• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/4/2013

Luxembourg - Protocol to tax treaty with Korea is ratified  

September 4: Luxembourg completed the ratification process of a Protocol to the Luxembourg-Korea income tax treaty.

The Protocol was signed in May 2012, and includes changes concerning the withholding tax on dividends, interest, and royalties. Specifically, the Protocol provides:

  • A reduced rate of withholding tax on dividends of 10% if the beneficial owner is a company (other than a partnership) holding directly at least 10% (formerly 25%) of the capital of the company distributing the dividends; otherwise, the default withholding rate of 15% continuing to apply to other dividend payments.
  • A reduced rate of withholding tax of 5% on interest payments to banks, with the standard withholding tax of 10% continuing to apply to all other interest payments.
  • A new withholding tax rate of 5% on royalties in connection with the use or the right to use commercial, industrial or scientific equipment or information concerning industrial, commercial or scientific equipment, and a reduced withholding tax rate of 10% (instead of 15%) for all other types of royalties.

The Protocol also provides for the removal of the deemed tax credit with respect to dividend and interest available to Luxembourg taxpayers investing in Korea, and “removes” the treaty treatment concerning Luxembourg “holding 1929” and any similar Luxembourg companies, so that the treaty benefit is not available.

Read a September 2013 report [PDF 110 KB] prepared by the KPMG member firm in Luxembourg: Luxembourg and Korea: New protocol, new opportunities

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