Double Tax Treaty between Luxembourg & Portugal | Damalion

CONVENTION

BETWEEN THE GRAND DUCHY OF LUXEMBOURG AND THE PORTUGUESE REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION AND  TO PREVENT FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND WEALTH 

 

The Government of the Grand Duchy of Luxembourg and the Government of the Portuguese Republic, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal avoidance of taxes on income and on capital, 

have agreed as follows

Article 1 

Persons Covered

The present Convention applies to persons who are residents of a Contracting State or two contracting states.

 

Article 2 

Taxes covered

  1. The existing taxes to which the Convention shall apply are

(a) in the case of Luxembourg:

(i) the personal income tax;

(ii) the impôt sur le revenu des collectivités;

(iii) the special tax on directors’ fees

(iv) the wealth tax;

(v) municipal business tax; and

(vi) property tax;

(hereinafter referred to as “Luxembourg tax”);

(b) in the case of Portugal:

(i) the personal income tax (Imposto sobre a Rendimento das Pessoas Singulares – IRS);

(ii) the tax on the income of legal entities (Imposto sobre o Rendimento das Pessoas Colectivas – IRC);

(iii) the local additional tax on corporate income tax (derrama); and

(iv) the property tax for municipalities (Contribuição autárquica);

(hereinafter referred to as “Portuguese tax”).

  1. The Convention shall also apply to taxes of the same or similar nature as the Convention and which would be in addition to the taxes analogous taxes which would be imposed or which replaces them. The competent authorities of the Contracting States shall notify each other at the beginning of each year of the beginning of each year of the significant changes made in their respective tax laws during the preceding year.

 

Article 3

General Definitions

 

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

(a) the terms “a Contracting State” and “the other Contracting State” mean, according to the context Luxembourg or Portugal, as the context requires;

(b) the term “Luxembourg” used in a geographical sense means the territory of the Grand Duchy of Luxembourg

(c) the term “Portugal” means the territory of the Portuguese Republic situated on the European continent and the archipelagos of the Azores and Madeira, the territorial sea, as well as the other areas over which, in accordance with Portuguese law, the over which, in accordance with Portuguese legislation and international law, the Portuguese Republic has jurisdiction or sovereign rights with respect to the exploration and exploitation of the natural resources of the seabed, the subsoil and the superjacent waters;

(d) the term “person” includes natural persons and corporations;

(e) “corporation” means any body corporate or any entity that is treated as a body corporate for tax purposes;

(f) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean 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 “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 when the ship or aircraft is operated solely between points in the other Contracting State

(h) the term “competent authority” means:

(i) in relation to Luxembourg, the Minister of Finance or his authorized representative ;

(ii) in relation to Portugal, the Minister of Finance, the Director General of Taxes or their authorized representatives.

  1. For the purposes of the application of the Convention by a Contracting State, any term not defined therein the meaning given to it by the law of that State concerning the taxes to which the Convention applies, unless the context otherwise requires.

 

Article 4

Resident

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 therein by reason of his residence, place of management or any other criterion of a similar nature. However, that term shall not include any person who is subject to tax in that State only on income The term “taxable person” means a person who is subject to tax in that State only in respect of income or capital situated in that State.

2 . Where, under the provisions of paragraph I, an individual is a resident of both Contracting States

(a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closest (centre of vital interests)

(b) if the State in which that person has the centre of his vital interests cannot be determined, or if he has no permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

(c) if such person is ordinarily present in both States or is not ordinarily present in either State, he shall be deemed to be a resident of the State of which he is a nationality,

(d) if the person is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

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

 

Article 5

Permanent Establishment

1 . For the purposes of this Convention, The term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

  1. The term “permanent establishment” includes

(a) a place of management

(b) a branch office,

(c) an office,

(c) a factory,

(e) a workshop, and

(f) a mine, oil or gas well, quarry or other place of extraction of natural resources.

3 . A construction or assembly site constitutes a permanent establishment only if the duration exceeds six months .

