The new treaty contains a substantial number of changes to the existing treaty, some potentially beneficial to taxpayers compared to the previous treaty. Two in particular will be especially significant with regard to the funds industry.
Article 10 of the recently revised treaty is set to bring about a noteworthy change by generally implementing a 0% withholding tax on dividends originating from Luxembourg and paid to a UK shareholder recognized as the beneficial owner of said dividends. It's noteworthy that the UK typically does not impose withholding tax on dividends. This development is particularly appreciated given that the previous treaty only provided a reduction in withholding taxes to 5%. Additionally, following the UK's withdrawal from the EU, there are instances where UK shareholders may no longer have the assurance of relying on the Parent/Subsidiary Directive.
Since January 1st, the benefits of the amended tax treaty are extended to more Luxembourg fund vehicles, including SICAV, SIF or RAIF. With regards to pension funds, the Treaty expressly includes now recognized pension funds in the notion of resident.This is welcome as these vehicles previously did not have access to any UK-LUX treaty benefits.
Ensuring that these benefits are applied to your funds and positions will be key to conduct your investment strategies in an effective way.
This is particulary relevant as analysts agreed on the potential of 2024's dividend payouts to be historical.
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