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CONVENTION

Between the Grand Duchy of Luxembourg and the Federative Republic of Brazil for the avoidance of avoidance of double taxation with respect to taxes on income and on capital.

The Grand Duchy of Luxembourg and the Federative Republic of Brazil, desiring to conclude a Convention for the avoidance of double taxation with respect to taxes on income and on capital,

have agreed upon the following provisions:

Article 1

Persons covered

  1. This Convention shall apply to persons who are residents of ́ a Contracting State or of each of the two States.
  1. It is understood that the Convention shall not apply to the income or capital of holdings resident in Luxembourg which enjoy special tax advantages under the laws of Luxembourg in force or under the Luxembourg law in force or any other similar law which may enter into force in Luxembourg after the signature of the Convention, nor to the income derived by a resident of Brazil from such companies, nor to the holdings of such residents in such companies.

Article 2

Taxes Covered

  1. The present taxes to which the Convention shall apply are:

  (a) as regards the Grand Duchy of Luxembourg:

      – personal income tax;

      – tax on the income of communities;

      – special tax on fees;

      – tax on wealth;

      – communal commercial tax after the profit and capital of ́exploitation;

      – tax on total wages;

      – tax on the property;

      (hereinafter referred to as “Luxembourg tax”);

(b) in the case of the Federative Republic of Brazil:

      – federal tax on income and profits of any kind excluding l ́ tax on

      – Excess transfers and on activities of lesser importance;

      (hereinafter referred to as “Brazilian tax”).

  1. The Convention shall also apply to future taxes of an identical or similar nature which are added to or which are to the present taxes or which would replace them.

Article 3

General Definitions

  1. For the purposes of this Convention unless the context otherwise requires:

(a) the term “Brazil” means the Federative Republic of Brazil;

(b) the term “Luxembourg” means the Grand Duchy of Luxembourg;

(c) the terms “a Contracting State” and “another Contracting State” mean, as the context requires, Luxembourg or Brazil;

(d) the term “person” includes individuals, companies and any other groups of persons;

(e) the term “corporation” means any body corporate or any entity that is considered a corporation for tax purposes; and

(f) the terms “enterprise of ́a Contracting State” and “enterprise of the ́other Contracting State” means, respectively, an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

(g) the term “nationals” means:

I )  all natural persons who possess the nationality of ́a Contracting State ;

II)  all legal persons, partnerships and associations constituted in accordance with the laws in force in a Contracting State; 

III) all legal persons, partnerships and associations constituted in accordance with the laws in force in a Contracting State.

(h) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise whose place of effective management is in a contracting State, except where the ship or aircraft is operated only between points in the other contracting state;l ́expression “competent authority” means:

I) in Brazil:

The Minister of Finance, the Secretary of the Federal Revenue or their self raised representatives;

II) in Luxembourg:

The Minister of Finance or his duly authorized representative.

  1. For the purposes of the application of the Convention by a Contracting State, any term not otherwise defined shall have the meaning given to it by the law of that State governing the taxes which are the subject of the Convention defined shall have the meaning which it has under the law of that State relating to the taxes which are the subject of the Convention unless the term “tax” is defined in the Convention.

Article 4

Domicile for tax purposes

  1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax in that State by reason of his domicile, residence, place of management or any other criterion of a similar nature.
  1. Where, under the provision of paragraph 1, an individual is considered to be a resident of each of the Contracting States, the case shall be resolved according to the following rules:

(a) Such person shall be deemed to be a resident of the ́Contracting State where he has a homed ́habitation. Where she has a permanent home in each of the Contracting States, she shall be considered a resident of the Contracting State with which her personal and economic ties are closest (center of vital interests);

(b) If the ́Contracting State in which such person has the center of his vital interests cannot be determined, or that ́Contracting State is not mined, or that ́he does not have a ́ permanent home in any of the Contracting States, he shall be deemed to be a resident of the Contracting State in which he has a habitual abode;

(c) If such person is ordinarily present in each of the Contracting States or is not ordinarily present in either of them, he shall be deemed to be a resident of the ́Contracting State contracting State of which he possesses the nationality;

(d) If such person possesses the nationality of each of the Contracting States or if he does not possess the nationality of either of them, the competent authorities of the Contracting States shall decide the question d ́un common accord.

