Convention signed at Washington December 18, 1962; 　　Ratification advised by the Senate of the United States of America July 29, 1964; 　　Ratified by the President of the United States of America August 5, 1964; 　　Ratified by Luxembourg December 17, 1964; 　　Ratifications exchanged at Luxembourg December 22, 1964; 　　Proclaimed by the President of the United States of America December 30, 1964; Entered into force December 22, 1964. GENERAL EFFECTIVE DATE UNDER ARTICLE XXII: 1 JANUARY 1964 TABLE OF ARTICLES Article I----------------------------------Taxes Covered Article II---------------------------------General Definitions Article III--------------------------------Permanent Establishments Article IV--------------------------------Related Enterprises Article V---------------------------------Ships and Aircraft Article VI--------------------------------Income from Real Property Article VII-------------------------------Royalties Article VIII------------------------------Interest Article IX--------------------------------Dividends Article X---------------------------------Other Dividends and Interest Article XI--------------------------------Government Compensation, Pensions and Annuities Article XII-------------------------------Compensation for Personal Services Article XIII------------------------------Teachers or Research Article XIV------------------------------Students and Business Apprentices Article XV-------------------------------Holding Companies Article XVI------------------------------Avoidance of Double Taxation Article XVII-----------------------------Source Rules Article XVIII----------------------------Exchange of Information and Mutual Collection Article XIX------------------------------Referral to the Competent Authorities Article XX-------------------------------Miscellaneous Rules of Application Article XXI------------------------------Agreement of the Competent Authorities Article XXII-----------------------------Entry into Force; Termination Letter of Submittal----------------------of 11 January, 1963 Letter of Transmittal--------------------of 15 January, 1963 The "Saving Clause"-------------------Paragraph 1(a) of Article XVI 　　　　　　　　　　　　　　　　MESSAGE 　　　　　　　　　　　　　　　　FROM 　　　　　　　　THE PRESIDENT OF THE UNITED STATES 　　　　　　　　　　　　　　　TRANSMITTING 　　THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE GRAND DUCHY OF LUXEMBOURG FOR THE AVOIDANCE OF DOUBLE TAXATION OF INCOME, THE PREVENTION OF FISCAL EVASION, AND THE PROMOTION OF TRADE AND INVESTMENT, SIGNED AT WASHINGTON ON DECEMBER 18, 1962 LETTER OF SUBMITTAL DEPARTMENT OF STATE, Washington, January 11, 1963. The PRESIDENT: 　　The undersigned, the Secretary of State, has the honor to lay before the President, with a view to its transmission to the Senate to receive the advice and consent of that body to ratification, if the President approve thereof, a convention between the United States of America and the Grand Duchy of Luxembourg for the avoidance of double taxation of income, the prevention of fiscal evasion, and the promotion of trade and investment, signed at Washington on December 18, 1962. 　　The convention was formulated as a result of technical discussions between representatives of this Government and representatives of the Government of Luxembourg, in the course of which an effort was made to determine the bases upon which agreement might be reached for the purpose of eliminating double taxation in regard to taxes on income, removing impediments to international trade and investment, and establishing certain procedures for mutual administrative assistance between the tax authorities of the two countries. 　　The convention follows in general the pattern of income-tax conventions presently in force between the United States and a number of other countries. Such conventions are now in force with Australia, Austria, Belgium, Canada, Denmark, Finland, France, Federal Republic of Germany, Greece, Honduras, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Pakistan, Sweden, Switzerland, South Africa, and United Kingdom. Income-tax conventions concluded with certain other countries are now under consideration in the Senate. 　　As in the cases of similar conventions, the convention with Luxembourg contains provisions relating to the following matters: 　　(1) Adoption of principles for determining and taxing business income derived by enterprises of one country from sources within the other country. 　　(2) Reciprocal exemption from taxation, upon certain conditions, of various items of business income, including profits derived from sources within one country by enterprises of the other country from the operation of ships and aircraft. 　　(3) Reciprocal taxation on the basis of net income of real property rentals and natural resources royalties and reciprocal exemption of industrial royalties and like income. 　　(4) Reciprocal tax exemption, upon certain conditions, of interest and dividend income and, in the case of dividends received from sources within one country by a resident or corporation of the other country not having a permanent establishment in the former, reduction of dividend taxes to 50 percent of the statutory rate otherwise imposed, with provision for a further reduction to 5 percent in the case of dividends paid by a subsidiary corporation in one country to its parent corporation in the other country, subject to specified conditions. 　　(5) Reciprocal exemptions with respect to (a) Government wages, salaries, and pensions, private pensions, and private life annuities, (b) compensation for labor or personal services other than fees of directors of corporations, and (c) remuneration or remittances received by teachers, students, or business apprentices in prescribed circumstances. 　　(6) Reciprocal credit provisions and a reservation by each country of the right, without regard to the provisions of the convention, to include in the basis upon which income tax is imposed in the case of certain taxpayers the various items of income taxable under its own tax laws. 　　