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The Government of Canada and the Government of the Grand
Duchy of Luxembourg desiring to conclude a Convention
for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income and on
capital, have agreed as follows:
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This Convention shall apply to persons who are residents of
one or both of the Contracting States.
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1. The existing taxes to which the Convention shall apply are,
in particular:
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(a) in the case of Canada; the taxes imposed by the
Government of Canada under the Income Tax Act, (hereinafter
referred to as ``Canadian Tax'');
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(b) in the case of Luxembourg:
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(i) the income tax on individuals,
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(ii) the corporation tax,
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(iii) the special tax on directors' fees,
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(iv) the capital tax, and
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(v) the communal trade tax,
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(hereinafter referred to as ``Luxembourg tax'').
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2. The Convention shall apply also to any identical or
substantially similar taxes which are imposed after the date of
signature of the Convention in addition to, or in place of, the
existing taxes. The competent authorities of the Contracting
States shall notify each other of any significant changes which
have been made in their respective taxation laws.
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1. For the purposes of this Convention, unless the context
otherwise requires:
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(a) the term ``Canada'' used in a geographical sense, means the
territory of Canada, including:
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(i) any area beyond the territorial sea of Canada which, in
accordance with international law and the laws of Canada,
is an area within which Canada may exercise rights with
respect to the seabed and subsoil and their natural
resources;
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(ii) the sea and airspace above every area referred to in
subparagraph (i) in respect of any activity carried on in
connection with the exploration for or the exploitation of
the natural resources referred to therein;
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(b) the term ``Luxembourg'' used in a geographical sense,
means the territory of the Grand Duchy of Luxembourg;
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(c) the terms ``a Contracting State'' and ``the other Contracting
State'' mean, as the context requires, Canada or Luxembourg;
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(d) the terms ``person'' includes an individual, an estate, a
trust, a company, a partnership and any other body of persons;
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(e) the term ``company'' means any body corporate or any
entity which is treated as a body corporate for tax purposes;
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(f) the term ``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;
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(g) the term ``competent authority'' means:
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(i) in the case of Canada, the Minister of National Revenue
or the Minister's authorized representative,
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(ii) in the case of Luxembourg, the Minister of Finance or
the Minister's authorized representative;
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(h) the term ``national'' means:
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(i) any individual possessing the nationality of a
Contracting State;
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(ii) any legal person, partnership or association deriving its
status as such from the laws in force in a Contracting State.
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2. As regards the application of the Convention at any time by
a Contracting State, any term not defined therein shall, unless the
context otherwise requires, have the meaning that it has at that
time under the law of that State for the purposes of the taxes to
which the Convention applies, any meaning under the applicable
tax laws of that State prevailing over a meaning given to the term
under other laws of that State.
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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 that person's
domicile, residence, place of management or any other criterion
of a similar nature. This term also includes a Contracting State or
a political subdivision or local authority thereof or any agency or
instrumentality of any such State, subdivision or authority. This
term, however, does not include any person who is liable to tax
in that State in respect only of income from sources in that State.
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2. Where by reason of the provisions of paragraph 1 an
individual is a resident of both Contracting States, then the
individual's status shall be determined as follows:
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(a) the individual shall be deemed to be a resident only of the
State in which the individual has a permanent home available;
if the individual has a permanent home available in both
States, the individual shall be deemed to be a resident only of
the State with which the individual's personal and economic
relations are closer (centre of vital interests);
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(b) if the State in which the individual's centre of vital interests
is situated cannot be determined, or if there is not a permanent
home available to the individual in either State, the individual
shall be deemed to be a resident only of the State in which the
individual has an habitual abode;
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(c) if the individual has an habitual abode in both States or in
neither of them, the individual shall be deemed to be a resident
only of the State of which the individual is a national;
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(d) if the individual 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.
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3. Where by reason of the provisions of paragraph 1 a person
other than an individual is a resident of both Contracting States,
the competent authorities of the Contracting States shall by
mutual agreement endeavour to settle the question. In the
absence of such agreement, such person shall not be entitled to
claim any relief or exemption from tax provided by the
Convention.
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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.
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2. The term ``permanent establishment'' includes especially:
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(a) a place of management;
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(f) a mine, an oil or gas well, a quarry or any other place
relating to the exploration for or the exploitation of natural
resources.
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3. A building site or construction or installation project
constitutes a permanent establishment only if it lasts more than
twelve months.
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4. Notwithstanding the preceding provisions of this Article,
the term ``permanent establishment'' shall be deemed not to
include:
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(a) the use of facilities solely for the purpose of storage,
display or delivery of goods or merchandise belonging to the
enterprise;
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(b) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of storage,
display or delivery;
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(c) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of
processing by another enterprise;
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(d) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise or for collecting
information, for the enterprise;
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(e) the maintenance of a fixed place of business solely for the
purpose of carrying on, for the enterprise, any other activity of
a preparatory or auxiliary character;
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(f) the maintenance of a fixed place of business solely for any
combination of activities mentioned in subparagraphs (a) to
(e) provided that the overall activity of the fixed place of
business resulting from this combination is of a preparatory or
auxiliary character.
