Luxembourg

Reverse hybrid rules as of the 2022 tax year

With effect as of the 2022 tax year, Luxembourg transparent partnerships will become liable to corporate income tax (CIT) in relation to net income to the extent that such income is not otherwise taxed under the Luxembourg domestic tax law or the laws of any other jurisdiction, provided one or more associated non-resident entities (i) holding in aggregate a direct or indirect interest in 50% or more of the voting rights, capital interests, or rights to a share of profit in the Luxembourg partnership (ii) consider the Luxembourg partnership to be a taxable person.

In such a situation, the Luxembourg Law confirms that, while the Luxembourg partnership will be considered as a tax resident for CIT purposes, it will be exempt from net wealth tax (NWT).

In line with the exclusion provided for in the European Union (EU) Anti-Tax Avoidance Directive 2 (ATAD 2), collective investment vehicles are out of the scope of this provision. For the purpose of this rule, collective investment vehicles are defined as an investment fund or vehicle that is widely held, holds a diversified portfolio of securities, and is subject to investor-protection regulations in the country in which it is established.