India–Luxembourg tax treaty — rates, PE and MLI

The rates, at a glance

Every figure below is taken from the article named beside it, not from a rates table. Read the condition in the same row before you use the rate — in this treaty the condition is usually the whole answer.

Income	Rate	The condition attached to it	Article
Dividends	10 per cent of the gross amount — a single flat ceiling, conditional on the beneficial owner of the dividends being a resident of the other Contracting State. Art. 10(2).	None. There is no shareholding threshold and no two-tier structure in Article 10, and the MLI added no holding-period condition.	Article 10, paragraph 2
Interest	10 per cent of the gross amount — Art. 11(2), conditional on the beneficial owner being a resident of the other Contracting State.	Art. 11(3) exempts interest at source where it is 'derived and beneficially owned by' one of three categories. As with Cyprus, and unlike Canada, Ireland, China and Switzerland, there is no…	Article 11, paragraph 2 for the rate; 3(a) to 3(c) for the exemptions
Royalties	10 per cent of the gross amount — Art. 12(2), conditional on the beneficial owner being a resident of the other Contracting State. A single flat ceiling covering royalties and fees for technical services alike, with no split by type and no time-tiering.	Art. 12(3)(a) defines royalties as consideration for the use of or right to use any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for television or…	Article 12, paragraph 2
Fees for technical services	10 per cent of the gross amount — the same single ceiling as royalties, Art. 12(2). Royalties and FTS do not carry different rates on this treaty.	There is no make-available requirement, and there is no rate-or-scope most-favoured-nation clause through which one could be argued in. The Protocol's only paragraph is an exchange-of-information MFN keyed to…	Article 12, paragraph 3(b)

Status

In force	9 july 2009 — the date of the later of the two notifications, under Art. 32(2). The Agreement and its Protocol were signed together at New Delhi on 2 june 2008, in Hindi, French and English, all texts equally authentic (no prevailing-language clause is stated, unlike the Cyprus, China and Ireland treaties). It covers taxes on income and on capital, and Article 23 is a free-standing Capital article.
Given effect by	Notification No. 78/2009 [S.O. 2591(E)], dated 12-10-2009 — issued under s.90 of the Income-tax Act 1961 and s.44A of the Wealth-tax Act 1957, the wealth-tax reference following from the Agreement extending to capital. It directs that all the provisions of the Agreement and the Protocol, as annexed, be given effect to in the Union of India with effect from 1 april 2010.
Modified by the MLI	Yes — a synthesised text exists. Based on India's MLI position deposited on ratification 25 June 2019 and Luxembourg's deposited on ratification 9 April 2019.
Principal purpose test	Yes — MLI Art. 7(1), replacing Art. 29(2) and (3) rather than merely superseding the Agreement generally. Note the wording is the wider 'item of income or capital' version, reflecting that this Agreement covers capital. Full test: notwithstanding any provisions of the Agreement, a benefit shall not be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the Agreement. No MLI Art. 7(4) discretionary-relief paragraph appears. Effective from 1 April 2020 for Indian source withholding and for all other Indian taxes. For periods before that, Art. 29(2) and (3) as originally drafted governed.

Dividends

Rate	10 per cent of the gross amount — a single flat ceiling, conditional on the beneficial owner of the dividends being a resident of the other Contracting State. Art. 10(2).
The holding that unlocks it	None. There is no shareholding threshold and no two-tier structure in Article 10, and the MLI added no holding-period condition.
Where this comes from	Article 10, paragraph 2

The second sentence of Art. 10(2) preserves taxation of the company on the profits out of which the dividends are paid. Art. 10(3) defines dividends as income from shares or other rights, not being debt-claims, participating in profits, plus income from other corporate rights subjected to the same taxation treatment as income from shares by the distributing company's law. Art. 10(4) is the PE / fixed-base override; Art. 10(5) the extraterritorial-dividend and undistributed-profits prohibition. Two provisions outside Article 10 can defeat a claim to the 10 per cent rate entirely and must be checked before it is applied: article 30, which disapplies the whole Agreement to certain Luxembourg companies (see anti_abuse), and article 29(1), which preserves domestic anti-evasion provisions.

