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Luxembourg: What happened in 2018 and significant events in 2019

Luxembourg Law: Year in Review 2018 and Year to Come 2019 summarises a selection of the major developments last year, and major developments expected over the coming year, with links to further reading, where available.

A broad range of legislative updates were made in 2018 focused around, banking and financial markets, investment funds, tax, employment, corporate and commercial law within Luxembourg, along with updates in a number of key sectors.

Explore our overview of key areas you need to be aware of below.

Key updates to

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major legal developments in 2018 and 2019

“It is the time of the year to look back and to look ahead, the subject having crystallised many concerns is Brexit as we all spent a year anticipating what Brexit could look like. But, this is not the only one.

While regulatory matters are taking the largest part of 2018 with notably the application of GDPR, the reshape of AML and the implementation of MiFID II & MiFIR, 2019 is expected to largely consolidate and reinforce the exercise of 2018, with noticeably (i) substance being more central than ever, (ii) the next phase of data protection with ePrivacy issues and (iii) the final implementation of the reshaped AML legislation. Challenging surely, Exciting definitely!”

Melinda Perera, Partner

MelindaPerera

Significant events in 2019

Substance

A wide and overlapping range of considerations relating to regulation, governance and taxation have brought the concept of substance in a jurisdiction to the fore, a development of particular importance to Luxembourg as a centre for international business, finance and above all funds and investment.

AML/CFT

The European and Luxembourg landscape on anti-money laundering issues has been significantly reshaped in 2018, with final implementation expected to occur in 2019 with the creation of the Luxembourg registers of beneficial owners and of trusts respectively.

Data Protection

With the entry into force of the General Data Protection Regulation and the subsequent amendments to the Luxembourg regime in 2018, data protection has become a topic relevant for all entities, including banks, investment funds, corporates and management companies. More is expected to happen on this front with a new European proposal aiming to regulate ePrivacy issues.

Significant legal and regulatory events in 2019

Explore the tabs below to review the key developments you need to be aware of in 2019

General Interest

AML/CFT: Directive (EU) 2015/849 was partially implemented in Luxembourg pursuant to the adoption of the laws of (i) 13 February 2018 broadening the definition of beneficial owners and widening the obligations bearing on professionals through a new risk assessment obligation for in-scope professionals and refined customer due diligence and (ii) 10 August 2018 setting out the obligations applicable to trustees regarding the identification of beneficial owners of trusts. Implementation will be completed by the adoption of draft laws 7217 and 7216A aiming to create a register of beneficial owners and a register of trusts respectively and include various provisions to implement the new Directive (EU) 2018/843. Read more...

Brexit: The UK is set to leave the EU on 29 March 2019. If the Withdrawal Agreement with the EU is ratified there will be a transition period until at least the end of 2020, during which the UK will for most purposes be treated as a member of the EU. Read more here, here and here...

Banking

Dormant accounts and inactive insurance contracts: Following the Belgium and French examples, Luxembourg contemplates to introduce a new law in relation to dormant accounts (including insurance contracts). Draft law 7348 includes (i) a preventive component that defines a series of measures to prevent account inactivity as well as the withdrawal of inactive insurance contracts respectively to restore contact through information and research procedures, (ii) a consignment component that defines the obligation to consign assets after inactivity, and (iii) a restitution component that includes provisions for the return of consigned assets.

EU insolvency harmonisation directive: The EU is expected to agree its position on the proposed EU Directive on business insolvency reform (the EU insolvency law harmonisation project). Read more here and here.

Protection of enterprises and modernisation of bankruptcy law: Draft law 6539 aims to reform the current legal framework by (i) providing conservatory measures and legal instruments to prevent financially distressed companies from being declared bankrupt should their financial problems be detected at an early stage and (ii) favouring turnaround options rather than liquidation of distressed companies.

Review of the European Supervisory Authorities (“ESAs”): In 2017, the EU Commission published a package of four legislative proposals to review and enhance the powers of the ESAs. These proposals have been recently updated to give the EBA a more explicit and comprehensive mandate to ensure that risks of money laundering and terrorist financing in the EU financial system are effectively and consistently incorporated.

Securitisation/STS: The regulation (EU) 2017/2402 which consolidates existing risk retention, disclosure and due diligence requirements and establishes a new regime for simple, transparent and standardised (’STS’) securitisations will apply from 1 January 2019. Draft law 7349 will amend the Luxembourg securitisation framework to reflect these changes.

