Luxembourg has published the new protocol to its existing Income and capital gains tax treaty with the UAE. The protocol was signed on 26 November 2014 in Abu Dhabi. The protocol will come into force after the two countries exchange ratification instruments. The provisions of the protocol will have effect from 1 January of the calendar year next following that in which the protocol enters into force.
Among other aspects, the protocol introduces the following:
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elimination of double taxation - Where a Luxembourg resident company receives dividends from a UAE resident company, such income shall be exempt in Luxembourg provided that the recipient holds directly at least 10% of the capital of the company paying the dividends and if this company is subject to income tax in the UAE corresponding to the Luxembourg corporate income tax. However this exemption shall also apply if the UAE company is exempt from tax or subject to tax at a reduced rate provided the dividends are derived out of profits from activities in agriculture, industry, infrastructure or tourism in the UAE
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capital gains - the Protocol specifically refers to gains from the alienation of shares, bonds and other securities or similar instruments that are listed and clarifies that such gains shall be taxable only in the State where the seller is a resident
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exchange of Information - it is brought largely in line with international standards for transparency and exchange of information for tax purposes of the Organisation for Economic Co-operation and Development
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