The Luxembourgish tax authorities (“ACD”) have initiated on-site audits aimed at compliance with due diligence and reporting obligations under Foreign Account Tax Compliance Act (“FATCA”) and Common Reporting Standard (“CRS”).
Prior to the on-site audit, the ACD requests a multitude of documents and information within a tight timeframe. During these audits, the tax authorities will conduct comprehensive reviews of policies, controls, procedures, and IT systems pertaining to reporting and due diligence obligations.
Therefore, it is crucial to have the following in place:
- Processes and procedures at the level of the entity along with a “Register of Actions” (as introduced by the updated FATCA/CRS law of June 2020);
- Robust IT systems in place related to reporting and due diligence obligations;
- Coherent self-certification forms; and
- Adequate internal and/or external control processes to identify and address non-compliance risks.
Considering the increased risks of fines and penalties in the event of defaults, it would be highly recommended that Luxembourg Financial Institutions ensure that they are fully compliant with their FATCA and CRS obligations, and if required, remediate any weaknesses in their FATCA and CRS overall process.
KPMG Luxembourg is well equipped to assist you in this process by carrying out a full review of Financial Institutions to assess their level of compliance and remediate to any weaknesses identified during the review.