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5. Notwithstanding the provisions of paragraphs 1 and 2,
where a person - other than an agent of an independent status
to whom paragraph 6 applies - is acting on behalf of an
enterprise and has, and habitually exercises in a Contracting State
an authority 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 any activities which that
person undertakes for the enterprise unless the activities of such
person are limited to those mentioned in paragraph 4 which, if
exercised through a fixed place of business, would not make this
fixed place of business a permanent establishment under the
provisions of that paragraph.
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6. 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.
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7. 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 either company a
permanent establishment of the other.
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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 other State.
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2. For the purposes of this Convention, the term ``immovable
property'' shall have the meaning which it has for the purposes
of the relevant tax law of the Contracting State in which the
property in question is situated. The term shall in any case include
property accessory to immovable property, livestock and
equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply,
usufruct of immovable property and rights to variable or fixed
payments as consideration for the working of, or the right to
work, mineral deposits, sources and other natural resources.
Ships and aircraft shall not be regarded as immovable property.
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3. The provisions of paragraph 1 shall apply to income derived
from the direct use, letting, or use in any other form of immovable
property and to income from the alienation of such property.
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4. The provisions of paragraphs 1 and 3 shall also apply to the
income from immovable property of an enterprise and to income
from immovable property used for the performance of
independent personal services.
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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 or has carried on
business as aforesaid, the profits of the enterprise may be taxed
in the other State but only so much of them as is attributable to
that permanent establishment.
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2. 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 in each Contracting State be attributed to that
permanent establishment the profits which it might be expected
to make if it were 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 and with all other persons.
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3. In the determination of the profits of a permanent
establishment, there shall be allowed those deductible expenses
which are incurred for the purposes of the permanent
establishment including executive and general administrative
expenses, whether incurred in the State in which the permanent
establishment is situated or elsewhere.
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4. No profits shall be attributed to a permanent establishment
by reason of the mere purchase by that permanent establishment
of goods or merchandise for the enterprise.
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5. For the purposes of the preceding paragraphs, the profits to
be attributed to the permanent establishment shall be determined
by the same method year by year unless there is good and
sufficient reason to the contrary.
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6. Where profits include items of income which are dealt with
separately in other Articles of the Convention, then the
provisions of those Articles shall not be affected by the
provisions of this Article.
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1. Profits derived by an enterprise of a Contracting State from
the operation of ships or aircraft in international traffic shall be
taxable only in that State.
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2. Notwithstanding the provisions of paragraph 1 and of
Article 7, profits derived by an enterprise of a Contracting State
from a voyage of a ship where the principal purpose of the
voyage is to transport passengers or goods exclusively between
places in the other Contracting State may be taxed in that other
State.
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3. The provisions of paragraphs 1 and 2 shall also apply to
profits from the participation in a pool, a joint business or an
international operating agency.
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4. For the purposes of this Article,
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(a) the term ``profits'' includes
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(i) gross receipts and revenues derived directly from the
operation of ships or aircraft in international traffic, and
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(ii) interest on sums generated directly from the operation
of ships or aircraft in international traffic if that interest is
incidental to the operation; and
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(b) the term ``operation of ships or aircraft in international
traffic'' by an enterprise, includes
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(i) the charter or rental of ships or aircraft,
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(ii) the rental of containers and related equipment, and
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(iii) the alienation of ships, aircraft, containers and related
equipment
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by that enterprise if that charter, rental or alienation is
incidental to the operation by that enterprise of ships or aircraft
in international traffic.
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1. Where
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(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
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(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,
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and in either case conditions are made or imposed between the
two enterprises in their commercial or financial relations which
differ from those which would be made between independent
enterprises, then any income which would, but for those
conditions, have accrued to one of the enterprises, but, by reason
of those conditions, have not so accrued, may be included in the
income of that enterprise and taxed accordingly.
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2. Where a Contracting State includes in the income of an
enterprise of that State - and taxes accordingly - income on
which an enterprise of the other Contracting State has been
charged to tax in that other State and the income so included is
income which would have accrued to the enterprise of the
first-mentioned State if the conditions made between the two
enterprises had been those which would have been made
between independent enterprises, then that other State shall make
an appropriate adjustment to the amount of tax charged therein
on that income. In determining such adjustment, due regard shall
be had to the other provisions of this Convention and the
competent authorities of the Contracting States shall if necessary
consult each other.
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3. A Contracting State shall not change the income of an
enterprise in the circumstances referred to in paragraph 1 after the
expiry of the time limits provided in its national laws and, in any
case, after five years from the end of the year in which the income
which would be subject to such change would, but for the
conditions referred to in paragraph 1, have accrued to that
enterprise.
