April 2014

Luxembourg and Mauritius signed new Protocol

Tax Alert

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On 28 January 2014, the Governments of the Republic of Mauritius and the Grand Duchy of Luxembourg signed a Protocol amending the current Double Taxation Avoidance Agreement (‘’DTAA’’) between the two countries. The Protocol was published by way of regulations in Mauritius on 28 February 2014.

The Protocol brings a few changes regarding the taxes covered by the DTAA, introduces a mutual agreement procedure and revises the exchange of information procedure in accordance with the OECD Model Tax Convention.

The conditions for benefiting of the favourable reduced withholding tax rates on dividends, interest and royalties remain unchanged:

  • The withholding tax on dividends stays limited to:
    • 5% of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 10% of the capital of the company paying the dividends
    • 10% of the gross amount of the dividends in all other cases
  • The DTAA provides that interest and royalties are not subject to withholding tax


Taxes covered

As per the DTAA, the taxes covered in Luxembourg are the following:

  • Income tax on individuals
  • Corporation tax
  • Tax on fees of directors of companies
  • Capital tax
  • Communal trade tax

Tax on fees of directors is no longer covered by the DTAA pursuant to the Protocol.


Mutual agreement procedure

With respect to the mutual agreement procedure concerning taxation which is not in accordance with the provisions of the DTAA, the Protocol introduces arbitration proceedings to resolve the case by the decision of an arbitration at the request of the taxpayer if the case has not been resolved by the consultation between the tax authorities of the two Contracting States within two years of presentation of the case. Unresolved issues cannot be submitted for arbitration if a decision on these issues has already been rendered by a court or administrative tribunal of either Contracting State.

Unless a person directly affected by the case does not accept the mutual agreement that implements the arbitration decision, that decision shall be binding on both Contracting States and shall be implemented independent of any time limits in their domestic laws.


Exchange of information

This article has been revised in line with Article 26 of the OECD Model Tax Convention.

The Contracting Parties agree, through their Competent Authorities, to exchange such information as is foreseeably relevant for carrying out the provisions of the DTAA or for the administration or enforcement of the domestic laws concerning the taxes covered by the DTAA. The effective date for the application of this provision is tax years beginning on or after 1 January of the calendar year next following the year of the entry into force of the Protocol.

The standard of foreseeable relevance is intended to provide for exchange of information in tax matters to the widest possible extent and, at the same time, to clarify that it is not possible to engage in ‘’fishing expeditions’’. Fishing expeditions are speculative requests for information that have no apparent nexus to an open inquiry or investigation.

The obligation to supply information is lifted in a limited number of situations. The Contracting State which has been requested for information has no obligation:

  1. To carry out administrative measures at variance with its laws and administrative practice
  2. To supply information which is not obtainable under its laws or in the normal course of administration
  3. To supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process or information the disclosure of which would be contrary to public policy

The obligation to exchange information is subject to certain limitations but in no case the Contracting State can refuse to provide information because it has no domestic tax interest in such information or because the information is held by a bank, other financial institution, nominee or person acting inan agency or fiduciary capacity or because it relates to ownership interests in a person.

Any information obtained a Contracting State is to be treated as secret in the same manner as information obtained under its domestic laws. The information is to be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment, collection, enforcement, prosecution and determination of appeals in relation to the taxes covered by the agreement. Information may be disclosed in public court proceedings or in judicial decisions.


Effective date

The Protocol shall come into force on the later of the completion of the ratification procedures in Luxembourg and Mauritius and will be gazetted in Mauritius.


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