Taxand Luxembourg and Taxand Cyprus examine the most relevant clauses of the Lux/Cyprus DTT.
On 8 May 2017, Luxembourg and Cyprus signed their first double tax treaty (Lux/Cyprus DTT). Through this tax treaty, both countries aim to strengthen their economic and commercial relationship. While Cyprus broadens its tax treaty network as Luxembourg was one of the few EU countries with which it had not yet signed a double tax treaty, Luxembourg fills the only remaining gap in its network of tax treaties with EU Member States.
On 7 June 2017, both Luxembourg and Cyprus also signed the multilateral convention (the MLI) to implement tax treaty related measures aimed at preventing Base Erosion and Profit Shifting (BEPS). However, neither of the 2 States listed the Lux/Cyprus DTT as a convention covered by the MLI given that the lists of covered tax treaties only contain tax treaties in force. As a result, once ratified, the MLI will not modify the Lux/Cyprus DTT.
However, the Lux/Cyprus DTT already provides for the OECD’s BEPS recommendations. In addition, the Lux/Cyprus DTT generally follows the OECD Model Convention and includes the latest international standards with regard to exchange of information. To the extent the ratification process is completed by both Luxembourg and Cyprus before the end of 2017, the Lux/Cyprus DTT will apply as from 1 January 2018.
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The Lux/Cyprus DTT is a new tool for international structuring. Taxand Members in Luxembourg and Cyprus are at your disposal to elaborate further on the impact which the Lux/Cyprus DTT might have on your existing business or to discuss the new business opportunities that may arise between those two countries.
