Double tax treaty between Luxembourg and Taiwan

The Grand Duchy of Luxembourg has ratified the first double tax treaty (the "Treaty") with Taiwan on 12 July 2014. Taiwan had already signed the Treaty and its protocol. Accordingly, the new Treaty will come into force on 1 January 2015.

The Treaty joins in a long list of over 70 comprehensive double tax treaties entered into by Luxembourg, all of which contribute to Luxembourg's unrivalled position as a major hub of international trade in the sectors of banking and finance, investment funds and holding companies. It is the 27th comprehensive double tax treaty agreement entered into by Taiwan and the 12th such treaty it has signed with a European country.

The main features of the Treaty include a reduction of withholding tax rates for dividends, interests and royalties to 10% (domestic rates in Taiwan are generally 20% or 15%; Luxembourg does either not levy withholding tax or provide in exemptions for distributions to treaty jurisdictions under certain conditions) or 15% (if the beneficial owner of the dividends or interest is a collective investment vehicle established in the other territory and treated as a body corporate for tax purposes in that other territory).

Capital gains in respect of movable assets may be taxed in the territory where the asset is situated (since that territory has the right to tax both the property and the income derived therefrom, without regard to the question whether such gain is a capital gain or a business profit). The influence of the OECD model can also be seen in the provision on exchange of information.