  1. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include

(a) use is made of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise

(b) goods belonging to the business are stored solely for the purpose of storage, display or delivery;

(c) goods owned by the business are stored solely for the purpose of processing by another business by another enterprise;

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

  1. e) a fixed place of business is used solely for the purpose of carrying on any other activity of a preparatory or auxiliary character for the enterprise ;

(f) a fixed place of business shall be used solely for the purpose of carrying on the activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from such combination remains of a preparatory or auxiliary character

  1. Notwithstanding the provisions of paragraphs 1 and 2, where a person – other than an agent of independent status to whom paragraph 7 applies – is acting on behalf of an enterprise and exercises in a Contracting State the power habitually exercised by him to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of in that State in respect of all activities which that person carries on for the enterprise, unless the activities of that person are limited to those referred to in paragraph 4 which, if carried on through a which, if carried on through a fixed place of business, would not qualify that fixed place of business as a the activities of such person are limited to those mentioned in paragraph 4 and which, if carried on through a fixed place of business, would not qualify that place of business as a permanent establishment under the provisions of that paragraph.
  1. Subject to the provisions of paragraphs 4, 7 and 8, an enterprise of a Contracting State that carries on business in the other Contracting State through its employees or through any other personnel rendering rendering substantially the same services, for a period equal to or exceeding 183 days in any twelve-month period commencing or ending in the taxable year concerned, in the other Contracting State shall be deemed to have a permanent establishment in that other State.
  1. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.
  1. 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 other State (whether through a permanent establishment or otherwise) shall not of itself constitute a permanent establishment of the other.

 

Article 6

Income from Real Property

  1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that another State.
  1. The term “real property” shall have the meaning which it has under the law of the Contracting State in which the property is situated. The term shall in any case include property accessory to immovable property, livestock and equipment of agricultural and forestry holdings, rights to which the provisions of private law concerning land ownership the usufruct of immovable property and rights to variable or fixed payments for the operation or fixed payments for the exploitation or concession of the exploitation of mineral deposits, springs and other natural resources; ships and aircraft are not considered real property.
  1. The provisions of paragraph 1 shall apply to income derived from direct exploitation, rental or leasing, as well as from any other form of exploitation of real estate.
  1. The provisions of paragraphs 1 and 3 shall also apply to income from immovable property of an enterprise as well as to income from immovable property used for the exercise of a self-employed profession.
  1. The foregoing provisions of this Article shall also apply to income from movable property which, under the tax law of the Contracting State in which the property in question is situated, is treated as income from immovable property.

 

Article 7

Business Profits

 

  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 therein. If the enterprise carries on business in such a manner, the profits of the enterprise may be taxed in the other State but only so much of its profits as is attributable to that permanent establishment.
  1. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall be attributed in each the profits which it might be expected to make if it were a separate enterprise shall be attributed in each Contracting State to that permanent establishment if it had constituted a separate enterprise engaged in the same or similar activities in the same or similar activities under the same conditions or a permanent establishment. The permanent establishment shall be deemed to be a separate enterprise carrying on the same or similar activities under identical conditions and dealing at arm’s length with the enterprise of which it is a part.
  1. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses incurred for the purposes of that permanent establishment, including executive and general administrative expenses incurred, shall be the State in which the permanent establishment is situated or elsewhere.
  1. If it is customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of such profits, on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall prevent such provision of paragraph 2 shall not prevent that Contracting State from determining the taxable profits according to the apportionment in use; the method of apportionment adopted shall, however, be such that the result is in accordance with the principles contained in this Article.
  1. No profit shall be attributed to a permanent establishment by reason of the fact that it has merely the enterprise purchased goods or services. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined each year by the same method, unless there are good and sufficient reasons for proceeding otherwise.
  1. Where profits include items of income which are dealt with 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. 1. Profits derived from taxable only in the State in which the headquarters of the company is located the taxable profits of the enterprise shall be taxed only in the Contracting State in which the place of business of the enterprise is situated. The profits derived from the operation of ships or aircraft are not taxable in the State in which the place of effective management of the enterprise is situated.
  1. If the place of effective management of a shipping enterprise is on board a ship, that place of effective management shall be deemed to be in the ship, that place of business shall be deemed to be in the Contracting State in which the home port of that ship is situated, or in the absence of a home port, in the Contracting State in which the ship is situated. If the place of effective management of a shipping enterprise is on board a ship, that place of effective management shall be deemed to be in the Contracting State in which the home port of that ship is situated or, if there is no home port, in the Contracting State of which the operator of the ship is a resident.
  1. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, joint venture or pool, joint business or international operating agency.

