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Fiscal transparency

Introduction

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At the European Council in June 2000, the member states reach agreement that the European Union should work towards full implementation of the exchange of information between tax authorities. The 2008 economic and financial crisis hastens the move towards fiscal transparency. This dossier presents Luxembourg's efforts in order to bring its entire body of tax agreements in line with the international standard.

2000-2010

Progress in fiscal transparency at EU level can be traced back to the Santa Maria da Feira European Council (under the Portuguese Presidency), which took place on 19 and 20 June 2000. At this European Council, the member states reached agreement that the European Union should work towards full implementation of the exchange of information between tax authorities, and that this exchange of information should be automatic.

On this basis of this agreement, Council Directive 2003/48/EC of 3 June 2003, known as the 'Savings Directive', was adopted. Elle prévoit un échange automatique d'informations sur les revenus de l’épargne sous forme d’intérêts. Twelve of the then fifteen member states implemented this system for the automatic exchange of savings information, while Luxembourg, Austria and Belgium applied a transitional system involving a withholding tax.

The 2008 economic and financial crisis hastened the move towards fiscal transparency, and efforts were stepped up to combat tax evasion by giving it an international dimension. In March 2009, Luxembourg announced that it would align itself with the standard for the exchange of information on request as laid down in the OECD model agreement. The government then embarked on negotiations with around ten partner countries with the aim of concluding and amending agreements to avoid double taxation, which were approved by the Law of 31 March 2010. Since then, Luxembourg has brought its entire body of tax agreements in line with the international standard.

2011-2013

At European level, provisions for administrative cooperation on tax matters were laid down in a new directive, Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation, which provided for the exchange of information on request, automatic exchange and spontaneous exchange between member states' tax authorities from 1 January 2013.

Moreover, in May 2013, Luxembourg signed the joint 1988 Council of Europe and OECD Convention on Mutual Administrative Assistance in Tax Matters and its Protocol (ratified by the Law of 26 May 2014) to facilitate international administrative cooperation in the area of taxation. 

That same year, Luxembourg became involved in the work on the OECD Action Plan, commissioned by the G20, for the development of measures to curb base erosion and profit shifting (BEPS). The plan was adopted by the G20 leaders in September 2013.

2014

In late March 2014, Luxembourg and the United States signed the intergovernmental agreement known as 'FATCA' (Foreign Account Tax Compliance Act), which provides for the automatic exchange of information between the Luxembourg and US tax authorities. The agreement was transposed into national legislation by the Law of 24 July 2015. This transition to the automatic exchange of information between tax administrations provided crucial impetus at international level and paved the way for a worldwide initiative.

With the support of the G20, the OECD developed a single global standard known as the CRS (Common Reporting Standard), which provides for the automatic exchange of financial account information and is largely inspired by FATCA (the US tax law). The CRS was approved by the OECD Council on 15 July 2014 and endorsed by the Finance Ministers at the G20 Summit on 20 and 21 September 2014 in Cairns.

On 28 and 29 October 2014, Luxembourg signed a multilateral agreement in Berlin between competent authorities on the implementation of the new global standard and agreed to apply automatic information exchange from 2017 onward.

At the same time, the European Union adopted Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation, which introduced the automatic exchange of financial account information between Member States.

The Luxembourg Government, together with the other member states, is therefore firmly committed to the adoption of the OECD's rules on the automatic exchange of information as a new global standard; it transposed Directive 2014/107/EU into national legislation with the Law of 18 December 2015. Via these initiatives, Luxembourg, along with around fifty other OECD countries applying the exchange of information as laid down in the CRS, is an 'early adopter'.

With regard to the exchange of information on request, the Global Forum recognised all the measures introduced by the Luxembourg Government, especially the adoption in July 2014 of the Law on the immobilisation of bearer shares and units and the Law of 25 November 2014 laying down the procedure applicable to the exchange of information on request in tax matters, and raised the country's rating on transparency and exchange of information for tax purposes to 'largely compliant'.

Since 2015

The Luxembourg Presidency of the Council of the European Union in 2015 made fighting fraud and tax evasion one of the priorities of its work programme. Transparency and the establishment of a level playing field on a global scale are vital if these efforts are to prove effective.

During the Luxembourg Presidency of the Council of the European Union, a unanimous agreement was reached by the member states on 6 October 2015 to strengthen cooperation between them with respect to taxation and to discourage the abusive use of advance tax rulings. This led to the adoption of Council Directive (EU) 2015/2376 of 8 December 2015 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation, which was transposed into national legislation by the Law of 23 July 2016 concerning the automatic exchange of information with respect to tax rulings and advance pricing agreements.

On 27 January 2016, Luxembourg Finance Minister Pierre Gramegna signed the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports, a key additional step towards transparency in tax matters at global level. Country-by-country reporting is a real step forward in strengthening cooperation and information exchange, this time in the area of transfer pricing documentation for multinational enterprises. This reporting, via Action 13 of the OECD's BEPS project, was introduced by Council Directive (EU) 2016/881 of 25 May 2016 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation, transposed by the Law of 23 December 2016.

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