Internatio­nales Steuer­recht

Luxembourg: First guidelines released on the reverse hybrid rule

On 9 June 2023, The Luxembourg tax authorities released a circular to clarify the application of the reverse hybrid rule as introduced from tax year 2022 by Article 168quater of the Luxembourg Income Tax Law. In addition, the LTA has provided an FAQ on the related tax return (Form 205) to be filed by Luxembourg reverse hybrid entities.

A Luxembourg reverse hybrid is an entity that is treated as tax transparent under the laws of Luxembourg but as a separate entity (i.e. opaque) under the laws of the jurisdiction(s) of the investor(s). As a result of the implementation of ATAD2 in Luxembourg, a Luxembourg reverse hybrid may become a “taxpayer within the meaning of article 168quater of the LITL”.

Oliver R. Hoor, and Marie Bentley, from ATOZ, Taxand member firm in Luxembourg, share an overview of the clarifications provided by the LTA which deal with the tax status of the reverse hybrid entity, the determination of its taxable basis, and the computation of the Luxembourg tax due as well as the tax compliance obligations of a reverse hybrid entity.

Read the full article here.

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