2022 Luxembourg Budget : Main Tax Measures

The Luxembourg budget for 2023 (the "Budget") has been adopted by the Luxembourg Parliament on 15 December 2022. While it contains no major tax reforms, there are various tax clarifications and reductions. These are as follows.

Clarification on reverse hybrid rules

The so-called "reverse hybrid rules" were implemented in Luxembourg domestic law under Article 168quater of the amended law dated 4 December 1967 on income tax ("LIR") which provides that a Luxembourg tax transparent entity could become taxable in Luxembourg if the majority of its investors consider the Luxembourg entity as a taxable person in Luxembourg, i.e. tax opaque (the hybridity deriving from the difference of qualification). As a measure of clarification, the Budget foresees that this rule will apply where the non-taxation of income only derives from a difference of qualification between the involved jurisdictions (and not as a consequence of the subjective exemption of such investors).