  1. Where, under the provision of paragraph 1, a person other than an individual is considered to be a resident of each of the Contracting States, he shall be deemed to be a resident of the ́Contracting State in which his place of effective management is situated.

Article 5

Permanent Establishment

  1. For the purposes of this Convention, the ́expression “permanent establishment” means a

fixed place of business where the enterprise carries on all or part of its business.

  1. The ́expression “permanent establishment” shall include, in particular:

      (a) a place of management;

      (b) a branch office;

      (c) an office;

      (d) a factory;

      (e) a workshop;

      (f) a mine, quarry or other places of ́extraction of natural resources;

      (g) a construction or assembly site lasting more than six months.

  1. It shall not be considered that ́ there is a permanent establishment if:

(a) use is made of ́installations solely for the purpose of storage, ́exhibition or delivery of goods or merchandise belonging to the ́nationalitý. dises belonging to the ́enterprise;

(b) merchandise belonging to the ́enterprise is warehoused for the sole purpose of storage, d ́expo- sition or delivery;

(c) goods belonging to the ́enterprise are warehoused for the sole purpose of processing by another enterprise;

(d) a fixed business facility is used for the sole purpose of ́purchasing goods or gathering information for the ́enterprise;

(e) a fixed business facility is used, for the ́enterprise, solely for the purpose of advertising, of providing ́information, scientific research, or similar activities which have a preparatory or auxiliary character.

  1. A person acting in a Contracting State on behalf of ́an enterprise of the other Contracting State other than an agent having the independent status referred to in paragraph 5 shall be deemed to be a permanent establishment” in the first-mentioned State if it has in that State powers which he habitually exercises therein enabling him to conclude contracts in the name of the enterprise, unless that person’s ́ activity is limited to the ́ purchase of goods for the ́enterprise. However, an insurance enterprise of ́a Contracting State shall be deemed to have a sement in the other Contracting State from the moment that, through the ́intermediary of a representative not falling within the category of persons referred to in paragraph 5 below, he receives premiums in the territory of the latter state or insures risks located in that territory.
  1. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business there through the ́entremise of a broker,clerk-at-large or any other intermediary with independent status, provided that such persons act in the ordinary course of their business.
  2. The fact that ́a company which is a resident of ́a Contracting State controls or is controlled by a company which is a resident of the other Contracting State or which carries on business in that State (whether by l ́intermediary of a permanent establishment or not) shall not of itself be sufficient to make any of such companies a permanent establishment of the ́other.
  3. An enterprise of ́one Contracting State shall be deemed to have a permanent establishment in the ́other Contracting State when it carries on there the ́activity of rendering services of ́artists and sportsmen mentioned in ́Article 17 of the present Convention.

Article 6

Real Estate Income

  1. Income from immovable property, including income from agriculture or forestry may be taxed in the Contracting State in which such property is situated.
  1. (a) The term “immovable property” shall be defined in accordance with the law of the ́Contracting State where the property in question is situated.

(b) This expression includes, in any case, the accessories, the dead or livestock of agricultural and forestry holdings, the rights to which the provisions of private law concerning land ownership, the ́usufruct of real estate and the rights to variable or fixed royalties variable or fixed for the ́exploitation or concession of the ́exploitation of mineral deposits, sources and other natural resources; ships, boats and aircraft are not considered as real property.

  1. The provisions of paragraph 1 shall apply to income derived from the direct ́exploitation, rental or leasing, and from any other form of ́exploitation of real property.
  1. The provisions of paragraphs 1 and 3 shall also apply to income derived from real estate of a business as well as to the income from real estate used for the ́exercise of a liberal profession.

