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FATCA’s implications for IGA
Key players and banking industries are racing to be ready for FATCA’s implementation. Taxand Luxembourg discusses what this means in terms of their intergovernmental agreement with USA.
While this agreement still needs to be ratified to receive full legal force, Luxembourg reporting financial institutions must register on the IRS portal by 22 December 2014 in order to appear on the list of Foreign Financial Institutions. Professional associations of the Luxembourg fund industry (ALFI) and of the Luxembourg banking industry (ABBL) have released clarifications for the content and implications of the IGA to help their members prepare for the final FATCA implementation steps.
Both documents share the same objective: to help the respective members of the fund and banking industries work their way through FATCA’s final implementation steps - classification of the entity and definition of the due diligence and reporting obligations.
The members of the ABBL raised particular concerns in regard to their characterisation as an investment entity. Addressing these concerns the ABBL took the view that the concept of customer when applied to the definition of investment entity shall be given a commercial meaning and so excluding entities acting solely for the benefit of their shareholders. The ABBL guidance notes further provide practical illustrations of the position taken applied to operational companies and to standard Luxembourg investment vehicles, such as SOPARFIs, SIFs, SICARs, etc.
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Also published in Thomson Reuters' Taxnet Pro, 24 July 2014
The ALFI Q&As and the ABBL guidance notes do not have any legal force attached to them. These documents have not been formally approved by the Luxembourg Authorities who are working on their own set of guidelines. Considering the current trends (European FATCA, OECD standards) the ALFI and the ABBL will undoubtedly be called upon again to clarify the implications of automatic exchange of information on their respective industries.