Reporting deadline for RAIFs or AIFs that cannot benefit from the Exempt CIV status: 30 June 2022
The common reporting standard (“CRS”), which has been implemented in Luxembourg by the law of 18 December 2015, has introduced an automatic exchange of information relating to financial accounts in tax matters with the Member States of the European Union and the other partner jurisdictions of Luxembourg.
On 4 April 2022, the Luxembourg tax authorities (“ACD”) released an update of their frequently asked questions (“FAQ”) on the CRS. The two added questions (2.3 and 2.4) provide a list of Investment Entities for CRS purposes and clarify that unregulated entities cannot benefit from the exempt Collective Investment Vehicle (“CIV”) status.
The main point of attention is that alternative investment funds (“AIFs”) or reserved alternative investment funds (“RAIFs”) that previously qualified as Non-Reporting Financial Institutions (“FIs”) based on the exempt CIV status under CRS are now being treated as Reporting FIs and must therefore file a (nil) report on 30 June 2022 for the year 2021 as well as a retroactive (nil) report for the year 2020 to avoid any penalties.
Finally, one should recall that any entity resident in Luxembourg or any branch located in Luxembourg should determine its FATCA or CRS status on a case-by-case basis and support its classification by a proper analysis of its legal and factual situation.
I. List of Investment Entities
Question 2.3 of the FAQ provides a non-exhaustive list of Luxembourg entities which fall in principle within the scope of the definition of an Investment Entity, which may be considered as Reporting Financial Institutions for CRS purposes, as follows:
- any undertaking for collective investment subject to Part I or II of the amended law of 17 December 2010 relating to undertakings for collective investment;
- any specialized investment fund subject to the amended law of 13 February 2007 relating to specialized investment funds;
- any venture capital company governed by the amended law of 15 June 2004 relating to venture capital companies (SICAR);
- any securitisation undertaking subject to the authorisation and supervision of the CSSF in accordance with the amended law of 22 March 2004 relating to securitisation;
- any RAIF falling within the scope of the amended law of 23 July 2016 relating to reserved alternative investment funds;
- any AIF whose management falls within the scope of the amended law of 12 July 2013 relating to alternative investment fund managers;
- any pension fund governed by the amended law of 13 July 2005 relating to institutions for occupational retirement provision in the form of SEPCAV and ASSEP;
- any pension fund governed by the amended Grand-Ducal Regulation of 31 August 2000 implementing Article 26, paragraph 3, of the amended law of 6 December 1991 on the insurance sector and relating to pension funds subject to the prudential supervision of the Commissariat aux assurances;
- any management company subject to part IV of the amended law of 17 December 2010 relating to undertakings for collective investment;
- any manager of alternative investment funds governed by the amended law of 12 July 2013 relating to managers of alternative investment funds; and
- any investment firm governed by the amended law of 5 April 1993 relating to the financial sector which carries out any of the following activities: (i) execution of orders on behalf of clients, (ii) portfolio management.
Following the release of this list, a review of the entity’s classification should be undertaken to ensure compliance with CRS reporting obligations.
II. RAIFs or AIFs cannot benefit from the Exempt CIV status (i.e. the Non-Reporting FI status) under CRS
Luxembourg entities which qualify as Reporting Financial Institutions for CRS purposes are required to file every year a nil report with the ACD in the absence of CRS reportable accounts (so called “ZeroReporting”). Non-Reporting Financial Institutions, such as the entities opting for the exempt CIV status, are exempt from this nil reporting obligation.
In Question 2.4 of the FAQ, the ACD indicates that unregulated entities cannot benefit from the exempt Collective Investment Vehicle (CIV) status, which can only be chosen by entities which are themselves subject to the supervision of the CSSF, and only if the other conditions for access to this status are met.
Therefore, unregulated entities, such as AIFs or RAIFs, cannot opt for the exempt CIV status, considering that only their manager (AIFM) is directly supervised by the CSSF, and they may be considered as Reporting FIs for CRS purposes. As a result, these unregulated entities are now required to submit every year a nil report to the ACD in the absence of CRS reportable accounts.
Considering that CRS reporting for the 2021 fiscal year should be done by 30 June 2022, RAIFs and AIFs which used to qualify as Non-Reporting FIs should immediately perform a review of their status under CRS to determine their potential new reporting obligations.
While RAIFs and AIFs that used to qualify as Non-Reporting FIs under the exempt CIV status should, in principle, have no CRS reportable accounts, a nil report should be filed by 30 June 2020 with respect to fiscal year 2021 and fiscal year 2020 to avoid any penalties.
ERIC FORT - Partner - Tax Law
ALAIN GOEBEL - Partner - Tax Law
THIERRY LESAGE - Partner - Tax Law
VINCENT MAHLER - Partner - Tax Law
JAN NEUGEBAUER - Partner - Tax Law