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Luxembourg Leads On FATCA Transparency
The Grand Duchy of Luxembourg is ranked third in the world for the number of financial institutions per-country that have now signed up to report under the Foreign Account Tax Compliance Act (FATCA).
IRS figures report 8,525 Luxembourg firms have registered with the FATCA portal, and the total is surpassed only by Britain with 24,000 and the Cayman Islands, which tops the list having 32,496 financial institutions now reporting customer information to the US Internal Revenue Service.
Aimed at detecting, deterring and discouraging offshore tax evasions by US citizens, the Foreign Account Tax Compliance Act (FATCA) is a US federal law which demands increased transparency and reporting on foreign accounts and offshore assets. The reporting requirements apply to foreign financial institutions with accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. Luxembourg signed an Intergovernmental Agreement (IGA) with the US government last year and a bill of law was introduced to the Luxembourg Parliament in March 2015. Subsequently, 31 August 2015 was the first FATCA reporting deadline.
Luxembourg being classed as third for registrations globally shows a willingness of local firms to be fully transparent in the exchange of information for tax purposes. More broadly, Luxembourg will become compliant with the OECD exchange of information with the common reporting standards, which can be seen as an extension of FATCA. This agreement is informally referred to as GATCA (the global version of FATCA).
The IRS figures show the implementation in Luxembourg of new standards for an automatic exchange of information when before, exchanges of information upon request was considered the norm. Luxembourg is therefore taking the steps to become a country of excellence in international finance for cross border movement and capital that is in full compliance with international standards.