 

Article 9

Associated companies

  1. 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 a Contracting State and an enterprise of the other Contracting State, and in either case the two enterprises are connected in their commercial or financial relations by terms and conditions agreed upon or imposed which differ from those which would be agreed upon between independent enterprises between independent enterprises, the profits which, but for these conditions, would have been made by one of the enterprises, but which could not in fact be realized by reason of those conditions, may be included in the profits of that enterprise and taxed accordingly.

  1. Where a Contracting State includes in the profits of an enterprise of that State – and taxes accordingly – profits on which an profits on which an enterprise of the other Contracting State has been taxed in that other State, and the profits so included are profits that would have accrued to the enterprise of the first-mentioned State of the first-mentioned State if the conditions agreed upon between the two enterprises had been those which between independent enterprises, the other State shall make an appropriate adjustment to the amount of tax imposed therein on those profits if that other State considers the adjustment to be justified. In determining such adjustment, regard shall be had to the other provisions of this Convention and, if necessary, to the In determining such adjustment, due regard shall be had to the other provisions of this Convention and, if necessary, the competent authorities (of the Contracting States) shall consult each other.

 

Article 10

Dividends

1 . Dividends paid by a company resident in one Contracting State to a resident of the other Contracting State shall be taxed as dividends.

  1. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the person receiving the dividends is the dividends is the beneficial owner thereof, the tax so charged shall not exceed 15 percent of the gross amount of such dividends. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are payment of dividends.
  1. The term “dividends” as used in this article means income from shares or profit sharing certificates, mining shares, founder’s shares or other profit shares, with the shares or profit sharing certificates, with the exception of claims, as well as income from other shares which is subject to the same tax regime as income from shares under the income from shares by the legislation of the State of which the distributing company is a resident. The term also includes, as far as Portugal is concerned, profits paid under a profit-sharing contract (associação em participação) and, in the case of Luxembourg, income received by the lessor of the income received by the donor with profit sharing in a commercial enterprise.
  1. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends resident, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein and that the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5 . 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 the profits or income paid by the company, except to the extent that such dividends are paid to a resident of that other State or to the extent that the holding in respect of which the dividends are paid is effectively connected with (w a permanent establishment or a fixed base situated in that other State, nor impose any tax, by way of taxation on undistributed profits, on the undistributed profits of the company, even if the dividends paid or the undistributed profits consist wholly or partly of distributed profits consist wholly or partly of profits or income arising in such other States.

 

Article 11

Interest

1 . Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxable in that other State.

  1. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the person receiving the interest is a resident of that State, the interest may be taxed in that State. the laws of that State, but if the person receiving the interest is the beneficial owner thereof, the tax so charged shall not exceed

(a) 10 percent (the gross amount of the interest if such interest is paid by an enterprise of a Contracting State, in respect of which the interest is considered a deductible expense, to that enterprise’s financial institution which is a resident of the other Contracting State;

