarified that they did not provide an answer to this request because they did not consider the request to be foreseeably relevant. The incoming request was rejected on this basis. During the on-site visit, Luxembourg indicated that as a general rule, when an individual is considered to be tax resident in Luxembourg, the information requested is not regarded by Luxembourg as being foreseeably relevant for application and enforcement of the laws of the requesting jurisdiction. Another case reported by the peer concerned a request made in respect of an individual resident in the requesting country using a credit card linked to a bank account held in Luxembourg by a natural person resident in Luxembourg. All banking transactions were made by the individual in the requesting country using the card of the Luxembourg resident via the bank account in Luxembourg. Luxembourg declined to provide the requested banking information, on the grounds that the account holder was resident for tax purposes in Luxembourg. The answer provided to the
regarding exchange of information. These reflect a very strict interpretation of the standard in Luxembourg. 373. In summary, the interpretation of the foreseeably relevant standard in Luxembourg is unduly restrictive and prevents it from engaging in effective exchange of information in line with the international standard in certain cases. It is recommended that Luxembourg review its practices in this regard to align them with the international standard.
requested party will submit the information requested regardless of whether it has a domestic tax interest in obtaining that information. 384. The agreements that have not been updated since March 2009 contain no express provision relating to the non-application of the principle of domestic tax interest. However, these treaties are interpreted by Luxembourg as allowing access to all information without reference to that principle.
In force (ToRC.1.8)
393. EOI cannot take place unless a jurisdiction has EOI arrangements in force. The international standard requires that jurisdictions take all steps necessary to bring information arrangements that have been signed into force expeditiously. 394. In Luxembourg all tax treaties, whether double taxation conventions, protocols amending existing conventions, or information exchange agreements, must be ratified by the Parliament. 395. Luxembourgs network of bilateral agreements covers to date a total of 7536 jurisdictions. Of these 75 agreements, 45 allow for the exchange of banking information and 43 are in line with the standard. Of the 43 agreements signed and in line with the standard, 23 are currently in force. Luxembourg is also party to the EU Council Directive on Administrative Cooperation 2011/16/EU. As a result, Luxembourg has an EOI relationship to the standard with 54 jurisdictions and can already exchange information with 40 of them.
36.
See Annex3 for the agreements signed, allowing for the exchange of banking information, to the standard and in force, including the jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU.
396. 18 agreements37 signed by Luxembourg which are in conformity with the international standard are not in force yet (including the new version of the agreement with Switzerland). It is important that Luxembourg ensures the completion of the procedure for these agreements to enter in force. 397. Agreements concluded with Belgium and the United States have been ratified in Luxembourg and will enter into force once ratified by the partner jurisdiction. Two draft laws providing for the ratification of 15 agreements have been enacted by Parliament on 7June 2013 and the laws are expected to be published by the end of June 2013. 398. Once agreed and initialled, the text of the agreement is translated into French by the international division of the ACD and transmitted to the Ministry of Finance for the signature process. A draft law is prepared (by the ACD and approved by the Ministry of Finance) and submitted to the Government Council for its approval. The Council of State then provides its comments before the approval by the Parliament. 399. To accelerate the signature and ratification process, it is also possible to sign and ratify an agreement that is only in English or in German. 400. Generally, a number of agreements are included in the same draft law and approved by the Parliament at once. No specific disposition is required for the implementation of the agreement into domestic law; international agreements take precedence over domestic law and are directly applicable. Since the ratification of the agreements concluded or updated since March 2009 and providing for the exchange of all types of information, including banking information and since the introduction of the new law providing for the collection of banking information, there has been no legal challenge in Luxembourg on the legality of these new measures.
In effect (ToRC.1.9)
401. For information exchange to be effective, the parties to an EOI arrangement need to enact legislation necessary to comply with the terms of the arrangement. 402. In the case of Luxembourg, the crucial point is to ensure access to banking information in a situation in which domestic tax legislation provides for banking secrecy and does not authorise access to such information for the purposes of international information exchange.
37. Canada, Czech Republic, FYROM, Isle of Man, Italy, Jersey, Kazakhstan, Laos, Malta, Poland, Romania, Russia, Seychelles, South Korea, Sri Lanka, Switzerland, Tajikistan and Chinese Taipei.
