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Order to implement the Comprehensive Agreement with Luxembourg for Avoidance of Double Taxation gazetted


An order made by the Chief Executive in Council under the Inland Revenue Ordinance to implement the Agreement with Luxembourg for the Avoidance of Double Taxation was gazetted today (February 1).

This is the fourth comprehensive agreement/arrangement for the avoidance of double taxation (CDTA) concluded by the Hong Kong Special Administrative Region Government with another economy.

"The agreement ensures that investors will not have to pay tax twice on a single source of income," a spokesman for the Government said.

"In simple terms, the agreement will bring about tax savings in respect of certain income to Luxembourg and Hong Kong investors doing businesses in each other’s jurisdictions."

Under the agreement:

- Luxembourg will eliminate double taxation by providing full exemption to profits of Luxembourg companies doing business through a branch in Hong Kong.

- Luxembourg withholding tax for dividends will be reduced to 0% if the recipient of the dividends is a company holding 10% or more of the share capital of the paying company (or invested EUR 1.2 million or more therein), and to 10% in all other cases. The current withholding tax rate is 20% on the dividends.

- Income from operation of ships in international traffic earned by a Hong Kong resident in Luxembourg will be exempted from Luxembourg income tax.

Subject to the completion of ratification procedures for both sides, the agreement will take effect with respect to Hong Kong taxes from April 1 and with respect to Luxembourg taxes from January 1. The order will be tabled at the Legislative Council on February 20 for negative vetting.

The Hong Kong/Luxembourg CDTA was signed by the Secretary for Financial Services and the Treasury, Professor K C Chan and the Luxembourg Minister of the Economy and Foreign Trade, Mr Jeannot Krecké, in Hong Kong on November 2, 2007.

Ends/Friday, February 1, 2008
Issued at HKT 14:30