Up to date CRS FAQ By The Luxembourg Tax Administration – Corporate and Firm Legislation

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REPORTING DEADLINE FOR RAIFS OR AIFS THAT CANNOT BENEFIT FROM
THE EXEMPT CIV STATUS: 30 JUNE 2022

The common reporting standard
(“CRS”), which has been implemented in
Luxembourg by the law of 18 December 2015, has introduced an
automatic exchange of information relating to financial accounts in
tax matters with the Member States of the European Union and the
other partner jurisdictions of Luxembourg.

On 4 April 2022, the Luxembourg tax authorities
(“ACD”) released an update of their
frequently asked questions (“FAQ”) on
the CRS. The two added questions (2.3 and 2.4) provide a list of
Investment Entities for CRS purposes and clarify that unregulated
entities cannot benefit from the exempt Collective Investment
Vehicle (“CIV”) status.

The main point of attention is that alternative investment funds
(“AIFs”) or reserved alternative
investment funds (“RAIFs”) that
previously qualified as Non-Reporting Financial Institutions
(“FIs”) based on the exempt CIV status
under CRS are now being treated as Reporting FIs and must therefore
file a (nil) report on 30 June 2022 for the year 2021 as well as a
retroactive (nil) report for the year 2020 to avoid any
penalties.

Finally, one should recall that any entity resident in
Luxembourg or any branch located in Luxembourg should determine its
FATCA or CRS status on a case-by-case basis and support its
classification by a proper analysis of its legal and factual
situation.

I. List of Investment Entities

Question 2.3 of the FAQ provides a non-exhaustive list of
Luxembourg entities which fall in principle within the scope of the
definition of an Investment Entity, which may be considered as
Reporting Financial Institutions for CRS purposes, as follows:

  • any undertaking for collective investment subject to Part I or
    II of the amended law of 17 December 2010 relating to undertakings
    for collective investment;
  • any specialized investment fund subject to the amended law of
    13 February 2007 relating to specialized investment funds;
  • any venture capital company governed by the amended law of 15
    June 2004 relating to venture capital companies (SICAR);
  • any securitisation undertaking subject to the authorisation and
    supervision of the CSSF in accordance with the amended law of 22
    March 2004 relating to securitisation;
  • any RAIF falling within the scope of the amended law of 23 July
    2016 relating to reserved alternative investment funds;
  • any AIF whose management falls within the scope of the amended
    law of 12 July 2013 relating to alternative investment fund
    managers;
  • any pension fund governed by the amended law of 13 July 2005
    relating to institutions for occupational retirement provision in
    the form of SEPCAV and ASSEP;
  • any pension fund governed by the amended Grand-Ducal Regulation
    of 31 August 2000 implementing Article 26, paragraph 3, of the
    amended law of 6 December 1991 on the insurance sector and relating
    to pension funds subject to the prudential supervision of the
    Commissariat aux assurances;
  • any management company subject to part IV of the amended law of
    17 December 2010 relating to undertakings for collective
    investment;
  • any manager of alternative investment funds governed by the
    amended law of 12 July 2013 relating to managers of alternative
    investment funds; and
  • any investment firm governed by the amended law of 5 April 1993
    relating to the financial sector which carries out any of the
    following activities: (i) execution of orders on behalf of clients,
    (ii) portfolio management.

Following the release of this list, a review of the
entity’s classification should be undertaken to ensure
compliance with CRS reporting obligations.

II. RAIFs or AIFs cannot benefit from the Exempt CIV status
(i.e. the Non-Reporting FI status) under CRS

Luxembourg entities which qualify as Reporting Financial
Institutions for CRS purposes are required to file every year a nil
report with the ACD in the absence of CRS reportable accounts (so
called “ZeroReporting”). Non-Reporting Financial
Institutions, such as the entities opting for the exempt CIV
status, are exempt from this nil reporting obligation.

In Question 2.4 of the FAQ, the ACD indicates that unregulated
entities cannot benefit from the exempt Collective Investment
Vehicle (CIV) status, which can only be chosen by entities which
are themselves subject to the supervision of the CSSF, and only if
the other conditions for access to this status are met.

Therefore, unregulated entities, such as AIFs or RAIFs, cannot
opt for the exempt CIV status, considering that only their manager
(AIFM) is directly supervised by the CSSF, and they may be
considered as Reporting FIs for CRS purposes. As a result, these
unregulated entities are now required to submit every year a nil
report to the ACD in the absence of CRS reportable accounts.

Considering that CRS reporting for the 2021 fiscal year should
be done by 30 June 2022, RAIFs and AIFs which used to qualify as
Non-Reporting FIs should immediately perform a review of their
status under CRS to determine their potential new reporting
obligations.

While RAIFs and AIFs that used to qualify as Non-Reporting FIs
under the exempt CIV status should, in principle, have no CRS
reportable accounts, a nil report should be filed by
30 June 2020 with respect to fiscal year 2021 and fiscal year 2020
to avoid any penalties.

How can we help?

The Tax Law partners and your usual contacts at Arendt are at
your disposal to further assist you on the impact assessment of
these new obligations. Our dedicated FATCA/CRS reporting team at
Arendt Regulatory & Consulting is also available to help you in
the preparation of your forthcoming CRS reporting obligations and
the definition of your FATCA/CRS policies, procedures and
supporting IT solutions.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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