France and Luxembourg have signed a new double tax treaty which incorporates provisions of the OECD’s base Taxation and Profit Transfer (BEPS) guidelines.
The treaty, signed during a Luxembourg state visit to France on 20 March, replaces the previous tax convention signed between the two countries on 1 April 1958.
The modernised tax treaty incorporates the new international standards in tax matters and is based on the OECD’s latest model tax convention.
It implements the new approaches to international tax developed in the OECD BEPS project and reflected in the Multilateral Convention to Implement Tax Treaty Related Measures, which both countries signed in 2017.
The BEPS project aims to counteract the exploitation of gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity.
Additionally, the new agreement contributes to improved legal certainty for the benefit of tax authorities and the taxpayer.
According to a statement from the Luxembourg ministry of finance: “it can be emphasised that the new agreement reduces the degree of participation required to benefit from the exemption from withholding tax on dividends.”
Luxembourg’s minister of finance Pierre Gramegna said the new treaty showed the excellent relations between the two countries.
He added: “The new convention is basically modernising the current text dating from 1958 and is an innovative instrument that benefits both citizens and businesses on both sides of the border."
