Luxembourg to share tax information in 2015
AFIP bureau will have access to data of companies such as Techint and Globant
The AFIP tax bureau yesterday signed a memorandum of understanding (MOU) with Luxembourg to share fiscal information between both countries, an arrangement that will begin from 2015. The MOU will give AFIP access to information of some large Argentine companies based in the European country such as Techint and Globant.
“The agreement gives a clear message to the international community about the firm conviction of both countries regarding the convenience of greater bilateral cooperation, in line with the worldwide trend that seeks to end tax evasion,” AFIP head Ricardo Echegaray said after signing the MOU with Luxembourg tax director Guy Heintaz.
The exchange of information will only be by request and not automatical since Luxembourg hasn’t yet adopted an international standard for the automatic exchange of bank data. This means the exchange can only be done when a fiscal investigation with sufficient proof has been started in the courts, thus having a limited impact in uncovering unlawful behavior.
But this could soon change as Luxembourg, whose banks hold deposits worth 10 times the nation’s annual economic output, promised two weeks ago to adopt the automatic standard, which could happen before the deal with Argentina is implemented in 2015.
“It’s one of the most important financial centres in the world so it makes sense AFIP is interested on it. There are only a few but large Argentine firms based there so there’s not that much information to access,” Andrés Edelstein, tax expert at Price Waterhouse Cooper, told the Herald. “The MOU is the next phase after both countries signed the multilateral convention.”
The MOU formally establishes the details on when and how the information will be shared since Argentina and Luxembourg were already entitled to exchange information by having signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, an instrument that allows co-operation between states to tackle tax evasion. Argentina agreed to it in September 2012 and Luxembourg last July.
“Argentina can already share information with Luxembourg because both countries signed the multilateral convention, which allows an exchange between all the countries that agree to it,” César Litvin, tax expert and head of the Argentine Tax Institute, told the Herald. “This is just to formalize the exchange and set its details.”
Financial centre
Decades of bank secrecy in Luxembourg helped the country establish itself as one of Europe’s biggest financial centres, making its citizens the EU’s wealthiest in terms of per-capita income.
Germany and the United States, backed by France and other major developed economies, have spent years trying to convince Luxembourg to end bank secrecy, which it agreed to do from 2017.
Such a decision will leave Austria as the only country in the European Union with rules that allow an EU citizen to open a bank account in another EU member state without the tax authority in the person’s country of origin being informed. At the last EU finance ministers meeting, Austria said it could not agree to scrap its rules by 2017 but signalled it may be willing to do so by 2018.
Bank secrecy rules, low taxes and lax regulations have led many Argentine steel companies and software manufacturers to choose to establish their headquarters in Luxembourg, Echegaray said yesterday. Ternium, the society that controls the majority stake in Siderar of Techint, is based in Luxembourgh (Avenue de la Porte-Neuve 29), as is the tech firm Globant (Rue Guillaume Kroll 5), which went was publicly listed in Wall Street a few months ago.
“There are a lot of non-declared assets based in Luxembourg and many people have chosen to save their money there, including Argentine companies. AFIP is trying to have information exchange agreements with as many countries as possible,” Letvin said. “Now they are negotiating one with Hong Kong and Paraguay, Panama, Seychelles and Dubai remain pending.”
