Various regulations aimed at combating tax evasion have emerged in recent years, both at European and international level.
The automatic exchange of information (Common Reporting Standard - CRS) falls into this category. As such, BGL BNP Paribas is now obliged to send financial information on some of its clients to the Luxembourg tax authorities.
What exactly does the law say?
The Common Reporting Standard (CRS) is an OECD initiative to combat tax evasion.
The mechanism is applied through multilateral agreements between the competent authorities of the participating countries. Within the European Union, the CRS has been introduced via the new directive on administrative cooperation (DAC 2), which makes the exchange of information obligatory in all European Union countries.
Any country can voluntarily participate in the AEOI (Automatic Exchange of Information). As of May 2017, some 100 countries have joined the CRS, including all European Union countries. Each country sets the date on which the CRS takes effect in its territory, as well as the date of the first exchange of information:
- in about 50 countries (European Union countries, Norway, South Korea, etc.), the CRS came into effect on 1 January 2016, with initial exchanges of information taking place in 2017.
- in about 50 other countries (Canada, Australia, China, Russia, Switzerland, Hong Kong, etc.), the CRS came into effect on 1 January 2017, with initial exchanges of information taking place in 2018.
The CRS covers all accounts held in the participating countries. This arrangement requires Financial Institutions to identify account holders in order to establish the jurisdictions in which they are resident for tax purposes. If they are resident for tax purposes in a CRS jurisdiction, they are declared to the tax authorities of the country where the account is held, which then sends these declarations to the tax authorities of the client's jurisdiction of residence.
This arrangement has been incorporated into Luxembourg law and has been in force since 1 January 2016.
Which BGL BNP Paribas clients are affected?
Clients resident for tax purposes in a jurisdiction for which Luxembourg authorises the automatic exchange of information:
- legal entities including the beneficial owners of certain companies (passive companies within the meaning of the CRS) and legal structures (trusts, foundations, etc.).
What information will be sent to the tax authorities?
On 30 June of the calendar year following the end of the relevant tax period, the Bank will declare the following information on the relevant clients to the Luxembourg tax authorities:
- the name, address, tax identification number(s) ("TIN"), date, place of birth (in the case of an individual);
- the account number (or its functional equivalent where there is no account number);
- the name and identification number of the Bank;
- the balance and value attributable to the account at the end of the calendar year in question (or, where relevant, the date of closure of the account);
- the amount of interest, dividends and proceeds from asset disposals accounted for in the account.
This reporting requirement applies to deposit accounts, financial instrument accounts, life insurance policies and investments in or receivables from a Financial Institution.
As such, financial data relating to the 2016 financial year will be sent by BGL BNP Paribas on 30 June 2017.