Updated CRS FAQ by the Luxembourg tax administration

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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:

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.

 

How can we help?

The Tax Law partners and your usual contacts at Arendt are at your disposal to further assist you on the impact assessment of these new obligations. Our dedicated FATCA/CRS reporting team at Arendt Regulatory & Consulting is also available to help you in the preparation of your forthcoming CRS reporting obligations and the definition of your FATCA/CRS policies, procedures and supporting IT solutions.

Download the press release

Luxembourg Newsflash – Updated CRS FAQ by the Luxembourg tax administration

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