An Income tax treaty between Luxembourg and the Czech Republic (the "Treaty") was signed in Brussels on March 5th 2013 and it is applicable on income received after January 1st 2015. It replaces the previous tax treaty dating back to 1991 concluded between the Grand Duchy of Luxembourg and the Czech and Slovak Federative Republic. The new Treaty is largely based on the OECD model tax convention except that the standard withholding tax on dividends is 10%. Moreover, it is 0% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which directly holds for an uninterrupted period of at least one year at least 10% of the capital of the company paying the dividends.
"No withholding tax applies on interest payments."
Withholding tax on royalties is 10% but the Protocol to the Treaty provides that if the Czech Republic signs a convention with any other EU Member State which limits the taxation of royalties arising in the Czech Republic to a rate lower than 10%, then this lower rate will automatically apply also to Luxembourg - Czech relations. Further, no withholding tax applies on copyright royalties.
One final interesting point is that the Protocol to the Treaty now complements its article 25 on exchange of information by providing for some further details on the conditions for making a request for information.