Phase1 Determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying the recommendations As a result of domestic law limitations with respect to access to information, only 43 of the 75 signed EOI mechanisms allow for exchange of information in accordance with the international standard. Of these 43 agreements, 23 are in force. Recommendations Luxembourg should ensure that all the treaties signed could allow for an exchange of information in accordance with the international standard.
Phase2 Rating To be finalised as soon as a representative subset of Phase2 reviews is completed. Luxembourg has interpreted the foreseeably relevant standard in an unduly restrictive way resulting in information not being exchanged in some cases. Furthermore, in some cases Luxembourg has sought unnecessary confirmations from the requesting jurisdiction. Luxembourg interprets its obligations under its EOI agreements as not obliging it to exchange banking information with regard to requests that relate to a tax period that is after the effective date of the agreement where the information precedes that date, even in instances where the information is otherwise available. Luxembourg should review its interpretation of the foreseeable relevance concept to conform with the standard.
Luxembourg should access and exchange banking information with regard to requests that are relevant to a tax period that is after the effective date of the agreement where the information precedes the effective date of the agreement.
407. The standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a
2009, Luxembourg has sought to negotiate protocols amending the conventions already in force (29 in total: Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Hong Kong (China), Iceland, Italy, Japan, Kazakhstan, Malta, Mexico, Netherlands, Norway, Poland, Portugal, Romania, Russia, San Marino, South Korea, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States) and to negotiate new tax conventions with a view to developing its economic relations. Luxembourg indicated that it does not refuse to propose in the future to its relevant partners to conclude tax information exchange agreements. 413. Luxembourg has started to negotiate new agreements for EOI with 24 jurisdictions, including 5 TIEAs. 12 agreements are already initialled40. 414. The Luxembourg treaty network covers to date: 22 OECD members;41 All of Luxembourgs EU partners;42 12 of the G20 members;43 63 of the Global Forum member jurisdictions; and its 3 neighbour countries (Belgium, France and Germany).
415. These figures shows that Luxembourgs neighbouring countries (60% of its trade takes place with its three neighbours (Belgium, France and Germany)) as well as a significant number of EU and OECD member states now have an exchange-of-information agreement with Luxembourg allowing for the exchange of banking information. 416.
40.
Initialled: Botswana, Brunei, Croatia, Estonia, Guernsey, Hungary, Kyrgyzstan, Mauritius, Oman, Saudi Arabia, Singapore and South Africa; in negotiation: Burkina Faso (TIEA), Chile (DTC), Cyprus (DTC), Egypt (DTC), Kenya (TIEA), Ireland (DTC), Latvia (DTC), Lebanon, (DTC), Lithuania (DTC), Malaysia (DTC), Mongolia (DTC), Morocco (DTC), Niger (TIAE), New Zealand (DTC), Pakistan (DTC), Senegal (DTC), Serbia (DTC), Slovenia (DTC), Syria (DTC), Thailand (DTC) Turks and Caicos (TIEA), Ukraine (DTC), Uruguay (DTC) and Vietnam (DTC). 41. Austria; Belgium; Canada; Denmark; Finland; France; Germany; Iceland; Italy; Japan; Malta; Mexico; the Netherlands; Norway; Poland; Portugal; Spain; South Korea; Sweden; Switzerland; Turkey; the United Kingdom and the United States. 42. Austria; Belgium; Denmark; Finland; France; Germany; Italy; Malta; the Netherlands; Poland; Portugal; Romania; Spain; Sweden; the United Kingdom. 43. With either an agreement to the standard or with the EU Directive on Administrative Cooperation.
417. Luxembourg has indicated that its principal economic partners are within the European Union: 80% of its trade is with member countries of the EU, and approximately 60% of that trade takes place with its three neighbours (Belgium, France and Germany). All its EU partners are, since 1January 2013, covered by an international agreement providing for EOI to the standard. Luxembourg has made a considerable amount of effort and progress, since March 2009, when it gave its formal commitment to implement international standards of transparency and exchange of information, to update and develop its treaty network, leading to a network of 51 EOI relationships to the standard. The commentaries received from Luxembourgs EU partners show that Luxembourg has concluded agreements with all those EU jurisdictions that have expressed an interest in negotiating with Luxembourg an agreement that respects the international transparency standard. Luxembourg therefore has a treaty network covering all its relevant partners.
