Double Tax Treaty between Germany and Luxembourg enters into force

The new Double Tax Treaty (DTT) for the avoidance of double taxation and the prevention of fiscal evasion with the respect to taxes on income and on capital between Germany and Luxembourg signed on 23 April 2012 entered into force on 30 September 2013 after the exchange of the instruments ratification had taken place.

The new DTT Luxembourg-Germany is applicable as of 1 January 2014 in order to directly follow the Treaty of 1958.

The new DTT corresponds in the main to the OECD Model Tax Convention.

It fixes the withholding tax rate for dividends at 15%. In case of direct shareholdings in a company (with the exception of partnerships and investment companies) of at least 10%, the withholding tax rate is reduced to 5%. In addition, a reduction of withholding tax rate according to EU Parent Subsidiary Directive has to be reviewed on a case to case basis. The withholding tax rates for interest and for licenses remain unchained at 0% and 5% respectively.