Bill implementing the Anti-Tax Avoidance Directive 2 on hybrid mismatches
Office Senior Partner
13 August 2019
On 8 August 2019, the Luxembourg government submitted Bill n° 7466 implementing Directive 2017/952 (ATAD 2) to the Parliament (the Bill).
The Bill extends the existing anti-hybrid rules applicable within the European Union (EU) as introduced by Directive 2016/1164 (ATAD 1) to cover hybrid mismatches involving non-EU countries and additional hybrid mismatches.
In a nutshell, a hybrid mismatch (i.e. double deduction or deduction without inclusion) results from the difference in the characterisation of a financial instrument or of an entity in different countries.
The Bill contains much appreciated clarifications made by the Luxembourg government regarding the treatment applicable in case of tax exempt investors as well as regarding the ‘acting together’ concept.
Most of the ATAD 2 provisions must be implemented into Luxembourg tax law before year-end and apply as from 1 January 2020.