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Luxembourg Tax News 2014-17

Luxembourg Tax News 2014-17



Pierre Kreemer

Partner, Head of Real Estate

KPMG in Luxembourg


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Double Tax Treaty: fourth protocol between France and Luxembourg

On 5 September 2014, the fourth protocol to the 1958 France-Grand Duchy of Luxembourg income and capital tax treaty (hereafter the “Treaty”) was signed in Paris by MM. Michel Sapin, the Ministre des Finances et des Comptes publics of France, and Pierre Gramegna, the Ministre des Finances of the Grand Duchy of Luxembourg.

Article 3 of the Treaty has been supplemented by a fourth point stating that gains, derived from the alienation of shares or other rights in a company, or any other legal person, the assets of which are composed, in value, for more than 50% - directly or through the interposition of one or more other companies or legal persons - by immovable property situated in a Contracting State, or by rights pertaining to such immovable property, are only taxable in that State. This provision applies whether the seller is a legal or a natural person. Immovable property allocated by such a company to its own business is however not taken into account in this respect.

This amendment ends potential situations of double non-taxation by granting France the taxation right of capital gains realized by Luxembourg companies on the direct or indirect sale of shares in French real estate companies, including shares in SCIs, sociétés civiles immobilières, the value of which is composed by real estate properties located in France for more than 50%.

Furthermore, the protocol states its provision should not conflict with the Council Directive 2009/133/CE on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office of an SE or SCE between Member States.

This new provision will be applicable to income pertaining to the year following the year in which the protocol has entered into force. Consequently, it may come into force on 1 January 2015, subject to the ratification process being finalized by the end of this year.


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Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough


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