Article 7

Profits of enterprises

  1. The profits of an enterprise of ́a Contracting State shall be taxable only in that State, unless the enterprise carries on business in the other Contracting State through a permanent establishment situated there cement which is situated there. If the ́enterprise carries on business in such a manner, the profits of the ́enterprise shall be taxable in the other State but only to the extent that they are attributable to the said permanent establishment.
  2. Subject to the provisions of paragraph 3, where ́an enterprise of ́a Contracting State carries on business in the other Contracting State through the medium of a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it would have made if it had constituted a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment undertaking of which it constitutes a permanent establishment.

(3) In computing the profits of a permanent establishment, there shall be allowed as a deduction expense incurred for the purposes of the permanent establishment, including the expenses of management and the general administrative expenses incurred.

  1. No profit shall be imputed to a permanent establishment by reason of the fact that such permanent establishment has merely- No profit shall be attributed to a permanent establishment on account of the fact that the permanent establishment has merely purchased goods for the enterprise.
  2. Where profits include items of income treated separately in other ́ Articles of this Convention, the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

Maritime and Air Navigation

  1. Profits derived from the ́operation, in international traffic, of ships or ́aeroplanes, shall be taxable only in the Contracting State in which the place of effective management of the ́enterprise is situated.
  1. If the place of effective management of ́a maritime navigation enterprise is on board ́a ship, This seat shall be deemed to be located in the Contracting State where the port of ́attachment of that vessel is situated or, in the absence of a port of ́attachment, in the Contracting State of which the ́operator of the vessel is a resident.
  1. The provisions of paragraph 1 shall also apply to profits from participation in a pool, a joint operation or an international operating agency.

Article 9

Associated enterprises

Where:

(a) an enterprise of ́a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

(b) the same persons participate directly or indirectly in the management, control or capital of ́an enterprise of ́one Contracting State and of ́an enterprise of the other Contracting State, and that, in the one and the other case, the two enterprises are, in their commercial or financial relations, bound by agreed terms and conditions the other, the two enterprises are bound by accepted or imposed conditions in their commercial or financial relations, which differ from those which would be concluded between independent undertakings, the profits which, without such conditions, would have been obtained by one of the ́ undertakings enterprises but could not in fact have been made by reason of such conditions, may be included in the profits of that enterprise and taxed accordingly.

Article 10

Dividends

  1. Dividends paid by a company which is a resident of ́ one Contracting State to a resident of the other Contracting State may be taxed in that other State.
  1. However, such dividends may be taxed in the Contracting State of which the company paying dividends is a resident, and according to the laws of that State, but the ́tax so imposed shall not exceed:

(a) 15 percent of the gross amount of the dividends if the recipient of the dividends is a company which directly disposes of ́at least 10 percent of the capital of the company paying the dividends;

(b) 25 percent of the gross amount of the dividends, in all other cases. This paragraph does not affect the ́taxation of the company for the profits used to pay dividends.

  1. The provisions of paragraphs 1 and 2 shall not apply where the recipient of the dividends, resident of ́ one Contracting State, has in the ́ other Contracting State of which the company paying the dividends is a resident, a permanent establishment to which the holding in respect of which the dividends are paid is effectively connected to the dividends. In such a case, the provisions of ́Article 7 shall apply.
  1. The term “dividends” as used in this Article means income from ́shares, jouissance shares or warrants, mine shares, founder’s shares or other profit shares at the ́exception of claims, as well as the income from other shares assimilated to the income from shares by the tax legislation of the ́State of which the distributing company is a resident.
  2. Where ́a Luxembourg resident company has a permanent establishment in Brazil, such establishment may be subject to a withholding tax in accordance with Brazilian law.

However, this tax may not exceed 15 percent of the profit of the permanent establishment, determined after the payment of the ́corporate tax pertaining to said profit.

  1. Where ́a company which is a resident of ́a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on dividends paid by the company to persons who are not residents of that other State, nor impose any tax, in respect of the tax on undistributed profits, on the undistributed profits of the company, even if the dividends paid or undistributed profits consist wholly or partly of profits or income arising in that other State.
  1. The limitations provided for in paragraph 2, subparagraph a, and paragraph 5 shall not apply to dividends paid and profits earned until the expiration of the fifth calendar year following the year ́in which the Convention shall enter into force.

