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Avv. Flavia Betti Tonini, PhD, Of Counsel Flavia Betti Tonini is an experienced attorney with a solid background in corporate law, compliance, criminal law, and...

Posted on 13th January 2023 by lcmm@melchionnalaw.com

About us

Mission and Values

Mission Melchionna PLLC is an indipendent law firm. Melchionna PLLC’s mission is to provide outstanding legal services and tax advice. We focus on building a relationship with...

Posted on 5th November 2019 by lcmm@melchionnalaw.com

About us

Melchionna PLLC, a law firm with a focus on business, corporate, tax, and IP law.

About us Melchionna PLLC represents and assists North American and European business clients in achieving their goals with sound legal advice and innovative solutions to current...

Posted on 18th February 2019 by lcmm@melchionnalaw.com

Finance and banking

Bank Secrecy: US, Luxemburg, and Switzerland’s Governments have agreed to limit bank secrecy rule. The Additional Tax Protocol and Article 28 of the US-Luxembourg Tax Treaty

2019 Tax Protocol with Luxembourg On September 20, 2019, the US Treasury Department announced the ratification of a new tax protocol (“Additional Protocol”) between the United...

Posted on 24th October 2019 by lcmm@melchionnalaw.com

International trade

October 18, 2019, Update on “The United States is set to impose new tariffs on goods imported from certain countries of the European Union: the WTO DS316 Decision.” Cheese imported from Italy

October 18, 2019, Update on “The United States is set to impose new tariffs on goods imported from certain countries of the European Union: the WTO DS316 Decision.” Cheese...

Posted on 19th October 2019 by lcmm@melchionnalaw.com

International tax

A new Digital Service Tax in France soon to be followed by other countries: digital presence and tax sovereignties

The increasingly globalized economy and income produced from digital media, combined with a renewed push for nationalism and protectionism, raises the issue of whether...

Posted on 15th October 2019 by lcmm@melchionnalaw.com

Food law

October 10, 2019, Update on “The United States is set to impose new tariffs on goods imported from certain countries of the European Union: the WTO DS316 Decision.” Wines and Fortified (or Liqueur) wine

Based on the most recent US tariffs affecting European goods, Italian wines will not be subject to the new 25% tariff. However, Liqueurs and Cordials will be. This area is highly...

Posted on 10th October 2019 by lcmm@melchionnalaw.com

Business law

The United States is set to impose new tariffs on goods imported from certain countries of the European Union: the WTO DS316 Decision

On 2 October, the Word Trade Organization (WTO) issued a decision (DS316 European Communities and certain Member States) authorizing the US to impose retaliatory tariffs on $7.5...

Posted on 6th October 2019 by lcmm@melchionnalaw.com

Business law

Protect your money. Use two-step verification for wire transfers

Wiring money internationally to clients, suppliers, and/or consultants may be a risky task for some businesses. The Financial Crimes Enforcement Network (“FinCEN”) reported...

Posted on 6th August 2019 by lcmm@melchionnalaw.com

Food law

Update: Tennessee Wine and Spirits Retailers Association v. Thomas

This post follows up on an earlier post written about the same case. Tennessee law imposes a residency requirement on individuals (and companies) wishing to operate retail liquor...

Posted on 11th July 2019 by lcmm@melchionnalaw.com

Trademark law

Trademark registration for foreign applicants is set to change on August 3rd

On July 2nd, the United States Patent and Trademark Office (“USPTO”) announced a new rule requiring “all foreign-domiciled trademarked applicants, registrants, and parties to...

Posted on 9th July 2019 by lcmm@melchionnalaw.com

Business law

The FTC takes aim at social media advertising

Social media advertising through “Influencers” is about to change. These personalities can bring in anywhere from $10,000 to $100,000 for each sponsored product recommendation or...

Posted on 28th June 2019 by lcmm@melchionnalaw.com

Food law

Food Waste: FDA is proposing a new “Best if Used By” label but the food industry is not yet taking advantage of the opportunity

Roughly 1/3 of all food produced globally is wasted (1.3 billion tons). Every year Industrialized countries waste $680 billion worth of food, and Americans alone $161 billion....

Posted on 24th May 2019 by lcmm@melchionnalaw.com

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Finance and banking

Bank Secrecy: US, Luxemburg, and Switzerland’s Governments have agreed to limit bank secrecy rule. The Additional Tax Protocol and Article 28 of the US-Luxembourg Tax Treaty


lcmm@melchionnalaw.com
Bank Secrecy: US, Luxemburg, and...
Posted on 24th October 2019 by lcmm@melchionnalaw.com

2019 Tax Protocol with Luxembourg

On September 20, 2019, the US Treasury Department announced the ratification of a new tax protocol (“Additional Protocol”) between the United States and the Grand Duchy of Luxembourg. The new agreement will replace Article 28 of the 2009 tax treaty, which currently regulates the exchange of information between the two countries’ tax administrations.

These revisions are part of a series of changes that is slowly redefining bank secrecy in Luxembourg.

