The fourth amendment to the France Luxembourg tax treaty was signed on 5 September 2014. The scope of the amendment is limited to the taxation of real estate capital gains. Gains derived from the alienation of stocks, shares or other rights in a company, a trust or in any other institution or entity with a real estate predominant character shall only be taxed in the State where the immovable properties or rights are located. Is considered as having a real estate predominant character any entity (i) which assets are constituted directly or indirectly for more than 50% of their value by real estate assets or rights or, (ii) which derives more than 50% of its value directly or indirectly from real estate assets or rights. Immovable properties allocated directly to the own enterprise business of such a company shall not be taken into account.
The amendment will apply to taxable income earned as from the calendar year following the one during which it entered into force (income taxes levied by way of withholding tax). As a reference to the past, the 2006 amendment only applied as from 2008, but it was signed on 24 November 2006. In order to be applicable as from 2007, the amendment would have had to be ratified in less than 6 weeks! The amendment of 5 September 2014 could become applicable as from 2015 should the ratification procedure be achieved on 30 November 2014 at the latest (the amendment will enter into force on the first day of the month following the day when the last notification will have been received). This leaves almost 3 months to both States to go through the ratification procedure.
To read the text of the amendment please click here.