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Double Tax Treaties in Luxembourg

Updated on Wednesday 22nd July 2020

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Luxembourg has concluded more than 70 double tax treaties and nearly 20 such agreements are pending approval. A Convention for the avoidance of double taxation is advantageous for foreign investors from that country who want to open a business in Luxembourg or vice versa. One of our company formation specialists in Luxembourg can provide support and guidance to entrepreneurs from abroad who want to start and register a company in Luxembourg.
 

The provisions of a double tax treaty

 
The model used for the double tax avoidance agreements is in line with the provisions of the Organization of Economic Cooperation and Development. The most important goal of a double taxation treaty is to eliminate double taxation for the same individual or same legal entity. This implies that the Contracting States decide which one will levy a certain tax on the income produced therein. 
 
The withholding taxes on dividends, royalties and capital gains are targeted in all double tax treaties. While both countries impose a normal rate for these types of income, under an agreement of this type the rate will be reduced and in some cases will be even eliminated completely. The types of taxes usually covered by a double tax treaty include the corporate tax, the income tax, the wealth tax, the communal business tax and others. Special provisions within these treaties allow for the prevention of tax discrimination and also for the prevention of tax evasion. Special rules are in place for the exchange of information between the Contracting States. Here is an infographic with information about the main benefits of double tax treaties signed by Luxembourg:
 
The main benefits of double tax treaties in Luxembourg.png
 

Double tax treaties signed by Luxembourg

 
Luxembourg has signed double tax treaties with the following countries: Armenia, Austria, Azerbaijan, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, China, the Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Guernsey, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan Laos, Latvia, Liechtenstein, Lithuania, Macedonia, Malaysia, Malta, Mauritius, Mexico, Moldova, Monaco, Morocco, the Netherlands, Norway, Panama, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Seychelles, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan, Thailand, Trinidad & Tobago, Tunisia, Turkey, United Kingdom, United Arab Emirates, USA, Uzbekistan, Vietnam.
 
Luxembourg has pending double tax treaties with the following countries: Albania, Andorra, Argentina, Botswana, Brunei, Croatia, Cyprus, Egypt, Kyrgyzstan, Kuwait, Lebanon, New Zealand, Oman, Pakistan, Senegal, Serbia, Syria, Ukraine, Uruguay.  
 

What are the provisions of Luxembourg – UAE treaty?

 
The economic collaboration between Luxembourg and the UAE dates for many years and a double taxation treaty signed by both countries strengthened the business relations in varied sectors of interest. The agreement applies to the wealth tax, income tax, communal tax imposed on commercial profits and the corporate tax in the case of Luxembourg. As for the UAE, the DTT covers the corporate and personal income tax. More than that, it is important to know that there is no withholding tax imposed on interests, royalties, and dividends in the case of the UAE. A withholding tax of 15% rate is not applicable if the parent company established in Luxembourg is a resident company in UAE. Branches of companies from the UAE that are established in Luxembourg might be subject to a 5% or 10% withholding tax rate under particular conditions. All the provisions of the double taxation agreement signed between Luxembourg and the UAE can be explained by one of our company formation agents in Luxembourg who can also help you register a company in Luxembourg.
 

The provisions of Luxembourg – Germany DTT

 
The protection of business collaborators and economic partners is important for Luxembourg, and a double taxation treaty that was first signed in 1958 met a series of modifications and updates in terms of provisions. Among these, the withholding tax is reduced from a 10% rate to a 5% rate if the company is a German resident. The agreement signed by Luxembourg and Germany also mentions the protection of the corporate tax, the wealth tax, and the income tax that is applicable to resident companies of both states. More details and information about the double taxation treaty signed by Luxembourg and Germany can be obtained from one of our specialists. You can also ask us about how to set up a fund or about how to open a SARL in Luxembourg.
 