Sustainable finance: Expected adoption of three proposals for (i) a Regulation amending the EU Benchmark Regulation, (ii) a proposed “ESG Taxonomy Regulation” which will establish a framework for the development of uniform criteria to identify whether a particular economic activity can be considered “environmentally sustainable”, and (iii) a proposed “ESG Disclosure Regulation” which will require financial market participants and investment advisers to make a range of disclosures relating to “sustainability risks” and ”sustainable investments”. Read more…

Capital Markets

Circulation of securities: Draft law 7363 has been introduced to modernise the legal framework under the law of 1 August 2001 on circulation of securities by taking into consideration new technologies. If adopted, securities may be booked and transferred using secured online record-keeping mechanism notably the distributed public ledger technology such as blockchain.

EMIR: Changes to EMIR under the REFIT proposal are expected to come into force early in 2019 and amendments to CCP supervision are anticipated later in the year. Read more...

Prospectus for securities: Draft law 7328 aims to implement Regulation (EU) 2017/1129 on prospectus to be published when securities are offered to the public or admitted to trading on a regulated market and repealing Directive 2003/71/EC and is repealing the law of 10 July 2005 on prospectuses for securities. It is divided into 4 main parts: (i) public offer and admission to trading of non-Euro denominated securities, (ii) prospectuses requirements and designation of the CSSF as competent authority, (iii) out of scope securities (‘light’ prospectus), and (iv) admission to trading on a non-regulated market (such as the Euro MTF operated by the Luxembourg Stock Exchange).

Prospectus Regulation: The remaining parts of the EU Prospectus Regulation are due to be implemented in July 2019. Key areas of change will be the exemptions from the requirement to produce a prospectus, the treatment of risk factors and the regime for secondary issuances. Read more...

 

Commercial/Real Estate

Dormant accounts and inactive insurance contracts: Following the Belgium and French examples, Luxembourg contemplates to introduce a new law in relation to dormant accounts (including insurance contracts). Draft law 7348 includes (i) a preventive component that defines a series of measures to prevent account inactivity as well as the withdrawal of inactive insurance contracts respectively to restore contact through information and research procedures, (ii) a consignment component that defines the obligation to consign assets after inactivity, and (iii) a restitution component that includes provisions for the return of consigned assets.

Procedural law: Draft law 7307 will introduce several changes to the procedures before the Luxembourg courts.

Space law: If adopted, draft law 7317 will put into place a new authorisation scheme for space activity carried out from the Luxembourg territory or by Luxembourg nationals/legal entities. This law would not apply to missions of exploration and use of space governed by the existing law of 20 July 2017 on the exploration and use of space resources.

Trade secrets: Draft law 7353 aims to transpose Directive (EU) 2016/94 which protects undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.

Corporate

Company law package: The EU Commission has introduced two proposals amending Directive (EU) 2017/1132 to respectively (i) increase the use of digital tools and processes in company law, especially in relation to registration, filing and update of information in business registers, and (ii) increase the protection of employees, shareholders and creditors in cross-border conversions, mergers and divisions and prevent these procedures being used to set up artificial arrangements.

EU insolvency harmonisation directive: The EU is expected to agree its position on the proposed EU Directive on business insolvency reform (the EU insolvency law harmonisation project). Read more here and here.

Non-profit associations and foundations: Draft law 6054 on non-profit associations and foundations aims to modernise the current legal framework, which dates back to 1928.

Patrimonial foundations: Draft law 6595 intends to introduce a new wealth management vehicle in the form of a private foundation with an attractive tax regime.

Protection of enterprises and modernisation of bankruptcy law: Draft law 6539 aims to reform the current legal framework by (i) providing conservatory measures and legal instruments to prevent financially distressed companies from being declared bankrupt should their financial problems be detected at an early stage and (ii) favouring turnaround options rather than liquidation of distressed companies.

Shareholders rights Directive (“SRD”): The EU-wide ‘say on pay’ rules in a revised SRD must be transposed by 10 June 2019 and may result in new board pay rules for listed companies. Other SRD provisions will affect related party transactions and shareholder voting issues. Read more...

Employment

Apprenticeship: Draft law 7268 aims to reform the professional training and the apprenticeship conditions.

