Singapore-Luxembourg Double Tax Treaty

The new Singapore-Luxembourg double taxation agreement

Singapore and Luxembourg have signed their first treaty on the avoidance of double taxation in 1993. The agreement was enforced three years later, in 1996 by both states. In 2013, the two countries have started negotiations on a new double tax treaty which was enforced last year and became effective at the beginning of 2016. The new Singapore-Luxembourg double tax convention contains a few modifications, among which the most important are the revised reduced rates on royalties payments.

Our lawyers in Singapore can provide you with more information about the new provisions of the double tax agreement with Luxembourg.

What does the new Singapore-Luxembourg double tax convention cover?

Singapore has started to amend its double taxation agreements in order to provide for more advantageous conditions for foreign investors coming to the city-state and for local companies expanding their operations abroad. The new tax convention with Luxembourg covers the following:

• -          individuals residing in Singapore and Luxembourg;
• -          legal entities registered in one or both contracting states.

With respect to the taxes covered by the double taxation treaty between Singapore and Luxembourg are:

• -          the Singapore income tax;
• -          the income tax levied on individuals, the corporate tax, the local trade tax and the capital tax in Luxembourg.

The new agreement provides for a new period of time under which any site or business operation carried out by a company in the other state can be considered a permanent establishment. The period has been increased from 6 months to 12 months. Our Singapore lawyers can offer you detailed information about the permanent establishment status.

New tax rates under the double taxation treaty between Singapore and Luxembourg

Under the new double tax agreement, Singapore and Luxembourg provide for the same 0% tax rate for dividend and interest payments, while royalties payments now benefit from a reduced rate from 10% to 7%.

With respect to the elimination of double taxation, the new agreement provides for a credit against the tax paid, for deductions or tax exemptions depending on the tax applied.

For complete information about how the avoidance of double taxation will occur under the treaty with Luxembourg, you may contact our law firm in Singapore.