Latest developments on automatic exchange of information within the EU

Automatic exchange of information ("AEOI") has been a hot topic on the international scene for more than a decade now. Besides the FATCA turmoil, the following EU directives currently provide for an AEOI for certain items of income.

On the one hand, Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments (the "Savings Directive"), implemented into Luxembourg domestic law by the Law of 21 June 2005, ensures that Member States collect information on savings income in the form of interest and similar income of non-resident individuals and automatically provide such information to the tax authorities of the State of residence of the interested recipient. In this context, Luxembourg has now decided to switch to an automatic exchange of information system, as from 1 January 2015, thereby ceasing the possibility to apply a 35% withholding tax in lieu of exchanging information.

On the other hand, Directive 2011/16/EC of 15 February 2011 on administrative cooperation in the field of taxation (the "Directive") has provided so far for an AEOI procedure as from 1 January 2015 for income from employment, director's fees, pensions, life insurance products, and income from ownership of immovable property. The Directive was implemented into Luxembourg domestic law by the Law of 26 March 2014 which considers the three first items of income (i.e., income from employment, director's fees and pensions) are subject to the AEOI but not yet the two last items of income (i.e., life insurance products and income from ownership of immovable property) as those, due to professional secrecy obligations embedded into Luxembourg domestic laws and statutes, do not qualify as reportable income covered by the concept of "Available Information", defined by the Directive as "information in the tax files of the Member State communicating the information, which is retrievable in accordance with the procedures for gathering and processing information in that Member State". This should however be the case as from 2017 when the AEOI under the Directive will be extended to dividends, capital gains, sales proceeds from financial assets and account balances, as it had been decided during the ECOFIN meeting in Luxembourg on 14 October 2014.

Concerning the date of application of the Directive on these categories of income, no consensus has been found between the EU Member States. Finally, after the ECOFIN meeting, Luxembourg together with all other EU Member States, except Austria, agreed to apply the AEOI under the Directive as from 2017, thus relating to income earned or generated in 2016. Following the Directive, the EU Member States shall mutually and automatically exchange as much information as they have undertaken to exchange with the United States of America under FATCA.This enlargement of the material scope of the Directive obviously questions the relevance of maintaining the Savings Directive or, on the contrary to repeal it, in order to have only one single standard of AEOI procedure.