Interest

Rate	10 per cent of the gross amount — Art. 11(2), conditional on the beneficial owner being a resident of the other Contracting State.
Exemptions	Art. 11(3) exempts interest at source where it is 'derived and beneficially owned by' one of three categories. As with Cyprus, and unlike Canada, Ireland, China and Switzerland, there is no guaranteed-or-insured limb — the exemption turns on who receives the interest, not on who backed the loan. Interest on a commercial loan merely guaranteed by a listed body is not exempt. Art. 11(3)(a) — the Government, a political sub-division or a local authority of the other Contracting State. Art. 11(3)(b)(i) — in the case of India: the Reserve Bank of India, the Export-Import Bank of India, the National Housing Bank. The same three institutions as the Cyprus treaty names. Art. 11(3)(b)(ii) — in the case of Luxembourg: the national credit and investment corporation (La Societe Nationale de Credit et d'Investissement) and the central bank of luxembourg (La Banque Centrale du Luxembourg). Unlike Cyprus, the Luxembourg side of the list is populated. Art. 11(3)(c) — 'any other institution as may be agreed upon from time to time between the competent authorities of the Contracting States through exchange of letters'. An open extension limb requiring the specified mechanism. Whether any such letters have been exchanged is not established. Art. 11(5) disapplies paras 1 and 2 (not, on its face, para 3) where the debt-claim is effectively connected with a PE or fixed base.
Where this comes from	Article 11, paragraph 2 for the rate; 3(a) to 3(c) for the exemptions

Art. 11(4) defines interest as income from debt claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, in particular income from Government securities and from bonds or debentures including premiums and prizes; penalty charges for late payment are excluded — though the closing words carry a stray parenthesis as printed ('Penalty charges for (late payment shall not be regarded as interest for the purpose of this Article)'), which is plainly a transcription artefact but should be checked against the Gazette if the sentence is quoted. Art. 11(6) sourcing uses the narrower formula also found in the Cyprus treaty: 'Interest shall be deemed to arise in a Contracting State when the payer is A resident of that state', with no reference to the State itself or a political sub-division as payer, followed by the usual PE / fixed-base carve-in. Art. 11(7) is the special-relationship restriction.

Royalties

Rate	10 per cent of the gross amount — Art. 12(2), conditional on the beneficial owner being a resident of the other Contracting State. A single flat ceiling covering royalties and fees for technical services alike, with no split by type and no time-tiering.
Where this comes from	Article 12, paragraph 2

Art. 12(3)(a) defines royalties as consideration for the use of or right to use any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, the use of or right to use industrial, commercial or scientific equipment, or information concerning industrial, commercial or scientific experience. Note what is not there: unlike the Cyprus treaty, whose otherwise near-identical definition carves out 'income for the use of, or the right to use aircrafts and ships that falls under Article 8', and unlike the Ireland treaty, which excludes aircraft from the equipment limb, the Luxembourg definition contains no transport-equipment carve-out at all. Equipment royalties — including aircraft and ship charter payments that do not fall within Article 8 — are inside the definition at 10 per cent. Art. 12(5)(b) is A secondary source rule, identical to the Cyprus provision: where under 5(a) royalties or fees for technical services do not arise in either Contracting State, and the royalties relate to the use of the right or property, or the fees for technical services relate to services performed, in one of the Contracting States, they are deemed to arise in that State. It reaches payments by a third-country payer where the underlying use or performance is in India or Luxembourg. Art. 12(4) PE / fixed-base override; Art. 12(6) special-relationship restriction.

Fees for technical services

Rate	10 per cent of the gross amount — the same single ceiling as royalties, Art. 12(2). Royalties and FTS do not carry different rates on this treaty.
Make-available requirement	No
Where this comes from	Article 12, paragraph 3(b)

