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Friday, 24 July 2020

Luxembourg introduces register for trusts and fiduciary arrangements

A new Luxembourg law (the “Trusts Register Law”), dated 10 July 2020, was published on 13 July 2020 and is in force since 17 July 2020.

Whereas the Trusts Register Law strengthens the former obligation for fiduciaries to collect and keep certain information (under the law dated 10 August 2018 that it repeals and replaces) with an extension to trustees, the Trusts Register Law mainly introduces a Luxembourg register for fiduciary arrangements and trusts (the “Trusts Register”).

Following the transposition of Article 30 of Directive (EU) 2015/849 and implementation of the Luxembourg ultimate beneficial owners Register January last year, the Trusts Register Law finalises the transposition of Article 31 of the same Directive in Luxembourg law. It represents a new milestone for Luxembourg’s legal system against money laundering and terrorism financing and contributes to a further transparency of assets and their effective owners.

Whereas the Trusts Register Law mainly focusses on trusts and fiduciaries administered from Luxembourg, the Trusts Register Law also creates filing obligations for foreign trusts with the Trusts Register, when those entered into a business relationship with a Luxembourg professional (as defined in part 1 below).

The Trusts Register Law mainly covers the information on beneficial owners to be collected and kept by fiduciaries and trustees, the implementation of the Trusts Register, the filings and regular updates to be made with the Trusts Register, as well as the access to this information.

The Trusts Register Law specifies that the Trusts Register is administered by the indirect tax authorities (Administration de l’Enregistrement, des Domaines et de la TVA) and several implementing rules still need to be further specified in a future Grand Ducal Regulation.

1. Scope of the Trusts Register Law and definitions

The Trusts Register Law includes in its scope:

  1. The fiduciary agreement in the meaning of the Luxembourg law dated 27 July 2003 on trusts and fiduciary agreements, i.e. a contract by which a person, the settlor (“fiduciant”), agrees with another person, the fiduciary (“fiduciaire”), that, subject to the rights and obligations determined by the parties, the fiduciary becomes the owner of assets which shall form the fiduciary property;
  2. The express trusts for which a trust is clearly established by a settlor, usually by way of a trust agreement such as a written act of creation of the trust, by opposition to implied trusts created by the operation of law, without the specific will of a settlor to set up a trust or a similar institution;
  3. Any arrangement assimilated to a trust or fiduciary arrangement due to such arrangement presenting a similar structure and function. An arrangement is usually assimilated when it allows a person to build legal relationships having for effect to put assets under the control of a third party for the benefit of a beneficiary or for a determined purpose, and when it presents the following characteristics:

    a. The assets put under control of the third party represent a distinct pool of assets without belonging to the third party;
    b. The title relating to the property under the control of the third party is in the name of the third party or another person on behalf of the third party;
    c. The third party is vested with the power and charged with the obligation, for which it is accountable, to administer, manage or to dispose of the property under its control in accordance with the terms of the legal structure and the special rules imposed on the third party by the law.

For easier reference, fiduciary arrangements, express trusts and arrangements assimilated to a trust or fiduciary arrangement are together referred below as “Trust(s)”.

The notion of professional should be defined by reference to the Article 2 of the amended law dated 12 November 2004 on the fight against money laundering and terrorism financing (the “AML Law”) (i.e. credit institutions, accountants, notaries, lawyers, etc.)

National authorities include, notably, public prosecutors, judges, CSSF, or the Luxembourg tax authorities.

Self-regulated bodies refers to a body, composed of members of a profession it represents, that has a role in regulating them, in performing certain supervisory or monitoring type functions and in ensuring the enforcement of the rules specific to that profession. It includes for example, the Luxembourg Bar Association or the Chamber of Notaries.

2. Information to be collected and kept by the fiduciaries and trustees

Fiduciaries and trustees shall collect information on the beneficial owners of any Trust administered from Luxembourg for which they occupy the function of fiduciary or trustee.

The Trusts Register Law considers the below persons as ultimate beneficial owners (“UBO”) of a Trust:

  • the settlor(s);
  • the fiduciary(ies) or trustee(s);
  • the protector(s), if any;
  • the beneficiaries, or the class of beneficiaries; and
  • any other natural person exercising an ultimate control over the Trust by means of direct or indirect ownership, or by other means.

