Exchange of Information with Luxembourg

Luc Frieden, Luxembourg Minister of Finances, declared at the spring conference of the Association of the Luxembourg Fund Industry (ALFI), that Luxembourg would fully implement the OECD standards for the exchange of taxation information. The government of Luxembourg also aimed at establishing the exchange of information, as defined by the OECD, as the only mandatory standard accepted within the EU. It became clear, that the new OECD standard would become the new global standard.

2009 headlines in the press of Luxembourg:

“By signing the double tax treaty, Luxembourg and Germany have settled their dispute in respect of banking confidentiality” (Luxembourg newspaper “Wort” on 11.12.2009).

The German Minister for Finances, Mr Schäuble, emphasised in this context, that for him

“The new double tax treaty with Luxembourg is a first step towards the automatic exchange of information”.

Luxembourg utilised a transitional phase within the EU, in which it was permitted not to automatically report information on interest income. Clients of Luxembourg’s banks had a choice: either a tracer note would be issued (exchange of information), or a certificate of tax residency issued by the Tax Authority at the place of residence had to be supplied, or the bank administering the portfolio would retain the anonymous EU-withholding tax. Since the middle of 2011, this meant the anonymous withholding of a tax rate of 35%.

The government of Luxembourg announced in April 2013, that interest income (except for dividends) would be automatically reported to the EU-member countries commencing on 1.1.2015. On 29.April 2013, the government of Luxembourg further expressed an interest in exchanging significantly more information than only on interest paid on bank balances. Luxembourg’s Minister for Finance elaborated in April 2013:

“We will continue to spearhead further initiatives”. He also foreshadowed Luxembourg’s willingness to report information on the fiscal conduct of large corporations.

Since 1.1.2015, Luxembourg automatically reports information on certain types of capital income by way of administrative assistance. This decision is based on the EU Savings Tax Directive (Directive 2003/48/EG of the Council, dated 3. June 2003 in the area of the taxation of interest income). The reporting of information also pertains to interest income and payments similar to interest made to individual taxpayers.

Based on the comprehensive information clause in Art 26 of the double tax treaty (DTT), Luxembourg also grants administrative assistance in tax matters upon request by the German Tax Authority (and vice versa). The regulation contained in Art 26 DTT is concurrently the legal basis in international law for group enquiries (the particularities are discussed controversially).

Legal assistance must be distinguished from administrative assistance, the former meaning administrative assistance in criminal tax proceedings, which is granted by Luxembourg according to the EU regulations (compare with our page on legal assistance).