Disability and inclusion assistance: Draft law 7269 introduces an assistance activity to better include disabled and redeployed employees in the labour market.

Flexibility: Draft law 7324 introduces a time-saving account (“compte épargne-temps”) to improve flexibility for both employers and employees in managing working hours.

Positive actions: Draft law 6101 aims to simplify the implementation of positive actions in private companies and to achieve professional equality.

Professional redeployment: Draft law 7309 aims to optimise the redeployment procedure, fight against malpractices and improve the financial situation of redeployed employees.

Redundancy on economic grounds: Draft law 6086 introduces various provisions to prevent wrongful dismissal on economic grounds.

Regulation of internship: Draft law 7265 introduces a legal framework for the occupation of interns to improve their protection and to avoid abuse from employers.

Secondment: Draft law 7319 aims to (i) exclude certain situations from the secondment regime, such as internal meetings, conferences provided that they do not exceed five calendar days per month, and (ii) reform the organisation of the Labour Inspectorate.

Wage withholding: Draft law 4955 aims inter alia to reform the procedure applicable to wage withholding.

IP/TMT

ePrivacy Regulation: During 2019, the EU is expected to adopt this Regulation which supplements the General Data Protection Regulation and contains specific rules on the use of cookies and electronic marketing.

Proposed EU copyright directive: The EU has proposed a controversial new Directive which will reform online copyright by, among other things, placing greater liability on platforms that allow users to share content.

Trade secrets: Draft law 7353 aims to transpose Directive (EU) 2016/94 which protects undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.

Insurance

Dormant accounts and inactive insurance contracts: Following the Belgium and French examples, Luxembourg contemplates to introduce a new law in relation to dormant accounts (including insurance contracts). Draft law 7348 includes (i) a preventive component that defines a series of measures to prevent account inactivity as well as the withdrawal of inactive insurance contracts respectively to restore contact through information and research procedures, (ii) a consignment component that defines the obligation to consign assets after inactivity, and (iii) a restitution component that includes provisions for the return of consigned assets.

Review of the European Supervisory Authorities (“ESAs”): In 2017, the EU Commission published a package of four legislative proposals to review and enhance the powers of the ESAs. These proposals have been recently updated to give the EBA a more explicit and comprehensive mandate to ensure that risks of money laundering and terrorist financing in the EU financial system are effectively and consistently incorporated.

Investment Funds

Amendments to Part II fund, SIF and SICAR laws: Draft law 6936 is still in the pipeline and aims to (i) allow the CSSF to issue a regulation that would restrict the eligible assets of a SIF which offers its units/shares to investors who do not qualify as professionals under MiFID II, (ii) allow Part II funds, under certain conditions, to issue units/shares at a different price than their net asset value, and (iii) update the SICAR law to align it with the SIF law.

Cross-border distribution of investment funds in Europe: Proposals for a Directive and accompanying Regulation aim to reduce regulatory barriers to cross-border distribution of investment funds regulated by the UCITS Directive and the AIFMD in Europe. Both drafts introduce measures to further harmonise and align the operation of the marketing regimes under these Directives. Read more…

EMIR: Changes to EMIR under the REFIT proposal are expected to come into force early in 2019 and amendments to CCP supervision are anticipated later in the year. Read more...

Pan-European Personal Pension Product: As part of its Capital Market Union initiative, the EU Commission may adopt a proposal aiming to create a new personal pension product that can be offered to EU citizens as an alternative to the products available at national level. Read more...

Review of the European Supervisory Authorities (“ESAs”): In 2017, the EU Commission published a package of four legislative proposals to review and enhance the powers of the ESAs. These proposals have been recently updated to give the EBA a more explicit and comprehensive mandate to ensure that risks of money laundering and terrorist financing in the EU financial system are effectively and consistently incorporated.

Shareholders rights Directive (“SRD”): The EU-wide ‘say on pay’ rules in a revised SRD must be transposed by 10 June 2019 and may result in new board pay rules for listed companies. Other SRD provisions will affect related party transactions and shareholder voting issues. Read more...

Securitisation/STS: The regulation (EU) 2017/2402 which consolidates existing risk retention, disclosure and due diligence requirements and establishes a new regime for simple, transparent and standardised (’STS’) securitisations will apply from 1 January 2019. Draft law 7349 will amend the Luxembourg securitisation framework to reflect these changes.

