Luxembourg chooses Model 1 IGA for FATCA purposes
Luxembourg intends to sign Multilateral Convention on Mutual Administrative Assistance in Tax Matters
As announced by Luxembourg’s Finance Minister Luc Frieden on 21 May 2013, Luxembourg will sign a Model 1 Intergovernmental Agreement (IGA), representing a next important step towards automatic exchange of information (following the announcement beginning of April to automatically exchange information on interest payments at EU level).
This clearly demonstrates Luxembourg’s willingness to a comprehensive review of the current Exchange of Information framework to guarantee further cooperation for tax matters.
An IGA between the Luxembourg and US Authorities should help to avoid 30% penal withholding tax, to follow the international standards also accepted by the other important financial centers (Singapore, UK and Switzerland) and to play an active role in determining the practical implementation guidelines of the FATCA regime.
Such a Model 1 IGA will simplify the implementation of FATCA requirements for national financial institutions and includes numerous advantages in comparison to the final FATCA regulations and Model 2 IGA:
- Provision under which national authorities only have to exchange information when both counterparties (Luxembourg and the US) have the necessary infrastructure and safeguards to confidentiality in place
- National governments, instead of local financial institutions will be in charge of receiving information from and reporting to U.S. authorities
- National authorities will have some authority to facilitate FATCA requirements through national guidelines to implementation (“interpretative authority”)
- No need to name a so-called “responsible officer” to the U.S.
- Luxembourg financial institutions only need to register with the IRS instead of entering into a contractual agreement with the IRS
FATCA e- alert 2013-10 on updated IGA model agreements
FATCA e-alert 2012-15 on Luxembourg’s negotiations of an IGA
FATCA e-alert 2012-06 on Model I IGA
Luxembourg to sign Multilateral OECD Convention on Mutual Administrative Assistance in Tax Matters
Luc Frieden also announced that Luxembourg intends to sign next week the Multilateral OECD Convention on Mutual Administrative Assistance in Tax Matters. This Convention contains certain provisions also covered by the European Directive 2011/16/EU of 15 February 2011 on Administrative Cooperation in the Field of Taxation, in force as of 1 January 2013, and partially covered by some tax treaties, which have already been modified on the basis of the new OECD model. The OECD Convention expands the geographical scope of these existing provisions to EU and international law.
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