On 5 August 2014, the income and capital tax treaty between Jersey and Luxembourg entered into force. The treaty was signed 17 April 2013, and is the first of its kind between the two jurisdictions.
The treaty covers Jersey income tax, and Luxembourg individual income tax, corporation tax, capital tax and the communal trade tax.
Jersey applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption method. However, in the case of dividend income, and entertainer and sportspersons income, Luxembourg applies the credit method.
In addition, Luxembourg will apply the credit method for business profits and capital gains from the alienation of movable property forming part of the business property of a permanent establishment, but only if the business profits and the capital gains are not derived from activities in agriculture, industry, infrastructure or tourism in Jersey.
The treaty will apply from 1 January 2015.
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