Determination and factors underlying recommendations
Phase1 Determination The element is in place. Factors underlying the recommendations Luxembourg cannot exchange information in accordance with the international standards under its EOI agreements with several partners. Recommendations Luxembourg should continue to develop its EOI mechanisms network to the standard, regardless of their form.
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other State. 433. Further, Article505 of the Luxembourg Penal Code provides that any person who handles assets that were obtained by way of a crime is subject to criminal sanctions. Similarly, benefiting from the product of a crime is considered as handling stolen assets. Luxembourg considers that even if the data was spontaneously received, it is legitimate to decline to answer the request as it would put Luxembourg in the position of cooperating in a violation of its own law. 434. The requesting jurisdiction disagrees with Luxembourgs position and considers that its refusal to provide information which is foreseeably relevant to an ongoing tax investigation in that jurisdiction is not in conformity with the DTC between Luxembourg and the requesting jurisdiction. Further, the information on which the requests were based was lawfully obtained by it, having been provided spontaneously under the EU Mutual Assistance Directive. In addition, the requesting jurisdictions Supreme Court has confirmed that information obtained under the Directive is lawfully obtained under its laws. 435. The interpretation and application of Luxembourgs laws relating to handling of stolen assets as a justification to decline to exchange information under an international treaty is unclear, has never been tested and has not been adequately explained. Accordingly Luxembourg is recommended to provide the information or a clear and valid legal basis for its practice of not providing information in these cases.
Determination and factors underlying recommendations
Phase1 Determination The element is in place. Phase2 Rating To be finalised as soon as a representative subset of Phase2 reviews is completed. Factors underlying recommendations Luxembourg has refused to provide banking information in response to valid requests in a number of cases on the basis that data used to support the requests had originally been obtained in violation of its laws without providing a clear legal basis for its refusal. Recommendations Luxembourg should respond to all valid requests for banking information or provide a clear and valid legal basis, in line with the standard, for its practice of not providing such information
2009 nr. Total number of requests received (a+b+c+d+e) Full response*: <90 days <180 days (cumulative) <1 year (cumulative) 1 year+ %
2010 nr. %
2011 nr. %
242 100% 234 100% 356 100% 832 (a) 44 18% 63 27% 125 35% 232 (b) 49 20% 116 49.5% 233 65% 398 (c) 68 28% 181 77.5% 296 83% 545 (d) 172 71% 53 22.5% 15 2 1% 4% 240 47 45 13%
* Luxembourg counts each written request from an EOI partner as one EOI request even where more than one person is the subject of an inquiry and/or more than one piece of information is requested. ** The time periods in this table are counted from the date of receipt of the requests and to the date on which the complete final response was issued. It should be noted that Luxembourg considers as complete, requests which they declined to provide a response irrespective of the reasons.
441. Luxembourgs response timeframe has improved with the introduction of the new procedure. In 2009, only 18% of the requests were answered in less than 90 days and only 2% within a period of between 90 days and 180 days. In 2011, Luxembourg answered EOI requests within 90 days in 45% of the cases, in 30% of the cases the answer was provided within 90 to 180 days, in 18% of the cases the answer was provided within 180 days to a year and the answer was provided after a period of more than a year in 4% of the cases. The average response timeframe for requests received under the old procedure is 124 days whilst the average response timeframe for requests received under the new procedure is 99 days. 442. A number of peers have commented on the timeframe within which Luxembourg answers incoming EOI requests. Luxembourg has explained that before the end of 2010, there was only one person working on EOI in addition to his/her other tasks and no EOI division existed. This system was not very efficient in correctly processing, monitoring and managing incoming requests. One peer also reported a very long response timeframe in a specific case. Luxembourg stated that it was due to inappropriate measures and insufficient staff for processing EOI requests before 2010. However, Luxembourg has also stated that with its new organisation, this should not happen in the future. 443. To improve the response timeframe for incoming requests, a new procedure for collecting information was implemented with the law of 31March 2010, which simplifies and accelerates the process of collection of information, including a new process for appeal, where the procedural deadlines have been reduced and the cases in relation to EOI prioritised in order to
