Double Taxation Agreement between Hong Kong and Luxembourg

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Signature of a Treaty to Avoid Double Taxation between Luxembourg and Hong Kong, 2 November 2007.

Hong Kong and Luxembourg have signed on 2 November 2007 an agreement to avoid double taxation and prevent fiscal evasion with respect to taxes on income and capital. The two governments were respectively represented by Prof. K C Chan, Secretary for Financial Services and the Treasury, and Jeannot Krecké, Luxembourg Minister of Economy and Foreign Trade.

The DTA agreement heralds closer economic partnership between the two entities as it provides added investment incentives for Luxembourg and Hong Kong companies to do business in each other’s jurisdiction.

Profits earned by Luxembourg nationals residing in Hong Kong will no longer be subject to taxes both in Hong Kong and Luxembourg as will also Luxembourg companies’ branches established in Hong Kong, which are for the moment fully taxed in both places. Under the DTA agreement, Luxembourg will provide full exemption for such income.

Hong Kong residents or companies receiving dividends from Luxembourg not attributable to a permanent establishment there will see the Luxembourg withholding taxes down from the current 20% to 10%. If the recipient is a company holding 10% or more of the share capital of the paying company (or having invested 1.2 Million Euros or more), the withholding tax will be simply lifted.

Profits from international shipping transport earned by Hong Kong residents that arise in Luxembourg will also enjoy tax exemption under the agreement.

The DTA agreement will come into force on 1 January 2008 for Luxembourg and 1 April 2008 for Hong Kong, subject to completion of ratification procedures in both countries.

This DTA treaty is the second Hong Kong has signed with an EU country after the signature of a similar DTA agreement with Belgium in December 2003.

The full text of the treaty is available on http://www.ird.gov.hk/eng/pdf/luxembourg/pdf.

1. Luxembourg-Hong Kong Comprehensive Tax Agreement, by KPMG Luxembourg (English version)

2. Luxembourg-Hong Kong Comprehensive Tax Agreement, by KPMG Luxembourg (Chinese version)

3. Luxembourg - The Worldwide Gateway to the Asian Market, by Deloitte Luxembourg

updated on 30 June 2008