Overall, tax treaties provide for the taxation of entities in the country where they reside (contracts contain “Tiebreaker” clauses to resolve cases where both countries are domiciled), except that when a unit established in one country has a stable establishment in another country, the revenues from that permanent representation are taxed in the second country. Individual taxation also follows residence, but in cases where income could be taxed twice, there is either a “Tiebreaker” clause or a provision that, in one country, rewards a tax with that due on the same income in the other, while the contract with the United States contains “savings” and “prescription benefits” clauses that may, in certain circumstances, nullify the purpose of the contract. The specific provisions for border workers are contained in the following double taxation agreements: a new double taxation agreement was signed with Germany on 23 April 2012. The new agreement complies with OECD standards and replaces the current treaty, signed in 1958. This agreement allows the exchange of tax information between the tax authorities at the request of certain cases identified in accordance with the agreement. Luxembourg concluded a new tax agreement with the Netherlands on 29 May 2009. The agreement provides for the exchange of tax information between the two countries in accordance with the OECD standard. Luxembourg and Finland signed a protocol in July 2009 amending the Treaty of 1 March 1982 between Finland and the Grand Duchy to avoid double taxation and prevent tax evasion on income and capital taxes. This agreement was the first since Luxembourg announced OECD standards for information exchange on 13 March 2009. As the region`s financial hub, it has come under considerable pressure, particularly from its neighbours, Germany and France, to meet these standards. Luxembourg has signed 82 DTTs, most of which contain provisions of Article 26.5 of the Organisation for Economic Cooperation and Cooperation (OECD) convention model on the exchange of information between tax authorities. Luxembourg is part of the European Union (EU) Regulations 1408/71 and 883/2004 (amended) on the coordination of social security systems.
In addition, Luxembourg has 39 bilateral social security agreements. The new protocol updates the exchange of information from the existing double taxation convention to adapt it to current OECD standards. On 22 May 2009, the Luxembourg and Liechtenstein governments announced their intention to open negotiations for a model OECD convention on the prevention of double taxation.