The long-awaited double tax avoidance agreement between Luxembourg and the United Arab Emirates has finally been ratified and will enter into effect on January 1, 2010. The treaty, which has been pending since it was signed on November 20, 2005, was held up by a backlog within Luxembourg’s legal body in charge reviewing laws before implementation, the Conseil d’Etat.
The agreement covers capital gains, dividends, interest and royalties.
Although the double tax agreement does not as yet provide for the exchange of information according to the OECD model, the Luxembourg parliament has agreed to amend the legislation before it enters into force to provide for adherence to the OECD standard.
The double tax agreement has an additional clause to provide sovereign wealth funds investing in Luxembourg a more beneficial tax environment, in that dividends paid from Luxembourg to sovereign wealth funds will be exempt from taxation.
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