Sustainable finance: Expected adoption of three proposals for (i) a Regulation amending the EU Benchmark Regulation, (ii) a proposed “ESG Taxonomy Regulation” which will establish a framework for the development of uniform criteria to identify whether a particular economic activity can be considered “environmentally sustainable”, and (iii) a proposed “ESG Disclosure Regulation” which will require financial market participants and investment advisers to make a range of disclosures relating to “sustainability risks” and ”sustainable investments”. Read more…

Regulatory

Prudential Regulation of investment firms: The new EU prudential framework for investment firms is expected to be concluded in the first half of 2019. The framework includes new remuneration rules and simpler capital rules for smaller investment firms.

Tax

Anti-Tax-Avoidance Directives: The draft law implementing ATAD 1, which notably sets anti-abuse rules regarding interest deduction and intra-EU hybrid mismatches, was released. Deduction of “exceeding borrowing costs” will consequently be limited to 30% of EBITDA, with exceptions for standalone and financial entities. Should also enter into force new rules regarding (i) controlled foreign companies and a general anti-abuse rule on 1 January 2019, and (ii) exit tax on 1 January 2020. ATAD 2 enlarges the scope of the ATAD 1 anti-hybrid rules by covering non-EU situations and including situations involving permanent establishments, reverse hybrids, imported mismatches, hybrid transfers, and dual residence. ATAD 2 must be implemented by 31 December 2019 save for measures on reverse hybrids to be transposed before 31 December 2021.

Digital services tax: A proposal for an EU directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services is expected to be adopted by April 2019.

Multilateral Instrument (“MLI”): Draft law 7333 purports to ratify the MLI signed in June 2017, whose provisions may apply to covered tax treaties as from 2019. It notably includes the Principal Purpose Test rule (“PPT”) according to which the benefit of a tax treaty shall not be granted if such benefit was one of the principal purposes of any arrangement or transaction.

Significant legal and regulatory events in 2018

Explore the tabs below to review the key developments you need to be aware of from 2018

General Interest

Brexit: EU-UK negotiations have resulted in the Withdrawal Agreement text and Political Declaration on the framework for the future relationship. In June, the EU Withdrawal Act was passed, preparing the UK’s legal system for Brexit. The Government began tabling statutory instruments to amend existing laws to fix deficiencies arising from Brexit. Acts providing for post-Brexit policies were passed in relation to data protection, nuclear safeguards, customs, sanctions and anti-money laundering. Read more here and here...

Data protection: The General Data Protection Regulation applies across the EU as of 25 May 2018. It marks the biggest shakeup for European privacy laws for 20 years with new obligations for businesses, new rights for individuals and new enforcement powers for regulators. Two laws of 1 August 2018 implement this Regulation. Read more…

Sanctions: In August, the EU Commission updated the EU Blocking Regulation in light of US extra-territorial secondary sanctions re-imposed in connection with Iran. Read more...

Banking

Benchmarks Regulation: The EU Benchmarks Regulation became applicable on 1 January 2018. The law of 17 April 2018 implementing Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds empowers the CSSF (for management/investment companies) and the CAA (for insurance companies) as the competent authorities to impose administrative fines for breaches of the Regulation. Read more here and here

Enforcement of the European Account Preservation Order: On 26 June 2018, the Parliament adopted draft law 7203 on the conversion of the European Account Preservation Order into a national enforcement measure. Read more...

Omnibus law on the financial sector: In February, the Parliament adopted draft law 7024 which (i) amends inter alia rules regarding professional secrecy, (ii) facilitates outsourcing, and (iii) clarifies the depositary regime of Part II funds. Read more…

Ranking of unsecured debt instruments in insolvency: The law of 25 July 2018 implements Directive (EU) 2017/2399 amending MiFID II as regards the ranking of unsecured debt instruments in insolvency hierarchy and amends the law of 18 December 2015 on failure of credit institutions and certain investment firms.

SFTR: The law of 6 June 2018 implementing Regulation (EU) 2015/2365 on transparency of securities financing transactions and of reuse (“SFTR Law”) was adopted. The SFTR Law notably empowers the CSSF (for management/investment companies) and the CAA (for insurance companies) respectively as the competent authorities to impose administrative fines for breaches of the Regulation. Read more…

Capital Markets

CSDR: On 6 June 2018, Luxembourg adopted certain measures to comply with Regulation (EU) 909/2014 on improving securities settlement in the EU and on central securities depositories (the “CSDR”) and designates the CSSF as the competent authority to ensure proper application of the CSDR and empowers it to impose administrative sanctions and other administrative measures.

