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Luxembourg Delays Filing Deadline For FATCA Again

Julia Reinholdsson

30 July 2015

Tax authorities in Luxembourg have delayed the deadline for financial institutions to comply with FATCA to 31 August 2015.

This is the second time Luxembourg has delayed the reporting deadline with the Foreign Account Tax Compliance Act, which is meant to prevent expat US persons from evading taxes.

The small European jurisdiction signed a model one intergovernmental agreement with the US on 28 March 2014, requiring all foreign financial institutions, or FFIs, ranging from banks to hedge funds, to report accounts details held by US persons to the Luxembourg Inland Revenue, its tax authority, which in turn would share the information with the US Internal Revenue Service.

The FATCA legislation, enacted into law in 2010, is controversial because a number of FFIs say it means Americans are no longer a profitable source of business, and have shut their doors to expat Americans. HSBC and Deutsche Bank, for example, have taken this route. 

The announcement of yet another delayed deadline does not come as a surprise as there have been late changes of a similar fashion in a number of countries, Thierry Haensenberger, Luxembourg entity manager and senior vice president, EMEA, AxiomSL, said.

“The postponement of FATCA reporting in Luxembourg and Mauritius will be welcomed. However, the truth is that most firms will not need to submit a large number of reports for FATCA this year, as the scope of reporting is limited to accounts that were opened by US taxpayers and citizens between July and December 2014. The real challenge will come in 2016, when firms will also need to report on accounts opened before July 2014,” said Haensenberger.

The original deadline was on 30 June, which would be the stipulated annual filing deadline after Luxembourg’s parliament adopted the FATCA law on 1 July 2015. It was delayed until 31 July and is now delayed another month. If regular information on financial accounts related to US persons is not reported, they will face a 30 per cent withholding tax on certain payments of US-sourced income.

“Next year will also see the beginning of reporting under the British equivalent of FATCA (‘UKFATCA’) and the beginning of preparations for the implementation of the Common Reporting Standard (a global version of FATCA). With this in mind, I expect to see firms migrating to more robust, automated solutions for the reporting of their FATCA and related returns next year,” added Haensenberger.

One consequence of the FATCA legislation is that a number of countries have created systems for automatically exchanging information to root out tax evasion.