Article 11

Interest

  1. Interest arising in ́a Contracting State and paid to a resident of the ́other Contracting State may be taxed in that other State.
  1. However, such interest may be taxed in the ́Contracting State from which it arises and according to the laws of that State, but the tax so imposed shall not exceed 15 percent of the gross amount of the interest.

 

  1. Notwithstanding the provisions of paragraphs 1 and 2:

(a) interest arising in one Contracting State and paid to the government of the other Contracting State, to a political subdivision thereof, or to an agency (including financial institutions) wholly owned by that government or political subdivision shall be exempt of taxes in the first contracting state;

(b) interest derived from public funds and bonds of ́emprunt issued by the government of a Contracting State shall be taxable only in that State ;

(c) the rate of the ́tax may not exceed 10 percent with respect to interest on loans and loans and credits granted for a minimum of 7 years by banking institutions and related to the sale of equipment goods or to the ́study, the ́installation or the supply of industrial or scientific equipment as well as public works.

  1. The term “interest” as used in this section means income from public funds, public loan obligations, whether or not secured by mortgages or a profit-sharing clause, and claims of any kind on the profit-sharing clause, and claims of any kind, as well as all other income assimilated to the income of sums lent by the tax legislation of the ́State in which the income originates.
  1. The provisions of paragraphs 1 and 2 shall not apply where the recipient of the interest, resident of ́one Contracting State, has in the ́other Contracting State from which the interest arises a permanent establishment to which he is effectively connected. permanent establishment to which the debt-claim giving rise to the interest is effectively connected. In this case, the provisions of the sections of Article 7 shall apply.

 

  1. The limitations provided for in paragraphs 2 and 3 shall not apply to interest arising in a ́ Contracting State and paid to a permanent establishment of ́an enterprise of the other Contracting State which is situated in a third State.
  1. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. However, where the payer of the interest, whether or not he is a resident of a Contracting State, has in a Contracting State a permanent Contracting State, has in a Contracting State a permanent establishment in connection with which the loan in respect of which the interest is paid was contracted and which bears the expense of such interest, such interest shall be deemed to arise in the Contracting State where the permanent establishment is situated.

 

  1. If as a result of special relations existing between the debtor and the creditor or which the ́one and the ́other maintain with third persons, the amount of interest paid, taking into account the claim for which they are paid, exceeds that which would have been agreed upon by the debtor and the creditor in the l ́ absence of such relations, the provisions of this article shall apply only to the latter amount. In such a case, the excess part of the payments shall remain taxable in accordance with the laws of each Contracting State and having regard to the other provisions of this Convention.

Article 12

Royalties

  1. Royalties arising in ́ a Contracting State and paid to a resident of the ́ other Contracting State may be taxed in that other State.
  1. However, such royalties may be taxed in the ́Contracting State in which they arise, and according to the laws of that State, but the ́tax so imposed shall not exceed:

(a) 25 percent of the gross amount of the royalties derived from the ́use or grant of the ́useof trademarks, motion pictures, and films or tapes of television or radio broadcasting;

(b) 15 percent of the gross amount of the royalties, in all other cases.

 

  1. The term “royalties” as used in this section means remuneration of any kind paid for the nature paid for the ́use or the grant of the ́use of a copyright in a literary, artistic or scientific work, including motion pictures and films or tapes for television or broadcasting, d ́a patent, d ́a trademark, d ́a design or d ́a model, d ́a plan, d ́a formula or d ́a secret process, as well as for the ́use or the grant of the ́used ́an industrial, commercial or scientific equipment and for information relating to an experience gained or studies in the industrial, commercial or scientific field.