MiFID II/MiFIR: MiFID II and MiFIR started to apply in January 2018. The law of 30 May 2018 implementing Directive 2014/65/EU on markets in financial instruments together with the Grand-Ducal regulation of 30 May 2018 and Commission Delegated Directive (EU) 2017/593 aim at increasing transparency, offering better investors protection, reinforcing confidence, addressing unregulated areas, and ensuring that supervisors are granted adequate powers to fulfil their tasks. Read more…

Sustainable and green finance/covered bonds: Luxembourg is internationally recognised as a main centre for sustainable and green finance notably with the launch of the Luxembourg Green Exchange (LGX), the setting up of the “Climate Finance Task Force” and the Climate Finance Label offered by LuxFLAG. In this context and in line with the COP 21 agreement, the law on the financial sector has been amended to reflect the creation of ‘renewable energy covered bonds’ (lettres de gage portant sur les énergies renouvelables). Furthermore, following EBA’s recommendations the regulatory regime of banks issuing covered bonds was reviewed.

Commercial/Real Estate

Business licence: The law of 18 July 2018 amends the law of 2 September 2011, regulating access to craft, commercial and industrial, as well as independent professions, and mainly abolishes the obligation to obtain a special business licence when operating a shopping mall of 400 m2.

Commercial leases: The regime applicable to commercial leases has been significantly amended with a new law of 3 February 2018 strengthening the protection granted to tenants. Read more...

Enforcement of the European Account Preservation Order: On 26 June 2018, the Parliament adopted draft law 7203 on the conversion of the European Account Preservation Order into a national enforcement measure. Read more...

Corporate

End of the transitional period for Luxembourg companies: The two-year transitional period granted to companies to amend their articles of association or constitutive documents to comply with mandatory provisions of the Luxembourg company law following the reform of 10 August 2016 has now expired. Read more...

Gun-jumping under the EUMR: Deal-makers must carefully monitor compliance with the standstill obligation during the merger review process until clearance and closing of the transaction. In April, the EU Commission issued a record fine of €124.5 million on Altice for gun-jumping. Read more…

Employment

Collective bargaining agreement for employees of banks: The agreement was signed on 12 July 2018 by the ABBL, ALEBA, LCGB-SESF and the OGB-L and is available here. It takes effect retroactively, starting from 1 January 2018, and will be applicable until 31 December 2020. 

Collective bargaining agreement for employees of insurance companies: The agreement was signed on 28 May 2018 by the ACA, ALEBA, LCGB-SESF and the OGBL and is available here. It takes effect retroactively, starting from 1 January 2018, and will be applicable until 31 December 2020.

Gradual return to work: The law of 10 August 2018, effective on 1 September 2018, increased (i) the reference period for the full salary maintenance of the sick employee from 12 to 18 months, and (ii) the right to a sick pay from 52 weeks to 78 weeks over a reference period of 104 weeks. The law also introduces the possibility for a gradual return to work of the sick employee which will be considered as an extension of the sickness leave and which costs will be fully borne by the Luxembourg social security (Caisse Nationale de Santé).

Protection of employees’ rights: The law of 8 April 2018 provides a better protection of employees' rights by (i) clarifying the remuneration of an employee during his/her sickness leaves, and (ii) granting additional rights to employees resigning as a result of their employer’s gross misconduct so that such resignation is considered as an abusive dismissal for gross misconduct.

Reform of the supplementary pension scheme: The law of 1 August 2018 facilitates worker mobility between EU member states by improving the acquisition and preservation of supplementary pension rights of their members. The law extends such schemes to self-employed professionals and limits the period for acquiring rights to three years. It also sets out the different scenarios in case a member leaves before reaching retirement age and strengthens the information obligation of the employers vis-à-vis their employees.

Social elections: The law of 10 August 2018 and the Grand Ducal regulation of 11 September 2018 modernise the social election process including changes of the pre-and post-social election communications, implementation of an electronic platform and postal voting reform. Furthermore, the social elections initially scheduled in November were postponed with the new election due to take place between 1 February and 31 March 2019.