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4. The provisions of paragraphs 2 and 3 shall not apply in the
case of fraud or wilful default.
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1. Dividends paid by a company which is a resident of a
Contracting State to a resident of the other Contracting State may
be taxed in that other State.
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2. 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
beneficial owner of the dividends is a resident of the other
Contracting State, the tax so charged shall not exceed:
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(a) 5 per cent of the gross amount of the dividends if the
beneficial owner is a company (other than a partnership)
which controls directly or indirectly at least 10 per cent of the
voting power in the company paying the dividends;
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(b) notwithstanding the provisions of subparagraph (a), 10
per cent of the gross amount of the dividends if the dividends
are paid by a non-resident-owned investment corporation that
is a resident of Canada to a beneficial owner that is a company
(other than a partnership) that is a resident of Luxembourg and
that owns at least 25 per cent of the capital of the company
paying the dividends; and
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(c) 15 per cent of the gross amount of the dividends in all other
cases.
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The provisions of this paragraph shall not affect the taxation of
the company in respect of the profits out of which the dividends
are paid.
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3. Notwithstanding the provisions of paragraph 2, dividends
paid by a company that is a resident of Luxembourg shall not be
taxable in Luxembourg if the beneficial owner of the dividends
is a company that is a resident of Canada and that has had during
an uninterrupted period of two years preceding the date of
payment of the dividends, a direct shareholding of at least 25 per
cent of the voting stock of the company paying the dividends.
This provision only applies to dividends attributable to that part
of the shareholding that has been owned without interruption by
the beneficial owner during such two-year period. Furthermore,
the provisions of this paragraph shall only apply if the distributed
dividend is derived from the active conduct of a trade or business
in Luxembourg (other than the business of making or managing
investments, unless such business is carried on by a banking or
insurance company) and if such dividends are exempt in Canada.
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4. Notwithstanding the provisions of paragraph 2, dividends
arising in a Contracting State and paid to an organization that was
constituted and is operated in the other Contracting State
exclusively to administer or provide benefits under one or more
pension, retirement or other employee benefits plans shall be
exempt from tax in the first-mentioned State provided that:
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(a) the organization is the effective owner of the shares on
which the dividends are paid, holds those shares as an
investment and is generally exempt from tax in the other State;
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(b) the organization does not own directly or indirectly more
than 5 per cent of the capital or 5 per cent of the voting stock
of the company paying the dividends; and
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(c) the class of shares of the company on which the dividends
are paid is regularly traded on an approved stock exchange.
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5. For the purposes of paragraph 4, the term ``approved stock
exchange'' means:
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(a) in the case of dividends arising in Canada, a Canadian
stock exchange prescribed for the purposes of the Income Tax
Act;
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(b) in the case of dividends arising in Luxembourg, the
Luxembourg Stock Exchange; and
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(c) any other stock exchange agreed to in letters exchanged
between the competent authorities of the Contracting States.
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6. The term ``dividends'' as used in this Article means income
from shares, ``jouissance'' shares or ``jouissance'' rights, mining
shares, founders' shares or other rights, not being debt-claims,
participating in profits, as well as income which is subjected to
the same taxation treatment as income from shares by the laws of
the State of which the company making the distribution is a
resident.
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7. The provisions of paragraphs 1, 2 and 3 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 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 the holding in respect of which the
dividends are paid is effectively connected with such permanent
establishment or fixed base. In such case the provisions of Article
7 or Article 14, as the case may be, shall apply.
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8. 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 dividends paid by the
company, except insofar as such dividends are paid to a resident
of that other State or insofar as the holding in respect of which the
dividends are paid is effectively connected with a permanent
establishment or a fixed base situated in that other State, nor
subject the company's undistributed profits to a tax on
undistributed profits, even if the dividends paid or the
undistributed profits consist wholly or partly of profits or income
arising in such other State.
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9. Notwithstanding any provision in this Convention, Canada
may impose on the earnings of a company attributable to
permanent establishments in Canada, tax in addition to the tax
which would be chargeable on the earnings of a company
incorporated in Canada, provided that the rate of such additional
tax so imposed shall not exceed 5 per cent. For the purpose of this
provision, the term ``earnings'' means the profits attributable to
such permanent establishments in Canada (including gains from
the alienation of property forming part of the business property,
referred to in paragraph 2 of Article 13, of such permanent
establishments) in accordance with Article 7 in a year and
previous years after deducting therefrom:
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(a) business losses attributable to such permanent
establishments (including losses from the alienation of
property forming part of the business property of such
permanent establishments) in such year and previous years;
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(b) all taxes chargeable in Canada on such profits, other than
the additional tax referred to herein;
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(c) the profits reinvested in Canada, provided that the amount
of such deduction shall be determined in accordance with the
existing provisions of the law of Canada regarding the
computation of the allowance in respect of investment in
property in Canada, and any subsequent modification of those
provisions which shall not affect the general principle hereof;
and
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(d) five hundred thousand Canadian dollars ($500,000) less
any amount deducted:
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(ii) by a person related thereto from the same or a similar
business as that carried on by the company,
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under this subparagraph (d); for the purposes of this
sub-paragraph (d), a company is related to another company
if one company directly or indirectly controls the other, or
both companies are directly controlled by the same person or
persons, or if the two companies deal with each other not at
arm's length.
