Do investors in Luxembourg funds pay tax?
Investors in Luxembourg funds pay taxes in their own country
The vast majority of Luxembourg funds are sold through banks and insurance companies throughout Europe and around the world. From a Luxembourg perspective, the “owners” of the funds are regulated banks and insurance companies. In turn, these “distributors” then sell the funds to their clients, either individuals or companies, who hold the shares of the funds in bank accounts within their home country. Tax declarations and reporting take place in the home country of the client. Consequently, Luxembourg funds are typically held by supervised financial institutions, who, in turn, sell them to their clients. These clients then make their fiscal declarations in their home country.
Investors in Luxembourg funds fall under the European Savings Directive
For the minority of private clients who hold funds in their own name, since 2005, resulting interest payments are covered by the European Savings Directive. This means they do not escape taxation.
Investors in Luxembourg funds cannot hide behind “banking secrecy”
As of January 2015, Luxembourg automatically reports bank accounts and financial holdings for European nationals to the fiscal authorities of their home countries. In practice, banking secrecy does not exist in Luxembourg.
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