Luxembourg follows G5’s lead in tax information exchange
Luxembourg will sign up to the EU Savings Directive, leaving Austria the last nation yet to sign
Luxembourg will sign up to the EU Savings Directive, leaving Austria the last nation yet to sign
LUXEMBOURG IS TO RELAX its policy of banking secrecy and enter into an automatic information exchange with the rest of Europe, according to the principality’s prime minister.
The exchange will commence from 1 January 2015, Jean-Claude Juncker (pictured) told his parliament in a state-of-the-nation address, insisting the country is making the move of its own volition, and not due to German pressure.
The move comes hot on the heels of a similar agreement between Europe’s G5 nations – UK, France, Germany, Italy and Spain – which sees financial information automatically exchanged between the countries in order to help catch and deter tax evaders as well as provide a template for a wider multilateral automatic tax information exchange.
Once Luxembourg adopts the legislation, however, it will not apply to foreign companies based in the country, which is a popular headquarters for major corporations. Instead, it will apply to EU citizens holding bank accounts there.
The scheme will be based upon the Foreign Account Tax Compliance Act (FATCA) agreements which exist between the US and the countries, which also formed the basis of subsequent agreements struck by the UK.
Jersey became the most recent jurisdiction to strike such a deal with the UK, closely following Guernsey and the Isle of Man. Under those deals, UK residents with assets concealed on the islands will have until September 2016 to disclose details to the taxman and pay any tax owed to the HMRC, as well as a fine between 10% and 20% of the amount owed.
While in most cases, the deal will see evaders escape prosecution, HMRC offers no guarantees.
Unlike a similar deal with Switzerland, anonymity is not enshrined, while the deals will not have the immunity from criminal prosecution seen in the Liechtenstein Disclosure Facility. The UK received its first payment from Switzerland, amounting to £340m in January.
Juncker’s announcement leaves Austria as the only country in the union not signed up to the rules, known as the EU Savings Directive.
But Austria’s finance minister, Maria Fekter said she would “fight like a lion” to retain her country’s banking secrecy policy in place, although chancellor Werner Faymann conceded Vienna may have to relent given that all other EU states are signed up.
James Hill, tax partner at law firm Mayer Brown, said: “It is unsurprising that Luxembourg has succumbed to international pressure and agreed to switch to the tax information exchange provisions of the EU Savings Directive, rather than applying a withholding tax.”