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France Suggests Changes to France-Lux DTT


The French authorities have recently announced that they wish to renegotiate the provisions of the France-Luxembourg Double Tax Treaty ("DTT"), dealing with the taxation of capital gains on French real estate. Even though the outcome of any negotiation is difficult to predict, Luxembourg tax payers, currently investing or willing to invest in French real estate should remain vigilant, as they may soon be impacted by this change. Taxand Luxembourg looks at the terms of the DTT to ascertain which taxpayers would be affected if the current provisions were to be amended.

The French tax authorities wish to amend the DTT in such a way that the capital gains realised by Luxembourg tax payers on the sale of shares in French real estate companies holding French real estate would become taxable in France.

As of today, the situation is such that, when a Luxembourg Company holds French real estate indirectly via a French real estate company, when the Luxembourg Company sells the shares in the French real estate company, no taxation occurs on the capital gains in neither of the countries. This is due to the fact that the taxing right is generally granted to Luxembourg, which exempts the capital gains under certain conditions.

Taxand's Take

The potential amendment to the DTT would therefore mean an increase of the tax burden on such real estate investment structures (due to the proposed taxation of the income in France). Taxpayers should consider either carefully reviewing the investment structures they have already in place with their tax advisers or reconsider any structuring of French real estate investments for the near future.

Your Taxand contact for further queries is

Keith O'Donnell
T. +352 26 940 257


Taxand's Take Author