Circular On Reverse Hybrid Rule

On 9 June 2023, the Luxembourg tax authorities ("LTA") issued an administrative circular ("Circular") providing some guidance on the determination of the total net income and tax due by the reverse hybrid entity ("RHE") under Article 168 quater of the Luxembourg Income Tax Lax ("LITL")¹.

The key takeaways of the Circular can be summarised as follows:

• According to the Circular, a RHE is not a resident collective undertaking (organismes à caractère collectif) within the meaning of Article 159 LITL. Accordingly, the following tax provisions are (inter alia) not applicable to it:
  • Article 164 ter LITL: Controlled Foreign Companies ("CFC") provisions;
  • Article 166 LITL: participation exemption on dividends received;