such as the identification of the person concerned; its address, if available; the name of the person in possession of the information, if known and the tax purpose for which the information is sought. 447. Requests received in French, German or English are processed without translation while requests received in another language will be automatically sent back to the requesting jurisdiction who will be asked to provide a translation in one of these three languages. 448. The CLO will inform the treaty partner if the request is found to be incomplete and will ask for further information within one to two weeks of reception. In general, requests are rarely rejected at this first stage; the CLO will try to obtain additional information to treat the request. Luxembourg mentioned that a certain number of requests received needed additional information because they were unclear and could not be processed without further explanations, which created delays. For the period under review (2009-11), approximately 13% of requests received needed additional information in order to be processed by Luxembourg. In such cases, Luxembourg requests additional information from the requesting jurisdiction while trying to process the part of the request where the information sought is clear in the meantime. Additional information requested relates to factual details, such as the objectives of the request and taxes concerned) or whether the jurisdiction has pursued all means available in its own territory or in a third jurisdiction where the person who is the subject of the request is resident is the third jurisdiction. 449. If the information requested is directly available to CLO, the information is generally sent to the treaty partner within two to three weeks, and two months at the latest. If the information is not available to the CLO, which is usually the case, the CLO transfers the request to the local tax office or to the competent tax administration (AED, ADA) electronically. No specific deadline is provided as it is understood that EOI is a priority and hence, the requests are generally processed within one to two weeks. Reminders, if needed, will be informal and made by phone calls. Luxembourg mentioned that, in practice, there have been no instances where the local tax office or another tax administration has not answered within two weeks. If the CLO only receives a partial answer, this answer will be transmitted to the treaty partner while the collection process is put in place to collect the missing information. 450. If the information is not available with the local tax office or with another tax administration (AED, ADA), the collection process will be done either by the local tax office for requests based on agreements that were concluded before March 2009 (the old procedure) or by the CLO if the request is based on an agreement concluded since March 2009 (the new procedure).
Resources
454. Three persons are devoted to EOI within the CLO. Although the size of the team seems sufficient to perform its functions, this situation is recent as only one person was in charge of EOI at the CLO before 2011. Nevertheless, statistics provided by Luxembourg for the period under review show improvements in the timeframe to answer EOI requests received since the CLO was reorganised. In 2009, only 18% of the requests were answered in less than 90 days and only a further 2% in less than 180 days. In contrast, in 2011, Luxembourg answered EOI requests within 90 days in 45% of the cases, and in a further 30% of the cases the answer was provided in 180 days. Reorganisation and hiring of staff has produced the expected effect. In addition to the CLO, since the AED and ADA are competent in the field for which
they are responsible under the new procedure, the AED has designated three persons to handle EOI requests while the ADA has designated two persons. 455. Staff involved in the EOI in Luxembourg come from the tax administration of Luxembourg and as such, possesses a good knowledge of taxation and of Luxembourg tax laws. The training is mainly done on the job, but they also have access to a manual that explains the EOI legal framework and procedure in Luxembourg and they participate in international meetings and conferences (OECD WP10, Fiscalis, Global Forum Competent Authority meetings). The CLO works closely with the local tax offices and provides specific training to their agents in relation to EOI. 456. Luxembourg has dedicated appropriate organisational processes and resources to its EOI system to ensure timely responses and the competent authority staff maintains high professional standards and expertise in relation to EOI.
Determination
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1) The element is not in place Luxembourg allows for the issuance of bearer securities by SAs, SEs and S.e.c.as without having mechanisms allowing for the identification of such securities holders in any circumstances. This possibility is also opened to investment companies taking the form of an SA or a S.e.c.a. Ownership information relating to foreign partners of SICARs which take the form of an S.e.c.s is not available in Luxembourg in all circumstances. Phase2 rating: To be finalised as soon as a representative subset of Phase2 reviews is completed Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2) The element is in place Phase2 rating: To be finalised as soon as a representative subset of Phase2 reviews is completed Luxembourg should ensure the availability of information relating to SAs, SEs and S.e.c.as bearer securities holders in any circumstances.
Luxembourg should ensure that ownership information relating to SICARs which take the form of an S.e.c.s is available in all circumstances.
Recommendations
Banking information should be available for all account-holders. (ToR A.3) Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1) The element is in place but some elements of the legal implementation of the element needs improvements Limitations in access to information provided for by Luxembourgs domestic legislation are currently overridden in respect of only 45 of the 75 signed agreements. Only these new rules allow for access to information held by financial institutions, insurance companies, and SPFs. In one case, Luxembourg refused to provide requested information on grounds of commercial secrecy and it did not adequately explain the basis on which it was unable to exercise its information gathering powers. Luxembourg has the legal framework and compulsory powers in place to access information under its updated and new agreements but has failed to use the powers in practice in a number of cases, including access to banking information. It has also failed to use its powers to obtain information from certain entities (i.e.SOPARFIs). Luxembourg should ensure access to information held by financial institutions, insurance companies, and SPFs for all its relevant partners.
