Hong Kong resident companies that own 10% or more of the shares of a Luxembourg corporation, or have invested €1.2 million ($1.8 million) in it, will be exempt from withholding tax in Luxembourg under the double tax treaty signed by the two territories on November 2.
The treaty also cuts Luxembourg withholding tax on dividends that Hong Kong resident receive from Luxembourg that are not attributable to a permanent establishment from 20% to 10%.
The profits earned by Luxembourg residents in Hong Kong and Luxembourg companies doing business through a branch in Hong Kong will not be liable for tax in the EU member state under the treaty
Profits from international shipping transport earned by Hong Kong residents that arise in Luxembourg will also escape Luxembourg tax.
The agreement is Hong Kong's fourth double tax treaty after signing similar deals with Belgium in 2003, Thailand in 2005 and mainland China in 2006. The territory is eager to conclude more. In the interim, the government said it will negotiate "limited double taxation avoidance arrangements for airline and shipping income with relevant partners".
To date, Hong Kong has agreed 23 double taxation avoidance arrangements on airline income, six agreements on shipping income and two agreements on both airline and shipping income
