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Luxembourg Expands Tax Treaty Network


Luxembourg has concluded a great deal of Double Tax Treaties ("DTTs") - there are currently 62 in force - and is working towards expanding its DTT network. The most recently concluded treaties include the DTTs with Panama and Barbados. Taxand Luxembourg looks at these treaties in respect of compliance with the OECD, and what impact this might have on foreign investment.

Barbados and Luxembourg signed an income and capital tax treaty and an exchange of notes on 1 December 2009. The DTT has now been ratified by Luxembourg. In order to avoid double taxation, Luxembourg has committed to apply the exemption with progression method, except for dividends and income from artists and sportpersons where the credit method applies. As far as interest and royalties are concerned, since they are exempt from tax in Barbados, they will be fully taxable in Luxembourg.

Panama and Luxembourg signed an income and capital tax treaty and protocol on 7 October 2010 which has now been ratified by both states. The new DTT will enter into force 3 months after its ratification and should apply as of 1 January 2012.

Luxembourg has also renegotiated some of its DTTs (28 DTTs so far) in order to render the exchange of information and transparency provisions in compliance with OECD standards.

Taxand's Take

It is positive that Luxembourg is fully complying with the OECD requirements in regards to transparency. This could lead to an expansion of the Luxembourg DTT network and ultimately, the attraction of new foreign investments to Luxembourg. Luxembourg continues to negotiate new DTTs (currently with Sri Lanka and the Seychelles).

Read the full article from Taxand Luxemburg to understand more

Your Taxand contacts for further queries are:
Paul Chambers
T: +352 26 940 364

Samantha Nonnenkamp
T: +352 26 940 23

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