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Change to the tax treatment of US branch structures


On 22 June 2016, a draft law was submitted to the Luxembourg Parliament anticipating an upcoming amendment to the US-Luxembourg double tax treaty (DTT). Taxand Luxembourg explains the amendment. 

The aim of this amendment is to stop situations of double non-taxation resulting from different interpretations of the permeant establishment (PE) concept in Luxembourg and the United States.

Example: Status quo

  • US-source income is paid to a Luxembourg resident company that is exempt under Luxembourg tax law and the applicable DTT as it is considered to be attributable to a PE in the US
  • At the same time, under US law, no taxable presence exists and the income is exempt in the US
  • Under these circumstances, neither the US nor Luxembourg would tax the income realised through the activities performed by the PE. This situation would result in double non-taxation 

Discover more: Change to the tax treatment of US branch structures under US-Luxembourg tax treaty

Your Taxand contacts for further queries are:
Keith O’Donnell
T. +352 26 940 257

Ernesto R. Perez
T. +1 305 704 6720

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Taxand's Take

Taxpayers that have implemented US branches of Luxembourg companies into their structure should already be aware of the on-going discussions regarding the US-Luxembourg DTT initiated by the US Internal Revenue Service more than a year ago.

Taxand's Take Author

Keith O'Donnell
Taxand Board member & Taxand global real estate tax service line leader

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