(7) Reciprocal exchange of information between the competent authorities of the two countries and reciprocal assistance in collection in certain cases, subject to the proviso insuring that an exemption or reduced rate of tax granted by the convention shall not be enjoyed by persons not entitled to such benefits. 　　(8) The right of taxpayers to appeal when they can show that double taxation has resulted or will result in respect of any of the taxes to which the convention relates. 　　Article I specifies the taxes which are the subject of the convention; namely, the Federal income tax, including surtax, imposed in the United States and, in the case of Luxembourg, the income taxes on individuals and corporations, the tax on fees of directors of corporations, the communal tax on commercial profits, the wealth tax, and the communal taxes on invested capital and land. 　　Article II contains definitions of various terms or expressions found in the convention, including a comprehensive definition of "permanent establishment." Article XVII also, in effect, defines certain terms or expressions by specifying how certain categories of income shall be treated in determining the source of such income. 　　Articles Ill and IV contain the provisions relating to the taxation of industrial and commercial profits. 　　Article V provides for the reciprocal exemption of income derived from the operation of ships or aircraft. 　　Article VI contains the provisions regarding reciprocal taxation on the basis of net income of income from real property and royalties in respect of the operation of mines, quarries, or other natural resources. 　　Article VII contains the provisions regarding reciprocal exemption of industrial royalties and like income. Royalties, rentals, and similar payments received by a resident or corporation of one of the countries not having a permanent establishment in the other country and derived as consideration for the use of, or for the privilege of using, certain categories of property or rights are exempted from tax by such other country. The specified categories include copyrights, artistic or scientific works, patents, designs, plans, secret processes or formulas, trademarks, motion picture films, films or tapes for radio or television broadcasting, and other like property or rights, and also industrial, commercial, or scientific equipment, knowledge, experience, skill, or know-how. 　　Article VIII provides for reciprocal exemption with respect to interest on bonds, notes, debentures, securities, or any other form of indebtedness. 　　Article IX contains the provisions regarding reduction of the rate of tax with respect to dividends received by a resident or corporation of one of the countries not having a permanent establishment in the other country and derived from sources within such other country. Each country agrees to reduce the rate of its dividend tax to 50 percent of the statutory rate of tax otherwise imposed. When the recipient is a corporation, the dividend tax is reduced to 5 percent in the case of dividends paid by a subsidiary corporation in one of the countries to its parent corporation in the other country, subject to certain limitations and conditions. The terms "statutory rate" and "subsidiary corporation" are specially defined for the purposes of this article. 　　Article X provides that the United States shall exempt from its tax dividends and interest paid by a Luxembourg corporation to a person other than a U.S. citizen, resident, or corporation and that Luxembourg shall exempt from its tax dividends and interest paid by a U.S. corporation to a person other than (a) a resident of Luxembourg or (b) a corporation having its business management or seat in Luxembourg. 　　Article XI contains the provisions relating to exemption from tax of wages, salaries, and similar compensation and pensions, annuities, or similar benefits paid to individuals for services rendered in the discharge of governmental functions, these provisions being applicable to services rendered to the national government or to any political subdivision. Article XI also contains the provisions relating to reciprocal exemption with respect to private pensions and private life annuities. 　　Article XII provides that each country shall exempt from its tax, subject to certain limitations, compensation for labor or personal services (other than fees of directors or corporations) performed in such country by a resident of the other country who is temporarily present in the former country for a period or periods not exceeding a total of 150 days during the taxable year. It is provided that each country shall exempt from its tax compensation for labor or personal services (other than fees of directors of corporations) performed in the other country by a resident of such other country "whether or not put to use" in the former country. 　　Article XIII contains the provisions relating to reciprocal exemption on certain conditions from tax on remuneration for teaching or research at a university, college, school, or other recognized educational institution. 　　Article XIV contains the provisions relating to reciprocal exemption on certain conditions from tax on remuneration or remittances received by students and business apprentices. 　　Article XV provides that the convention shall not apply to income of any holding company entitled to any special tax benefit under specified Luxembourg law or to any income derived from such companies by any shareholder thereof. It is provided further that, in the event that substantially similar benefits are granted to other corporations under Luxembourg law enacted after signature of the convention, the convention shall not apply to income of any such corporation or to any income derived from such corporation by any shareholder thereof. 　　