Did you know: Common Reporting Standard deadline is fast approaching

Governments across the world are increasingly putting tax transparency at the top of their agenda. In this context, the OECD developed the Common Reporting Standard (CRS) as a global reporting standard to achieve a complete and multilateral automatic exchange of information framework. The Luxembourg CRS first reporting is due on 30 June 2017. Here are a few basics to understand what is at stake, where Luxembourg Financial Institutions (FIs) should be and which practical issues they are currently facing.

Understand the Common Reporting Standard objectives

The CRS, developed in response to the G20 request to strengthen the fight against tax evasion, calls on countries to get financial account information from their FIs. Doing so, they would be able to exchange information automatically with other countries on an annual basis.

In Luxembourg, the CRS has been implemented into local law in 2015 and entered into force on 1 January 2016. Each Luxembourg entity must first assess its individual status under CRS to determine its consequent obligations. Failure to do so may trigger the relevant local penalties of EUR 250,000 for major non-compliance.

If a Luxembourg entity qualifies as Reporting FI, it has to perform its first reporting to the Luxembourg tax authorities by 30 June 2017 on 2016 financial account information.

Review and collect the right information

First and foremost, Luxembourg FIs need to identify the tax residence and/or the CRS status of their clients / investors. So, any financial account identified as a reportable account in 2016 must be reported to the Luxembourg tax authorities.

Depending on the type of client /investor, the required information may be obtained based on publically available information or AML/KYC documentation. In practice, Luxembourg FIs often collect self-certification forms to obtain all required data (e.g. tax identification numbers).

In addition, Luxembourg FIs need to make sure the information provided in the self-certification forms is reasonable. They also need to check whether there is any reason to know that the information is not correct or complete.

Are you ready to comply with the first reporting deadline?

The Luxembourg tax authorities have confirmed that Reporting FIs in Luxembourg must meet the deadline of 30 June. FIs can split the reportable data into several files and report these in separate tranches by 30 June 2017. Corrective files submitted after 30 June 2017 should be accepted without the application of late penalty fees. Alternatively, FIs can recall a reporting file already submitted to the Luxembourg tax authorities and send out a new one.

reporting FIs should be able to answer these questions:

  • Have you analysed your products to assess whether they qualify as financial accounts? And what about the related payments?
  • Have you identified all reportable clients /investors (incl. certain pre-existing investors/clients)?
  • Are your systems ready to create the required XML files with the Luxembourg specificities ? Or did you subcontract your reporting obligations?
  • Have you informed the concerned individuals to which jurisdiction(s) their data will be forwarded?

In case of missing, late, incomplete or wrong reporting, Luxembourg Reporting FI’s will be subject to a penalty of 0.5 % of the amount that should have been reported. With the deadline of 30 June, make sure you do it right, explore our solutions here.

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