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Luxembourg: What happened in 2019 and significant events in 2020

Luxembourg Law: Year in Review 2019 and Year to Come 2020 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 2019 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 2019 and 2020

“Although the Brexit discussions remained very much in the spotlight, 2019 saw an intensification of measures fostering the protection of investors and enhancing transparency (EMIR, Register of Beneficial Owners, Shareholders Rights Directive 2, Interest Rate Reform, Prospectus Regulation, Securitisation to name a few) together with a change in the tax landscape with the implementation of ATAD 1. These trends will be confirmed in the new year with the start of new phases for EMIR, AML/CFT and ATAD 2. Interestingly, a new chapter will be opened during which the EU Commission will review key legislation such as AIFMD and MAR. In addition to these developments, 2020 is expected to be a turning point in terms of sustainable finance with the likely adoption of the ESG taxonomy regulation. Exciting and promising!”

Melinda Perera, Partner

MelindaPerera

Significant events in 2020

Brexit and EU reshuffle

The upcoming Brexit and EU reshuffle will have a major impact on the legislative activity as well as the regulatory environment for 2020.

ESG

Integrating ESG factors in investment decisions will be high on the agenda of financial services firms and asset managers in the next months with the introduction of a new framework to screen potential investments.

ATAD

ATAD 1 and 2 introduce a new framework of anti-tax avoidance provisions to address aggressive tax planning which will likely require some adjustments to Luxembourg structures.

Significant legal and regulatory events in 2019

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

General Interest

Brexit: Hundreds of regulations have been passed to amend the UK’s statute book in case of a ‘no deal’ exit. In October, the UK Prime Minister agreed a revised Withdrawal Agreement and Political Declaration with the EU. The European Union (Withdrawal Agreement) Bill must be passed to implement the deal in UK law. The government did not have a majority to secure the Bill’s passage, and therefore called the general election on 12 December. Read more... here, here and here. Luxembourg laws of 8 April 2019 as well as various press releases from the CSSF establish transitional measures in the financial sector in the event of the UK’s withdrawal of the EU. Read more…

Register of beneficial owners (“RBO”): The law of 13 January 2019 was adopted to implement some provisions of Directive (EU) 2015/849 (“AMLD IV”) and Directive (EU) 2018/843 (“AMLD V”) in relation to the creation of a RBO. The law provides a new obligation for in-scope entities to file certain information regarding their beneficial owners with the RBO. Read more… here, here and here.

Whistle-blowing: Directive (EU) 2019/1937 introduces a series of measures to improve protection granted to whistle-blowers reporting breaches of Union law on areas such as financial services, products and markets, prevention of money laundering, public health, environment, and protection of privacy and personal data

Banking

Banking package: Adopting important changes to the EU rules on the prudential regulation of banks and on bank resolution, CRR2, CRDV, BRRD2 and SRMR2 were published in the EU Official Journal in June. Read more... here and here.

Cryptoassets: The CSSF published a warning regarding virtual currencies, stating that entities under its prudential supervision must take into account that investing in virtual currencies is not suitable for all kinds of investors and investment objectives. UCITS, UCIs addressing non-professional customers and pension funds are thus not allowed to invest directly or indirectly in virtual currencies. Read more…

European Supervisory Authorities (“ESAs”) review package: By the end of December, the package of four legislative proposals to review and enhance the powers of the ESAs will be published.

Insolvency: Directive (EU) 2019/1023 to be implemented by 17 July 2021 amends Directive (EU) 2017/1132 to ensure access to effective national preventive restructuring frameworks and improve the effectiveness of procedures concerning restructuring, insolvency and discharge of debt.

Interest rate reform: 2019 has seen significant developments on interest rate reform, with the development of market conventions, particularly in relation to SONIA FRNs and by the LMA’s publication of new draft compounded risk-free rate facilities agreements. Read more...

Securitisations/STS: Regulation (EU) 2017/2402 which consolidated existing risk retention, disclosure and due diligence requirements and established a new regime for simple, transparent and standardised (“STS”) securitisations applies to securitisations which closed on or after 1 January 2019. The law of 16 July 2019 amending the Luxembourg securitisation framework reflects these changes.

Capital Markets

Circulation of securities: The law of 1 March 2019 modernises the legal framework on circulation of securities by taking into consideration new technologies. Securities may be booked and transferred using secured online record-keeping mechanisms, notably the distributed public ledger technology such as blockchain.

