On December 12 2011 the Lower Administrative Court rendered the first decision regarding a request for exchange of information under the Law of March 31 2010, which introduced certain Organisation of Economic Cooperation and Development (OECD) standards into Luxembourg tax law.
The decision followed a request from the French tax authorities on the basis of the Luxembourg-France double tax treaty. The treaty was amended in 2009 to include Article 26.5 of the OECD Model Tax Convention, whereby a state may not decline to supply information solely because the information:
- is held by a bank, another financial institution, a nominee or a person acting in an agency or fiduciary capacity; or
- relates to a person's ownership interests.
The provisions that amended the treaty entered into force on January 1 2010 and apply to income related to the civil year or an accounting period beginning as of this date.
A Luxembourg company was asked to provide certain information in relation to 2009, 2010 and 2011. The company declined to provide the information and instead brought a request in voidance before the Lower Administrative Court, as foreseen by the law. The question arose as to the extent to which the new procedure under the law should be applied, since the requested information related, at least partly, to the year before the law entered into force. The law provides for a specific procedure in exchange of information matters, since under the ordinary administrative procedure a prior complaint to the head of the Luxembourg tax authorities is a precondition of a court action. The court decided that the procedure in question did not apply in this case - even in respect of information requested for 2011 - because of the "uniqueness" of the request. Since the period that the requested information covered began in 2009, which was before the law entered into force, the court decided that a request in voidance under the law was inadmissible. Instead, the ordinary administrative procedure should be followed and a prior complaint should be addressed to the head of the Luxembourg tax authorities.
Although its impact is limited to the applicable procedure, the decision is debatable. The main change introduced by the law was intended to require banks or other persons covered by Luxembourg's professional secrecy rules to exchange the type of information being requested. However, in this case the request was made to an ordinary company, which was not covered by the professional secrecy rules and was thus obliged to exchange information dating from before the law's entry into force.
An appeal has been lodged with the Administrative Court of Appeal.
For further information on this topic please contact Thierry Lesage or Alain Goebel at Arendt & Medernach by telephone (+352 40 787 81), fax (+352 40 780 4) or email ([email protected] or [email protected]).