 

  1. Royalties shall be deemed to arise from ́a Contracting State when the debtor is that State itself, a political subdivision, a local authority or a resident of that State. Any-However, where the payer of the royalties, whether or not he is a resident of a Contracting State, has in a Contracting State, has in a Contracting State a permanent establishment for which he has incurred the obligation to pay the royalties and that permanent establishment bears the expense of such royalties, such royalties shall be deemed to arise in the reed as arising in the Contracting State in which the ́permanent establishment is situated.

 

  1. The provisions of paragraphs 1 and 2 shall not apply where the recipient of the royalties, resident of a Contracting State, has in the other Contracting State from which the royalties arise a permanent establishment to which the right or property giving rise to the royalties is effectively connected. In such a case, the provisions of Article 7 shall apply.

 

  1. If, by reason of special relations existing between the debtor and the creditor or which the ́one and the ́other maintain with third parties, the amount of the royalties paid, taking into account the service for which they are paid, shall be for which they are paid, exceeds that which would have been agreed upon by the debtor and the creditor in l ́ absence of such relations, the provisions of this Article shall apply only ́ to the latter amount. In such case, the excess part of the payments shall remain taxable in accordance with the laws of each Contracting State and having regard to the other provisions of this Convention.

 

  1. The limitation on tax provided for in subparagraph (b) of paragraph 2 shall not apply to royalties paid to a resident of ́a Contracting State that directly or indirectly disposes of ́at least 50 percent of the voting capital of the company paying the royalties until the expiration of the fifth calendar year following the ́year in which the Agreement shall become effective.

Article 13

Capital Gains

  1. Gains from the ́alienation of real property, as defined in paragraph 2 of Article 6, may be taxed in the Contracting State where such property is located.

 

  1. Gains from the ́alienation of movable property forming part of the ́ assets of a ́ stable establishment which ́an enterprise of ́one Contracting State has in the ́other Contracting State, or of movable property constituting a fixed base which a resident of a Contracting State has in the other Contracting State for the ́exercise of a profession, including such gains from the ́whole of the such permanent establishment (alone or with the ́ whole enterprise) or from such fixed base, may be taxed in that other State. However, gains derived from the ́alienation of ships or ́aircraft operated in international traffic and movable property allocated to the operation of such ships or aircraft shall be taxable only in the Contracting State where the place of effective management of the ́enterprise is situated.

 

  1. Gains from the ́alienation of any property or rights other than those mentioned in paragraphs 1 and 2 may be taxed in both Contracting States.

Article 14

Independent Personal Services

  1. Income derived by a resident of ́ of a Contracting State from ́ a liberal profession or from ́ other independent activities of a similar character shall be taxable only in that State, unless the cost of such remuneration is borne by a company resident in the other State or by a permanent establishment situated therein. In that case, such income may be taxed in that other State.

 

  1. The term “professional services” includes in particular independent activities of scientific, technical, literary, artistic, educational or pedagogical activities, as well as the independent activities of doctors, lawyers, engineers and activities of doctors, lawyers, engineers, architects, dentists and accountants.

Article 15

Dependent Professions

  1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, the wages, salaries and other similar remuneration which a resident of a Contracting State receives in respect of an employment shall be taxable only in that State unless the ́employment is carried on in the other Contracting State. If the ́employment is carried on there, remuneration received in respect thereof may be taxed in that other State.

 

  1. Notwithstanding the provisions of paragraph 1, remuneration that ́a resident of ́a Contracting State shall be taxable only in the first-mentioned State if:

(a) the beneficiary stays in the ́other State for a period or periods not exceeding in the

183 days in total during the relevant tax year;

 

(b) the remuneration is paid by an employer or on behalf of ́ an employer who is not a resident of the other state; and

 

(c) the remuneration is not borne by a permanent establishment or a fixed base that The ́employer is in another State.

 

  1. Notwithstanding the foregoing provisions of this Article, remuneration in respect of ́ employment on board a ship or aircraft in international traffic may be taxed in the Contracting State where the place of effective management of the ́enterprise is situated.