EMIR: The EMIR REFIT regulation (Regulation (EU) 2019/834) saw changes to counterparty classification and reduction in the scope of the clearing obligation. A further temporary exemption from clearing for pension schemes and exemption from reporting for certain intra-group transactions were also granted. Read more...

European Supervisory Authorities (“ESAs”) review package: By the end of December, the package of four legislative proposals to review and enhance the powers of the ESAs will be published.

Prospectus for securities: Regulation (EU) 2017/1129 became applicable in its entirety on 21 July 2019, overhauling the pan European prospectus. It is supplemented by a Luxembourg law of 16 July 2019. It creates a new and harmonised set of rules with a view to maximise harmonisation and reducing divergences and impediments at national level, to increase investors protection by making the prospectus more accessible to investors via shorter and more focused disclosures (risk factors/summary/advertisements) and to increase access to the market (new exemptions, frequent issuer regime (URD), EU growth prospectus, secondary issuances). Read more...

Shareholders rights directive (“SRD”): The revised SRD was transposed in Luxembourg through the law of 1 August 2019 amending the amended law of 24 May 2011. It aims to encourage long-term shareholder engagement in listed companies through new obligations imposed on asset managers and institutional investors as well as on listed companies regarding, among others, new board pay rules and related party transactions. Read more…

Corporate

Company law package: Directive (EU) 2017/1132 is currently being amended by two new directives to respectively increase: (i) the use of digital tools and processes in company law, especially in relation to registration, filing and update of information in business registers (Directive (EU) 2019/1151), and (ii) 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 (publication in the EU Official Journal is expected to take place within a few weeks).

Interest rate reform: 2019 has seen significant developments on interest rate reform, with the development of market conventions, particularly in relation to SONIA FRNs and by the LMA’s publication of new draft compounded risk-free rate facilities agreements. Read more...

Securitisations/STS: Regulation (EU) 2017/2402 which consolidated existing risk retention, disclosure and due diligence requirements and established a new regime for simple, transparent and standardised (“STS”) securitisations applies to securitisations which closed on or after 1 January 2019. The law of 16 July 2019 amending the Luxembourg securitisation framework reflects these changes.

Shareholders rights directive (“SRD”): The revised SRD was transposed in Luxembourg through the law of 1 August 2019 amending the amended law of 24 May 2011. It aims to encourage long-term shareholder engagement in listed companies through new obligations imposed on asset managers and institutional investors as well as on listed companies regarding, among others, new board pay rules and related party transactions. Read more…

Employment

Annual leave: The law of 25 April 2019 increased the number of days of annual leave to 26 days.

Investment firms review: The investment firms regulation and directive are expected to be published in the EU Official Journal in December. These contain an overhaul of the prudential and remuneration regimes which apply to investment firms. Read more…

Working time account: The law of 12 April 2019 introduces working time accounts allowing better flexibility in the management of working time for both companies and employees.

IP/TMT

EU copyright directive: Directive (EU) 2019/790 includes new rules to make certain online platforms responsible for the copyright infringements of their users, therefore shifting the burden of policing the internet from content creators to platforms. Read more... here and here.

Significant GDPR fines: The Information Commissioner has announced her intention to fine BA £183m and Marriott £99m for breach of the EU General Data Protection Regulation after they suffered a cyber-attack. Read more...

Insurance

Pan-European Personal Pension Product (“PEPP”): In April, Regulation (EU) 2019/1238 on a PEPP was adopted. Its main objective is to create a harmonised personal retirement product while channelling more household savings towards the capital markets. Read more...

Investment Funds

Cross-border distribution of investment funds in Europe: The EU made changes to the way investment funds can be marketed under AIFMD and UCITS to take effect in 2021, and delayed the application of the PRIIPs KID to UCITS. Read more…

Cryptoassets: The CSSF published a warning regarding virtual currencies, stating that entities under its prudential supervision must take into account that investing in virtual currencies is not suitable for all kinds of investors and investment objectives. UCITS, UCIs addressing non-professional customers and pension funds are thus not allowed to invest directly or indirectly in virtual currencies. Read more…

EMIR: The EMIR REFIT regulation (Regulation (EU) 2019/834) saw changes to counterparty classification and reduction in the scope of the clearing obligation. A further temporary exemption from clearing for pension schemes and exemption from reporting for certain intra-group transactions were also granted. Read more...

European Supervisory Authorities (“ESAs”) review package: By the end of December, the package of four legislative proposals to review and enhance the powers of the ESAs will be published.