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The provisions of this paragraph shall also apply with respect to
earnings from the alienation of immovable property in Canada
by a company carrying on a trade in immovable property without
a permanent establishment in Canada but only insofar as these
earnings may be taxed in Canada in accordance with the
provisions of Article 6 or paragraph 1 of Article 13.
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1. Interest arising in a Contracting State and paid to a resident
of the other Contracting State may be taxed in that other State.
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2. 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 beneficial owner of the interest is a resident of the other
Contracting State, the tax so charged shall not exceed 10 per cent
of the gross amount of the interest.
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3. Notwithstanding the provisions of paragraph 2,
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(a) interest arising in a Contracting State and paid in respect
of indebtedness of the government of that Contracting State or
of a political subdivision or local authority thereof shall,
provided that the interest is beneficially owned by a resident
of the other Contracting State, be taxable only in that other
State;
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(b) interest arising in Luxembourg and paid to a resident of
Canada shall be taxable only in Canada if it is paid in respect
of a loan made, guaranteed or insured, or a credit extended,
guaranteed or insured by the Export Development
Corporation; and
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(c) interest arising in a Contracting State and paid to an
organization that was constituted and is operated in the other
Contracting State exclusively to administer or provide
benefits under one or more pension, retirement or other
employee benefit plans shall be exempt from tax in the
first-mentioned State provided that:
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(i) the organization is the beneficial owner of the interest
and is generally exempt from tax in the other State, and
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(ii) the interest is not derived from carrying on a trade or a
business or from a related person.
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4. Notwithstanding the provisions of paragraph 2, interest
arising in a Contracting State and paid to a resident of the other
Contracting State who is the beneficial owner thereof shall be
taxable only in that other State if such interest:
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(a) is a penalty charge for late payments; or
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(b) is paid in connection with the sale on credit of any
equipment or merchandise, except where the sale is made
between persons not dealing with each other at arm's length.
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5. The term ``interest'' as used in this Article means income
from debt-claims of every kind, whether or not secured by
mortgage, and whether or not carrying a right to participate in the
debtor's profits, and in particular, income from government
securities and income from bonds or debentures, as well as
income which is subjected to the same taxation treatment as
income from money lent by the laws of the State in which the
income arises. However, the term ``interest'' does not include
income dealt with in Article 10.
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6. The provisions of paragraphs 1, 2, 3 and 4 shall not apply
if the beneficial owner of the interest, being a resident of a
Contracting State, carries on business in the other Contracting
State in which the interest arises, through a permanent
establishment situated therein, or performs in that other State
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 permanent establishment or
fixed base. In such case the provisions of Article 7 or Article 14,
as the case may be, shall apply.
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7. Interest shall be deemed to arise in a Contracting State when
the payer is a resident of that State. Where, however, the person
paying the interest, whether the payer is a resident of a
Contracting State or not, has in a Contracting State a permanent
establishment or a fixed base in connection with which the
indebtedness on which the interest is paid was incurred, and such
interest is borne by such permanent establishment or fixed base,
then such interest shall be deemed to arise in the State in which
the permanent establishment or fixed base is situated.
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8. Where, by reason of a special relationship between the
payer and the beneficial owner or between both of them and some
other person, the amount of the interest, having regard to the
debt-claim for which it is paid, exceeds the amount which would
have been agreed upon by the payer and the beneficial owner in
the absence of such relationship, the provisions of this Article
shall apply only to the last-mentioned 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 the other
provisions of this Convention.
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1. Royalties arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other
State.
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2. 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 beneficial owner of the royalties is a
resident of the other Contracting State, the tax so charged shall
not exceed 10 per cent of the gross amount of the royalties.
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3. Notwithstanding the provisions of paragraph 2,
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(a) copyright royalties and other like payments in respect of
the production or reproduction of any literary, dramatic,
musical or other artistic work (but not including royalties in
respect of motion picture films nor royalties in respect of
works on film or videotape or other means of reproduction for
use in connection with television broadcasting), and
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(b) royalties for the use of, or the right to use, computer
software or any patent or for information concerning
industrial, commercial or scientific experience (but not
including any such information provided in connection with
a rental or franchise agreement)
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arising in a Contracting State and paid to a resident of the other
Contracting State who is the beneficial owner of the royalties
shall be taxable only in that other State.
