How important are double taxation treaties in Luxembourg? Are we able to use them to the advantage of our clients?

The Grand-Duchy of Luxembourg is the largest centre for private wealth management in the European Union. One hundred and forty two international banks have been established within its borders, and numerous investment funds are domiciled in the country.

As a consequence, Luxembourg has a strong network of double tax treaties developed over several years. As at 26 January 2017, Luxembourg had 80 double tax treaties in force, 57 of which include article 26-5 of the OECD Tax Convention Model. There are 17 double tax treaties pending (under negotiation or not yet applicable).

The double tax treaty network is very useful, but is subject to strict substance requirements, consigning treaty shopping to history. The use of double tax treaties requires demonstration of sufficiently strong links with the residence State.

In this respect, we have to mention the recent adoption by the OECD of a multilateral convention negotiated by more than 100 jurisdictions, allowing a quasi-automatic amendment of all the bilateral tax treaties that are in force between the signatory states.