Interest rate reform: 2019 has seen significant developments on interest rate reform, with the development of market conventions, particularly in relation to SONIA FRNs and by the LMA’s publication of new draft compounded risk-free rate facilities agreements. Read more...

Investment firms review: The investment firms regulation and directive are expected to be published in the EU Official Journal in December. These contain an overhaul of the prudential and remuneration regimes which apply to investment firms. Read more….

Pan-European Personal Pension Product (“PEPP”): In April, Regulation (EU) 2019/1238 on a PEPP was adopted. Its main objective is to create a harmonised personal retirement product while channelling more household savings towards the capital markets. Read more...

RAIF: The RAIF law was amended to clarify inter alia that RAIFs taking the form of a Luxembourg fonds commun de placement (“FCP”) may have as their legal representative a ‘Super-ManCoʼ. Read more...

Securitisations/STS: Regulation (EU) 2017/2402 which consolidated existing risk retention, disclosure and due diligence requirements and established a new regime for simple, transparent and standardised (“STS”) securitisations applies to securitisations which closed on or after 1 January 2019. The law of 16 July 2019 amending the Luxembourg securitisation framework reflects these changes.

Shareholders rights directive (“SRD”): The revised SRD was transposed in Luxembourg through the law of 1 August 2019 amending the amended law of 24 May 2011. It aims to encourage long-term shareholder engagement in listed companies through new obligations imposed on asset managers and institutional investors as well as on listed companies regarding, among others, new board pay rules and related party transactions. Read more…

Litigation

Insolvency: Directive (EU) 2019/1023 to be implemented by 17 July 2021 amends Directive (EU) 2017/1132 to ensure access to effective national preventive restructuring frameworks and improve the effectiveness of procedures concerning restructuring, insolvency and discharge of debt.

New judgments convention: The Hague Conference on Private International Law concluded the final text of a new convention designed to promote the recognition and enforcement of court judgments. Read more...

Regulatory

Banking package: Adopting important changes to the EU rules on the prudential regulation of banks and on bank resolution, CRR2, CRDV, BRRD2 and SRMR2 were published in the EU Official Journal in June. Read more... here and here.

Cryptoassets: The CSSF published a warning regarding virtual currencies, stating that entities under its prudential supervision must take into account that investing in virtual currencies is not suitable for all kinds of investors and investment objectives. UCITS, UCIs addressing non-professional customers and pension funds are thus not allowed to invest directly or indirectly in virtual currencies. Read more…

EMIR: The EMIR REFIT regulation (Regulation (EU) 2019/834) saw changes to counterparty classification and reduction in the scope of the clearing obligation. A further temporary exemption from clearing for pension schemes and exemption from reporting for certain intra-group transactions were also granted. Read more...

European Supervisory Authorities (“ESAs”) review package: By the end of December, the package of four legislative proposals to review and enhance the powers of the ESAs will be published.

Investment firms review: The investment firms regulation and directive are expected to be published in the EU Official Journal in December. These contain an overhaul of the prudential and remuneration regimes which apply to investment firms. Read more….

Securitisations/STS: Regulation (EU) 2017/2402 which consolidated existing risk retention, disclosure and due diligence requirements and established a new regime for simple, transparent and standardised (“STS”) securitisations applies to securitisations which closed on or after 1 January 2019. The law of 16 July 2019 amending the Luxembourg securitisation framework reflects these changes.

Tax

Anti-tax avoidance directive (“ATAD 1”): Luxembourg new article 168bis of the income tax law implementing ATAD 1 limits the deduction of ‘exceeding borrowing costsʼ incurred by entities subject to corporate income tax in Luxembourg to 30% of EBITDA or €3 million. Exceeding borrowing costs are defined as the amount by which deductible borrowing costs of a taxpayer exceed its taxable interest revenues and other economically equivalent taxable revenues. Financial undertakings such as AIFs, UCITS, and certain securitisation vehicles are excluded from the scope of this measure.

Change of the corporate income tax rate: From 2019, the combined corporate income tax rate for the City of Luxembourg was lowered to 24.94%. This rate comprises the corporate income tax of 17%, the 7% solidarity surcharge and the 6.75% municipal business tax.

OECD Multilateral Instrument (“MLI”): The MLI came into force in Luxembourg on 1 August. The effective application of its provisions vis-à-vis any given jurisdiction will depend on the ratification process of such other jurisdiction. It notably includes the principal purpose test (“PPT”) according to which the benefit of a tax treaty shall be refused if one of the principal purposes of an arrangement was to obtain this benefit.

