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Luxembourg-Germany Double Tax Treaty

Luxembourg-Germany Double Tax Treaty

The Federal Republic of Germany and the Grand Duchy of Luxembourg signed a new agreement for the avoidance of double taxation with respect to the taxes on income. The new agreement replaces the first one signed between the two countries in 1958, it has a new structure and new principles in line with those imposed by the double tax agreement policy between the two countries.

The new agreement not only protects individuals and companies from double taxation, but it is also a facilitator of the economic relations between Luxembourg and Germany. Our lawyers in Luxembourg can give you more information about the legislation for foreign investments in this country as well as more details about the other double tax agreements (DTA) concluded by the Grand Duchy.

The taxes covered by the double tax agreement

The agreement applies to individuals who are residents of one or both contracting states. For the purpose of the treaty, a “national” of the Federal Republic of Germany is an individual who possesses citizenship or a legal person, partnership or other legal entity established according to the laws of Germany. A “national” in Luxembourg is a natural person who is a Luxembourg citizen or a legal person/partnership incorporated under the laws applicable in Luxembourg.

The taxes for which the convention applies, in case of Luxembourg, are:

– the income tax;

– the corporation tax;

– the business tax;

– the wealth tax.

In the Federal Republic of Germany, the convention applies to the following taxes:

– the income tax;

– the corporate tax;

– the business tax and the wealth tax, including any supplements levied on these taxes.

If you are a foreign investor, our attorneys in Luxembourg can give you detailed information about the taxation laws and tax compliance for companies and individuals.

Taxation according to the treaty and other principles

The double tax agreement between Luxembourg and Germany provides certain withholding taxes for dividends, royalties and interests. According to the treaty, the withholding tax rate for dividends is 5%, if certain conditions are met by the company receiving the dividend payments. Otherwise, the standard treaty rate for dividend payments is 15%. The agreement establishes a withholding tax rate for interest of 0% and a 5% reduced withholding tax rate for royalty payments.

The treaty also establishes the taxation for capital gains derived from selling real estate in Luxembourg or Germany. Thus, according to the treaty, capital gains are only taxable in the country where the real estate is located.

For more information about the principles for the avoidance of double taxation, you can contact our lawyers in Luxembourg.