Andorra
Details have been published on the double tax treaty signed between Andorra and Luxembourg on 2 June 2014.
The following withholding tax rates apply under the new treaty:
Dividends: The treaty provides for a standard withholding tax rate of 15% which can be reduced to 5% if the beneficial owner is a company (other than a partnership that is not liable to tax) which directly holds at least 10% of the capital of the company paying the dividends or to 0% if the beneficial owner holds, directly and uninterruptedly, for at least one year, at least 10% of the share capital of the company paying the dividends or a participation with an acquisition cost of at least EUR 1.2 million in the company paying the dividends.
Interest: The treaty provides for a 0% rate on interest payments.
Royalties: The treaty provides for a 0% rate on royalties.
Luxembourg and Andorra apply both the exemption and credit methods for the avoidance of double taxation.
Brunei
Details have been published on the double tax treaty between Brunei and Luxembourg on Income and Capital signed in Brussels on 14 July 2015.
The following withholding tax rates apply under the new treaty:
Dividends: The standard withholding tax rate is 10%. However, if the beneficial owner of the dividends is a company (other than a partnership) and holds a direct holding of at least 10% of the share capital of the company paying the dividends for an uninterrupted period of at least one year, the treaty provides for a 0% rate.
Interest: The treaty provides for a standard withholding tax rate of 10% on interest payments, which can be reduced to 0% on interest paid to financial institutions, mutual funds or government bodies, among others.
Royalties: The treaty provides for a 10% rate on royalties.
Luxembourg applies the credit and exemption-with-progression methods for the avoidance of double taxation whereas Brunei applies the credit method for the avoidance of double taxation.
Colombia
On 7 October 2015, Colombia and Luxembourg expressed their intention to negotiate and sign a tax treaty. Further details will be reported in a later edition, once available.
Hungary
Details have been published on the tax treaty between Hungary and Luxembourg on Income and Capital signed on 10 March 2015.
The treaty generally follows the OECD standard and the following withholding tax rates apply under the new treaty:
Dividends: The standard withholding tax rate is 10% which can be reduced to 0% if the beneficial owner is a company (other than a partnership that is not liable to tax) which directly holds at least 10% of the capital of the company paying the dividends.
Interest: 0% on interest
Royalties: 0% on royalties
The treaty provides that both states apply the credit and exemption-with-progression methods for the avoidance of double taxation.
Once in force, the treaty will replace the double tax treaty of 15 January 1990.
Moldova
On 26 August 2015, the Luxembourg and Moldovan governments entered into negotiations in order to revise the double tax treaty between Moldova and Luxembourg on Income and Capital signed on 11 July 2007. Details will be reported subsequently.
Spain
The double tax treaty concluded by Luxembourg and Spain on 3 June 1986 was complemented by a protocol of the same date (the “First Protocol”) and a protocol dated 10 November 2009 on exchange of information (the “Protocol”).
The First Protocol provides that the treaty is not applicable to so-called “1929 holding companies”, subject to the Law of 31 July 1929 (since repealed).
The Luxembourg tax authorities issued the Circular L.G.-Conv. D.I. n°52 (the “First Circular”) dated 10 May 2000 according to which the treaty applies to UCITS (as defined under Section VIII of the Council Directive 85/611/CEE dated 20 December 1985).
Following an exchange of letters between the Spanish and Luxembourg tax authorities, the Luxembourg tax authorities issued a new Circular on 21 July 2015 which replaces the First Circular and confirms that the treaty does not apply to SICAVs and SICAFs subject to part II of the Law of 17 December 2010 on UCIs or SICAV/SICAF which are specialised investment funds (SIFs) subject to the Law of 13 February 2007, as amended. The Circular further confirms that the treaty does not apply to SPFs (sociétés de gestion de patrimoine familial), subject to the Law of 11 May 2007, which replaced the 1929 holding companies.
However, the treaty and its Protocol remain applicable to SICAFs/SICAVs regulated by part I of the Law of 17 December 2010 on UCIs.
Ukraine
On 22 September 2015, Luxembourg and Ukraine initialled a new double tax treaty on Income and Capital. The first treaty signed between Luxembourg and Ukraine on 6 September 1997 never came into force. Details on this new tax treaty will be highlighted in a later edition.
United Arab Emirates
Details have been published on the protocol amending the double tax treaty between Luxembourg and United Arab Emirates signed on 26 October 2014.
The protocol provides that gains derived from the alienation of shares, bonds and any other securities or similar instruments which are listed on a recognised stock exchange in a contracting state shall be taxable only in the residence state of the alienator.
However, all other gains derived from the alienation of shares in a company which are not in the scope of paragraphs 1 to 4 of Article 13 of the treaty on capital gains, such as bonds and similar instruments, shall be taxable only in the state of residence of the seller.
The protocol further provides that Luxembourg will not grant any tax credit in order to avoid double taxation in the case of business profits and capital gains resulting from agricultural, industrial, infrastructure or tourist activities derived from a permanent establishment based in the United Arab Emirates.
Article 4, the protocol expands the list of financial institutions which are exempt from dividend withholding tax.
Article 26 of the treaty is replaced by a new provision on exchange of information in line with Article 26 of the OECD Model Standard of 2014.
This protocol was submitted to the Luxembourg Parliament for ratification and approved by the United Arab Emirates earlier this year. This protocol will become effective on 1 January of the calendar year following the year of its entry into force.
