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Luxembourg: Real estate rich companies clause - tax treaty with France

14 October 2014   (0 Comments)
Posted by: Authors: Bonn Steichen & Partners
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Authors: Bonn Steichen & Partners (Bonn Steichen & Partners)

Luxembourg signed a protocol to the income tax treaty with France on September 5th 2014 ("French Protocol").

The French Protocol introduces a so called "real estate rich company" clause. Under the present version of the income tax treaty with France, Luxembourg is authorized to tax capital gains realised by a Luxembourg resident upon disposal of shares held in a company holding real estate in France. Under the French Protocol, the "real estate rich company" clause shifts the right to tax such capital gains to the source state (in our case France).

Under the French Protocol, capital gains derived from the alienation of shares or other rights in a company, trust or any other legal person the assets of which are composed, in value, for more than 50% - directly or through the interposition of one or more companies or legal persons - of immovable property situated in a contracting state, are only taxable in such state. Immovable property allocated by the "real estate rich company" to its own commercial activity is however not taken into account.

The French Protocol also provides that the "real estate rich company" clause should not conflict with the application of the council directive 2009/133/CE (so-called EU Merger Directive). The French Protocol will enter into force on the first day of the month following the completion of the ratification process by Luxembourg and France and its provisions will apply as from the following year.

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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