Under the new version of Article 28, information exchanged must be “foreseeably relevant.” The standard of “foreseeable relevance” is intended to provide for the exchange of information (for tax purposes) to the widest possible extent and, at the same time, to clarify that contracting states are not at liberty to request information that is unlikely to be relevant to the tax affairs of a given taxpayer (source: Commentary of Article 26 of the OECD Tax Convention approved by OECD Council, available at this link:  https://www.oecd.org/ctp/exchange-of-tax-information/120718_Article%2026ENG_no%20cover%20.pdf). It includes information that would otherwise be protected by domestic bank secrecy laws and covers persons of any nationality if the individual maintains a financial connection to the applicable jurisdiction (e.g., a bank account).

In practice, the new tax rules mean that the US is entitled to receive all bank account, income, and asset information held by a bank in Luxembourg in order to determine whether the signatory of the account holds unreported income. Reciprocity applies, so Luxembourg will enjoy the same rights.

The same rules will apply to business tax and ownership information. The US will now be entitled to exchange “foreseeably relevant” financial information on any owner of a multinational enterprise or one of its foreign subsidiaries.

Tax Arbitration Agreement with Switzerland

The US also improved tax transparency with Switzerland earlier this year by signing the 2019 Amending Tax Protocol. The Amending Tax Protocol introduces the same mechanisms described in the 2019 Tax Protocol with Luxembourg and includes a “Mutual Agreement Procedure” in Article 26, which is intended to help the two countries resolve tax disputes.

Under the Mutual Agreement Procedure (MAP), if the tax authorities in the two countries are not able to resolve a tax dispute, the taxpayer is authorized to submit the dispute to an arbitration panel. The panel’s decision would then only be binding if the petitioner accepts the result.

The Amending Tax Protocol also modifies certain tax exemption rules. Under the new version of Article 10 of the agreement, “dividends, pensions or other retirement arrangements” may not be taxed in one of the contracting countries if they are owned by a resident of the other contracting state. Additionally, the exemption requires that the Swiss and US authorities agree that the assets in question generally corresponds to a pension, retirement arrangement, or individual retirement account.

Tax heavens in general

“Tax havens” are jurisdictions that impose little or no taxation on foreign individuals and businesses, maintain pervasive bank secrecy laws, or offer little collaboration when it comes to the exchange of tax information. Countries traditionally considered to be tax havens include Andorra, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands, The Island of Jersey, Hong Kong, The Isle of Man, Mauritius, Lichtenstein, Monaco, Panama, St. Kitts, and Nevis, only to name a few. In recent years, many countries have tried to gather financial information from tax heavens by putting political and economic pressure on the most successful of them (e.g. Luxembourg and Switzerland) in order to improve financial transparency.  International organizations, like the OECD and the IMF, have also suggested legislative and executive measures to limit the effects of bank secrecy.

After 9/11, US authorities grew increasingly concerned about foreign investments in the US as well as US taxpayer offshore financial reach. Following various important pieces of legislation enacted since 2001, in March 2010, the US Government adopted the Foreign Tax Compliance Act (FATCA), which allows the automatic exchange of information between foreign financial entities and the US Government.

Between 2013 and 2015, the OECD developed its own program to facilitate the exchange of information between member states. On July 15th, 2014, the OECD Council approved the Common Reporting Standard (CRS), which instructs member states to obtain information from their financial institutions and exchange that information with other jurisdictions. The CRS also sets out requirements for the type of financial information to be exchanged, the financial institutions that must comply, which accounts and taxpayers covered, and the common due diligence procedures to be followed by financial institutions (source: https://www.oecd.org/tax/automatic-exchange/common-reporting-standard/).

Luxembourg was the first jurisdiction to commit to the OECD’s global standards and one of 113 jurisdictions that have signed on to the US FATCA program.  

Switzerland also made several improvements to its bank secrecy regulations after the 2009 financial crisis. Since then, the country has signed the US FATCA agreement as well as the OECD’s CRS agreement.

Despite their recent regulatory modifications to improve transparency on tax and bank secrecy, Luxemburg and Switzerland remain important financial players in the international market. In 2018 alone, managed funds in Luxembourg reached over EUR 4,000 billion (source: Association of the Luxembourg Fund Industry, https://www.alfi.lu/, data available at this link https://www.alfi.lu/Alfi/media/Statistics/Luxembourg/ouverture_section_statistique_chiffres_du_mois.pdf). Meanwhile, in 2018, Swiss banks held $6.5 trillion in assets, according to the Swiss Bankers Association, of which 48 percent originated from abroad (source: Swiss Bankers Association https://www.swissbanking.org/en/topics/tax/the-automatic-exchange-of-information ).

The information provided here does not, and is not intended to, constitute legal advice but simply information for general purposes only and may not be the most up to date. Use of our website or any of its links or resources do not create an attorney-client relationship between the reader, user, or browser and the law firm. The views expressed at, or through, this site are those of the individual authors writing in their individual capacities only.

lcmm@melchionnalaw.com
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