The income and capital tax treaty between Saudi Arabia and Luxembourg was signed on 7 May 2013. The text of the treaty has become available now. The treaty will now undergo with some ratification procedures. The new treaty is expecting to become applicable from 1 January 2014 onwards.
According to the text of the treaty the definition of permanent establishment would include all places from which natural resources are obtained and would also include a construction, dredging or assembly project and related supervisory activities with activity period of at least 6 months. There is also provision of services in the definition of permanent establishment.
Under the treaty the maximum withholding tax on dividends would be 5% and on royalties it would be 7% or 5% for the use or the right to use industrial, commercial or scientific equipment. Interest would be taxable in the recipient’s state of residence only.
