Since January 1st 2015, the withholding tax on interest income paid by Luxembourg paying agents to individuals resident in another EU Member is abolished and Luxembourg applies the automatic exchange of information as provided for by the EU Savings Directive.
In 2014, the OECD released a global standard for automatic exchange of information in tax matters (the "Global Standard") the purpose of which is the implementation of a mechanism for automatic exchange of financial account information. The Global Standard is built on the intergovernmental agreements ("IGA") concluded between the United States of America (the "USA") and several other countries to implement FATCA.
In this context, on October 29th 2014, 51 jurisdictions including Luxembourg signed a multilateral competent authority agreement (the "MCAA") to automatically exchange information based on article 6 of the convention on mutual administrative assistance in tax matters.
At the European level, the EU Council adopted, on December 9th 2014, a directive revising the directive 2011/16/EU of February 15th 2011 on administrative cooperation in the field of taxation (the "DAC"). Pursuant to the most favoured nation clause included in the DAC, EU Member States having concluded an IGA with the USA relating to FATCA are under the obligation to provide other EU Member States with the same wider cooperation as the one in place under the IGA.
"The aim of the revised DAC is to ensure a cooperation between EU Member States as wide as the cooperation with the USA under FATCA and to avoid the conclusion of parallel and uncoordinated agreements by the EU Member States under the most favoured nation clause of the DAC which could lead to distortions detrimental to the functioning of the internal market."
In order to achieve this objective, the financial institutions' reporting and due diligence rules foreseen in the Global Standard have been introduced in the DAC and the scope of the mandatory automatic exchange of information has been expanded to other sources of income such as dividends, capital gains and other financial income and account balances.
The DAC shall be applicable as from January 1st 2016. First reporting under the DAC and the MCAA are expected in 2017.