Article 16

Directors’ Fees

Directors’ fees and other similar remuneration which a resident of a Contracting State ́ receives in his capacity as a member of the board of directors of the enterprise shall be paid to him in the Contracting State in which the enterprise is situated. ́ a Contracting State receives in his capacity as a member of the board of directors or supervisory board or of a similar body or similar organ of a company, which is a resident of the other Contracting State, may be taxed in that other State.

Article 17

Artists and Athletes

Notwithstanding the provisions of Articles 14 and 15, income derived by professional entertainers, such as theater, motion picture, radio or television artistes and musicians, as well as athletes from their personal activities as such may be taxed in the Contracting State in which such activities are carried on.

Article 18

Pensions

  1. Subject to the provisions of paragraphs 2 and 3 of Article 19, pensions and other similar remuneration, up to rations, up to an annual amount of US$ 3,000, arising in a Contracting State and paid to a resident of the other Contracting State, shall be taxable only in that State. The amount which exceeds US $3,000 may be taxed in the first-mentioned Contracting State.

 

  1. For the purposes of this Article the term “pensions and other similar remuneration” means

periodic payments made after retirement in consideration of ́ past employment or as compensation for damages suffered in connection with such prior employment.

Section 19

Public Offices

  1. (a) Remuneration, other than pensions, paid by a Contracting State or l ́one of its political subdivisions or local authorities to an individual in respect of services rendered to that State or subdivision or local authority, shall be taxable only in that State.

(b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and if the recipient of the remuneration is a resident of that State who:

(I) is a national of that State, or

(II) has not become a resident of that State solely for the purpose of rendering the services.

(a) Pensions paid by a Contracting State or a political subdivision or local authority thereof, either directly or out of funds established by it, to the taxable income of a natural person in respect of services rendered to that State or to that subdivision or collectivity , shall be taxable only in that State. The same shall apply to pensions and other allowances, whether periodic or not, paid in pursuance of the social legislation of ́ a Contracting State.

(b) However, such pensions shall be taxable only in the other Contracting State if the recipient is a resident of that State and if ́ he possesses the nationality thereof.

  1. The provisions of Articles 15, 16 and 18 shall apply to remuneration or pensions paid in respect of services rendered in connection with an industrial or commercial activity carried on by one of the Contracting States or one of its political subdivisions or local authorities.

Article 20

Professors

An individual who is a resident of ́one Contracting State at the beginning of his stay in the other Contracting State and who, at the ́invitation of the government of the ́other Contracting State, or of ́a university or other officially recognized educational or research institution of that other State, stays in the latter State primarily for the purpose of ́teaching or engaging in research, or for either of these purposes, shall be exempt from taxation in the latter State for a period not exceeding two years from the date of his arrival in the said State on account of remuneration received in respect of such teaching or research activities.

Article 21

Students and Trainees

  1. Amounts that ́ a student or trainee who is, or was formerly, a resident of a ́ Contracting State and who is staying in the other Contracting State for the sole purpose of ́ pursuing his education or training, receives to cover his maintenance, ́study or training expenses shall not be taxable in that other State, provided that ́they arise from sources outside that other State. The same shall apply to remuneration which ́ such a student or trainee receives in respect of employment performed in the Contracting State where he is pursuing his studies or training, provided that such remuneration is strictly necessary for his maintenance.

 

  1. A student of ́a university or of ́another institution of higher or technical education of ́a Contracting State who is engaged in gainful activity in the ́other Contracting State solely for the obtaining practical training related to his studies shall not be subject to tax in the latter State on account of the remuneration paid in this connection, provided that the duration of such activity does not exceed two years.

Article 22

Income not expressly mentioned

Items of income of a resident of a Contracting State which are not expressly mentioned in the preceding Articles of this Convention may be taxed in both States.

Article 23

Fortune

  1. Capital constituted by immovable property, as ́defined in paragraph 2 of Art. 6, shall be taxable in the Contracting State where such property is situated.

 

  1. Capital constituted by movable property forming part of the ́ assets of a permanent establishment or by movable property constituting a fixed base used for the exercise of a business  professional shall be taxable in the Contracting State in which the permanent establishment or fixed base is situated.

