HMRC has published the text of a new treaty and protocol to replace the 1967 UK-Luxembourg convention that is currently in force. The new convention signed on 7 June 2022 is not yet in force.
Ben Eaton, shareholder at Greenberg Traurig, said the new treaty confirms that it will no longer be possible to claim exemption under the treaty from UK tax on exit from UK real estate investments held through Luxembourg holding structures.
‘In practice, the change is likely to be most relevant to investments held through Luxembourg holding structures that were established before April 2019, when the UK implemented a more general extension of its rules for taxing gains from UK real estate,’ he said. ‘Further, such legacy structures are unlikely to be protected by “exemption elections” under the NRCG rules.
‘The change compounds the relative attractiveness of transparent holding structures for UK real estate, such as those using JPUTs (Jersey Property Unit Trusts) that have elected for transparency, and of UK REITs,’ Eaton added.
HMRC has published the text of a new treaty and protocol to replace the 1967 UK-Luxembourg convention that is currently in force. The new convention signed on 7 June 2022 is not yet in force.
Ben Eaton, shareholder at Greenberg Traurig, said the new treaty confirms that it will no longer be possible to claim exemption under the treaty from UK tax on exit from UK real estate investments held through Luxembourg holding structures.
‘In practice, the change is likely to be most relevant to investments held through Luxembourg holding structures that were established before April 2019, when the UK implemented a more general extension of its rules for taxing gains from UK real estate,’ he said. ‘Further, such legacy structures are unlikely to be protected by “exemption elections” under the NRCG rules.
‘The change compounds the relative attractiveness of transparent holding structures for UK real estate, such as those using JPUTs (Jersey Property Unit Trusts) that have elected for transparency, and of UK REITs,’ Eaton added.
