Double taxation treaty between Ireland and Luxembourg

Irish and Luxembourgian Plenipotentiaries met on the 14th of January 1972 to sign the Double taxation agreement between Ireland and Luxembourg. Their goal was to avoid double taxation and fiscal evasion in regards to capital gains and income of their nationals. Over the years, the bilateral ties of the two countries have strengthened. Both countries are members of the Organisation for Economic Co-operation and Development, the Council of Europe, and the European Union.
 
It is very important for investors in Ireland and Luxembourg to know the terms of the Double taxation treaty—they can significantly benefit from the treaty’s provisions.
 
Irish Tax Regime

  • The income tax(including sur-tax)

Income tax is charged on the gross income earned by an entity from its business activities within Ireland

  • The corporation tax

Businesses resident in Ireland will be taxed on trading profits they receive from their activities.
 
Luxembourg Tax Regime

  • The income tax

Income tax is charged on the gross income earned by an entity from its business activities within Luxembourg

  • The corporation tax

Businesses resident in Luxembourg will be taxed on trading profits they receive from their activities. 

  • tax on fees of directors of companies 

This tax is charged on director’s fees and respective payments. The tax goes to the country in which the company where the director works is a resident.

  • the capital tax

Capital gains tax is applicable on the revenue gained from asset disposal.  

  • the communal trade tax on profits and capital 

 
In the case that any of the two countries introduce new tax regimes, they will notify each other annually of any changes that may have transpired in their respective taxation regulations. Nonetheless, the Double taxation treaty will still continue to be relevant.
 
Special Provisions For Non-Residents

  • People who reside in Luxembourg will be entitled to the exact allowances, reductions, and reliefs for the purpose of Irish Tax as Irish citizens who are not residents of Ireland,
  • People who reside in Ireland will also be entitled to the exact personal allowances, reductions, and reliefs for the purpose of Luxembourg tax as those to which Luxembourg nationals not resident in Luxembourg may be entitled.

 
6 facts you should know about the Ireland-Turkey Double tax treaty

  1. Profits derived from immovable property should be taxed in the country in which the property is located.
  2. Income derived from the operation of aircraft, ships, and road transport vehicles shall only be taxed in the respective resident country.
  3. A business entity can only be considered as an Irish resident if its business operations are conducted and managed in the Irish territory. 
  4. A company or business shall only be considered a Luxembourgian resident, provided that it’s influential management is located in Luxembourg.
  5. If a company is conducting business activities in either Ireland or Luxembourg through an agent of independent statuses such as a broker or commission agent—it does not automatically become a permanent establishment in the state in which it is operating. The same applies to an entity which is controlled or controls a resident of either the two countries—it does not automatically become a permanent establishment in the state where it is controlling or in the state from which it is controlled.
  6. The profits of an Irish or Luxembourgian business are only taxable in the respective countries unless the business conducts business operations either of the two countries through a permanent establishment situated therein. The tax charged in the country where the permanent establishment is located should only be limited to the profits acquired from the establishment.

 
Conclusion
As two smaller member states of the European Union, Ireland and Luxembourg share many similar challenges and advantages. The two countries have excellent diplomatic relations and the double tax treaty just intensifies the bilateral ties between the two. To learn more about all the provisions of the Ireland-Luxembourg double tax agreement, you can reach out to our expert consultants at SIGTAX.

 

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