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Us Luxembourg Intergovernmental Agreement

The development of intergovernmental agreements (IGAs) on the implementation of tax reporting and retention procedures and FATCA-related sources continues. The U.S. Treasury has issued standard agreements for the implementation of FATCA. These agreements will form the basis of negotiations between the United States and FATCA partner countries. They will continue to be updated as more IGAs are announced. In addition to the countries that have signed IGAs, the U.S. Treasury will treat an IGA as “in force” with a partner jurisdiction if the United States has reached an agreement on the merits. So far, most U.S. agreements are Model 1 IgAs. Under Model 1 IGA, information relating to their national authorities is transferred from the foreign financial institution to the IRS, while Model 2 IGA provides for the direct transmission of information from the foreign financial institution to the IRS and involves the adoption, in national law, of voluminous and complex final regulations. In May 2013, Luxembourg announced that a Model 1 would be selected for the adoption of an IGA. The U.S. Treasury has adopted two standard agreements for the implementation of FATCA.

These agreements serve as the basis for negotiations between the United States and the country implementing fatca. The fundamental difference between Model 1 and Model 2 is that FFI provides information to their national tax authorities on the basis of Model 1, which then transmits this information to the IRS, whereas, under Model 2, it must be communicated directly to the IRS. On 21 May 2013, Luxembourg opted for Model 1 in order to share the necessary information under FATCA. As part of the signing of the FATCA intergovernmental agreement with Model 1 between Luxembourg and the United States on 28 March 2014, the Luxembourg tax administration set up two working groups bringing together different public and private sector actors to carry out the automatic exchange of information under this agreement. The first working group focuses on general issues related to the implementation of the agreement, while the second deals primarily with technical issues related to the electronic transmission of information between reporting financial institutions and the tax administration (such as communication channels, format, etc.) – In accordance with the Taiwan Relations Act, the parties to the agreement are the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States. FATCA requires foreign financial institutions (FFIs) to report information to the IRS on the financial accounts of U.S. taxpayers or foreign companies in which U.S. taxpayers hold a significant stake.

FFI are invited to either register directly with the IRS to comply with FATCA rules (and, if applicable, FFI agreements), or to comply with FATCA agreements (IGA), which are considered effective in their legal systems. Information on fatca rules and administrative guidelines for FATCA and information on taxpayer obligations can be found on the INTERNAL Revenue Service`s FATCA page. The IGA Global Summary provides a general summary of all countries with substance agreements or agreements that are published directly with updates to the Fatca Resource Center of the U.S. Treasury Department. A press release from the Luxembourg government announced that the ratification procedures were completed in early September 2019, bringing the protocol into force. The new protocol replaces the current information exchange article with an article following the approach of the U.S. Model Income Tax Convention and the Organisation for Economic Co-operation and Development(OECD) income and capital tax model.

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