New Tax Treaties Voted By The Luxembourg Parliament

Draft law 6501 has been voted by the Luxembourg Parliament. This Law of 14 June 20131 implements new tax treaties with:

Germany, Kazakhstan, Macedonia, Seychelles, Tajikistan, Laos, and Sri Lanka, and protocols to existing tax treaties with:

Canada, South Korea, Italy, Malta, Poland, Romania, Russia, and Switzerland These new instruments contain provisions for the exchange of information that are line with Article 26 of the OECD Model Convention.

New tax treaty between Germany and Luxembourg

Under the new treaty, the reduced withholding tax for dividends is lowered to 5% (10% under the current treaty) when the parent company holds 10% of the share capital of the paying subsidiary. The standard rate of 15% for portfolio and partnership dividends remains unchanged. For interests, the treaty provides for a 0% withholding rate whereas royalties are subject to a reduced withholding tax of 5%.

The new treaty attributes the taxing rights to the source State for capital gains on disposal of shares of Real Estate companies deriving more than 50 % of their value directly or indirectly from immovable property situated therein.

Investment funds such as SICAV, SICAF or SICAR are expressly entitled to treaty benefits, namely they can take advantage from the reduced withholding tax rate for interest and dividends. Contractual investment funds such as FCP are also entitled to treaty benefits provided that they are held by persons resident in the country where the FCP is established.

The Luxembourg tax authorities have issued a newsletter on this tax treaty following the publication of the approving law2.

Protocol to the tax treaty between Luxembourg and Russia

The protocol provides for beneficial withholding tax rates which should place Luxembourg on the short list for Russian investors or investments located in Russia, i.e.:

Dividends

Max. 5% (10% under the current treaty) withholding tax when the parent company...