Luxembourg: constructive non-compliance

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Direct taxation: The European Commission refers Luxembourg to the European Court of Justice over its incorrect application of the Savings Tax Directive : Ethics and governance in the European Financial centers.

The European Commission has decided to refer Luxembourg to the European Court of Justice over its incorrect application of certain provisions of the Savings Tax Directive as regards interest payments made to beneficial owners who benefit from so-called "non-domiciled resident" status in their country of residence.

Luxembourg refuses to apply the Directive to beneficial owners who benefit from the so-called "non-domiciled resident" status in their country of residence. Consequently, Luxembourg paying agents do not levy withholding tax on interest payments to such beneficial owners.

This will be the next problem in secrecy jurisdictions: constructive non-compliance.