TAX ALERT RESTRICTION OF THE TERRITORIAL SCOPE OF THE RELIBI REGIME MARCH

Transcription

1 TAX ALERT RESTRICTION OF THE TERRITORIAL SCOPE OF THE RELIBI REGIME MARCH ã 2017

2 I. INTRODUCTION : THE RELIBI REGIME The RELIBI ( Retenue à la source libératoire ) law of 23 December 2005 introduced a withholding tax (of 20% as from 1 January 2017) in full discharge of personal income tax on certain interest paid by paying agents established in Luxembourg to Luxembourg resident individuals (the RELIBI Regime ), similar to the whithholding tax operated under the EU Savings Directive 2003/48/EC (the EUSD ). With the aim of increasing attractiveness of Luxembourg for high net worth individuals the RELIBI Regime was extended by the law of 17 July 2008 to interest paid by non-luxembourg resident paying agents established in either (i) an EU Member State 1, (ii) an EEA Member State 2 or (iii) a State or territory having entered into an international agreement relating directly to the EUSD. The Circular RELIBI no 1 issued by the Luxembourg direct tax authorities on 4 February 2009 enumerates all countries concerned by the RELIBI Regime. Luxembourg resident individual taxpayers may thus elect for the RELIBI Regime on interest perceived from non-resident paying agent (as above mentioned) by filing the form 931F/931D duly completed. For the purposes of the RELIBI Regime the term interest means any interest an capital gains on debt claims including interest accrued on zero coupon bonds, sale proceeds on such bonds before maturity or payment of the coupon. Any savings income not falling within the scope of the RELIBI Regime (like e.g. savings on assets allocated to a professional activity) is subject to tax at the progressive income tax rate. II. THE LAW OF 23 JULY 2016 : LIMITATION TO THE RELIBI REGIME Further to the repeal of the EUSD by EU Directive 2015/2060 of 10 November 2015, the RELIBI Regime has been slightly amended by the law of 23 July 2016 so that the optional RELIBI regime is no more available to territories having entered into an international agreement relating directly to the EUSD. Even though the main provisions of the international agreements relating directly to the EUSD should be continued through the world-wide automatic exchange of information based on the common reporting standard (the CRS ), paying agents established in States and territories having entered such international agreements were removed from the ambit of the RELIBI Regime 3. The excluded States and territories (the Excluded Jurisdictions ) encompass (i) Andorra;; (ii) Anguilla;; (iii) Aruba;; (iv) British Virgin Islands;; (v) Caribbean Netherlands (i.e. Bonaire, Sint Eustatius and Saba);; (vi) Cayman Islands;; (vii) Curaçao;; (viii) Guernsey;; (ix) Isle 1 Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Croatia, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Malta, Netherlands, Poland, Portugal, Slovakia, Romania, Slovenia, Spain, Sweden and United Kingdom. 2 In addition to the EU Member States, Iceland, Liechtenstein and Norway. 3 The Luxembourg Chamber of Commerce issued on 10 May 2016 its opinion on the bill of law n o 6978 giving rise to the law of 23 July 2016, where it advocates against the exclusion of these States and territories and suggests to include at least all States and territories which have effectively conferred to Luxembourg the qualification of Reporting Jurisdiction in the sense and for the purposes of the CRS. 2

3 of Man;; (x) Jersey;; (xi) Monaco;; (xii) Montserrat;; (xiii) San Marino;; (xiv) Sint Maarten;;(xv) Switzerland;; and (xvi) Turks and Caicos Islands. 4 Surprisingly enough, although the implications are quite significant, the geographic restriction to the RELIBI Regime seems to have gone largely unnoticed by practitioners and paying agents alike. III. HOW WILL THIS CHANGE IMPACT CLIENTS? As the limitation of the RELIBI Regime s scope is applicable as from 1 January , the first withholding tax declarations (form 931F/931D) that are impacted are those for the 2016 fiscal year, which must be filed by the beneficial owners at the latest on 31 March As a result, for interest paid by paying agent established in one of the Excluded Jurisdictions, the option for the RELIBI Regime is not available to the resident individual taxpayer who must include his or her interest income in the general taxable base 6. It should be highlighted that an omission to declare such interest income may not only qualify as a simple tax fraud (fraude fiscale), which is (only) subject to administrative sanctions, but could also constitute, under certain conditions, an aggravated tax fraud (fraude fiscale aggravée) or a tax swindling (escroquerie fiscale), which are both criminal offences 7 and money laundering predicate offences 8. In cases where paying agents are located in the Excluded Jurisdictions, structuring solutions remain available since insofar an economic operator established in Luxembourg or any other EU/EEA Member States may be appointed as paying agent to benefit from the RELIBI Regime. In this respect, it is worthwhile to note that an economic operator acting purely in a passive way (e.g. a bank acting only as a depository bank or only transferring the interest) is not considered as a paying agent and will simply be disregarded in the chain of payers for the purposes of the RELIBI Regime. It may therefore be required in some instances to set up an intermediary entity in Luxembourg between the paying agent and the beneficial owner, such as a private wealth management company (société de gestion de patrimoine familial). Alternative solutions have to be analysed on a case-by-case basis. 4 The Circular RELIBI n o 1 issued by the Luxembourg direct tax authorities on 27 February 2017 enumerates all countries currently concerned by the RELIBI Regime, i.e. the countries mentioned under footnotes n os 1 and 2. 5 The law of 23 July 2016 has a so-called economic retroactive effect since it entered into force on 1 January 2016 and therefore impacts interest payments made prior to its adoption. This type of retroactive effect should nonetheless not be unconstitutional nor in breach of the principle of nonretroactivity of fiscal laws. 6 Which is subject to the progressive income tax rate capped at in 2016 and 2017 at respectively 43.6% and 45.78% (including the solidarity surcharge) and may therefore be subject to a higher rate than the current 20% withholding tax rate applicable to the RELIBI Regime. 7 Punished by fines and imprisonment. 8 Taking into consideration that all professionals, including tax counsels and lawyers, are subject to the obligations set out by the law of 23 December 2016 transposing the revised Financial Action Task Force standards of 2012 and 2013 and Directive 2015/849/EC of 20 May 2015 relating to the prevention of the financial system against money laundering and terrorist financing must take into account since 1 January 2017 the two predicate tax offences within the framework of their professional obligations (e.g. KYC requirements or cooperation with Luxembourg tax authorities). 3

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