In cases where Luxembourg does not use its information gathering powers in response to an EOI request it should fully explain the basis on which it was unable to do so.
Luxembourg should exercise its powers to compel production of information and apply sanctions as appropriate. The exercise of these powers and application of sanctions should be carefully monitored.
Determination
Recommendations
The rights and safeguards (e.g.notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2) The element is in place Phase2 rating: To be finalised as soon as a representative subset of Phase2 reviews is completed The practices and procedures used to collect information in Luxembourg have not always been clear to its treaty partners and may not always have been followed in practice. Luxembourg should ensure that in all cases its processes and procedures to collect information are clearly communicated to all of its treaty partners and that these processes are followed in all cases.
Exchange of information mechanisms should allow for effective exchange of information. (ToR C.1) The element is in place but some elements of the legal implementation of the element needs improvements Of the 45 agreements concluded by Luxembourg, since its commitment to the standard in March 2009, 3 establish restrictions which are inconsistent with the standard. As a result of domestic law limitations with respect to access to information, only 43 of the 75 signed EOI mechanisms allow for exchange of information in accordance with the international standard. Of these 43 agreements 23 are in force. Luxembourg should ensure, in line with its commitment to the standard, that each of its EOI mechanisms strictly respects the standard of transparency Luxembourg should ensure that all the treaties signed could allow for an exchange of information in accordance with the international standard.
Determination Phase2 rating: To be finalised as soon as a representative subset of Phase2 reviews is completed
Recommendations Luxembourg should review its interpretation of the foreseeable relevance concept to conform with the standard.
Luxembourg should access and exchange banking information with regard to requests that are relevant to a tax period that is after the effective date of the agreement where the information precedes the effective date of the agreement.
The jurisdictions network of information exchange mechanisms should cover all relevant partners. (ToR C.2) The element is in place Luxembourg cannot exchange information in accordance with the international standards under its EOI agreements with several partners. Phase2 rating: To be finalised as soon as a representative subset of Phase2 reviews is completed Luxembourg should continue to develop its EOI mechanisms network to the standard, regardless of their form.
Determination
Recommendations
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3) The element is in place Phase2 rating: To be finalised as soon as a representative subset of Phase2 reviews is completed The unnecessary disclosure of information, in injunction letters, which is not otherwise public information, is not in accordance with the principle that the information contained in an EOI request should be kept confidential. Luxembourg authorities are encouraged to ensure that the confidentiality of information contained in EOI requests is adequately protected.
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4) The element is in place Phase2 rating: To be finalised as soon as a representative subset of Phase2 reviews is completed Luxembourg has refused to provide banking information in response to valid requests in a number of cases on the basis that data used to support the requests had originally been obtained in violation of its laws without providing a clear legal basis for its refusal. Luxembourg should respond to all valid requests for banking information or provide a clear and valid legal basis, in line with the standard, for its practice of not providing such information
Determination
Recommendations
The jurisdiction should provide information under its network of agreements in a timely manner. (ToRC.5) The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase2 review. Phase2 rating: To be finalised as soon as a representative subset of Phase2 reviews is completed While progress has been made for the last year under review, some peers expressed concerns with delays in receiving certain responses. In instances where it cannot provide an answer within 90 days, Luxembourg does not provide, routinely, a status update to its treaty partners. Luxembourg should monitor its timeframe for answering requests to ensure that it always replies in a timely manner. Luxembourg should ensure that its authorities respond to EOI requests in a timely manner, by providing the information requested within 90 days of receipt of the request, or if it has been unable to do so, by providing a status update.
ANNEXES 125
46.
This Annex presents the jurisdictions response to the review report and shall not be deemed to represent the Global Forums view.