 

  1. Ships and aircraft operated in international traffic and movable property pertaining to their shall be taxable only in the Contracting State in which the place of effective management of the ́enterprise is located.

 

  1. All other elements of the capital of ́a resident of ́a Contracting State shall be taxable only in that State.

Article 24

Methods for Eliminating Double Taxation

  1. With respect to Brazil, double taxation shall be avoided in the following manner:

(a) Where ́ a resident of Brazil receives income which, in accordance with the provisions of this Convention may be taxed in Luxembourg, Brazil shall deduct from the tax which it levies on the income of such resident, an amount equal to the ́tax on income paid in Luxembourg ;

(b) However, the sum deducted may not exceed the fraction of the income tax, calculated before the deduction, corresponding to the income taxable in Luxembourg.

 

  1. With respect to Luxembourg, double taxation shall be avoided in the following manner:

(a) Where ́ a resident of Luxembourg receives income or owns capital other than that referred to in subparagraphs b and c below which, in accordance with the provisions of this Convention may be taxed in Brazil, Luxembourg shall exempt from tax such income or capital but may, in calculating the amount of the ́tax on the remaining income or capital of such resident, apply the same rate as if the income or capital in question had not been exempted;

(b) Subject to ́paragraph c when ́a Luxembourg resident company has held, since the beginning of its fiscal year, on a continuous basis, a direct holding of at least 25 percent in the capital of a company resident in Brazil, the income derived from such participation and The said participation is exempt from ́tax in Luxembourg. The ́exemption also applies when the cumulative holdings of several companies resident in Luxembourg resident companies reach at least one-quarter of the capital of the Brazilian resident company and that one of the Luxembourg resident companies has in each of the other Luxembourg resident companies resident in Luxembourg participation of more than 50 percent.

(c) Where ́a Luxembourg resident receives income which, in accordance with the provisions of l ́article 10, paragraph 2, l ́article 11, paragraphs 2 and 3, subparagraph c, l ́article 12, paragraph 2, of l ́article 13, paragraphs 1 and 3, and of articles 14, 16, 17, 18 and 22, may be taxed in Brazil, Luxembourg shall deduct from the income tax it levies on the income of such resident an amount equal to the ́tax paid in Brazil. The amount so deducted may not, however, exceed the fraction of the l ́tax, calculated before the deduction, corresponding to the income received from Brazil;

(d) For the purpose of the ́imputation provided for in subparagraph (c) above, the ́tax of Brazil shall always be considered to having been levied:

1. at the rate of 25 percent with respect to dividends other than those referred to in ́paragraph b;

2. at the rate of 20 percent with respect to interest;

3. at the rate of 25 percent as regards the royalties referred to in ́article 12, para, subparagraph b.

Article 25

Non-discrimination

  1. The nationals of ́one Contracting State shall not be subject in the ́other Contracting State to any tax or more burdensome than those to which the nationals of that other State are or may be nationals of that other State who are in the same situation.

 

  1. The ́imposition of a permanent establishment which ́an enterprise of ́one Contracting State has in the ́other Contracting State shall not be established in that other State in a manner less favorable than the ́taxation of enterprises of that other State carrying on the same activity.

This provision shall not be construed to require a Contracting State to accord to residents of the other Contracting State the personal deductions, allowances and reductions of tax on the basis of family status or dependency that it grants to its own residents.

 

  1. Enterprises of ́a Contracting State, the capital of which is wholly or partly, directly or owned or controlled by one or more residents of the other Contracting State, shall not be the other Contracting State, shall not be subjected in the first-mentioned Contracting State to any taxation or any requirement connected therewith which is other or than that to which other enterprises of the same kind in the first-mentioned State are or may be subjected. other enterprises of the same kind in the first-mentioned State.

 

  1. The term “taxation” in this Article means taxes of every kind and description.

 

Article 26

Amicable procedure

  1. Where a resident of a Contracting State considers that the actions of one or both Contracting States or by each of the two States result or will result for him in taxation not in accordance with Convention, it may, irrespective of the remedies provided by the domestic laws of those States, submit his case to the competent authority of the Contracting State of which he is a resident.

