Luxembourg: Implications of protocol to tax treaty with Germany
The protocol came into force 1 January 2024.
The protocol came into force 1 January 2024.
Luxembourg and Germany signed an amending protocol to the Luxembourg-Germany income tax treaty on 6 July 2023, which incorporated certain provisions implementing the BEPS Multilateral Instrument (MLI) and modified several other significant provisions. The protocol came into force 1 January 2024.
The key changes introduced by the protocol include:
- Extension of the tolerance threshold for cross-border workers to 34 days
- Introduction of a new “effectively taxed” clause to avoid double non-taxation
- Amendment of the provisions related to treaty benefits granted to investment funds
- Revision of the provisions on exit tax in the case of a change of tax residence
- Insertion of the anti-abuse provision of the MLI (preamble and principal purpose test)
The Luxembourg tax authorities also recently released guidance (Circular L.G.- Conv. D.I. n°71 dated 18 March 2024) regarding the protocol.
Read a May 2024 report prepared by the KPMG member firm in Luxembourg discussing implications of the protocol for individuals and cross-border workers
Read a May 2024 report prepared by the KPMG member firm in Luxembourg discussing implications of the protocol for corporate taxpayers and investment funds
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