There is no make-available requirement, and there is no rate-or-scope most-favoured-nation clause through which one could be argued in. The Protocol's only paragraph is an exchange-of-information MFN keyed to Luxembourg's arrangements with EU member States; it says nothing about rates and nothing about the royalty or FTS definitions, and it is triggered by Luxembourg's concessions rather than India's. So the FTS definition stands on its own words. Art. 12(3)(b) reads in full: the term 'fees for technical services' means 'payments of any kind, other than those mentioned in articles 14 and 15 of this Agreement, as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel'. A pure services-nature test with the three limbs stated disjunctively, no technology-transfer condition, no enduring-benefit condition, no make-available limb, and no territorial requirement of the kind the China treaty carries. The only exclusion is for payments mentioned in Article 14 (independent personal services) and Article 15 (dependent personal services). There is no teaching carve-out, no sale-of-property carve-out and no personal-use carve-out. Read with the Art. 12(5)(b) place-of-performance source rule, this is a wide charge: ordinary management fees, consultancy retainers and technical support charges paid from India to Luxembourg are within Article 12 at 10 per cent gross.

Capital gains on shares

Treatment	Full source-state taxing right over shares, with no rate cap and no threshold. Art. 13(5): 'Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which is a resident of a Contracting State may be taxed in that state.' So a Luxembourg resident's gain on shares of an Indian company is taxable in India under domestic law, and the treaty restricts nothing. Art. 13(4) separately allows the situs State to tax gains on shares of the capital stock of a company whose property consists directly or indirectly principally of immovable property situated there. Art. 13(6) preserves residence-only taxation for gains on any property not within paras 1 to 5. Art. 13(3) gives exclusive residence taxation for ships and aircraft in international traffic and related movable property.
Grandfathering	None, and — unlike cyprus — none was ever needed. This is the contrast worth drawing, because the two treaties are drafted in the same family and read almost identically. The 1994 India-Cyprus treaty conferred residence-State taxation on share gains and had to be renegotiated in 2016, with acquisition-date grandfathering in the Protocol. The 2008 India-Luxembourg Agreement gave India source taxation of share gains from the outset, in Art. 13(5) as originally signed. There has never been a benefit to withdraw and therefore nothing to grandfather. There is no acquisition-date cut-off, no transition rate and no limitation-of-benefits gateway attached to Article 13.
Conditions	Because the MLI Art. 9 capital gains provision does not apply to this treaty, Art. 13(4) keeps its undefined 'principally' test, applied at a single point in time, confined to 'shares of the capital stock of a company' — there is no 365-day look-back and no extension to partnership or trust interests. That is a material difference from Australia, Canada, France and Ireland. The overlays that do apply to Article 13 are Article 29(1) (domestic anti-evasion provisions preserved), the MLI Art. 7(1) principal purposes test from 1 April 2020 for Indian taxes, and — potentially decisive for fund structures — article 30, which disapplies the entire Agreement to certain Luxembourg companies and, expressly, to shares or other rights in the capital of such companies.
Where this comes from	Article 13, paragraph 5, with 4 and the residual rule at 6

Permanent establishment

Construction or installation PE	More than 9 months — Art. 5(3)(a): 'A building site or construction, installation or assembly project or supervisory activities in connection therewith constitutes a permanent establishment only if such site, project or activities last more than 9 months.' nine months is an unusual figure and is unique among the ten treaties in this batch — Australia, France, Ireland, Cyprus and Switzerland use six months, China 183 days, Canada 120 days. It is easy to state as six or twelve by reflex. Installation and supervisory activities are both expressly inside the limb. Because MLI Art. 14 does not apply to this treaty, there is no splitting-up-of-contracts rule: connected activities of closely related enterprises are not aggregated, and the nine months is tested against the enterprise's own activity at the site.
Service PE	More than 183 days within any 12 months period — Art. 5(3)(b): 'The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose constitutes a permanent establishment, but only where activities of that nature continue (for the same or connected project) within the country for a period or periods aggregating more than 183 days within any 12 months period.' Three qualifiers: consultancy services are expressly included; the same-or-connected-project limitation applies; and it is 'more than' 183 days. Note that this is double the Cyprus threshold (90 days) in an otherwise identically drafted provision — the two treaties are from the same drafting family and differ precisely here. There is no related-enterprise trigger with a shorter or zero threshold, unlike Canada (no threshold at all for related enterprises) and Switzerland (30 days). And, as with cyprus, the limb is not expressed to exclude services falling within the article 12 definition of fees for technical services — contrast Canada, China and Switzerland, which all carve Article 12 services out of the service PE limb. So a consultancy engagement exceeding 183 days can engage both Art. 5(3)(b) and Art. 12, and the overlap is resolved only in one direction, by Art. 12(4), where the fees are effectively connected with the PE.
Agency PE	Yes — Art. 5(5), with three limbs, untouched by the MLI. A person other than an independent agent within Art. 5(7), acting in a State on behalf of an enterprise of the other State, creates a PE 'in respect of any activities which that person undertakes for the enterprise' if he: (a) has and habitually exercises authority to conclude contracts in the name of the enterprise, unless his activities are limited to those in Art. 5(4) which would not make a fixed place a PE — the pre-beps formulation, so a person who negotiates but does not bind is outside it; (b) has no such authority but habitually maintains a stock of goods from which he regularly delivers on behalf of the enterprise; or (c) habitually secures orders in that State, 'wholly or almost wholly for the enterprise itself' — narrower than the Australia, Canada and Ireland equivalents, which extend to orders secured for the enterprise and other commonly controlled enterprises. Art. 5(7) independent-agent relief is withdrawn where 'the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise' — exclusivity alone destroys independence, with no arm's-length requirement, matching Cyprus and Switzerland and harsher than Canada and Ireland.
Where this comes from	Article 5