Substance, purpose and beneficial ownership: Following the decisions of the CJEU in the so-called Danish cases, the focus has shifted from the level of physical presence in a given jurisdiction (i.e., the employees and infrastructure in Luxembourg to execute significant functions) to the actual purpose supported by the relevant means (business rationale). In addition, any entity should have a meaningful economic activity and therefore some discretionary power regarding the use of its assets and the income it receives (beneficial ownership).

Significant legal and regulatory events in 2020

Explore the tabs below to review the key developments you need to be aware of in 2020

General Interest

AML/CFT: Draft law 7467 purports to transpose Directive (EU) 2018/843 (“AMLD V”) under Luxembourg law to prevent risks deriving from virtual currencies and limit the use of prepaid cards as well as reinforce and harmonise the treatment of high risk countries in respect of due diligence obligations imposed on professionals. Read more... If adopted, draft law 7216B will implement the EU framework relating to the creation of a register of trusts in Luxembourg. 2020 will also see an evaluation of the Grand Duchy of Luxembourg by the Financial Action Task Force with its conclusions expected to be reached in 2021.

Brexit: The UK is due to leave the EU at 11.00pm (UK time) on 31 January 2020. If the Withdrawal Agreement (WA) is ratified, the UK will enter a transition period during which the UK will for most purposes be treated as a member of the EU. The government has pledged not to extend the transition period beyond the end of 2020. Negotiations on new trading arrangements between the EU and UK as outlined in the Political Declaration will take place during the transition period. Read more... here and here.

New EU priorities follow institutional reshuffle: Following 2019’s EU Parliament elections and appointment of a new EU Commission, 2020 will bring a wave of EU draft laws reflecting the priorities of EU Commission President, Ursula von der Leyen. Digitalisation and sustainability will be high on the agenda of EU law makers during the coming legislative term. Read more…

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.

Banking

Dormant accounts and inactive insurance contracts: Following the Belgium and French examples, Luxembourg is considering introducing a new law in relation to dormant accounts (including insurance contracts) which includes: (i) a series of measures to prevent account inactivity as well as the withdrawal of inactive insurance contracts to restore contact through information and research procedures; (ii) the obligation to consign assets after inactivity; and (iii) provisions for the return of consigned assets.

Implementation of Basel III: The EU is working on the next round of amendments to the Capital Requirements Regulation and Directive, aiming to present draft laws to implement Basel III standards in the second half of 2020.

Interest rate reform: The transition from LIBOR to risk-free rates is expected to continue with a shift towards the practical implementation of new risk-free rate products. ISDA is expected to publish a supplement to the 2006 ISDA Definitions and a protocol to support amendment of legacy transactions. Read more...

MiFID II and MiFIR: Several EU MiFID II review reports are due over the course of 2020, and these may be accompanied by proposals for changes to Level 1 or 2 texts or further tweaks to Level 3 guidance and Q&As.

Payment Services Directive 2 (“PSD2”): The migration to strong customer authentication under the PSD2 is to be completed by the end of 2020. Read more...

Review of Solvency II: During 2020, the EU Commission will conduct a broad review of the EEA-wide framework for (re)insurers known as ‘Solvency IIʼ. Its report is due by 1 January 2021.

Sustainable finance: 2020 will likely see the adoption of the ESG taxonomy regulation establishing a framework for the development of uniform criteria to identify whether a particular economic activity can be considered environmentally sustainable. It will supplement the regulation amending the EU Benchmark Regulation and the ESG Disclosure Regulation requiring financial market participants and investment advisers to make a range of disclosures relating to sustainability risks and sustainable investments, both of which have just been published in the EU Official Journal. Read more… here and here.

Capital Markets

EMIR: Further changes will be phased in under the EMIR REFIT regulation (Regulation (EU) 2019/834), including mandatory reporting by FCs for their NFC- counterparties and provisions related to initial margin model approval. EMIR 2.2 is expected to come into force early in 2020 with changes to EU CCP supervision and delegated legislation relating to the new ‘tieringʼ of third country CCPs, comparable compliance and fees. Read more...

MiFID II and MiFIR: Several EU MiFID II review reports are due over the course of 2020, and these may be accompanied by proposals for changes to Level 1 or 2 texts or further tweaks to Level 3 guidance and Q&As.

Review of the Market Abuse Regulation (“MAR”): The EU Commission will be conducting a review of MAR. An initial consultation by the European Securities and Markets Authority indicates that the review may cover extending the scope to spot FX contracts, amending the definition of inside information and extending the restriction on dealings in closed periods.