 

  1. That competent authority shall endeavour, if the claim appears to it to be well-founded and if it is not itself in a position to ́itself is not in a position to bring about a satisfactory solution, to settle the matter by means of an amicable agreement with the competent authority of the other Contracting State, with a view to ́avoiding taxation not in accordance the Convention.

 

  1. The competent authorities of the Contracting States shall endeavor, by mutual agreement, to resolve any difficulties or doubts to which the interpretation or application of the Convention may give rise. They may also consult together with a view to ́ avoiding double taxation in cases not provided for in the Convention.

 

  1. The competent authorities of the Contracting States may communicate directly with each other with a view to reaching an agreement as described in the preceding paragraphs. If an oral exchange of views appears to facilitate such agreement, such exchanges of views may take place in a Commission composed of representatives of the competent authorities of the Contracting States.

Article 27

Exchange of Information

  1. The competent authorities of the Contracting States shall exchange such information as is necessary to the provisions of this Convention and of the domestic laws of the Contracting States relating to taxes covered by the Convention to the extent that the taxation thereunder is in accordance with the Convention. Any information so exchanged shall be treated as secret and may be communicated only to persons or authorities responsible for the assessment or collection of taxes covered by this Convention.

 

  1. The provisions of paragraph 1 shall in no case be construed as imposing on l ́one of the Contracting States the ́obligation:

(a) to make administrative arrangements at variance with its own legislation or administrative practice or with those of the other Contracting State;

(b) to supply information that could not be obtained under its own laws or within the framework of its normal administrative practice or those of the other Contracting State;

(c) to transmit the information which would disclose any trade, business, industrial, commercial or professional secret or any information the disclosure of which would be contrary to the public.

Article 28

Diplomats and international organizations

  1. The provisions of this Convention shall not affect the fiscal privileges of diplomatic or consular officials diplomatic or consular officials under either the general rules of the law of nations or the provisions of nations, or under the provisions of special agreements.

 

  1. The Convention shall not apply to international organizations, to their organs and functionaries, or to persons who, by virtue of their membership in such organizations, have been granted tax privileges persons who, being members of diplomatic or consular missions of third States, are present in a contracting present in a Contracting State and are not considered as residents of either of the Contracting State for the purposes of taxes on income and on capital.

Article 29

Methods of Application

The competent authorities of the Contracting States shall settle by mutual agreement the mode of application of the Convention and shall communicate to each other the details of the application of the Convention and shall communicate directly with each other for the ́application of the Convention.

Article 30

Entry into Force

  1. This Convention shall be ratified and the instruments of ratification shall be exchanged at Brasilia as soon as possible.

 

  1. The present Convention shall enter into force upon the ́exchange of the instruments of ratification and its provisions shall apply for the first time:

(a) in respect of taxes levied by way of withholding, to amounts paid or made available on or after the first day of January in the calendar year next following the year in which the Convention enters into force which the Agreement shall become effective;

(b) in respect of other taxes forming part of this Convention, to the tax periods beginning on or after the first day of January in the calendar year next following the year in which the Convention enters into force;

Article 31

Denunciation

  1. The present Convention shall remain in force indefinitely. However, each State may, by giving six months’ notice, notified in writing through diplomatic channels, to denounce it by the end of a calendar year, beginning with the third year from the date of its entry into force.

 

  1. In such case, the Convention shall apply for the last time:

(a) in respect of taxes levied by way of withholding, to amounts paid or made available before the expiry of the calendar year in which the notice of denunciation will have been given;

(b) in respect of other taxes forming part of this Convention, to the tax periods beginning in the calendar year in which the ́ notice of termination shall have been given. In witness whereof, the plenipotentiaries of the two States have signed the present Convention and have affixed thereto their seals. Done at Luxembourg, this 8th day of November 1978, in two originals, one in the French and one in the Portuguese language, both being equally authentic.

Portuguese language, both being equally authentic.