Luxembourg - Germany: new tax agreement


On April the 23rd  2012, Luxembourg and Germany signed a new agreement against double taxation which, once ratified by the Contracting Parties, will abrogate the 1958 treaty. The most important modifications are:

  • The tax withholding on dividends goes from 10% to 5% if the economic beneficiary is a company resident in the other Contracting Party and that the latter holds a minimum of 10% in the company paying the dividends.
  • No tax withholding on interest payments and a 5% tax withholding on the payment of royalties.
  • The rule applicable to dividends and interests shall apply by analogy to the Unit trust- Specialised Investment Funds and Joint Venture Investment Trust, as well as to the Mutual Funds subject to compliance with certain conditions.
  • Income earned on convertible or participatory bonds will be treated as interests, and therefore will not be subject to tax withholding.
  • Capital gains on share transfers whose value is at least 50% (directly or indirectly) of real estate assets located in the territory of a Contracting Party shall be taxed according to the tax law of the location of the real estate.
  • Limitation of the concept of permanent setting-up for the construction works to a minimum of 12 months (instead of the six months of the previous treaty).