  1. b) 15 percent (of the gross amount of the interest in all other cases. The tax authorities of the Contracting States shall by agreement determine the manner in which of the application of these limitations.
  1. The term “interest” as used in this Article means income from (public funds, bonds or debentures, whether or not secured by mortgage or otherwise, and claims of any kind, whether or not secured by a mortgage, and whether or not secured by a bond or debenture and debts of any kind, as well as all other income assimilated to income from loans by the tax laws of the tax laws of the State in which the income is earned.
  1. The provisions of paragraphs I and 2 shall not apply if the beneficial owner of the interest, being a resident of a State, is a resident of a Contracting State carries on business in the other Contracting State in which the interest arises a business activity through a permanent establishment situated therein, or performing independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such fixed base. In this case, the provisions of Article 7 or Article 14, as the case may be, shall apply.
  1. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political or administrative subdivision, a local authority or a resident of that State. However, where the payer of the interest, whether or not a resident of a Contracting State, has in a Contracting State has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness the debt-claim giving rise to the attribution or payment of the interest was incurred and which bears the expense of that interest, such interest shall be deemed to arise in the shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
  1. Where, by reason of a special relationship between the payer and the beneficial owner or where both maintain beneficial owner, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount of the for which it is paid, exceeds that which would have been agreed upon by the debtor and the beneficial owner in the absence of such a relationship, the provisions of this article shall apply only to the latter amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to other In such a case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had 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 also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the person receiving the royalties is the actual recipient thereof, the tax so charged shall not exceed 10 percent of the brown amount of the royalties. The competent authorities of the Contracting States shall by mutual agreement determine the manner of application of this limitation.
  1. The term “royalties” as used in this Article means remuneration of any kind whatsoever paid for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films and films and recordings for radio and television radio and television transmissions, a patent, a trademark design, plan, secret formula or process, as well as for the use of or the right to use  The term “royalties” also includes royalties for the use of or the right to use industrial, commercial or scientific equipment and information relating to industrial, commercial or scientific experience. The term “royalties” also includes payments for technical assistance in connection with the use or with the use of, or the right to use, the rights, property or information referred to in this paragraph.
  1. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein, or performs in that other State independent personal services in the course of his business. the person who is a resident of a Contracting State carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and property in respect of which royalties are due is effectively connected with it. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 

5 . Royalties shall be deemed to arise in a contracting State when the payer is that State itself, a political or administrative subdivision, a local authority or a resident of that State. However, where the payer of the royalties, whether or not a resident of a Contracting State However, where the person paying the royalties, whether or not he is a resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

  1. Where, by reason of a special relationship between the payer and the beneficial owner or where both maintain beneficial owner, the amount of the royalties, having regard to the service for which they are paid, is performance for which they are paid, exceeds the amount that would have been agreed upon by the obligor and the beneficial owner in the absence of such relationship, 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 according to the laws of each Contracting State, due regard being due to the other provisions of this Convention.

 

Article 13

Capital Gains

  1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
  1. Gains from the alienation of movable property forming part of the business property of a permanent establishment enterprise of a Contracting State has in the other Contracting State, or of movable property pertaining to a fixed base of which a resident belongs to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such permanent establishment (alone or with the whole enterprise) or fixed base, may be taxed in that other State.
  1. Gains from the alienation of ships or aircraft operated in international traffic, or of movable property used in the operation of such movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
  1. Gains from the alienation of any property other than that referred to in paragraphs I, 2 and 3 shall be taxable only in the Contracting State of which the transferor is a resident.

 

Article 14

Independent Personal Services

1 . Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State. However, such income may be taxed in the other Contracting State in the following cases

(a) if the resident has a fixed base regularly available in the other Contracting State for the purpose of performing his activities; in such case, only that part of the income which is attributable to the said fixed base may be taxed in the other Contracting State

(b) if the resident is present in the other Contracting State for a period or periods exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the taxable year concerned.

  1. The term “professional services” includes, but is not limited to, independent scientific, literary, artistic, educational or teaching activities and the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

 

Article 15

Dependent occupations

  1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is exercised in that State, remuneration derived therefrom may be taxed in that other State.
  1. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if 

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the tax year, and

(b) the remuneration is paid by 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 which the employer is in another State.

