Robert Mandell and Pierre Gramegna signing a FATCA accord on Friday
Finance: The Grand Duchy’s government has signed a long awaited tax data sharing deal with the US. While implementation working groups have already sprung into action, ratification by Luxembourg’s parliament could be months away.
After months of negotiations, the Grand Duchy has inked a tax data sharing deal with Washington. Pierre Gramegna, Luxembourg’s finance minister, and Robert Mandell, the US ambassador to the Grand Duchy, signed an accord on America’s Foreign Account Tax Compliance Act, Luxembourg’s government said on Friday.
FATCA takes effect on July 1 and requires nearly every financial institution in the world to provide information to the IRS, the American tax office, on anyone with links to the US, or face a 30% withholding tax on all US revenues. Data can filed directly or via national agencies in countries that have signed a “model 1” intergovernmental agreement (IGA).
Luxembourg’s government said it initialled just such a model 1 IGA, and that automatic exchange of information would begin January 1 of next year using the same mechanisms that are utilised for the EU Savings Directive.
Shortly after the government announcement, the Association of the Luxembourg Fund Industry said it “welcomes the signature” of the agreement, and would soon issue a Q&A document to provide guidance on implementing the exchange of tax data. In its press alert, Alfi added that under the terms of the IGA, Luxembourg’s tax administration would set up two working groups to address practical and technical matters.
The Grand Duchy’s FATCA deal now goes to the Chamber of Deputies for approval. Earlier this year, a spokeswoman for Luxembourg’s finance ministry said the measure would ideally be ratified by late autumn.
However tax consultancy KPMG said that a memorandum of understanding between the Grand Duchy and the US signed in February means that Luxembourg financial institutions “are deemed compliant with FATCA” with the signature of the IGA. Even if ratification is delayed, Luxembourg’s status as a country cooperating with the US “would not get lost until September 2015 or even September 2016”, the advisory firm stated in an email alert on Friday.
The Grand Duchy began its FATCA talks with the US last spring.
Last week Luxembourg’s finance ministry said the text of its accord would be published in “early April”.
As of this writing, a spokeswoman for the US Treasury Department had not returned Delano’s message requesting the details of the deal.
More than 20 other jurisdictions have already reached similar agreements with the US, including Bermuda, Canada, Cayman Islands, Finland, France, Germany, Isle of Man, Japan, Malta, Netherlands, Switzerlandand the UK.