Art. 5(2) includes (f) A sales outlet with no time qualification, (g) a warehouse in relation to a person providing storage facilities for others, (h) a farm or plantation, and (i) a mine, oil or gas well, quarry or other place of extraction of natural resources. There is no separate limb for an installation or structure used for exploration or exploitation of natural resources and no oilfield-services deeming rule of the kind Ireland's Art. 5(4) creates. Art. 5(4) preparatory-and-auxiliary exceptions run (a) to (f) and are the standard set; as with Cyprus, sub-paragraphs (a) and (b) protect facilities and stock used for storage or display but not for delivery — 'delivery' is omitted from both, a narrower safe harbour than Ireland's. Because MLI Art. 13(4) does not apply, there is no anti-fragmentation rule. Art. 5(6) is an insurance PE limb: an insurance enterprise of one State is deemed to have a PE in the other, except in regard to re-insurance, if it collects premiums there or insures risks situated there through a person other than an independent agent. Art. 5(8) is the standard subsidiary-is-not-a-PE rule.

Anti-abuse: limitation of benefits, and the MLI

LOB	Yes — article 29, limitation of benefits, and this is the only treaty in the batch with A pre-existing general anti-abuse article, which makes the MLI interaction here unique. As originally agreed it had three paragraphs. Para 1: 'Nothing in this Agreement shall affect the application of the domestic provision to prevent tax evasion.' Para 2: 'An enterprise of a Contracting State shall not be entitled to the benefits of this Agreement if the main purpose or one of the main purposes of the creation of such enterprise was to obtain the benefits under this Agreement that would not otherwise be available.' Para 3: 'The case of legal entities not having bona fide business activities shall be covered by the provisions of this Article.' since the MLI took effect, paragraphs 2 and 3 have been replaced by the MLI PPT and paragraph 1 has not. The synthesised text is explicit: 'The following paragraph 1 of Article 7 of the MLI replaces paragraphs 2 and 3 of article 29 of this Agreement.' Paragraph 1 is left unbracketed and unreplaced, so it survives as a live treaty provision. Why the partial replacement matters to A practitioner. (i) The old para 2 was narrower than the PPT in a specific and useful way: it asked about the purpose of the creation of the enterprise, a one-off historical enquiry, and it denied benefits to 'an enterprise', not to a particular item of income. The PPT asks about the purpose of any arrangement or transaction that resulted in the benefit — a transaction-by-transaction test — and denies the benefit in respect of an item of income or capital. A Luxembourg vehicle incorporated for genuine commercial reasons in 2010, which would have satisfied the old para 2, can now lose a particular benefit because of the purpose of a later transaction. (ii) The PPT is wider in reach but adds a taxpayer escape the old article lacked: the closing 'unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions'. Article 29(2) had no such let-out. (iii) The old para 3 — legal entities without bona fide business activities are covered by the Article — is gone as a free-standing rule; substance now enters through the PPT's 'all relevant facts and circumstances'. (iv) article 29(1) survives, and it is the sleeper. It means the treaty itself preserves the operation of Indian domestic anti-evasion provisions, so a taxpayer cannot argue that the treaty overrides them. It is also unaffected by the MLI's entry-into-effect dates, having been in the treaty since 2010.
PPT	Yes — MLI Art. 7(1), replacing Art. 29(2) and (3) rather than merely superseding the Agreement generally. Note the wording is the wider 'item of income or capital' version, reflecting that this Agreement covers capital. Full test: notwithstanding any provisions of the Agreement, a benefit shall not be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the Agreement. No MLI Art. 7(4) discretionary-relief paragraph appears. Effective from 1 April 2020 for Indian source withholding and for all other Indian taxes. For periods before that, Art. 29(2) and (3) as originally drafted governed.