126 ANNEXES
Bilateral agreements
No. 1 2 3 4 5 6 Jurisdiction Albania Armenia Austria Azerbaijan Bahrain Barbados Type of arrangement DTC DTC DTC DTC Protocol EU Directive 2011/16/EU DTC DTC DTC Date of signature 14.01.2009 23.06.2009 18.10.1962 07.07.2009 15.02.2011 16.06.2006 06.05.2009 01.12.2009 Date of entry intoforce --09.04.2010 07.02.1964 01.09.2010 01.01.2013 02.07.2009 10.11.2010 08.08.2011
ANNEXES 127
No.
Jurisdiction
Type of arrangement DTC DTC Protocol DTC Protocol EU Directive 2011/16/EU DTC DTC EU Directive 2011/16/EU DTC DTC Protocol DTC DTC DTC Protocol EU Directive 2011/16/EU DTC DTC Protocol EU Directive 2011/16/EU DTC EU Directive 2011/16/EU DTC DTC Protocol EU Directive 2011/16/EU DTC DTC Protocol EU Directive 2011/16/EU DTC DTC
Date of signature 17.09.1970 11.12.2002 16.07.2009 15.02.2011 08.11.1978 27.01.1992 15.02.2011 10.09.1999 08.05.2012 12.03.1994 18.03.1991 05.03.2013 15.02.2011 17.11.1980 04.06.2009 15.02.2011 23.05.2006 15.02.2011 01.03.1982 01.07.2009 15.02.2011 24.11.2006 03.06.2009 15.02.2011 15.05.2012 15.10.2007
Date of entry intoforce 30.12.1972 11.12.2002 --01.01.2013 23.07.1980 15.03.1994 01.01.2013 10.10.2000 --28.07.1995 30.12.1992 --01.01.2013 22.03.1982 09.04.2010 01.01.2013 23.01.2007 01.01.2013 27.03.1983 12.04.2010 01.01.2013 27.12.2007 29.10.2010 01.01.2013 --14.12.2009
Belgium
8 9 10 11 12
13
Denmark
14
Estonia
15
Finland
16 17 18
128 ANNEXES
Type of arrangement DTC DTC Protocol DTC EU Directive 2011/16/EU Multilateral Convention DTC EU Directive 2011/16/EU DTC DTC Protocol DTC EU Directive 2011/16/EU DTC DTC DTC EU Directive 2011/16/EU DTC DTC Protocol DTC DTC DTC DTC Protocol EU Directive 2011/16/EU DTC DTC Protocol DTC DTC DTC Protocol DTC DTC EU Directive 2011/16/EU DTC Date of entry intoforce 06.06.1960 23.12.2010 --01.01.2013
No.
Jurisdiction
19
Germany
22.11.1991 15.02.2011 02.11.2007 11.11.2010 15.01.1990 15.02.2011 02.06.2008 14.01.1993 14.01.1972 15.02.2011 04.10.1999 28.08.2009 08.04.2013 13.12.2004 03.06.1981 21.06.2012 15.02.2011 05.03.1992 25.01.2010 17.04.2013 26.06.2008 03.005.2012 11.12.2007 14.06.2004 15.02.2011 04.11.2012
26.08.1995 01.01.2013 20.01.2009 17.08.2011 21.04.1991 01.01.2013 09.07.2009 10.03.1994 25.02.1975 01.01.2013 19.09.2001 28.04.2010 --22.05.2006 04.02.1983 --01.01.2013 27.12.1992 30.12.2011 --------14.04.2006 01.01.2013 ---
30 Japan 31 Jersey
ANNEXES 129
No.
