Luxembourg Tax News 2014-25 | KPMG | LU
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Luxembourg Tax News 2014-25

Luxembourg Tax News 2014-25



Partner, Head of Real Estate

KPMG in Luxembourg


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France-Luxembourg Tax Treaty

New protocol to enter into force in 2016 at the earliest

The fourth protocol to the France-Luxembourg income tax treaty (hereafter the “Treaty”) will basically be applicable to income pertaining to the year following the year in which the protocol enters into force. In his answer to the parliamentary question Nr. 631 of 16 October 2014, the Minister of Finance of the Grand Duchy of Luxembourg confirmed that the bill approving this protocol is foreseen to be lodged with the Luxembourg Parliament early in 2015. Consequently, the protocol should produce its effects at the earliest as from the 2016 civil or financial year.


Scope of the protocol

As a reminder, on 5 September 2014, the fourth protocol to the 1958 France-Luxembourg tax treaty was signed in Paris.

Article 3 of the Treaty has been supplemented by a fourth point stating that gains, derived from the alienation of shares or other rights in a company, or any other legal person, the assets of which are composed, in value, for more than 50% - directly or through the interposition of one or more other companies or legal persons - by immovable property situated in a Contracting State, or by rights pertaining to such immovable property, are only taxable in that State. This provision applies whether the seller is a legal or a natural person. Immovable property allocated by such a company to its own business is however not taken into account in this respect.

This amendment ends potential situations of double non-taxation by granting France the taxation right of capital gains realized by Luxembourg companies on the direct or indirect sale of shares in French real estate companies, including shares in SCIs, sociétés civiles immobilières, the value of which is composed by real estate properties located in France for more than 50%.


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Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


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