Common Reporting Standard and DAC 6

Common Reporting Standard and Automatic Exchange of Information

The Common Reporting Standard and due diligence in the Automatic Exchange of financial account Information (AEOI) was drawn up by the OECD, incorporated in Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards the mandatory automatic exchange of information in the field of taxation and transposed by the law of 18 December 2015 on the Common Reporting Standard (CRS), published in the Luxembourg Mémorial A – No 244 of 24 December 2015.

The AEOI requires financial institutions to identify account holders to establish in which jurisdiction(s) they are tax resident. If they are tax resident in any foreign AEOI jurisdiction, they will be reported to the tax authority of the country where the account is maintained that will transmit this reporting to the tax authority of the account holder’s residence country.

By 30 June each year, Luxembourg financial institutions are required to report to the Luxembourg tax authorities (Administration des Contributions Directes) personal and financial information for the previous year relating to the accounts of the persons concerned.

Before 30 September each year, the Luxembourg tax authorities will transfer this information to the tax authorities of the customer’s country of residence and to those of the countries in which indicia have been detected without being invalidated by a self-certification (provided the countries identified are countries participating in the exchange).

Today, more than 100 jurisdictions have joined the AEOI, including all European Union countries.

DAC 6

Disclosure of information in relation to “reportable cross-border arrangements”

The European Council Directive 2018/822 of 25 May 2018 amending Directive 2011/16/EU (also known as “DAC 6”) as regards mandatory automatic exchange of information in the field of taxation entered into force on 25 June 2018. It represents the sixth amendment to the EU Directive on Administrative Co-operation. In Luxembourg, the Directive has been transposed into Luxembourg law on 25 March 2020 (the “DAC 6 Law”).

DAC 6 requires EU-based intermediaries (and in some cases taxpayers in the absence of intermediaries subject to a disclosure obligation) to report certain information about reportable “cross-border arrangements” to EU tax authorities that will then be exchanged between tax authorities of EU Member States automatically on a quarterly basis.

The stated purpose of DAC 6 is to enhance transparency, reduce uncertainty over beneficial ownership and dissuade intermediaries from designing, marketing and implementing harmful tax structures.