IP/TMT

Data protection: The General Data Protection Regulation applies across the EU as of 25 May 2018. It marks the biggest shakeup for European privacy laws for 20 years with new obligations for businesses, new rights for individuals and new enforcement powers for regulators. Two laws of 1 August 2018 implement this Regulation. Read more…

New IP regime: The new IP regime was introduced by the law of 17 April 2018 and included in article 50 ter of the Income Tax Law (“LIR”). This regime is compliant with OECD's new nexus approach for IP regimes and includes an 80% exemption from income tax for eligible net income derived from qualifying IP, the list of which has also been broadened. The new IP regime is applicable with retroactive effect as from 1 January 2018. However, taxpayers can opt in to keep benefiting from the former regime until 30 June 2021.

Insurance

Distribution of insurance products: Directive (EU) 2016/97 on insurance distribution (as amended) (“IDD”) was implemented on 10 August 2018 and came into force on 1 October 2018. IDD sets out regulatory requirements for professionals manufacturing and/or selling insurance products. Read more…

PRIIPs: PRIIPs started to apply in January imposing requirements for pre-contractual, standardised disclosure for packaged retail and insurance-based investment products (“PRIIPs”). In March, the Luxembourg law implementing the PRIIPs Regulation (the “PRIIPs Law”) was adopted. The PRIIPs Law (i) designates the CSSF (for management/investment companies) and the CAA (for insurance companies) respectively as the competent authorities to ensure the proper application of the provisions of the Regulation, (ii) establishes sanctions, and (iii) specifies which entities are allowed to use a UCITS key investor information document instead of a PRIIPs KID. Read more…

SFTR: The law of 6 June 2018 implementing Regulation (EU) 2015/2365 on transparency of securities financing transactions and of reuse (“SFTR Law”) was adopted. The SFTR Law notably empowers the CSSF (for management/investment companies) and the CAA (for insurance companies) respectively as the competent authorities to impose administrative fines for breaches of the Regulation. Read more…

Investment Funds

Amendments to the AIFM/UCITS delegated Regulations as regards safe-keeping duties of depositaries: To ensure the same level of protection for financial instruments held in custody by third parties, the EU Commission clarified the asset segregation requirements. The Regulations shall apply from 1 April 2020.

Benchmarks Regulation: The EU Benchmarks Regulation became applicable on 1 January 2018. The law of 17 April 2018 implementing Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds empowers the CSSF (for management/investment companies) and the CAA (for insurance companies) as the competent authorities to impose administrative fines for breaches of the Regulation. Read more here and here

CSSF fees: The Grand-Ducal regulation of 21 December 2017 relating to the fees to be levied by the CSSF was amended and introduced provisions on the fees to be levied in relation to (i) administrators of indices used as benchmarks in financial instruments and financial contracts, (ii) organised trading facilities and their operators, and (iii) data reporting service providers.

Depositaries of non-UCITS funds: The CSSF has issued Circular 18/697 regarding the organisational requirements applicable to depositaries of non-UCITS funds based on the model of CSSF Circular 16/644 regarding the depositaries of UCITS.

MiFID II/MiFIR: MiFID II and MiFIR started to apply in January 2018. The law of 30 May 2018 implementing Directive 2014/65/EU on markets in financial instruments together with the Grand-Ducal regulation of 30 May 2018 and Commission Delegated Directive (EU) 2017/593 aim at increasing transparency, offering better investors protection, reinforcing confidence, addressing unregulated areas, and ensuring that supervisors are granted adequate powers to fulfil their tasks. Read more…

Money Market Funds (“MMFs”) Regulation: In July, the new European framework applicable to MMFs entered into force. UCITS and AIFs that invest in short-term assets with the objective of achieving returns in line with money market rates or preserving the value of the investment must now comply with these new provisions. Read more…

Omnibus law on the financial sector: In February, the Parliament adopted draft law 7024 which (i) amends inter alia rules regarding professional secrecy, (ii) facilitates outsourcing, and (iii) clarifies the depositary regime of Part II funds. Read more…

