On 8 August 2019, draft law 7465 transposing the EU directive 2018/822 on cross-border reportable arrangements (referred to as DAC 6) in Luxembourg was submitted before the Luxembourg Parliament. Under the terms of DAC 6 the draft law should have been passed by 31 December 2019. However, due to a number of debates around its implementation, including the treatment of the professional privilege exemption, the draft law has not been passed yet. On 14 February 2020, a revised version of the draft was published substantially amending the original provisions on the professional privilege exemption.
Under DAC 6, each Member State may take the necessary measures to give intermediaries the right to a waiver from filing information on a reportable cross-border arrangement where the reporting obligation would breach the legal professional privilege under the national law of that Member State. This waiver is also frequently referred to, particularly in the context of civil legal systems, as the professional secrecy waiver.
Luxembourg had initially intended to apply the professional privilege exemption only to lawyers acting in their capacity as lawyers. As a result of a number of representations made, this has now been extended to chartered accountants and auditors, once again only in so far as they act in that capacity.
In the original draft, the legal professional waiver was accompanied by a number of additional obligations, including an obligation to provide the Luxembourg tax administration with certain information on the reportable arrangements on a no names basis. The revised draft has seemingly taken account of a number of objections raised by the Luxembourg Bar to such an obligation, which no longer appears in the revised draft. Those benefitting from the waiver will now only be required to advise other intermediaries of their potential reporting obligations or, in the absence of any other intermediary, the taxpayer itself. While there are still some issues that need to be ironed out, this represents a much more satisfactory way of dealing with the legal professional privilege issue, at least in so far as concerns the beneficiaries of the newly formulated waiver.
The final law, which in general follows closely the wording of DAC 6, is proposed to be put to the Luxembourg parliament for approval in the course of March. This will leave a short period before it takes effect as of 1 July 2020 including in relation to the reporting of cross-border reportable arrangements whose first step of implementation occurred between 25 June 2018 and 1 July 2020.
The text of the original draft law 7465 may be found here.
The text of the proposed amendments may be found here.