When a natural person occupies these positons or exercises these functions, the information to be kept by the fiduciary or trustee includes:

  • family name;
  • surname;
  • nationality;
  • date and place of birth;
  • country of residence;
  • private or professional address;
  • national identification number;
  • nature of his or her involvement in the Trust; and
  • nature of his / her effective interest held in the Trust.

When these positions and/or functions are occupied or exercised by a legal entity, the following information of such entity must also be kept by the fiduciary or trustee:

  • its corporate name;
  • its registered office address;
  • its Luxembourg or foreign (company) identification number;
  • the nature of its involvement or position towards the Trust; and
  • the nature of its effective interest, if any, held in the Trust.

In addition to the information regarding UBOs, trustees and fiduciaries shall collect and keep as well (basic) information on foreign professionals or entities providing services to - or entering into a business relationship with - a Trust administered in Luxembourg. Those foreign professionals or entities are those which, if established in Luxembourg, would be considered as falling into the scope of the AML Law.

All the collected information has to be adequate, accurate, up-to-date and kept for 5 years following the termination of their involvement in the Trust. It shall be shared with the national authorities and self-regulated bodies upon their demand.

When required, the information concerning the UBOs, as well as information regarding the substance of the assets managed by the Trust shall also be shared with Luxembourg professionals to enable them to fulfill their obligations under the AML Law.

3. Filing obligations with the Trusts Register

The Trusts that would become subject to registration are the following:

  1. Any Trust for which a fiduciary or a trustee is established or domiciled in Luxembourg
    (unless a proof of registration in the trusts register of another EU Member State is provided by the fiduciary or the trustee)
  2. Any Trust for which the fiduciary or trustee is established outside of the EU, when the fiduciary or trustee enters into a business relationship with a professional in Luxembourg or acquires a real estate property in Luxembourg, on behalf of the Trust.
    (unless a proof of registration in the trusts register of another EU Member State is provided by the fiduciary or the trustee)

Upon its registration, the Trust receives a unique (Luxembourg) registration number and it is then required to file and maintain up-to-date information including:

  • its registration number;
  • its name (if any);
  • the date on which it was settled;
  • the information on its UBO(s) (see section 2 above); and
  • whether the Trust owns (directly or indirectly) a controlling interest in a company established outside of the EU.

The registration and filings need to be made within one month following the event giving rise to such registration and filling on the portal MyGuichet.lu

4. Access to the information of the Trusts Register

National authorities and self-regulated bodies have access to all the information filed in the Trusts Register.

Professionals have also access to the same information in order for them to fulfill their obligations under the AML Law.

Unlike the UBO Register which grants a public access, (duly identified third parties) can only be granted access to a Trusts Register’s file upon specific demand and provided they can demonstrate a legitimate interest related to the fight against money laundering and terrorism financing. The existence of a legitimate interest should be analyzed on a case-by-case basis.

Nevertheless, information on Trusts owning (directly or indirectly) a controlling interest in a company established outside of the EU shall be accessible by any person upon written demand and payment of a fee.

Subject to the above restrictions, people may access all the information of a given file kept by the Trusts Register, except the (i) exact private or professional address, identification number of the UBO(s), day and place of birth for natural persons and (ii) registered office address for legal entities.

UBOs may file a request to the indirect tax authorities to make the information only accessible to the national authorities, self-regulated bodies, financial institutions, notaries and bailiffs, when the access by other persons would carry a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence, intimidation, or when the UBO is a minor.

5. Sanctions

In case of non-compliance with the Trusts Register Law, a number of administrative sanctions, including a fine of up to EUR 1,250,000, can be imposed to fiduciaries and trustees as well as to members of their governing bodies or other persons non complying with their obligations.

These possible sanctions are:

  • a warning;
  • a reprimand;
  • “name and shame” publications;
  • administrative fines up to twice the amount of the benefit from the violation, where it can be determined, or a maximum amount of 1,250,000 euros.

Sanctions can also be applied to persons who make inappropriate use of the information, i.e. for other purposes than those for which access was granted.

Tiberghien Luxembourg remains committed to monitor the legal and practical implementation of the register for fiduciary arrangements and trusts within Luxembourg (and within other EU Member States).

For any questions, please contact your trusted advisor at Tiberghien Luxembourg or contact any of the authors of this publication.

Michiel Boeren – Partner (michiel.boeren@tiberghien.com)

Maxime Grosjean - Senior Associate (maxime.grosjean@tiberghien.com)

Madeline Morel - Associate (madeline.morel@tiberghien.com)

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