Tax Treaty Case Law around the Globe 2018

S. 39Chapter 5 Luxembourg: Dual Residence and Income Qualification of a Lawyer in Hong Kong

Werner Haslehner

5.1. Introduction

The reviewed judgment concerns a dispute between Luxembourg’s direct tax administration and a lawyer (the taxpayer) who resided and worked in Hong Kong for 7 months of the relevant tax year. Two questions of interest to this review were raised in the case: first, whether the taxpayer was correctly classified as a resident of Luxembourg despite his longer presence in Hong Kong during the tax year; and second, how the relevant income should be classified for tax treaty purposes: it would qualify as business income under Luxembourg’s domestic law but was treated as employment income in Hong Kong.

Luxembourg’s highest administrative court (Cour administrative, hereinafter the court) relied on the 2007 double taxation convention (DTC) between Luxembourg and Hong Kong to resolve these issues. It made ample reference to the relevant explanations of the Commentary on the OECD Model when answering the first question, holding that the taxpayer’s centre of vital interests remained in Luxembourg throughout the relevant period. By contrast, the court made no such reference in re...