PRIIPs: PRIIPs started to apply in January imposing requirements for pre-contractual, standardised disclosure for packaged retail and insurance-based investment products (“PRIIPs”). In March, the Luxembourg law implementing the PRIIPs Regulation (the “PRIIPs Law”) was adopted. The PRIIPs Law (i) designates the CSSF (for management/investment companies) and the CAA (for insurance companies) respectively as the competent authorities to ensure the proper application of the provisions of the Regulation, (ii) establishes sanctions, and (iii) specifies which entities are allowed to use a UCITS key investor information document instead of a PRIIPs KID. Read more…

SFTR: The law of 6 June 2018 implementing Regulation (EU) 2015/2365 on transparency of securities financing transactions and of reuse (“SFTR Law”) was adopted. The SFTR Law notably empowers the CSSF (for management/investment companies) and the CAA (for insurance companies) respectively as the competent authorities to impose administrative fines for breaches of the Regulation. Read more…

Substance for management companies: The CSSF issued its long-awaited Circular 18/698 on the substance requirements for Luxembourg management companies. The Circular provides a great level of transparency, reliability and comfort to stakeholders while at the same time keeping a considerable level of flexibility that will allow the CSSF to adjust its individual regulatory assessment to specific situations. The Circular notably contains (i) new provisions regarding numerical limits on fund directors’ mandates, (ii) tightened rules regarding delegation, and (iii) requirements regarding anti-money laundering. Read more and more...

Regulatory

CSSF fees: The Grand-Ducal regulation of 21 December 2017 relating to the fees to be levied by the CSSF was amended and introduced provisions on the fees to be levied in relation to (i) administrators of indices used as benchmarks in financial instruments and financial contracts, (ii) organised trading facilities and their operators, and (iii) data reporting service providers.

Omnibus law on the financial sector: In February, the Parliament adopted draft law 7024 which (i) amends inter alia rules regarding professional secrecy, (ii) facilitates outsourcing, and (iii) clarifies the depositary regime of Part II funds. Read more…

PSD 2: The law of 20 July 2018 implements Directive (EU) 2015/2366 on payment services in the internal market and amends the law of 10 November 2009 relating to services of payment to (i) take into consideration significant technical evolutions (e.g. electronic and mobile payments and the emergence of new types of payments), (ii) include more detailed EU passporting procedure applicable to payment institutions/electronic money institutions, (iii) strengthen rights of payment services users, and (iv) strengthen the safety of electronic payments (e.g. through personalised security credentials to be used for secure customer authentication by the payment service user).

Ranking of unsecured debt instruments in insolvency: The law of 25 July 2018 implements Directive (EU) 2017/2399 amending MiFID II as regards the ranking of unsecured debt instruments in insolvency hierarchy and amends the law of 18 December 2015 on failure of credit institutions and certain investment firms.

Tax

New FR-LUX Double Tax Treaty (“DTT”): On 20 March 2018, France and Luxembourg signed a new DTT which (i) implements the OECD/G20 BEPS approach, (ii) introduces new rules for the taxation of cross-border payments such as dividends (notably from French “OPCI” set up as “SPPICAV”), interest and royalties, and (iii) limits access to the DTT for UCIs. Although the ratification process is not final, the DTT is likely to enter into force on 1 January 2019.

New IP regime: The new IP regime was introduced by the law of 17 April 2018 and included in article 50 ter of the Income Tax Law (“LIR”). This regime is compliant with OECD's new nexus approach for IP regimes and includes an 80% exemption from income tax for eligible net income derived from qualifying IP, the list of which has also been broadened. The new IP regime is applicable with retroactive effect as from 1 January 2018. However, taxpayers can opt in to keep benefiting from the former regime until 30 June 2021.

State aids: The EU Commission took several decisions in relation to State aids according to which (i) the transfer pricing rulings issued by Luxembourg on Amazon’s corporate taxation were incompatible State aid (decision of 4 October 2017) and (ii) Luxembourg gave illegal tax benefits to Engie through tax rulings that endorsed financing structures and simultaneously treated the same transaction both as debt and equity (decision of 20 June 2018). These decisions have been challenged by Amazon and the Luxembourg Government respectively.

VAT group: After the ECJ ruled that Luxembourg regime on independent groups of persons was contrary to EU legislation (case C-274/15), Luxembourg decided to implement the VAT group regime with the law of 6 August 2018. This regime can only be adopted by Luxembourg companies or local establishment of foreign companies and requires sufficient financial, economic and organisational links between members, who must operate within the group at least two civil years. All members of a VAT group will be considered as one single taxable person for VAT purposes.

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