Fatca & CRS Alert 2023-01

Luxembourg reporting financial institutions (“RFIs”) must submit FATCA and CRS declarations to the ACD for year 2022 by 30 June 2023.

1. Review your FATCA and CRS status:

Why? Tax authorities is closely monitoring FATCA and CRS status of FIs.

Further to the Section 2.3. of the FAQ (PDF, .8MB) published on 04/04/2022 (See alert), we note that the tax authorities are investigating the FATCA and CRS statuses of regulated entities which did not submit FATCA and CRS reports for the past years. More particularly, they are requesting for evidence of non-reporting FI statuses such as a written classification analysis, the FI’s self-certification form, investors’ register and/or investors’ self-certification forms.

2. Process, procedures, and governance

Why? Legal requirement for Register of Actions

All Luxembourg Financial Institutions ("FIs") are now required to implement a FATCA/CRS compliance program that incorporates a variety of obligations (e.g., IT infrastructure, written policies and procedures, oversight in case of delegated functions). A second critical component of this compliance program requires FIs to develop appropriate and effective procedures to ensure that FATCA and CRS due diligence and reporting obligations are met.

The tax authorities have the right during a period of 10 years to access the records of actions taken and evidence used, as well as the RFI's policies, controls, procedures, and IT systems, upon request.

3. Review the reportable jurisdictions

Why? New reportable jurisdictions for CRS have been implemented on 6 January 2023

The following jurisdictions have been added to the list of reportable jurisdictions for reporting year 2022.

• Jamaica
• Moldova
• Montenegro
• Uganda
• Thailand

You may access the official list here (PDF, 2.5MB).

4. Monitor updates from the IRS

Why? Clarifications were issued by the IRS for missing U.S. TINs through FAQs

Further the requirement to document the TINs with prescribed codes (See tax alert), the IRS should no more consider a missing TIN as a significant non-compliance until reporting year 2024 provided the FIs are:

• Using the prescribed codes for missing TINs
• Implementing adequate procedures to recover the missing TINs
• Reaching out to the investors with missing TINs once a year

The IRS has also issued additional codes to be used in the absence of TINs to better understand the facts and circumstances behind missing TINs – Please refer to Q6 under the Reporting section of the FAQs

5. Reminder of implications of non-compliance

Why? Penalties as per below may be enforced by the tax authorities

• The previous penalty for late, incomplete or wrong reporting — i.e. a maximum of 0.5% of the amount not reported and a minimum penalty of EUR1,500 — was replaced by a fixed penalty of EUR10,000 (per year and per RFI). This new fixed penalty applies if a Luxembourg RFI has not filed a CRS or FATCA return within the legal reporting deadline. This also includes a nil return.
• If a CRS or FATCA audit by the Luxembourg tax authorities finds non-compliance with due diligence procedures, the maximum penalty of EUR250,000 could apply. And, if reportable accounts are found to be non-reported or under-reported, an additional penalty of a maximum of 0.5% of the non-reported amount could apply.

In any case, do not hesitate to reach out to us should you need assistance with your FATCA and CRS reporting obligations. We have developed an innovative reporting solution that enables our clients to process their CRS and FATCA reports quickly and efficiently.