Within the mutual agreement procedure provided for under Article 25(3) of the Luxembourg-Russia Double Tax Treaty, the tax authorities of both countries agreed on a uniform interpretation of Article 10 (2) of the treaty, which pertains to dividends.

The treaty provides for a standard withholding tax rate of 15% which can be reduced to 5%. Luxembourg and Russia clarified that the reduced 5% rate applies provided that the two following conditions are met simultaneously:

(i) an investment of at least EUR 80,000 (or its equivalent in roubles) in the capital of the company paying the dividends; and
(ii) a direct holding of at least 10% of the capital of the company paying the dividends.

In this respect, the Russian authorities indicated that (i) “holding” shall mean that the holder is the legal and economic owner of the shares, (ii) “investment” includes, inter alia, acquiring the shares at the time of the initial placement, purchasing the shares from the previous owners, directly or on an organised market or stock exchange, or through a corporate reorganisation, and that (iii) the amount of the investment is determined on the initial arm’s length acquisition cost of the shares.

Kosovo

On 8 December 2017, Luxembourg and Kosovo signed a double tax treaty on income and capital. Kosovo ratified the treaty on 16 January 2018. Further details on the treaty will be made available in a later edition.

Negotiations with Peru

Based on recent public information, Luxembourg and Peru have expressed their intention to negotiate and sign a double tax treaty.