Please enter your email address to receive a password reminder.
Log into Tax-News+
Luxembourg’s Finance Minister Luc Frieden has announced plans to begin negotiations shortly on an inter-governmental agreement between Luxembourg and the United States, implementing the Foreign Account Tax Compliance Act (FATCA).
The US FATCA legislation was enacted in March 2010 as part of efforts to strengthen the US tax administration’s capacity to combat cross-border tax evasion by US citizens with accounts held abroad.
FATCA aims to achieve this objective by requiring Foreign Financial Institutions (FFIs), including banks, investment funds, insurance companies, foreign trusts and foreign corporations, to enter into agreements with the US Internal Revenue Service (IRS), signing contracts pursuant to which the FFIs are obliged to conform to certain obligations.
Failure by an FFI to disclose information on financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, would result in a requirement to withhold 30% tax on US-source income.
However, to assist compliance by FFIs, the US Treasury has published a model inter-governmental agreement for implementing FATCA and announced the development of a second model agreement. It is intended that these models should serve as the basis for concluding bilateral agreements with interested jurisdictions. Under this model agreement, it is intended that FFIs would pass the relevant information to the authorities in the country in which they are based, which would then be transmitted to the US via information exchange provisions contained in double tax avoidance or tax information exchange agreements.
Highlighting the fact that the first round of bilateral talks took place on November 19, to prepare for upcoming negotiations, the finance ministry revealed that the negotiations are expected to conclude in the first half of 2013.
Concluding, the finance ministry underscored that the inter-governmental agreement will serve to enable the country’s financial institutions to conform in all legal certainty to the new US legislation and to guarantee the competitiveness of the Luxembourg financial sector.
IMPORTANT NOTICE: Wolters Kluwer TAA Limited has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
All rights reserved. © 2016 Wolters Kluwer