India – Luxembourg tax treaty

India and the Grand Duchy of Luxembourg have ratified a double tax agreement which is now effective from 1 April 2010.  This DTA will greatly enhance capital and investment flows between Europe and India.

Under the DTA there is only 10% withholding tax on interest and dividends paid to investors from the other contracting state provided the investors are beneficially entitled to such income.  Similarly, there is a 10% withholding tax on income from royalties and fees for technical services.  Without the treaty the effective rates of withholding tax would be much higher and the treaty rates compare favourably with the rates under India’s treaties with other western European countries.  Therefore, this is a very exciting development overall and should boost capital flows into India. 

This important development makes Luxembourg an interesting jurisdiction for investments into and out of India.  Different types of Luxembourg vehicles can now be considered for investments into India real estate, infrastructure projects, listed Indian companies, IT, BPO, pharma and the manufacturing and industrial sector in India generally.

RKG Consulting can provide further details if contacted.  The following articles provide some basic information.