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4. The term ``royalties'' as used in this Article means payments
of any kind received as a consideration for the use of, or the right
to use, any copyright, patent, trade mark, design or model, plan,
secret formula or process, or for the use of, or the right to use,
industrial, commercial or scientific equipment, or for
information concerning industrial, commercial or scientific
experience, and includes payments of any kind in respect of
motion picture films and works on film or videotape or other
means of reproduction for use in connection with television.
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5. The provisions of paragraphs 1, 2 and 3 shall not apply if
the beneficial owner 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 from a fixed base situated therein,
and the right or property in respect of which the royalties are paid
is effectively connected with such permanent establishment or
fixed base. In such case the provisions of Article 7 or Article 14,
as the case may be, shall apply.
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6. Royalties shall be deemed to arise in a Contracting State
when the payer is a resident of that State. Where, however, the
person paying the royalties, whether the payer is a resident of a
Contracting State or not, has in a Contracting State a permanent
establishment or 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.
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7. Where, by reason of a special relationship between the
payer and the beneficial owner or between both of them and some
other person, the amount of the royalties, having regard to the
use, right or information for which they are paid, exceeds the
amount which would have been agreed upon by the payer and the
beneficial owner in the absence of such relationship, the
provisions of this Article shall apply only to the last-mentioned
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 the other provisions of this Convention.
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1. Gains derived by a resident of a Contracting State from the
alienation of immovable property situated in the other
Contracting State may be taxed in that other State.
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2. Gains from the alienation of 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 of movable property pertaining 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 a permanent
establishment (alone or with the whole enterprise) or of such a
fixed base may be taxed in that other State.
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3. Gains derived by an enterprise of a Contracting State from
the alienation of ships or aircraft operated in international traffic
or movable property pertaining to the operation of such ships or
aircraft, shall be taxable only in that State.
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4. Gains derived by a resident of a Contracting State from the
alienation of:
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(a) shares (other than shares listed on an approved stock
exchange in the other Contracting State) forming part of a
substantial interest in the capital stock of a company the value
of which shares is derived principally from immovable
property situated in that other State; or
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(b) an interest in a partnership, trust or estate, the value of
which is derived principally from immovable property
situated in that other State,
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may be taxed in that other State. For the purposes of this
paragraph, the term ``immovable property'' does not include
property (other than rental property) in which the business of the
company, partnership, trust or estate was carried on; and a
substantial interest exists when the resident and persons related
thereto own 10 per cent or more of the shares of any class or the
capital stock of a company.
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5. Gains from the alienation of any property, other than that
referred to in paragraphs 1 to 4 shall be taxable only in the
Contracting State of which the alienator is a resident.
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6. Where a resident of a Contracting State alienates property
in the course of a corporate or other organization, reorganization,
amalgamation, division or similar transaction and profit, gain or
income with respect to such alienation is not recognized for the
purpose of taxation in that State, if requested to do so by the
person who acquires the property, the competent authority of the
other Contracting State may agree, subject to the terms and
conditions satisfactory to such competent authority, to defer the
recognition of the profit, gain or income with respect to such
property for the purpose of taxation in that other State until such
time and in such manner as may be stipulated in the agreement.
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7. The provisions of paragraph 5 shall not affect the right of
either of the Contracting States to levy, according to its law, a tax
on gains from the alienation of any property derived by an
individual who is a resident of the other Contracting State and has
been a resident of the first-mentioned State at any time during the
six years immediately preceding the alienation of the property.
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8. Where an individual who ceases to be a resident of a
Contracting State, and immediately thereafter becomes a resident
of the other Contracting State, is treated for the purposes of
taxation in the first-mentioned State as having alienated a
property and is taxed in that State by reason thereof, the
individual may elect to be treated for purposes of taxation in the
other State as if the individual had, immediately before becoming
a resident of that State, sold and repurchased the property for an
amount equal to its fair market value at that time. However, this
provision shall not apply to property any gain from which
arising, immediately before the individual became a resident of
that other State, may be taxed in that other State nor to immovable
property situated in a third State.
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1. Income derived by an individual who is a resident of a
Contracting State in respect of professional or similar services of
an independent character shall be taxable only in that State unless
the individual has a fixed base regularly available in the other
Contracting State for the purpose of performing the services. If
the individual has or had such a fixed base, the income may be
taxed in the other State but only so much of it as is attributable to
that fixed base.
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2. The term ``professional services'' includes especially
independent scientific, literary, artistic, educational or teaching
activities as well as the independent activities of physicians,
lawyers, engineers, architects, dentists and accountants.
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1. Subject to the provisions of Articles 16, 18 and 19, salaries,
wages and other 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 so exercised, such
remuneration as is derived therefrom may be taxed in that other
State.