SFTR: The reporting obligation under the Securities Financing Transaction Regulation will be phased-in from April 2020.

Sustainable finance: 2020 will likely see the adoption of the ESG taxonomy regulation establishing a framework for the development of uniform criteria to identify whether a particular economic activity can be considered environmentally sustainable. It will supplement the regulation amending the EU Benchmark Regulation and the ESG Disclosure Regulation requiring financial market participants and investment advisers to make a range of disclosures relating to sustainability risks and sustainable investments, both of which have just been published in the EU Official Journal. Read more… here and here.

Corporate

Interest rate reform: The transition from LIBOR to risk-free rates is expected to continue with a shift towards the practical implementation of new risk-free rate products. ISDA is expected to publish a supplement to the 2006 ISDA Definitions and a protocol to support amendment of legacy transactions. Read more...

Review of the Market Abuse Regulation (“MAR”): The EU Commission will be conducting a review of MAR. An initial consultation by the European Securities and Markets Authority indicates that the review may cover extending the scope to spot FX contracts, amending the definition of inside information and extending the restriction on dealings in closed periods.

Sustainable finance: 2020 will likely see the adoption of the ESG taxonomy regulation establishing a framework for the development of uniform criteria to identify whether a particular economic activity can be considered environmentally sustainable. It will supplement the regulation amending the EU Benchmark Regulation and the ESG Disclosure Regulation requiring financial market participants and investment advisers to make a range of disclosures relating to sustainability risks and sustainable investments, both of which have just been published in the EU Official Journal. Read more… here and here.

Employment

Age policy measures: Draft law 6678, if adopted, will introduce new measures in relation to age management in the work environment.

Occupational re-employment: Draft law 7309 aims at optimising the procedures in place, improving the financial situation of people in occupational re-employment and addressing criticisms from beneficiaries of a professional reclassification, employers and unions.

IP/TMT

Data transfers under the microscope: The CJEU will decide if Standard Contractual Clauses and the EU-US Privacy Shield are valid. The loss of these key mechanisms would create serious problems when transferring personal data outside of the EU.

ePrivacy regulation: The EU institutions are still struggling to adopt the draft e-privacy regulation. This regulation is due to supplement the GDPR and includes, among others, specific rules on the use of cookies and marketing via electronic communications. It was initially tabled in 2017 and has been heavily debated ever since. To break the deadlock, the new EU Commission recently indicated it might put forward a new draft. At this stage, next steps and content remain unclear.

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.

Insurance

Dormant accounts and inactive insurance contracts: Following the Belgium and French examples, Luxembourg is considering introducing a new law in relation to dormant accounts (including insurance contracts) which includes: (i) a series of measures to prevent account inactivity as well as the withdrawal of inactive insurance contracts to restore contact through information and research procedures; (ii) the obligation to consign assets after inactivity; and (iii) provisions for the return of consigned assets.

Investment Funds

AIFMD review: The EU Commission is undertaking further analysis of the functioning of AIFMD following publication of its report in January 2019 and will publish the results identifying areas for reform in 2020. Read more...

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.

Amendments to Part II fund, SIF and SICAR laws: Draft law 6936 remains 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.

EMIR: Further changes will be phased in under the EMIR REFIT regulation (Regulation (EU) 2019/834), including mandatory reporting by FCs for their NFC- counterparties and provisions related to initial margin model approval. EMIR 2.2 is expected to come into force early in 2020 with changes to EU CCP supervision and delegated legislation relating to the new ‘tieringʼ of third country CCPs, comparable compliance and fees. Read more...

Interest rate reform: The transition from LIBOR to risk-free rates is expected to continue with a shift towards the practical implementation of new risk-free rate products. ISDA is expected to publish a supplement to the 2006 ISDA Definitions and a protocol to support amendment of legacy transactions. Read more...

SFTR: The reporting obligation under the Securities Financing Transaction Regulation will be phased-in from April 2020.

Sustainable finance: 2020 will likely see the adoption of the ESG taxonomy regulation establishing a framework for the development of uniform criteria to identify whether a particular economic activity can be considered environmentally sustainable. It will supplement the regulation amending the EU Benchmark Regulation and the ESG Disclosure Regulation requiring financial market participants and investment advisers to make a range of disclosures relating to sustainability risks and sustainable investments, both of which have just been published in the EU Official Journal. Read more… here and here.

