Shelf Company Luxembourg

CRS Reportable and Participating Jurisdictions for Luxembourg

CRS Reportable and Participating Jurisdictions for Luxembourg

On 19 April 2024, a Grand Ducal Decree on CRS was published in the Official Gazette. The Grand Ducal Decree dated 18 April 2024 amends the previous Grand Ducal Decree dated 23 December 2022 and modifies the list of CRS Participating and Reportable Jurisdictions for the year 2023.

More precisely, the list of Participating Jurisdictions for the year 2023 removed Liberia, Uganda, Moldova, Montenegro, and Morocco. This means that entities tax resident in those jurisdictions that qualify as Investment Entities managed by other Financial Institutions will need to reclassify as Passive Non-Financial Entities (“NFEs”) and disclose their Controlling Persons.

Additionally, authorities have added Georgia and Ukraine to the list of Reportable Jurisdictions for the reporting year 2023. As a result, financial institutions will need to report account holders and Controlling Persons who reside in those jurisdictions for the year 2023 and must notify them before reporting their personal information that will be exchanged in the context of CRS.

The mismatch between the list of Participating Jurisdictions and the list of Reportable Jurisdictions may also impact DAC 6 reporting obligation and more importantly AML tax risk assessments. For instance, the Luxembourg tax authorities do not currently effectively report a client who is a tax resident in Morocco to his country of tax residence.

Therefore, considering that the latter will be known by the Morocco tax authorities will make it difficult to mitigate the risk of non-tax transparency of his account.

Next steps?

In the publication, Luxembourg Reporting Financial Institutions can determine the Account Holders that should be included in the 2023 CRS report.

Reportable individuals (including Controlling Persons) should be notified a reasonable amount of time before the submission of the CRS reports (i.e., at least one month before filing). As the deadline to report information related to accounts maintained in 2023 is set on 1 July 2024, meaning reportable individuals will need to be notified by the end of May at the latest.

When notified, individuals may have questions or request changes to their personal data, so operational processes need to adapt to properly communicate with those clients and identify which requested changes impact the person’s reportability and the effective date of that change. Therefore, we recommend sending the notification as soon as possible to provide sufficient time to treat any information changes, obtain new supporting documents, and update systems accordingly.  

Financial Institutions in Luxembourg must also update their written procedures and policies to accommodate this new obligation.

Will there be tax audits in Luxembourg?

We also expect the Luxembourg tax authorities to perform more controls and audits in the future based on the developments that we see currently at an OECD level as well as in other European countries. In February 2024, the Global Forum Secretariat launched a new tool named, “Model Manual for CRS Compliance Audits” which is available to tax authorities upon request.

In addition, the implementation of DAC 8 in 2026 will require the inclusion of additional information in the CRS reports so that tax authorities can perform further controls.

Apart from data quality checks, based on our experience, tax authorities focus on written procedures, register of actions, IT system(s), FATCA/CRS self-certification form templates, internal and/or external controls process(es) and any other measures put in place to prove compliance with FATCA/CRS obligations. Therefore, when preparing your reporting, you should document how you have reconciled the population with the fund register or client listing and with the previous year’s reporting. It is crucial to assess and document the reportable status of a given Account Holder not only based on the FATCA/CRS self-certification obtained, but also based on the KYC documentation and publicly available information.

Our subject matter experts are available to discuss the above updates in more detail and help you to implement sound governance as required. Our expert team can assist you with:

  • Drafting or reviewing procedures and your control matrix;
  • Reviewing self-certifications (incl. IRS Forms) obtained from clients or investors; 
  • Preparing and filing FATCA and CRS reports;
  • Generating notification letters for your reportable clients/investors & Controlling Persons;
  • Performing due diligence on service providers (e.g., transfer agents for the fund industry); 
  • Providing dedicated training sessions.

Contact us to speak to one of our professionals for further information or if you’re looking to acquire a Luxembourg shelf company.