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2. Notwithstanding the provisions of paragraph 1,
remuneration derived by a resident of Contracting State in
respect of an employment exercised in the other Contracting
State shall be taxable only in the first-mentioned State if:
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(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 fiscal year
concerned; and
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(b) the remuneration is paid by, or on behalf of, an employer
who is not a resident of the other State; and
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(c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in the
other State.
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3. Notwithstanding the preceding provisions of this Article,
remuneration derived in respect of an employment exercised
abroad a ship or aircraft operated by an enterprise of a
Contracting State in international traffic may be taxed in that
State.
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Directors' fees and other similar payments derived by a
resident of a Contracting State in that resident's capacity as a
member of the board of directors of a company which is a
resident of the other Contracting State, may be taxed in that other
State.
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1. Notwithstanding the provisions of Articles 7, 14 and 15,
income derived by a resident of a Contracting State as an
entertainer, such as a theatre, motion picture, radio or television
artiste, or a musician, or as a sportsperson, from that resident's
personal activities as such exercised in the other Contracting
State, may be taxed in that other State.
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2. Where income in respect of personal activities exercised by
an entertainer or a sportsperson in that individual's capacity as
such accrues not to the entertainer or sportsperson personally but
to another person, that income may, notwithstanding the
provisions of Articles 7, 14 and 15, be taxed in the Contracting
State in which the activities of the entertainer or sportsperson are
exercised.
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3. The provisions of paragraph 2 shall not apply if this is
established that neither the entertainer or the sportsperson nor
persons related thereto, participate directly or indirectly in the
profits of the person referred to in that paragraph.
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1. Pensions and annuities arising in a Contracting State and
paid to a resident of the other Contracting State may be taxed in
that other State.
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2. However, such pensions and annuities may also be taxed in
the State in which they arise and according to the law of that State.
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3. Notwithstanding anything in this Convention:
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(a) pensions paid by, or out of funds created by, the
Luxembourg State or a political subdivision or a local
authority thereof to an individual in respect of services
rendered to that State or subdivision or authority shall be
taxable only in Luxembourg;
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(b) war pensions and allowances (including pensions and
allowances paid to war veterans or paid as a consequence of
damages or injuries suffered as a consequence of war) arising
in Canada shall not be taxable in Luxembourg so long as they
are not subject to Canadian Tax;
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(c) benefits and annuities received from Luxembourg from the
accident insurance association and from the office of war
damage as compensation for bodily injury shall not be taxable
in Canada so long as they are not subject to Luxembourg tax;
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(d) alimony and other similar payments arising in a
Contracting State and paid to a resident of the other
Contracting State who is subject to tax therein in respect
thereof, shall be taxable only in that other State but the amount
taxable in that other State shall not exceed the amount that
would be taxable in the first-mentioned State if the recipient
were a resident thereof;
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(e) benefits under the social security legislation in a
Contracting State paid to a resident of the other Contracting
State shall be taxable only in the first-mentioned State.
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1. (a) Salaries, wages and other similar remuneration, other
than a pension, paid by a Contracting State or a political
subdivision or a 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.
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(b) However, such salaries, wages and other similar
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:
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(i) is a national of that State; or
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(ii) did not become a resident of that State solely for the
purpose of rendering the services.
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2. The provisions of paragraph 1 shall not apply to salaries,
wages and other similar remuneration in respect of services
rendered in connection with a business carried on by a
Contracting State or a political subdivision or a local authority
thereof.
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Payments which a student or business apprentice who is, or
was immediately before visiting a Contracting State, a resident of
the other Contracting Stage and who is present in the
first-mentioned State solely for the purpose of that individual's
education or training receives for the purpose of his that
individual's maintenance, education or training shall not be
taxed in that State, provided that such payments arise from
sources outside that State.
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1. Items of income of a resident of a Contracting State,
wherever arising, not dealt with in the foregoing Articles of this
Convention shall be taxable only in that State except that if such
income is derived from sources within the other Contracting
State, it may also be taxed in that other State. However, in the case
of income from an estate or trust, other than a trust to which
contributions were deductible, the tax so charged shall, provided
that the income is taxable in the Contracting State in which the
recipient resides, not exceed 15 per cent of the gross amount of
the income.
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2. The provisions of paragraph 1 shall not apply to income,
other than income from immovable property, if 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 with such permanent establishment or
fixed base. In such case the provisions of Article 7 or Article 14,
as the case may be, shall apply.
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1. Capital represented by immovable property owned by a
resident of a Contracting State and situated in the other
Contracting State, may be taxed in that other State.
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2. 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 pertaining 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.
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3. Capital represented by ships and aircraft operated by an
enterprise of a Contracting State in international traffic and by
movable property pertaining to the operation of such ships and
aircraft, shall be taxable only in that State.
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4. All other elements of capital of a resident of a Contracting
State shall be taxable only in that State.