Litigation

Confiscation regime: Draft law 7452 will complement the law of 1 August 2018 in relation to the Luxembourg confiscation regime. If adopted, it will enlarge the scope of the assets that can be seized in relation to money laundering and terrorist financing and enable the detection and tracing of property to be frozen and confiscated even after a final conviction for a criminal offence.

Regulatory

Confiscation regime: Draft law 7452 will complement the law of 1 August 2018 in relation to the Luxembourg confiscation regime. If adopted, it will enlarge the scope of the assets that can be seized in relation to money laundering and terrorist financing and enable the detection and tracing of property to be frozen and confiscated even after a final conviction for a criminal offence.

EMIR: Further changes will be phased in under the EMIR REFIT regulation (Regulation (EU) 2019/834), including mandatory reporting by FCs for their NFC- counterparties and provisions related to initial margin model approval. EMIR 2.2 is expected to come into force early in 2020 with changes to EU CCP supervision and delegated legislation relating to the new ‘tieringʼ of third country CCPs, comparable compliance and fees. Read more...

Implementation of Basel III: The EU is working on the next round of amendments to the Capital Requirements Regulation and Directive, aiming to present draft laws to implement Basel III standards in the second half of 2020.

MiFID II and MiFIR: Several EU MiFID II review reports are due over the course of 2020, and these may be accompanied by proposals for changes to Level 1 or 2 texts or further tweaks to Level 3 guidance and Q&As.

Payment Services Directive 2 (“PSD2”): The migration to strong customer authentication under the PSD2 is to be completed by the end of 2020. Read more...

Review of Solvency II: During 2020, the EU Commission will conduct a broad review of the EEA-wide framework for (re)insurers known as ‘Solvency IIʼ. Its report is due by 1 January 2021.

SFTR: The reporting obligation under the Securities Financing Transaction Regulation will be phased-in from April 2020.

Tax

Anti-tax avoidance directive 2 (“ATAD 2”): The draft law implementing ATAD 2 in Luxembourg enlarges the scope of the anti-hybrid rules introduced by ATAD 1 so as to notably also cover non-EU situations. The anti-hybrid rules only apply between associated enterprises (i.e. entities linked by way of 25/50% of their capital, voting rights or profit entitlements). Whereas in some instances, the ownership or voting rights of individuals or entities acting together are aggregated to compute the relevant threshold, the draft law proposes that investors holding an interest of less than 10% in an investment fund should not be regarded as ‘associated enterprisesʼ of the fund or any underlying entities. Regulated funds and RAIFs are excluded from the scope of the reverse hybrid rule. Read more...

BEPS 2.0: The OECD is continuing to work on measures that would effectively impose a minimum level of tax as an additional weapon in the fight against so-called “base erosion and profit shifting”.

EU-wide disclosure rules: Draft law 7465 implementing DAC 6 into domestic law, takes yet another step in the administrative co-operation in tax matters, introducing an exchange of information regarding potentially aggressive tax planning arrangements in general. It relies on intermediaries involved in the structuring or the implementation of the relevant arrangements. Even though its effective date is 1 July 2020, the reporting will include any structure the first step of which was implemented as from 25 June 2018. Read more…

New FR-LUX Treaty: On 20 March 2018, the Luxembourg and French governments entered a new double tax treaty (“New DTT”). The New DTT: (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 or royalties; and (iii) grants limited access to its provisions to undertakings for collective investments. Following ratification in France and Luxembourg, the New DTT will be effective from 1 January 2020.

Taxation of the digital economy: The OECD has put forward proposals for the reform of the international tax system to address the tax challenges arising from the digital economy. Pending international agreement, jurisdictions may decide to impose unilateral measures.

Tax rulings: According to the Luxembourg draft budget law 7500 for 2020, tax rulings granted prior to 1 January 2015 will be binding on the tax administration for the last time for tax year 2019.

2019 has seen significant changes in law at EU level, which will impact your business in the years to come. By watching this video, you can get a sneak peek into:

  • the sustainable finance package, which seeks to integrate environmental, social and governance considerations into the investment process;
  • the banking package, which brings changes to prudential regulation and the resolution of banks;
  • the investment firms review package, which marks a major reform for capital and liquidity rules for investment firms;
  • the clean energy package, which aims to create an integrated energy market;
  • the screening of FDI regulation, which sets minimum standards for national FDI screening.

Explore our Year in Review 2019 and Year to Come 2020 series across 20+ jurisdictions and a number of topics.

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