  1. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

 

Article 16

Directors’ Fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors in his capacity as a member of the board of directors or a supervisory board or a similar organ of a company which is a resident of a Contracting State of a company which is a resident of the other Contracting State may be taxed in that other State. However, remuneration paid by that company to a member of one of its organs in respect of the performance of its organs in respect of the performance of a permanent activity may be taxed in accordance with the provisions of Article 15 of this Convention.

 

Article 17

Artists and Sportsmen

  1. Notwithstanding the provisions of Articles 7, 14 and 15, income derived by a resident of a Contracting State from his personal activities as an entertainer, such as a theatre, motion picture, radio or television artiste, exercised in the other Contracting State artist, such as a theater, motion picture, radio or television artiste, or a musician, or as an sportsmen may be taxed in that other State.
  1. Where income from activities which an entertainer or sports person performs personally and in that capacity is attributed not as such is attributed not to the entertainer or sportsman himself but to another person, such income may be notwithstanding the provisions of Articles 7, 14 and 15, such income may be taxed in the Contracting State in which the activities of the artist or athlete are carried on.

 

Article 18

Pensions

  1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in respect of past employment shall be taxable only in that State.
  1. Notwithstanding the provisions of paragraph the social security system of a Contracting State shall be 1, pensions paid are taxable in that State.

Article 19

Public Offices

1. (a) Remuneration, other than a pension, paid by a Contracting State or a political or administrative subdivision or local authority thereof to an individual in respect of services rendered to that State or subdivision or 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 the individual is a resident of that State who:

(i) is a national of that State, or

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

  1. (a) Pensions paid by a Contracting State or any political or administrative subdivision or local authority thereof, either directly or out of funds established by it, to an individual in respect of services rendered to that State or subdivision or authority, shall be taxable only in respect of such pensions or local authority, shall be taxable only in that State.

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

  1. The provisions of Articles 15, 16, 17 and 18 shall apply to remuneration and pensions paid in respect of services rendered in connection with a business carried on by a Contracting State or a political or administrative subdivision or a local authority thereof.

Article 20

Professors

Subject to the provisions of Article 19, the remuneration of a professor or other member of the teaching staff who is member of the teaching profession who is, or who was immediately before entering a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of to teach or engage in scientific research for a period not exceeding two years, in a university or other nonprofit institution for education or scientific research shall be taxable only in the said other Contracting State.

Article 21

Students

Amounts paid to a student or a trainee who is, or immediately before entering a Contracting  State was to a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned State solely for the sole purpose of pursuing his education or vocational training, shall receive for his maintenance, education or maintenance, education or vocational training, shall not be taxable in that State, provided that such amounts are derived from sources outside that State, or are received as remuneration for an activity performed on a part-time basis in that State within the limits of an income enabling him to pursue his education or vocational training.

Article 22

Other Income

  1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this the preceding Articles of this Convention shall be taxable only in that State, provided that they are taxable in that State.
  2. The provisions of paragraph I shall not apply to income other than income from immovable property as defined in paragraph 2 of Article 6, where the recipient of such income resident of a Contracting State, carries on business in the other Contracting State, either as a the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected therewith. is effectively connected with it. (In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

Article 23

Fortune

  1. Capital represented by immovable property referred to in Article 6 owned by a resident of a Contracting State and situated in the other Contracting State may be taxed in that other State.
  1. Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or by movable property which belongs to a fixed base belongs to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, may be taxed in that other State.

3 . Capital constituted by ships and aircraft operated in international traffic and by movable property used for the ships or aircraft operated in international traffic, and movable property pertaining to the operation of such ships or aircraft, shall be taxable only if the enterprise is situated.

  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. In the case of Luxembourg, double taxation shall be avoided in the following manner

(a) Where a resident of Luxembourg receives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in Portugal, Luxembourg shall exempt such income or capital from tax, subject to the provisions of subparagraphs (b) to (e).

(b) Where a resident of Luxembourg receives (items of) income which, in accordance with the provisions of (Articles 10, I I and 12, may be taxed in Portugal, Luxembourg shall allow a deduction from the tax it collects on the income of (that resident) of an amount equal to the tax paid in Portugal. This deduction may not, however, exceed the fraction of the tax, calculated before deduction, corresponding to those items of income received from Portugal.