Subject to tax	None as such, but article 30, exclusion of certain companies, does something more drastic than a subject-to-tax clause and is entirely untouched by the MLI. It reads: 'This Agreement shall not apply to holding companies as defined in the special Luxembourg laws, (currently the Act (loi) of 31 July, 1929 and the Decree (arrete grand-ducal) of December 17, 1938) or any other similar provision enacted in luxembourg after the signature of the agreement or other companies that enjoy A similar special fiscal treatment by virtue of the laws of luxembourg. It shall not apply either to income derived by A resident of india from such companies or to shares or other rights in the capital of such companies owned by such person.' Three features make this the most aggressive exclusion in the batch. First, it is not a denial of particular benefits but a disapplication of the whole agreement. Second, it is not confined to the named 1929 regime: the words 'or any other similar provision enacted in Luxembourg after the signature of the Agreement or other companies that enjoy a similar special fiscal treatment by virtue of the laws of Luxembourg' are open-ended and forward-looking, so the exclusion can capture regimes created since 2008. Third, it operates in both directions — it strips treaty protection not only from the Luxembourg company but from an Indian resident's income from such a company and from the Indian resident's shares in it. The named 1929 holding company regime was itself repealed by Luxembourg with effect during 2010-2011, so the express reference is spent; what remains live, and undecided on the face of the instrument, is the scope of 'other companies that enjoy a similar special fiscal treatment'. Whether that reaches modern Luxembourg vehicles is the single most important open question on this treaty for fund and holding structures.
Where this comes from	Article 29 (as partially replaced by MLI Art. 7(1)) and 30

MLI entry into force: 1 October 2019 for India, 1 August 2019 for Luxembourg. Entry into effect: in india, for taxes withheld at source, events on or after 1 april 2020, and for all other Indian taxes, taxable periods beginning on or after 1 april 2020. In luxembourg, for taxes withheld at source, events on or after 1 January 2020, and for all other Luxembourg taxes, taxable periods beginning on or after 1 April 2020. Like cyprus, the MLI touched only two things — but on this treaty the second of them is far more consequential, because unlike every other treaty in this batch Luxembourg already had A limitation of benefits article. The two boxes are: (1) MLI Art. 6(1), inserting the beps preamble language on treaty-shopping; and (2) MLI Art. 7(1), the principal purposes test. The PPT does not merely apply alongside the existing anti-abuse article — IT partially replaces IT, and the partial character of the replacement is the point. The synthesised text states: 'The following paragraph 1 of Article 7 of the MLI replaces paragraphs 2 and 3 of article 29 of this Agreement.' Paragraph 1 of Article 29 is not bracketed and not replaced — it survives. See anti_abuse for what that means. Notably absent: no MLI Art. 4 dual-resident box, so Art. 4(3) stands as agreed; no MLI Art. 8 dividend-holding-period box; no MLI Art. 9 capital gains box, so Art. 13(4) keeps its undefined 'principally' test at a point in time, confined to shares, with no 365-day look-back; no MLI Art. 12, 13, 14 or 15 box, so Article 5 is entirely untouched — no commissionnaire test, no anti-fragmentation rule, no contract-splitting rule; and no MLI Art. 16 map box.

The protocols, in order

A treaty read without its protocols is a wrong answer.

