Will bank/client confidentiality continue to exist in Luxembourg?
Yes. Banking secrecy in Luxembourg exists to protect clients’ privacy and will continue to exist for this purpose. The government of Luxembourg places high priority on the protection of privacy.
Background to the debate surrounding banking secrecy
- In the view of the European Commission, it is unacceptable that – in today’s globalised world – banking secrecy in one member state should hinder the correct calculation of tax liability in another member state.
- As part of its strategy to combat tax evasion and tax fraud, at the beginning of February the Commission approved proposed guidelines governing the collaboration of authorities in relation to tax assessment. These guidelines contain a provision based on the OECD model convention according to which one member state may not refuse to provide another member state with information about an individual who is subject to taxation (should such information be requested) solely on the basis that this information comes under the terms of banking secrecy and client confidentiality.
- In light of this, states with strict banking secrecy regulations find themselves increasingly exposed to international criticism. The pressure on Luxembourg, Switzerland, Liechtenstein and Austria to disclose information about banking clients is ever increasing. There are massive efforts underway at many different political levels to implement standards on transparency and the exchange of information for tax purposes across the whole of the EU. Particularly as a result of the threat issued by the OECD prior to the summit which was held in April 2009, stating that countries which are “uncooperative” in tax matters could be placed on a blacklist and sanctions imposed on them accordingly, many jurisdictions around the world have announced their readiness to implement the OECD standards on transparency and the exchange of information for tax purposes.
- As one of the founding members of the European Union, Luxembourg has been and continues to be committed to complying with the legislation of the EU while maintaining its national identity, thus creating a legally stable, EU-compliant framework for its clients and for the benefit of the location as a whole. For this reason, Luxembourg has announced its political will to implement these OECD standards.
What will change?
- In future, all countries with strict regulations regarding banking secrecy are to apply the OECD standards when working together with foreign tax authorities.
- There is to be no general, automated querying of bank data by the financial authorities.
- Supplementary to the existing agreements which were restricted to tax fraud, in future administrative assistance is to be granted in relation to any kind of tax offence in individual cases where justifiable reasons are provided.
At present it is assumed that the following prerequisites must be fulfilled in order that administrative assistance may be provided in relation to tax matters:
- there is real and justifiable suspicion and proof of the existence of an account in Luxembourg (account statement, credit card invoice etc.) and the name of the bank is specified and
- criminal proceedings for tax offences must have been initiated and
- there must be a realistic chance that the exchange of information will aid in the investigations relating to these criminal proceedings for tax offences and
- the amounts involved must be “substantial” (this has yet to be defined in detail).
When do the new rules come into force?
The details and procedures are still at the negotiation stage, and these will then be laid down in the respective double taxation agreements which also provide assistance in relation to tax matters. Only then will the national parliaments be able to approve them. At present, the parties are assuming that the process will be concluded at the end of 2009 at the earliest.
The government of Luxembourg has stated its intention to re-negotiate the EU guidelines on the taxation of savings income on the basis of the changes to the framework conditions, with the aim of achieving uniform, flat-rate tax rates for the taxation of interest income for all EU member states and other financial centres.
What happens next?
The political framework has been defined, so now the details need to be negotiated and laid down. | 