(c) By way of derogation from subparagraph (b), dividends distributed by a company which is a resident of Portugal, subject in that State to a tax corresponding to the Luxembourg corporate income tax, to a capital company which is a resident of resident in Luxembourg which, since the beginning of its fiscal year, has held directly at least 25 per cent of the directly at least 25 per cent of the capital of the first company. The shares or units of the Portuguese company in Portugal are, under the same conditions, exempt from Luxembourg wealth tax.

(d) When, as a result of special incentives for the promotion of economic and social development in Portugal, the social development in Portugal, the interest and royalties referred to respectively in subparagraph a) of paragraph 2 of Article 1 1 and in paragraph 2 of Article 12, paid by the resident of Portugal, are exempted from Luxembourg wealth tax the interest and royalties referred to in subparagraph (a) of paragraph 2 of Article 1 1 and in paragraph 2 of Article 12 respectively, paid by him resident in Portugal are exempt from tax or subject to a reduced rate of tax in Portugal, such income shall be considered for the purposes of applying subparagraph (b) of this paragraph as having been taxed in Portugal at the rate of 10 percent of the gross amount thereof. The provisions of this subparagraph shall apply for a period of eight years beginning on January 1 of the year following the date of the transfer of the income. January 1 of the year following the entry into force of this Convention.

(e) Where, under any provision of this Convention, except subparagraph (c) of this paragraph, income derived or capital owned by a resident of Luxembourg is exempt from tax in Luxembourg, that resident may nevertheless, in calculating the amount of tax payable by the nevertheless, in calculating the amount of tax on the remainder of the income or capital of such the resident, take into account the exempted income or wealth.

  1. In the case of Portugal, double taxation shall be avoided in accordance with the provisions of Portuguese law (insofar as such laws do not derogate from the general principles contained in this paragraph) in the following manner:

(a) Where a resident of Portugal receives income which, in accordance with the provisions of this Convention, may be taxed in Luxembourg, Portugal shall deduct from the income tax of that resident an amount equal to the tax paid in Luxembourg. The amount deducted may not, however, exceed the fraction of the income tax, calculated before deduction, which corresponds to the income which may be taxed in Luxembourg.

  1. b) Where a company which is a resident of Portugal receives dividends from a company which is a resident of Luxembourg resident in Luxembourg in whose capital the first company has a direct holding of at least 25 per cent, Portugal shall deduct, in determining the taxable profit subject to the taxable profit subject to corporate income tax, Portugal shall deduct 95 percent of such dividends the taxable income subject to corporate income tax, under the terms and conditions provided for in legislation.

(c) Where, in accordance with any provision of this Convention, income derived by a resident of Portugal is exempt from tax in Portugal, Portugal may nevertheless, in calculating the amount of tax on the remaining income of that resident, take into account the exempted income.

 

Article 25 

Non Discrimination

  1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than those to which nationals of that other State in the same circumstances are or may be subjected. This provision shall also apply, notwithstanding the provisions of Article 1, to persons who are not residents of a Contracting State of one or both of the Contracting States.
  1. The term “nationals” means

(a) all individuals who possess the nationality of a Contracting State

(b) all legal persons, partnerships and associations formed in accordance with the laws in force in a contracting State.

  1. The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation of enterprises of that other State carrying on the same activities. This provision shall not be construed This provision shall not be construed to require a Contracting State to grant to residents of the other Contracting personal deductions, allowances and reductions for taxation purposes on account of civil status or family responsibilities that it grants to its own residents.
  1. 4. Unless the provisions of paragraph 1 of Article 9, paragraph 6 of Article 11 or paragraph 6 of Article 12 are applicable, interest, royalties and other expenses paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, in determining the taxable profits of that same conditions as if they had been paid to a resident of the first-mentioned State, in determining the taxable profits of that paid to a resident of the first-mentioned State. Similarly, debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of that enterprise, be deductible under the same conditions as if they had been incurred to a resident of the first-mentioned State.
  1. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than those to which other similar enterprises of the first-mentioned State are or may be subjected.

