Changes to Russia - Luxembourg Double Tax Treaty

Russia and Luxembourg have signed the draft protocol to the double tax treaty of 1993.

The protocol reduces the withholding tax on dividends from 10% to 5%. It proposes that dividend treatment will apply to any other income, including interest, which is considered income from shares by the tax legislation of the payer’s state as well as to payments in connection with investment trusts or other forms of collective investment (except for those relating to real estate).

In addition, the amendments seek to hinder treaty shopping and to further the exchange of information between tax authorities.

As the protocol stands, tax officials will not be able to refuse to provide information to each other ‘solely on the grounds that the information is at the disposal only of a bank or other financial institution, nominee holder, agent or trustee, or that such information reveals the owners of a particular entity’.

Article 29 of the treaty, retitled as ‘The limitation of Benefits’, will introduce limitation on benefits for entities which ‘mainly’ exist to obtain benefits under the agreement.

To become effective the protocol must be ratified. In Russia, it means that it must be approved by Parliament and signed by the President.