On 3 July 2025, Luxembourg and Georgia signed a protocol (the “Protocol”) amending the double tax treaty originally signed on 15 October 2007 (the “DTT”). The ratification of the Protocol is currently pending in Luxembourg. The draft law, approving the Protocol, was published on 10 December 2025 and remains subject to review by the Council of State (Conseil d'État) and vote by the parliament.
Key amendments introduced by the Protocol
The Protocol does not modify the substantive allocation of taxing rights under the DTT, but simply brings the DTT into compliance with OECD requirements regarding the exchange of information. Indeed, article 1 of the Protocol replaces the former Article 27 concerning the exchange of information with a new Article 27 corresponding to the current version of the OECD model tax convention.
Under the revised article, the competent authorities of Luxembourg and Georgia shall exchange information that is foreseeably relevant for the application of the DTT or for the administration and enforcement of their domestic tax laws, regardless of the nature or designation of the taxes concerned.
Information received under the exchange of information article must be treated as confidential in the same manner as information obtained under domestic tax laws. It may only be disclosed to persons or authorities involved in tax assessment, collection, enforcement or litigation. The exchange of information is not restricted by bank secrecy or by the fact that the requested information is held by financial institutions, nominees, agents or fiduciaries.
The Protocol will enter into force on the date of receipt of the last notification by which the contracting states inform each other that the procedures required under their respective domestic laws have been completed. Its provisions will apply to tax years beginning on or after 1 January of the calendar year following the year in which the Protocol enters into force.
Reminder of the key features of the DTT
Dividend taxation
Dividends paid by a company resident in one contracting state to a resident of the other contracting state may be taxed in the recipient’s state of residence. However, the source state may also levy withholding tax, subject to reduced rates depending on the level of participation and the amount of the investment:
- 0% withholding tax applies where the beneficial owner is a company holding, directly or indirectly at least 50% of the capital of the distributing company and having invested more than EUR 2 million (or the equivalent in Georgian currency).
- 5% withholding tax applies where the beneficial owner holds at least 10% of the capital and has invested more than EUR 100,000.
- In all other cases, the withholding tax rate is capped at 10%.
Interest taxation
Interest arising in a contracting state and paid to a resident of the other contracting state shall be taxable only in that other state, if such resident is the beneficial owner. This means that no withholding tax can be levied by the contracting state on interest payments.
Royalties taxation
Similarly, royalties arising in one contracting state and paid to a beneficial owner resident in the other contracting state are taxable exclusively in the recipient’s state of residence.
Capital Gains taxation
The DTT generally provides that capital gains are taxed only in the contracting state where the seller is a resident. However, the following capital gains derived by a resident of one contracting state may be taxed by the other state:
- gains from the disposal of immovable property situated in the other state;
- gains from the disposal of movable property forming part of the business property of a permanent establishment in the other state.
No real estate rich clause is foreseen in the DTT.
Elimination of double taxation
For Luxembourg residents, double taxation is generally eliminated through the exemption method, allowing Luxembourg to exempt income that may be taxed in Georgia, while retaining the right to take such income into account for computation purposes. However, for certain categories of income such as dividends and income derived by artists and sportsmen, Luxembourg applies the tax credit method, granting a credit for Georgian tax paid, limited to the Luxembourg tax attributable to such income.
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