 

Article 26

Mutual Agreement Procedure

  1. 1. Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Convention, that person may, irrespective of the remedies provided by the domestic law of those States submit its case to the competent authority of the Contracting State of which it is a resident or, if its case the Contracting State of which it is a resident or, if its case comes under paragraph 1 of Article 25, to that of the Contracting State of which it is a national. The case must be submitted within two years after the date of taxation not in accordance with the provisions of the Convention.
  1. The competent authority shall endeavour, if the complaint appears to it to be well-founded and if it is not itself in a position to provide a satisfactory solution, to resolve the case by satisfactory solution, to resolve the case by mutual agreement with the competent authority of the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the Convention.
  1. The competent authorities of the Contracting States shall endeavor by mutual agreement to resolve any difficulties or doubts arising as to the interpretation or application of 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 If it appears that an oral exchange of views will facilitate such agreement, such exchange 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 for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning the taxes covered by the Convention to the extent that the taxation thereunder is not imposed on the taxpayer. the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention to the extent that the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. Information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. Such persons or authorities shall use such information only for such purposes. They may disclose such information in public court proceedings or in judgments.
  1. In no case shall the provisions of paragraph 1 be construed to interfere with the provisions of this Convention.

(a) to take measures to protect the interests of the administrative contracting State;

(b) to supply information which is not obtainable under the laws or administrative practices of that or of the other Contracting State;

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

Article 28

Members of Diplomatic Missions and Consular Posts

  1. The provisions of this Convention shall not apply to companies enjoying special tax treatment under the laws or treatment under the laws or administrative practice of either Contracting State. Nor shall they apply to the income derived by a resident of the other Contracting State from such companies or to the income of a resident of the other Contracting State or to shares or other equity securities of such companies owned by such person.
  1. The Governments of the Contracting States shall agree from time to time as to the meaning of companies that are accorded special tax treatment under the laws or administrative practice of either Contracting State” under the provisions of paragraph 1 of this Article.

 

Article 29

Exclusion of certain companies

  1. The provisions of this Convention shall not apply to companies enjoying special tax treatment under the laws or treatment under the laws or administrative practice of either Contracting State. Nor shall they apply to the income derived by a resident of the other Contracting State from such companies or to the income of a resident of the other Contracting State or to shares or other equity securities of such companies owned by such person.
  1. The Governments of the Contracting States shall agree from time to time as to the meaning of companies that are accorded special tax treatment under the laws or administrative practice of either Contracting State” under the provisions of paragraph 1 of this Article.

Article 30

Entry into force

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

  1. The Convention shall enter into force thirty days after the exchange of the instruments of ratification and its provisions shall apply:

(a) in Luxembourg:

(i) to taxes due at source on income allocated or paid on or after January 1 of the year following that in which it enters into force;

(ii) to other taxes for any taxable year beginning on or after January 1 of the year following that in which it enters into force;

(b) in Portugal:

(i) taxes due at source whose chargeable event occurs on or after January 1 of the year following the year of entry into force of this Agreement;

(ii) other taxes on income relating to any tax year beginning on or after January 1 of the year following the year of its entry into force,

Article 31

Denunciation

This Convention shall remain in force until denounced by a Contracting State. Each Contracting State may denounce the Convention through diplomatic channels with a minimum of six months notice before the end of each calendar year. In this case, the Convention will cease to be applicable:

(a) in Luxembourg:

(i) taxes due at source on income allocated or paid on or after January 1 of the year following the date on which the period specified in the notice of termination expires

(ii) other taxes for any taxable year beginning on or after the first day of January in the year following the date on which the period specified in the notice of termination expires§;

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Convention.

DONE in duplicate at Brussels, this 25th day of May 1999 in the French and Portuguese languages, each version being equally authentic.

 

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