Article XVI contains the credit provisions. Subject to the allowance of credit for Luxembourg income taxes specified in Article I(1)(b)(i) and subject to a specific qualification, the United States reserves the right, in determining the income tax of individuals who are citizens, residents, or corporations of the United States, to include in the basis upon which such tax is imposed all items of income taxable under the U.S. revenue laws without regard to any provision in the convention. There is a corresponding reservation by Luxembourg as applied to residents of Luxembourg or corporations having their business management or seat in Luxembourg. It is provided further, however, that Luxembourg, in determining certain taxes of its residents or of corporations having their business management or seat in Luxembourg, shall exclude from the basis upon which such taxes are imposed specified items of property, subject to a qualification in regard to the Luxembourg wealth tax. It is provided further that Luxembourg, in determining the wealth tax and the communal taxes on invested capital and land of citizens, residents, or corporations of the United States, shall not tax specified items of property of such persons unless Luxembourg is entitled under other provisions of the convention to tax the income derived from such property. 　　Article XVII, as hereinbefore indicated, specifies how certain categories of income shall be treated in determining the source of such income. 　　Articles XVIII, XIX, XX, and XXI contain administrative provisions, corresponding in general to such provisions in other tax conventions to which the United States is a party. 　Article XVIII contains the provisions on exchange of information and, subject to certain limitations, assistance in collection. 　　Article XIX contains the provisions relating to the right of taxpayers to appeal by showing that the action of the tax authorities has resulted or will result in double taxation contrary to the convention. 　　Article XX provides that 　　(1) the convention shall not restrict the right of diplomatic or consular officers to additional exemptions now enjoyed or which may hereafter be granted to them; 　　(2) the convention shall not restrict any exclusion, exemption, deduction, credit, or other allowance accorded by the laws of either country in determining the tax imposed by that country or accorded by any other agreement between the two countries; 　　(3) citizens of one of the countries shall not, while residing in the other country, be subject therein to other or more burdensome taxes than are the citizens of such other country resident in its territory, the term "citizens" being defined as including all juridical persons, partnerships, and associations created or organized under the laws in force in the respective countries and the term "taxes" being defined as meaning taxes of every kind or description, whether national, state, communal, or municipal; and 　　(4) the provisions of Luxembourg law granting a carryover of losses to taxpayers domiciled in Luxembourg shall apply with respect to taxation of a permanent establishment maintained in Luxembourg by a U.S. resident or corporation under the same conditions and in the same manner as in the case of taxpayers domiciled in Luxembourg. 　　Article XXI provides that the competent authorities may prescribe regulations necessary to give effect to the convention and may communicate with each other directly for the purpose of giving effect to the convention. The term "competent authority" or "competent authorities" is defined in Article II(1) (g). 　　Article XXII provides for ratification and for the exchange of instruments of ratification and prescribes the effective date of the convention; namely, taxable years beginning on or after January 1 of the calendar year in which the exchange takes place. It is provided that the convention shall remain in force for a minimum period of 5 years, but may be terminated at the end of that period or thereafter by a 6-month written notice by one of the governments to the other government, the termination to become effective for taxable years beginning on or after January 1 next following the expiration of the 6-month period. 　　The Department of State and the Treasury Department collaborated in the negotiation of the convention. It is understood that the Treasury Department is prepared to make such further explanations as may be found desirable regarding the technical aspects and application of the convention. Faithfully yours, (s) Dean Rusk, DEAN RUSK. 　　(Enclosure: Income tax convention with Luxembourg, signed December 18, 1962.) 　　　　　　　　　　　　　LETTER OF TRANSMITTAL 　　　　　　　　　　　　　　　　　　　　　　　　　　　THE WHITE HOUSE, 　　　　　　　　　　　　　　　　　　　　　　　　　　　January 15, 1963. To the Senate of the United States: 　　With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the convention between the United States of America and the Grand Duchy of Luxembourg for the avoidance of double taxation of income, the prevention of fiscal evasion, and the promotion of trade and investment, signed at Washington on December 18, 1962. 　　I transmit also, for the information of the Senate, the report of the Secretary of State with respect to the convention. 　　The convention has the approval of the Department of State and the Treasury Department. 　　　　　　　　　　　　　　　　　　　　　　　　　　JOHN F. KENNEDY. 　　(Enclosures: (1) Report of the Secretary of State; (2) Income-tax convention with Luxembourg, signed December 18, 1962.) 　　BY THE PRESIDENT OF THE UNITED STATES OF AMERICA 　　　　　　　　　　　　　A PROCLAMATION 　　WHEREAS the convention between the United States of America and the Grand Duchy of Luxembourg with respect to taxes on income and property was signed at Washington on December 18, 1962 by their respective Plenipotentiaries, the original of which convention, in the English and French languages, is word for word as follows: