On 25 March 2020, Luxembourg passed a law implementing Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards to mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (“DAC 6”).
In simpler terms, DAC 6 is a mandatory disclosure regime which requires EU intermediaries and in some instances taxpayers to report certain types of cross-border arrangements that present certain specific and pre-defined hallmarks. The Luxembourg law implementing DAC 6 was supposed to enter into effect as of 1 July 2020. Given that the aim of the directive is to target tax-avoidance practices, it comes as no surprise that the planned reporting deadlines under DAC 6 are rather short, granting only a 30-day reporting period.
Although DAC 6 is one of the EU’s prized directives, with mounting pressure to alleviate potential difficulties to comply with legal requirements in the context of the COVID-19 pandemic, the EC proposed to delay certain key reporting deadlines. In early June 2020, the Luxembourg government announced that in accordance therewith, it opted to postpone the filing deadlines with a three month increase on the initial EC proposal of three months.
On 22 July 2020, the Luxembourg Parliament approved the bill No. 7625 implementing the Council Directive (EU) 2020/876 and 2014/107/EU, and it is anticipated that the new law will be published in the coming days, giving greater certainty to all practitioners.
The law introduces a six-month deadline extension for reporting under DAC 6. Reporting in relation to “historic” arrangements (i.e., arrangements which occurred between 25 June 2018 and 30 June 2020) will have to be done by 28 February 2021. With respect to arrangements relating to subsequent periods, the 30-day reporting requirement will start from 1 January 2021. The deadline for quarterly reporting of marketable arrangements is 30 April 2021.
Of note, the law implements a three-month deadline extension for exchanges of information under the common reporting standard (“CRS”) for financial year 2019. As a result, reporting institutions will have to submit their CRS reports by 30 September 2020, instead of 30 June 2020. The Luxembourg tax authorities also benefit from this relief, as they now have until 31 December 2020 to communicate with the authorities of reportable information. Similarly, financial reporting institutions also have an additional three months to submit their FATCA reports under the Foreign Account and Tax Compliance Act (“FATCA”).
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