Law implementing EU mandatory tax disclosure rules for intermediaries (DAC6)

The Law introduces new reporting obligations applicable to EU intermediaries (including banks, accounting firms, tax advisors, corporate service providers and certain other persons) involved in cross-border and potentially aggressive tax arrangements subject to certain characteristics or features (called “hallmarks”) that are listed by DAC6. DAC6 imposes the obligation on all intermediaries involved in the design, marketing or the implementation of arrangements that include one of the hallmarks to file a report on the relevant transaction with their local tax authorities. In the absence of intermediaries required to make a filing (eg where the intermediaries are non-EU intermediaries or benefit from legal professional privilege), the taxpayer has, to itself, disclose the arrangement to the Luxembourg income tax authorities.

As mentioned in our e-alert dated 9 August 2019, the legal professional privilege applies to Luxembourg lawyers. In order to avoid discrimination as required by the Council of State, the professional privilege will also be recognised in favour of Luxembourg chartered accountants as well as Luxembourg auditors. Consequently, intermediaries which are bound by professional privilege must inform other EU intermediaries, and, if there is no other EU intermediaries not bound by legal professional privilege, the taxpayer, regarding their disclosure obligations to be fulfilled.

The Law strictly follows the wording of DAC6 and no specific guidance has been issued at this stage. Please refer to our previous global e-alert DAC6 – Mandatory disclosure tax reporting what does it mean for you? For further information on these new requirements, including the list of information required as well as the hallmarks as defined by DAC6.

It is worth noting that unlike several other EU Member States, the Luxembourg reporting obligation is not applicable in the case of domestic transactions.

The Law applies from 1 July 2020. However, information regarding reportable cross-border arrangements where the first step was implemented between DAC6’s date of entry into force (ie 25 June 2018) and DAC6’s application date in Luxembourg (ie 1 July 2020) must be reported by 31 August 2020 at the latest.

Finally, please note that under the Law, non-compliance may result in penalties imposed by Luxembourg tax authorities up to EUR 250,000.