LUXEMBOURG: Jurisdiction Details BEPS Amendments To Swiss DTA.

As published on tax-news.com, Monday 30 November, 2020.

On November 17, 2020, Luxembourg's tax authority published Circular LG – Conv. DI no. 66, outlining the changes made by the BEPS multilateral instrument (BEPS MLI) to the double tax agreement in place with Switzerland.

The Circular includes details of the provisions added to their double tax agreement, rather than a synthesized treaty text.

The BEPS MLI, developed through negotiations involving more than 100 countries and jurisdictions as part of the OECD's BEPS project, is intended to enable countries to incorporate BEPS-related amendments into their tax treaties without having to renegotiate bilateral treaties on a piecemeal basis.

The treaty amendments are intended to counter hybrid mismatch arrangements, which can result in double non-taxation or double deductions for the same income, and treaty abuse. In addition, provisions are added to prevent the avoidance of permanent establishment rules and they are intended also to improve dispute resolution.

The updates made to the agreement between Luxembourg and Switzerland include a new preamble, which states that the DTA is not intended to create opportunities for non-taxation or reduced taxation through tax evasion or avoidance, or treaty shopping, and attempts to abuse it will be counteracted by the treaty's provisions. In addition, the amended agreement includes strengthened provisions for Mutual Agreement Procedure resolution in the case of double tax disputes.

The provisions of the MLI came into force on August 1, 2019, for Luxembourg's covered agreements, and on December 1, 2019, for Switzerland's covered agreements.

The modifications made by the MLI are effective in respect of the 1993 double tax agreement between Luxembourg and Switzerland, with effect from:

  • January 1, 2021, for taxes withheld at source; and
  • Taxable periods beginning on or after December 26, 2020, for all other taxes.

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