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1. In the case of Canada, double taxation shall be avoided as
follows:
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(a) subject to the existing provisions of the law of Canada
regarding the deduction from tax payable in Canada of tax
paid in a territory outside Canada and to any subsequent
modification of those provisions - which shall not affect the
general principle hereof - and unless a greater deduction of
relief is provided under the laws of Canada, tax payable in
Luxembourg on profits, income or gains arising in
Luxembourg shall be deducted from any Canadian tax
payable in respect of such profits, income or gains;
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(b) where, in accordance with any provision of the
Convention, income derived or capital owned by a resident of
Canada is exempt from tax in Canada, Canada may
nevertheless, in calculating the amount of tax on other income
or capital, take into account the exempted income or capital.
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2. In the case of Luxembourg, double taxation shall be
avoided as follows:
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(a) where a resident of Luxembourg derives income or owns
capital which, in accordance with the provisions of this
Convention, may be taxed in Canada, Luxembourg shall,
subject to the provisions of subparagraph (b), exempt such
income or capital from tax, but may, in calculating the amount
of tax on the remaining income or capital of such resident,
apply the rate of tax which would have been applicable if the
exempted income or capital had not been so exempted;
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(b) where a resident of Luxembourg derives income which, in
accordance with the provisions of Articles 10, 11, 12, 13
paragraphs 4 and 7, 18 and 21, may be taxed in Canada,
Luxembourg shall allow as a deduction from the tax on the
income of that resident an amount equal to the tax paid in
Canada. Such deduction shall not, however, exceed that part
of the income tax, as computed before the deduction is given,
which is attributable to the income derived from Canada;
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(c) notwithstanding subparagraph (b), dividends distributed
by a company resident in Canada, and subject in that State to
the corporation tax, to a company resident in Luxembourg
which has directly controlled at least 10 per cent of the capital
of the first-mentioned company since the beginning of its
fiscal year shall be subject to the tax treatment provided for
under subparagraph (a). The shares in the Canadian company
referred to above shall, under the same conditions, be exempt
from the Luxembourg capital tax.
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3. For the purposes of this Article, profits, income or gains of
a resident of a Contracting State shall be deemed to arise from
sources in the other Contracting State if they may be taxed in that
other Contracting State in accordance with this Convention.
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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 the
taxation and connected requirements to which nationals of that
other State in the same circumstances are or may be subjected.
This provision shall, notwithstanding the provisions of Article 1,
also apply to individuals who are not residents of one or both of
the Contracting States.
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2. The taxation of a permanent establishment which an
enterprise of a Contracting State has in the other Contracting
State shall not be less favourably levied in that other State than
the taxation levied on enterprises of that other State carrying on
the same activities. This provision shall not be construed as
obliging a Contracting State to grant to residents of the other
Contracting State any personal allowances, reliefs and
reductions for taxation purposes on account of civil status or
family responsibilities which it grants to its own residents.
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3. 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 the taxation and connected requirements to
which other similar enterprises of the first-mentioned State, the
capital of which is wholly or partly owned or controlled, directly
or indirectly, by one or more residents of a third State, are or may
be subjected.
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4. In this Article, the term ``taxation'' means taxes which are
the subject of this Convention.
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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, address to the
competent authority of the Contracting State of which that
person is a resident or, if that person's case comes under
paragraph 1 of Article 24, to that of the Contracting State of
which that person is a national, an application in writing stating
the grounds for claiming the revision of such taxation. To be
admissible, the said application must be submitted within two
years from the first notification of the action which gives rise to
taxation not in accordance with the Convention.
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2. The competent authority referred to in paragraph 1 shall
endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at a satisfactory solution, to resolve the
case by mutual agreement with the competent authority of the
other Contracting State, with a view to the avoidance of taxation
not in accordance with the Convention.
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3. The competent authorities of the Contracting States shall
endeavour to resolve by mutual agreement any difficulties or
doubts arising as to the interpretation or application of the
Convention. They may also consult together for the elimination
of double taxation in cases not provided for in the Convention.
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4. In particular, the competent authorities of the Contracting
States may consult together to endeavour to agree:
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(a) to the same attribution of profits to an enterprise of a
Contracting State and to its permanent establishment situated
in the other Contracting State;
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(b) to the same allocation of profits between associated
enterprises as provided for in Article 9;
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(c) to the method of avoiding double taxation in the case of an
estate or trust.
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5. The competent authorities of the Contracting States may
communicate with each other directly for the purpose of
applying the provisions of the Convention.
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1. The competent authorities of the Contracting States shall
exchange such information as is relevant for carrying out the
provisions of this Convention or of the domestic laws of the
Contracting States concerning taxes covered by the Convention
insofar as the taxation thereunder is not contrary to the
Convention. The exchange of information is not restricted by
Article 1. Any 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) involved in 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 the information only for such
purposes. They may disclose the information in public court
proceedings or in judicial decisions.