None. There is no amending protocol and no amending notification. The single protocol record is the original Protocol signed with the Agreement at New Delhi on 2 June 2008, expressed to be an integral part of it.
The protocol has only one substantive paragraph, and IT is A most-favoured-nation clause — but not the kind practitioners go looking for. It is confined to exchange of information: 'Ad. Article 27 — In respect of Article 27, it is understood that if after the signature of this Agreement under any Agreement or Convention or Protocol between luxembourg and any other member of european union, Luxembourg offers an arrangement for more favourable or effective arrangement of exchange of information, the same arrangement shall also apply for the purpose of Article 27.' Three points distinguish it from the France and Switzerland MFN clauses: it is triggered by luxembourg'S concessions, not India's; the comparator pool is other EU member States, not OECD members; and its subject-matter is administrative cooperation, not rates or scope of taxation. It confers no rate benefit and no narrowing of the royalty or FTS definitions. Anyone searching this treaty for a rate MFN will find this clause and must not mistake it for one.
The dates, set out precisely. (1) signed 2 June 2008. (2) entered into force 9 July 2009. (3) effect in india under Art. 32(3)(a): in respect of taxes withheld at source, to income derived on or after 1 april of the calendar year next following the year of entry into force, i.e. 1 april 2010; and in respect of other taxes on income and taxes on capital, to taxes chargeable for any taxable year beginning on or after 1 April 2010. The notification's operative direction matches: effect in the Union of India from 1 April 2010. Note the gap — the Agreement was in force for nearly nine months before it had any effect in India.

The words themselves

Quoted from the treaty as notified.

Nothing in this Agreement shall affect the application of the domestic provision to prevent tax evasion.

Article 29, paragraph 1 (not replaced by the MLI) of the treaty as notified.

An enterprise of a Contracting State shall not be entitled to the benefits of this Agreement if the main purpose or one of the main purposes of the creation of such enterprise was to obtain the benefits under this Agreement that would not otherwise be available.

Article 29, paragraph 2 (replaced by MLI Art. 7(1) with effect from 1 April 2020 for Indian taxes) of the treaty as notified.

This Agreement shall not apply to holding companies as defined in the special Luxembourg laws, (currently the Act (loi) of 31 July, 1929 and the Decree (arrete grand-ducal) of December 17, 1938) or any other similar provision enacted in Luxembourg after the signature of the Agreement or other companies that enjoy a similar special fiscal treatment by virtue of the laws of Luxembourg. It shall not apply either to income derived by a resident of India from such companies or to shares or other rights in the capital of such companies owned by such person.

Article 30, paragraph sole paragraph of the treaty as notified.

A building site or construction, installation or assembly project or supervisory activities in connection therewith constitutes a permanent establishment only if such site, project or activities last more than 9 months.

Article 5, paragraph 3(a) of the treaty as notified.

The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose constitutes a permanent establishment, but only where activities of that nature continue (for the same or connected project) within the country for a period or periods aggregating more than 183 days within any 12 months period.

Article 5, paragraph 3(b) of the treaty as notified.

if after the signature of this Agreement under any Agreement or Convention or Protocol between Luxembourg and any other member of European Union, Luxembourg offers an arrangement for more favourable or effective arrangement of exchange of information, the same arrangement shall also apply for the purpose of Article 27

Article Protocol, paragraph Ad. Article 27 of the treaty as notified.

