Tax treaties news

Italy

On 7 April 2017, the Luxembourg tax authorities published an update stating that the amending protocol and exchange of letters, signed on 21 June 2012, to the double tax treaty between Luxembourg and Italy, entered into force on 20 January 2015 and not on 25 October 2014, as previously reported. The protocol clarifies the taxes covered by the double tax treaty and provides for new exchange of information provisions.

Cyprus

On 8 May 2017, a double tax treaty on income and capital was signed between Luxembourg and Cyprus.

The following withholding tax rates will apply under the treaty:

• Dividends: the treaty provides for a standard withholding tax rate of 5% which can be reduced to 0% if the receiving company directly owns at least 10% of the capital of the company paying the dividends.
• Interest: 0%, the treaty provides for an exclusive taxation in the jurisdiction of residence of the beneficiary of the interest.
• Royalties: 0%, the treaty provides for an exclusive taxation in the jurisdiction of residence of the beneficiary of the royalties.

Luxembourg applies the credit and exemption methods for the avoidance of double taxation.

Negotiations

Based on recent public information, Luxembourg has started negotiations to sign new double tax treaties on income and capital with Kosovo, Ivory Coast, the Democratic Republic of Congo and Cuba.

Luxembourg and Norway have also expressed their intention to negotiate an update to the existing double tax treaty on income and capital of 6 May 1983.