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2. In no case shall the provisions of paragraph 1 be construed
so as to impose on a Contracting State the obligation:
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(a) to carry out administrative measures at variance with the
laws or the administrative practice of that or of the other
Contracting State;
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(b) to supply information which is not obtainable under the
laws or in the normal course of the administration of that or of
the other Contracting State;
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(c) to supply information which would disclose any trade,
business, industrial, commercial or professional secret or trade
process, or information, the disclosure of which would be
contrary to public policy (ordre public).
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3. If information is requested by a Contracting State in
accordance with this Article, the other Contracting State shall
endeavour to obtain the information to which the request relates
in the same way as if its own taxation were involved even though
the other State does not, at that time, need such information. If
specifically requested by the competent authority of a
Contracting State, the competent authority of the other
Contracting State shall endeavour to provide information under
this Article in the form requested, such as depositions of
witnesses and copies of unedited original documents (including
books, papers, statements, records, accounts or writings), to the
same extent such information can be obtained under the laws and
administrative practices of that other State with respect to its own
taxes.
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1. Nothing in this Convention shall affect the fiscal privileges
of members of diplomatic missions or consular posts under the
general rules of international law or under the provisions of
special agreements.
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2. Notwithstanding Article 4, an individual who is a member
of a diplomatic mission, consular post or permanent mission of
a Contracting State which is situated in the other Contracting
State or in a third State shall be deemed for the purposes of the
Convention to be a resident of the sending State if that individual
is liable in the sending State to the same obligations in relation to
tax on total income as are residents of that sending State.
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3. The Convention shall not apply to International
Organizations, to organs or officials thereof and to persons who
are members of a diplomatic mission, consular post or permanent
mission of a third State or group of States, being present in a
Contracting State and who are not liable in either Contracting
State to the same obligations in relation to tax on their total
income as are residents thereof.
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1. The provisions of this Convention shall not be construed to
restrict in any manner any exemption, allowance, credit or other
deduction now or hereafter accorded by the laws of a Contracting
State in the determination of the tax imposed by that State.
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2. Nothing in the Convention shall be construed as preventing
a Contracting State from imposing a tax on amounts included in
the income of a resident of that State with respect to a partnership,
trust, or controlled foreign affiliate, in which that resident has an
interest.
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3. The Convention shall not apply to holding companies
within the meaning of the special Luxembourg laws (currently
the Act of July 31, 1929 and the Grand Duchy Order of
December 17, 1938) or any other similar law enacted in
Luxembourg after the signature of the Convention, nor to
companies subjected to similar fiscal laws in Luxembourg. It
shall not apply either to income derived by a resident of Canada
from such holding companies nor to shares or other rights in the
capital of such companies owned by such person.
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4. For the purposes of paragraph 3 of Article XXII
(Consultation) of the General Agreement on Trade in Services,
the Contracting States agree that, notwithstanding that
paragraph, any dispute between them as to whether a measure
falls within the scope of this Convention may be brought before
the Council for Trade in Services, as provided by that paragraph,
only with the consent of both Contracting States. Any doubt as
to the interpretation of this paragraph shall resolved under
paragraph 3 of Article 25 or, failing agreement under that
procedure, pursuant to any other procedure agreed to by both
Contracting States.
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1. This Convention shall be ratified and the instruments of
ratification shall be exchanged as soon as possible.
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2. The Convention shall enter into force upon the exchange of
instruments of ratification and its provisions shall have effect:
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(a) in respect of tax withheld at the source on amounts paid or
credited to non-residents on or after the first day of January in
the calendar year next following that in which the exchange of
instruments of ratification takes place; and
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(b) in respect of other taxes for taxation years beginning on or
after the first day of January in the calendar year next
following that in which the exchange of instruments of
ratification takes place.
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3. The provisions of the Convention between Canada and the
Grand Duchy of Luxembourg for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to
Taxes on Income and on Capital signed at Luxembourg on the
17th day of January, 1989, shall cease to have effect with respect
to taxes to which this Convention applies in accordance with the
provisions of paragraph 2.
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This Convention shall continue in effect indefinitely but either
Contracting State may, on or before June 30 in any calendar year
after the year of the exchange of instruments of ratification, give
to the other Contracting State a notice of termination in writing
through diplomatic channels. In such event, the Convention shall
cease to have effect:
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(a) in respect of tax withheld at the source on amounts paid or
credited to non-residents on or after the first day of January in
the calendar year next following that in which the notice is
given; and
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(b) in respect of other taxes for taxation years beginning on or
after the first day of January in the calendar year next
following that in which the notice is given.
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IN WITNESS WHEREOF the undersigned, duly authorized
to that effect, have signed this Convention.
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DONE in duplicate at Luxembourg, this 10th day of
September 1999, in the English and French languages, each
version being equally authentic.
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FOR THE GOVERNMENT FOR THE
GOVERNMENT OF CANADA: OF THE GRAND
DUCHY OF LUXEMBOURG: Paul Desbiens Ly
die Polfer
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