New procedures applicable to exchange of information on request

On November 25th 2014, the Luxembourg parliament approved the draft law amending the procedure applicable to the exchange of information on request (the "Law") which supersedes the procedure applicable to the exchange of information on request within the frame of double tax treaties of March 31st 2010.

The Law applies to any requests of exchange of information from a tax authority based on:

  • a double tax treaty. The procedure is applicable to a request deriving from any treaty country and hence is not limited to the requests deriving from a treaty country where article 26 was amended and extended to information held by banks (for the latter countries the Law does however not provide for an exchange of information held by banks);
  • the EU Directive of March 16th 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures;
  • the EU Directive of February 15th 2011 on administrative cooperation in the field of taxation and,
  • the convention on mutual administrative assistance in tax matters developed jointly by the OECD and the Council of Europe.

Pursuant to the new procedure, the Luxembourg tax authorities are only required to review a request as regards its compliance with the formal conditions provided for in the relevant tax treaty or applicable law. They will no longer control, "a priori", the foreseeable relevance of the request. A control "a posteriori" once the information has been collected and before it is communicated to the requesting State is however possible.

"The Law aims at ensuring an exchange of information as broad as possible."

The holders of information must provide all the information requested without any alteration. An exchange of information for a period before the entry into force of the double tax treaty or the applicable laws is allowed if the requested information is foreseeably relevant for the determination of the taxable income of a year post-entry into force of such double tax treaty or such laws.

The Law also provides that, upon demand from the requesting State, the holder of the information will be forbidden to inform the taxpayer about the existence of the request of exchange of information. In the draft law submitted on April 3rd 2014 (the "Draft Law"), such ban was limited to certain circumstances where the holder of the information was a bank.

Taxpayers are no longer able to appeal against a request of information. The Draft Law did initially allow claims relating to the formal conditions of the request of information; such article has eventually been removed as well as article 6 allowing the Luxembourg tax authorities to decline a request of exchange of information where such an exchange would have led to the disclosure of:

i. a commercial, industrial or professional secret,
ii. a commercial process or
iii. information whose disclosure would be contrary to public policy.