What to watch

This is the only treaty in the batch where the MLI PPT replaces an existing anti-abuse article rather than simply superseding the treaty. It replaces Article 29 paragraphs 2 and 3 only. Paragraph 1 — preserving the application of domestic anti-evasion provisions — survives untouched and is not subject to the MLI's effective dates.
The replacement widened the test in the dimension that matters most. Old Article 29(2) looked at the purpose of the creation of the enterprise, once, and denied benefits to the enterprise. The PPT looks at the purpose of any arrangement or transaction, every time, and denies the specific benefit. A Luxembourg vehicle whose incorporation was unimpeachable is no longer safe on that ground alone.
But the replacement also added A defence. Article 29(2) had no escape clause; the PPT has one — that granting the benefit would be in accordance with the object and purpose of the relevant provisions. Quote the PPT with that limb or the article reads as absolute, which it is not.
Article 30 is the provision most likely to decide A luxembourg fund or holding case and IT is untouched by the MLI. It disapplies the entire Agreement — not merely selected benefits — to 1929 holding companies and to 'other companies that enjoy a similar special fiscal treatment by virtue of the laws of Luxembourg', and it does so in both directions, reaching an Indian resident's income from such a company and his shares in it. The 1929 regime named in the article was repealed, but the open-ended limb was drafted to outlive it.
The construction PE threshold is nine months. Not six, not twelve. It is the only nine-month figure in the batch and there is no contract-splitting rule to aggregate connected activities of related enterprises.
The service PE threshold is 183 days — double the 90 days in the near-identically drafted Cyprus treaty. The two instruments are from the same drafting family and diverge exactly at this number, so cross-reading them is dangerous.
The protocol'S MFN clause is about exchange of information only. It confers no rate benefit and cannot be used to import a narrower royalty or FTS definition. It is also triggered by what luxembourg concedes to EU member States, not by what India concedes to anyone. Treat it as an administrative-cooperation provision, not a tax-rate provision.
Unlike cyprus and ireland, the royalty definition has no aircraft or ship carve-out. Charter and lease payments that fall outside Article 8 are equipment royalties at 10 per cent.
The article 11 interest exemption has no guaranteed-or-insured limb — the exemption requires that a listed body itself derive and beneficially own the interest. Compare Ireland, Canada, China and Switzerland, all of which extend theirs to guaranteed or insured lending.
The service PE limb is not drafted as mutually exclusive with article 12. A consultancy engagement exceeding 183 days can engage both, and only Art. 12(4) resolves the overlap, and only where the fees are effectively connected with the PE.
Article 12(5)(b) can source A fee in india even where the payer is in neither state, if the services were performed in India. Third-country payers should be checked against it.
The MLI left article 5, article 4 and article 13 entirely alone. Place of effective management still governs dual residence; the agency test still requires contracts concluded in the name of the enterprise; there is no anti-fragmentation rule; and Art. 13(4) has no 365-day look-back and does not reach partnership or trust interests. Do not carry assumptions across from the Australia, France or Ireland records.
The agreement covers capital as well as income — Article 23 is a Capital article and the notification was issued under s.44A of the Wealth-tax Act 1957 as well as s.90. The PPT accordingly denies benefits in respect of an item of income or capital.
The agreement was in force from 9 july 2009 but had no effect in india until 1 april 2010. For Indian fiscal year 2009-10 there was no treaty relief available.

What this page does not tell you. The scope of article 30 is the largest unresolved question on this treaty and this record does not settle IT. The named 1929 holding company regime has been repealed by Luxembourg, but the article extends to 'any other similar provision enacted in Luxembourg after the signature of the Agreement or other companies that enjoy a similar special fiscal treatment by virtue of the laws of Luxembourg'. Whether that language reaches modern Luxembourg vehicles — investment funds, specialised investment funds, reserved alternative investment funds, securitisation vehicles, or ordinary participation-exemption holding companies — is a question of Luxembourg tax law and of treaty interpretation that must be researched before advising. Nothing in the treaty text, the Protocol or the synthesised text defines 'similar special fiscal treatment'. The date on which the Luxembourg 1929 holding company regime was repealed, and any transitional period, is not established here; it is a matter of Luxembourg domestic law. Whether any institutions have been added under Art. 11(3)(c) by exchange of letters between the competent authorities is not established. Whether the Protocol's exchange-of-information MFN has been triggered — that is, whether Luxembourg has since offered a more favourable or effective exchange arrangement to another EU member State — is not established, and if it has, the resulting arrangement is not recorded in the sources used here. The stray parenthesis in the rendering of Art. 11(4) ('Penalty charges for (late payment shall not be regarded as interest for the purpose of this Article)') has not been checked against the notified Gazette text of S.O. 2591(E) dated 12-10-2009. Articles 22 (other income), 23 (capital), 24 (methods for elimination of double taxation) and 25 (non-discrimination) were read only in passing and are not summarised here. Article 24 matters because Art. 13(5) leaves share gains taxable in both States. Whether Article 29(1) — preserving domestic anti-evasion provisions — has been judicially considered in the Indian context, and how it interacts with the general anti-avoidance rules in the Income-tax Act, is outside what this reading establishes.

The India–Luxembourg tax treaty