The Luxembourg treaty network is in constant development as a result of political and economic objectives. And now, the multilateral instrument is part of the tax treaties bringing additional complexity to the topic.
83 Luxembourg tax treaties – 69 Covered Tax Agreements*
- Trinidad and Tobago
- Czech Rep.
- Isle of Man
- San Marino
- Hong Kong
- Sri Lanka
- Saudi Arabia
- South Africa
- United Arab Emirates
- Cape Verde
- New Zealand
Covered tax agreements Non-covered tax agreements
* As at 15 January 2021: 69 CTAs / 83 tax treaties (treaty with Mongolia terminated by Mongolia with effect as from 1.1.2014
** Bahrain signed the MLI on 27.11.2020
*** Jurisdiction having expressed its intent to sign the MLI
**** New Protocol ratified
The latest developments on MLI – timing aspects
The Luxembourg tax authorities published synthesized texts of the MLI-affected treaties. Different types of taxes mean different timing of application. Below we break down the timing application in Luxembourg* of certain key MLI-affected treaties.
- Belgium: WHT: 1 January 2020 / All other taxes: taxable period starting as from 1 April 2020
- Canada: WHT: 1 January 2020 / All other taxes: taxable period starting as from 1 June 2020
- Ireland: WHT: 1 January 2020 / All other taxes: taxable period starting as from 1 February 2020
- India: WHT: 1 January 2020 / All other taxes: taxable period starting as from 1 April 2020
- Malta: WHT: 1 January 2020 / All other taxes: taxable period starting as from 1 February 2020
- Netherlands: WHT: 1 January 2020 / All other taxes: taxable period starting as from 1 February 2020
- United Kingdom: WHT: 1 January 2020 / All other taxes: taxable period starting as from 1 February 2020
Note that some of the provisions of the MLI take effect on different dates for the other jurisdiction, depending on the type of taxes involved and the choice made by the jurisdiction.
Luxembourg and Russia: what’s the new protocol?
Signed on 6 November 2020 and ratified by both Russia and Luxembourg, the protocol will entry into effect for taxable periods starting as from 1 January following the exchange of ratification instruments, i.e. 1 January 2022
Dividends WHT reduction to 5% only applicable to:
- an insurance institution or a pension fund;
- a publicly listed company*;
- a government, its political subdivision or local authorities or the Central Bank.
Interest WHT full exemption only applicable to:
- entities listed above, except publicly listed companies* (the latest could benefit from reduction to 5%)
- government bonds, corporate bonds and external loan bonds (Eurobonds).
Beneficial ownership requirement for the recipients:
The concept of beneficial owner is a topic of high interest in recent case law and tax authorities’ practice, with different interpretations and approaches followed. A case by case analysis is necessary.
* The definition of publicly listed companies applies if at least 15% of company shares are in the free float on registered stock exchange and if the company’s stake in a dividend payer is at least 15% and the period of ownership has been at least one year.
Table of contents
Updates on double tax treaties and MLI