2019 Tax Forecasts

OUR INSIGHTS AT A GLANCE

The ratification procedures of the new France-Luxembourg tax treaty and the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS ("MLI") have been launched in the course of 2018 but could not be finalised prior to the end 2018. However, this is expected to happen in 2019. The slightly delayed ratification of these treaties will have an impact on the date as from when the related changes to be introduced will become applicable, most probably and, in most cases, 1 January 2020. Finally, some other tax changes are expected in 2019 following some recent announcements of the Luxembourg government, some of which are planned to be introduced with retroactive effect as from 1 January 2019, such as the 1% decrease of the corporate income tax rate. New France-Luxembourg tax treaty to apply as from 1 January 2020 at the earliest

In October and November 2018 respectively, France and Luxembourg launched the ratification process of the new double tax treaty ("DTT") they signed on 20 March 2018. The aim of the new DTT is to replace the existing treaty that was signed in 1958, and amended 4 times in subsequent years. The DTT follows the structure and, for the most part, the content of the 2017 OECD Model Tax Convention.

Since both France and Luxembourg did not manage to finalise the ratification process and exchange the instruments of ratification prior to the end of 2018, the new DTT has not yet entered into force and thus did not become applicable as from 1 January 2019, as initially expected. Instead, provided the instruments of ratification will be exchanged before the end of 2019, the new provisions will apply as from 1 January 2020.

The DTT shall enter into force on the date on which the latter of these notifications has been received. Assuming that this will take place in the course of 2019, as far as Luxembourg is concerned, the new DTT shall have effect as follows:

in respect of taxes withheld at source, for income derived on or after 1 January 2020; and in respect of other taxes on income and taxes on capital, for taxes chargeable for any taxable year beginning on or after 1 January 2020. To get an overview of the provisions of the new DTT, please read our 16 November 2018 tax alert: https://www.atoz.lu/sites/default/files/atoz_articles/atoz-alert-16112018-lux-france-dtt.pdf

MLI will impact covered tax treaties by 1 January 2020 at the earliest

The draft law ratifying the Multilateral...