Jurisdiction
Type of arrangement DTC DTC EU Directive 2011/16/EU DTC DTC DTC Protocol EU Directive 2011/16/EU DTC DTC DTC Protocol DTC DTC DTC DTC DTC Protocol EU Directive 2011/16/EU DTC DTC Protocol DTC DTC DTC Protocol EU Directive 2011/16/EU DTC DTC Protocol EU Directive 2011/16/EU DTC DTC DTC Protocol EU Directive 2011/16/EU DTC DTC Protocol
Date of signature 16.08.2009 22.11.2004 15.02.2011 21.11.2002 29.04.1994 30.11.2011 15.02.2011 15.02.1995 07.02.2001 07.10.2009 11.07.2007 27.07.2009 19.12.1980 08.05.1968 29.05.2009 15.02.2011 06.05.1983 07.07.2009 07.10.2010 14.06.1995 07.06.2012 15.02.2011 25.05.1999 07.09.2010 15.02.2011 03.07.2009 14.12.1993 04.10.2011 15.02.2011 28.06.1993 21.11.2011
Date of entry intoforce 17.12.2010 14.04.2006 01.01.2013 02.07.2004 14.02.1996 --01.01.2013 12.09.1996 27.12.2001 20.11.2011 04.12.2009 03.05.2010 16.02.1984 20.10.1969 01.07.2010 01.01.2013 27.01.1985 12.04.2010 01.11.2011 31.07.1996 --01.01.2013 30.12.2000 18.05.2012 01.01.2013 09.04.2010 08.12.1995 --01.01.2013 07.05.1997 ---
36 Liechtenstein 37 Lithuania
46 Norway 47 Panama
48 Poland
52
Russia
130 ANNEXES
Type of arrangement DTC DTC Protocol DTC DTC DTC EU Directive 2011/16/EU DTC EU Directive 2011/16/EU DTC DTC DTC Protocol DTC DTC Protocol EU Directive 2011/16/EU DTC DTC DTC Protocol EU Directive 2011/16/EU DTC DTC Protocol DTC Protocol DTC DTC DTC DTC DTC DTC DTC Protocol DTC DTC Date of entry intoforce 29.12.2006 05.08.2011 --24.05.1996 30.12.1992 01.01.2013 08.12.2002 01.01.2013 08.09.2000 26.12.1986 --19.05.1987 16.07.2010 01.01.2013 --15.03.1998 11.09.2011 01.01.2013 09.02.1994 19.11.2010 ------22.07.1998 20.11.2003 18.10.1999 18.01.2005 ----19.06.2009
No.
Jurisdiction
Date of signature 27.03.2006 18.09.2009 04.06.2012 06.03.1993 18.03.1991 15.02.2011 02.04.2001 15.02.2011 23.11.1998 07.11.1984 29.05.2012 03.06.1986 10.11.2009 15.02.2011 31.01.2013 14.10.1996 07.09.2010 15.02.2011 21.01.1993 25.08.2009 11.07.2012 19.12.2011 09.06.2011 06.05.1996 07.05.2001 27.03.1996 09.06.2003 30.09.2009 06.09.1997 20.11.2005
62 Sweden
63 Switzerland 64 Chinese Taipei 65 Tajikistan 66 Thailand 67 Trinidad and Tobago 68 Tunisia 69 Turkey 70 71 Ukraine United Arab Emirates
ANNEXES 131
No. 72
Type of arrangement DTC DTC Protocol EU Directive 2011/16/EU DTC DTC Protocol DTC DTC
73 74 75
132 ANNEXES
Annex3:List of all agreements signed, allowing for the exchange of banking information, to the standard and in force, including jurisdictions covered by the EU Council Directive on Administrative Cooperation in the Field of Taxation (2011/16/EU)
Bilateral Agreements Allowing exchange of banking information Agreements (with paragraph5 but Agreements to the some agreements not to the standard signed to the standard) standard and in force X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Albania Armenia Austria Azerbaijan Bahrain Barbados Belgium Brazil Bulgaria Canada China Czech Republic Denmark Estonia Finland France FYROM Georgia Germany Greece Hong-Kong Hungary India
ANNEXES 133
Bilateral Agreements Allowing exchange of banking information Agreements (with paragraph5 but Agreements to the some agreements not to the standard signed to the standard) standard and in force X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57
Indonesia Ireland Iceland Israel Isle of Man Italy Japan Kazakhstan Jersey Kuwait Latvia Laos Liechtenstein Lithuania Malaysia Malta Mauritius Mexico Moldavia Monaco Morocco The Netherlands Norway Panama Poland Portugal Qatar Romania Russia San Marino Seychelles Singapore Slovak Republic Slovenia
134 ANNEXES
Bilateral Agreements Allowing exchange of banking information Agreements (with paragraph5 but Agreements to the some agreements not to the standard signed to the standard) standard and in force 58 South Africa X 59 South Korea X X X 60 Spain X X X X 61 Sri Lanka X X X 62 Sweden X X X X 63 Switzerland X X X 64 Chinese Taipei X X X 65 Tajikistan X X X 66 Thailand X 67 Trinidad and Tobago X 68 Tunisia X 69 Turkey X X X X 70 Ukraine X 71 United Arab Emirates X 72 United Kingdom X X X X 73 United States X X X 74 Uzkekistan X 75 Viet Nam X Total 75 45 43 23
Jurisdictions covered by the EU Council Directive on Administrative Cooperation without a bilateral without a bilateral without a agreement agreement to bilateral allowing for the standard agreement EOI for banking (no bilateral to the without a information (no agreement, no standard bilateral bilateral agreement para 5 or subject and in agreement or no para 5) to conditions) force X X X X X X X X X X X
