The agreement was signed on November 2 by Secretary for Financial Services and the Treasury, Professor KC Chan and Luxembourg Economy and Foreign Trade Minister, Jeannot Krecke. It will eliminate double taxation instances encountered by Hong Kong and Luxembourg investors, and bring about tax savings and certainty in tax liabilities in connection with cross-border economic activities.

The agreement will also help foster closer economic and trade links between the two places, and provide added incentives for Luxembourg enterprises to do business or invest in Hong Kong.

"Both Hong Kong and Luxembourg are among the freest economies in the world, and both places have succeeded in surpassing our relatively small geographical size to become one of the most vibrant global economies," Professor Chan commented. "It is therefore no coincidence that we find ourselves natural partners in a taxation agreement."

The agreement is scheduled to come into force on April 1 in Hong Kong, and on January 1 in Luxembourg.