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Update - Protocol to Tax Treaty between Kuwait and Luxembourg — Orbitax Tax News & Alerts

The amending protocol to the 2007 income and capital tax treaty between Kuwait and Luxembourg was signed on 25 March 2021. The protocol is the first to amend the treaty and includes the following changes:

  • The preamble is replaced in line with BEPS standards;
  • Paragraph 3 of Article 2 (Taxes Covered) is updated to provide that the treaty covers:
    • Luxembourg income tax on individuals, corporation tax, capital tax, and communal trade tax; and
    • Kuwait income taxes as per Decree No.3 of 1955 as amended by Law No 2 of 2008, Law No. 23 of 1961 of the Neutral Zone, and Law No. 19 of 2000 of Supporting of National Employees;
  • Paragraph 1 of Article 25 (Mutual Agreement Procedure) is updated, providing that where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of either Contracting State (originally only to the competent authority of the State of residence);
  • Article 26 (Exchange of Information) is replaced in line with OECD standards for information exchange;
  • Article 29 (Limitation of Benefits) is replaced with a new Article 29 (Entitlement to Benefits), providing that a benefit under the treaty shall not be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

The protocol will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.