Luxembourg – UK double tax treaty

 
 
The capital gains tax, the corporate tax, the income tax, the development land tax, and the petroleum revenue tax are protected by the double tax treaty signed by Luxembourg and UK, for British companies. We mention that UK companies with establishments in Luxembourg (office buildings, factories, subsidiaries, branches, construction sites) will only be taxed in Luxembourg for the profits generated in this country. The same thing is available to Luxembourg companies registered in the United Kingdom. Furthermore, the provisions of the agreement signed by Luxembourg and UK mention that the royalties which need to be paid to a company from Luxembourg are subject to a 5% tax rate. More aspects related to the provisions of the double tax treaty signed by Luxembourg and the UK can be detailed by one of our company formation representatives in Luxembourg.
 
Luxembourg and the United States of America have agreed upon and signed a double taxation treaty for taxes on income and property. This convention entered into force in January 1964 and it is useful for the prevention of double taxation of individuals doing business and earning income in the two countries as well as for the protection against fiscal evasion.
 
The convention sets forth the manner of taxation, taxes covered, it refers to multiple types of income and it also describes the rules for exchange of information and mutual collection. Our Luxembourg company registration agents can help you understand the implications of this convention, if you are a US foreign investor in Luxembourg.
 

Luxembourg – USA double tax treaty

 
The taxes covered by the double taxation treaty between the US and Luxembourg are as follows:
 
- for Luxembourg: the income taxes on individuals and companies, the taxes on the director’s fees, the communal tax on commercial profits, the wealth tax and the communal tax on invested capital and land;
- for the United States: the federal income tax, including surtax.
 
The treaty also applies to similar taxes or taxes imposed in addition to or in place of the aforementioned taxes. The two countries must notify one another, if any changes occur in their taxation laws.
 
Our Luxembourg company registration agents can give you details about the taxes in Luxembourg applicable for companies and individual.
 
For the purpose of the convention, an enterprise in one of the two states is a legal entity created in that state and organized under the laws of the state. The term “permanent establishment” can refer to a branch in Luxembourg or in the U.S., a place of management, an office, factory or workshop. A resident or company in one of the contracting states is taxed as per the income produced in that state.
 
The treaty for the avoidance of double taxation on income is an effort not only to eliminate the unnecessary payment of the same type of taxes, but also an agreement that encourages international trade and investment in Luxembourg and establishes a series of procedures for the mutual assistance of the tax authorities of the two countries
 

Short facts about taxation in Luxembourg

 
Luxembourg is an appealing business hub that offers great conditions in terms of taxation to international investors. For instance, companies with less than EUR 175,000 taxable income, the corporate income tax of 15% will apply. For companies with taxable incomes between EUR 175,000 and 200,000 must pay EU 26,250 and 31% of the tax base above EUR 175,000. The solidary surtax of a 7% rate is applicable to enterprises registering taxable incomes of EUR 30,000. The municipal income tax of 6.75% is applicable in Luxembourg City, but it varies in each municipality. When it comes to VAT, this one of the lowest among the European countries and it is established at a 17% rate for most taxable goods and services. A reduced VAT tax of 14% rate applies to mineral oils, printed advertising materials, credit administration and more. As for the 8% VAT rate, this is applicable to textiles, art and antiques, leather products, electricity, utilities and many more. The VAT rate of 3% applies to foodstuff, special medical equipment, bars, phone services, etc.
 
  • Below you can find some interesting information and facts about the economy and the investments in Luxembourg:
  • EUR 164,806 million was the FDI stock registered in Luxembourg in 2018;
  • The World Bank 2019 Doing Business report mentions Luxembourg on 66th position among 190 worldwide economies.
  • The government in Luxembourg sustains foreign investments of any kind, among which, the ones in the financial services, biotechnology, and other innovative industries;
  • On the Global Competitiveness Index, Luxembourg ranks 20th.
 
Those interested in more details about the double tax treaties signed by Luxembourg with countries worldwide should address their inquiries to our team. If you are a foreign investor from one of these countries or if you simply want to know more about taxes in Luxembourg and other issues concerning investments you can contact our company registration agents in Luxembourg.
 
Investors who are interested in doing business in other European countries, such as Italy, Poland, Hungary, Luxembourg etc. may find out information about double tax treaties signed by these countries from our local representatives.
 
 

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Contact our specialists in company formation in Luxembourg, who have a large experience in finance and international business. 

Set up an appointment with us at (+352)278 617 15. Alternatively you can incorporate your company without traveling to Luxembourg.
 

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