Amendment to the Luxembourg-France Tax Treaty

25 September 2014

On September 5th,  2014, France and Luxembourg signed a 4th Protocol to the Tax Treaty of April 1st,  1958 and definitively  put an end to tax planning schemes involving French real estate assets.

If the 3rd Protocol signed on November 2006 clarified the taxation of income deriving from the detention of a French real estate, this Protocol is in line with OECD Model Tax Convention and puts an end to the current double non-taxation of real estate capital gains deriving from the transfer by a Luxembourg tax resident of the shares of a French company helding  real estate.

According to this Protocol, “Profits derinving from the disposal of shares, units or other rights in a company, trust or any other institution or entity, whose assets or property are made up of more than 50 per cent of their value or hold more than 50 per cent of their value – directly or indirectly through one or more other companies, trusts, institutions or entities – of real estate situated in a Contracting State or of rights in such property shall be taxable only in that State“.

This protocol, applying the conventional practice of France, would enter into force, at the earliest, on January 1st, 2015 if France and Luxembourg ratified this amendment by the end of 2014.

Through our Bird & Bird network, we are able to offer you assistance, and answer yours questions regarding these new measures.

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