1 2 3 4 5 6
ANNEXES 135
Jurisdictions covered by the EU Council Directive on Administrative Cooperation without a bilateral without a bilateral without a agreement agreement to bilateral allowing for the standard agreement EOI for banking (no bilateral to the without a information (no agreement, no standard bilateral bilateral agreement para 5 or subject and in agreement or no para 5) to conditions) force X X X
7 Estonia 8 Finland 9 France 10 Germany 11 Greece 12 Hungary 13 Ireland 14 Italy 15 Latvia 16 Lithuania 17 Malta 18 The Netherlands 19 Poland 20 Portugal 21 Romania 22 Slovak Republic 23 Slovenia 24 Spain 25 Sweden 26 United Kingdom Total
X X X X X
X X X X X
X X X X X X X X X X X
X X
X X
10
11
17
76
55
54
40
136 ANNEXES
Commercial legislation
Law of 1915 on commercial companies and partnerships Law of 21April 1928 on foundations Law of 31July 1929 on the fiscal regime of socit de participation financires Law of 31May 1999 on professionals providing registered office Law of 19December 2002 concerning the commerce and company register as well as annual accountings of enterprises Law of 27July 2003 on trusts and fiduciary contracts Law of 11May 2007 concerning the creation of familial assets management companies Law of 20April 2009 on electronic submission by the commerce and company register Law of 10December 2010 on new international accounting norms for enterprises Grand ducal regulation of 23January 2003 concerning the commerce and company register as well as annual accountings of enterprises Grand ducal regulation of 22April 2009 concerning the commerce and company register as well as annual accountings of enterprises CSSF regulation 12-02 of 14December 2012
ANNEXES 137
Fiscal legislation
General tax law of 22May 1931 Law of 27November 1933 concerning the recovery of direct taxes and excise duties on alcohols and social insurance contributions Adaptation fiscal law of 16October 1934 Wealth tax law of 16October 1934 Commercial tax law of 1December 1936 Law of 17April 1964 modified, concerning the reorganisation of the direct taxes administration
Financial legislation
Law of 6December 1991 concerning the supervision of insurance companies Law of 5April 1993 concerning the financial sector Law of 15June 2004 on capital risk investment companies Law of 11January 2008 on transparency requirements for issuers of securities
Treaties ratification
Law of 31March 2010 concerning the approval of double tax conventions and introducing the applicable procedure in the field of exchange of information on request
138 ANNEXES
Administrative co-operation
Law of 15March 1979 concerning the mutual assistance in the field of direct taxes Law of 27April 2006 transposing the EU 2004/56/CE Directive concerning the mutual assistance between competent authorities of the member states in the field of direct taxes Law of 19December 2008 concerning cooperation between administrations and justice Law of 19December 2008 on inter-administrative and judicial co-operation Grand ducal regulation of 15March 1979 concerning the international mutual assistance in the field of direct taxes
Others
Law of 1December 1978 concerning administrative tax claims Decision of 8June 1950 of the Supreme court of justice Decision of 18June 2007 of the Administrative court of appeal of Luxembourg Decision N 30164 of 27March 2012 of the Administrative Tribunal Decision N 28742 of 12December 2011 of the Administrative Court Decision N 28728 of 25January 2012 of the Administrative Court Decision N 29655C of 9February 2012 of the Appeal Court Decision N 30630 of 3March 2012 of the Appeal Court Decision N 30664C of 12July 2012 of the Appeal Court
ANNEXES 139
Representatives from the Tax Departments Direct Tax Administration Indirect Tax Administration Customs and Excise Duties Administration Exchange of Information Unit
Representatives of the Financial Sector Supervisory Commission Commission de Surveillance du Secteur Financier (CSSF) Representatives of the Registration office Representatives of the Financial Intelligence Unit Representatives of the Ministry of Justice Representatives of the Supervisory Authority for professionals including: A representative of the Luxembourg Bar A representative of the notaries A representative of the Chartered Accountants A representative of the statutory auditors