New Bill Implementing DAC6

On 8 August 2019, the Luxembourg Government tabled a new Bill of Law N° 7465 (the "Bill") before the Luxembourg Parliament (Chambre des députés) implementing the so-called "DAC6" (EU Directive 2018/822 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements) into Luxembourg domestic law.

DAC6 requires EU "intermediaries" (or taxpayers) to report cross-border arrangements that strongly present a risk of tax avoidance or abuse.

Please find below a summary of the main provisions of the Bill which generally adopts the wording of DAC6.

WHAT must be reported? The following arrangement are considered as Reportable Arrangements: "Cross-Border Arrangements" (i.e. arrangements involving either more than one EU member state or an EU member state and a third country); Arrangements that meet at least one of the "hallmarks" listed in the Bill. Hallmarks reflect characteristics of an arrangement identified as potentially indicative of aggressive tax planning. Some of them are subject to a gateway criterion, known as the "Main Benefit Test". The Bill reproduces the hallmarks listed in DAC6 without any add-ons or amendments. However, at the time DAC6 was released, those hallmarks already raised many concerns as they are wide in scope and thus leave plenty of room for debate. WHO has to report? Intermediaries (e.g. tax consultants or service providers such as banks, auditors, PSF, accountants) who design or provide, directly or indirectly, assistance with respect to Reportable Arrangements ("Intermediaries") or; the taxpayer(s) if there are no Intermediaries who are obliged to report (e.g. in the case the Intermediary asserts professional secrecy or in the case the taxpayer designs and implements a scheme in-house). The definition is wide for, not only does it cover Intermediaries who provide tax advice but it also covers Intermediaries that know, or who are reasonably expected to know that, they are providing assistance with respect to a Reportable Arrangement.

Some Intermediaries are however exempted from the reporting obligations: - The Bill exempts lawyers that are subject to professional secrecy, as set out in Article 35 of the Law of 10 August 1991 on the profession of lawyer 1 (the "Lawyers"), from reporting obligations when such reporting would be in breach of the attorney-client privilege. However, when they are acting outside the boundaries of...