On 7 June 2022, Luxembourg and the UK signed a new double tax treaty (the “DTT”) and an additional Protocol which will replace the double tax treaty signed back in 1967 (the “old tax treaty”). The aim of the signature of that new DTT is for the UK and Luxembourg to have a tax treaty that reflect the latest OECD tax standards. Some of these had already been reflected through the modifications introduced by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ("Multilateral Instrument" or "MLI"); the new DTT goes significantly further.
As expected, the main change is in relation to the taxation of Luxembourg entities with real estate investments in the UK; the taxation of these is now aligned with other jurisdictions.
We provide an overview of the most important changes to be introduced by the DTT for corporate taxpayers.