Luxembourg ratifies the multilateral convention on mutual administrative assistance in tax matters

In 2013, automatic exchange of information was endorsed as the new global standard for exchange of information. Earlier this year, the OECD released the Standard for Automatic Exchange of Financial Account Information (also called GATCA (Global Account Tax Compliance Act), in reference to a globalisation of FATCA). The standard has two components: (i) the Common Reporting Standard ("CRS") detailing the reporting and due diligence rules to be imposed on financial institutions; and (ii) the Model Competent Authority Agreement (Model CAA) that will link the CRS and the legal instrument that will serve as a legal basis for the automatic exchange of information.

One of the legal instruments that will allow the implementation of the global standard is the Multilateral Convention on Mutual Administrative Assistance in tax matters developed jointly by the OECD and the Council of Europe. This multilateral agreement, already signed by 66 countries, is currently the "most comprehensive multilateral instrument available for tax cooperation and exchange of information", covering various forms of administrative assistance (such as exchange of information on request, spontaneous exchange of information, automatic exchange of information and simultaneous tax examinations), assistance in the recovery of tax claims and the service of documents.

Luxembourg signed the Convention on 29 May 2013. Just one year later, on 26 May 2014, the Luxembourg Parliament adopted the law approving the Convention and the protocol signed by Luxembourg. The Convention enables Member States to limit their participation in the provision of mutual assistance by formulating reservations regarding the taxes covered and the type of assistance provided. Luxembourg has already made use of this facility and will not grant any form of assistance in respect of taxes listed in article 2, § 1, b of the Convention including, inter alia, estate, inheritance or gift taxes, general consumption taxes and compulsory social security contributions.

Conversely, administrative assistance, assistance in the recovery of tax claims (except tax claims in existence at the date of entry into force of the Convention) and the service of documents will be provided by Luxembourg with respect to: (i) taxes on income or profits; (ii) taxes on capital gains which are imposed separately from the tax on income or profits; and (iii) taxes on net wealth.

If the Convention enters into force in respect of Luxembourg before the end of the year (the Convention will enter into force on the first day of the month following the expiry of a period of 3 months after the date of deposit of the instrument of ratification) administrative assistance could be provided with respect to taxable periods beginning on or after January 2015.

However for tax matters involving intentional conduct liable to prosecution under criminal law of the requesting Member State, and still supposing that the Convention enters into force in respect of Luxembourg before the end of the year, Luxembourg reserves administrative assistance for taxable periods beginning on or after 1 January 2011 or where there is no taxable period, for administrative assistance related to tax charges arising on or after 1 January 2011.