Hybrid mismatches typically originate from a different tax treatment of an entity, a permanent establishment or a financial instrument under the laws of two or more jurisdictions and may result in deduction without inclusion or double deduction outcomes. In general, the hybrid mismatch rules target hybrid mismatches between associated enterprises, structured arrangements between third parties, imported hybrid mismatches and tax residency mismatches.
At the same time, the hybrid mismatch rules should not create economic double taxation. This is ensured through a number of carve-outs and limitations that discharge the application of the hybrid mismatch rules (for example, timing differences, inclusion of the payment at the level of any payee, tax exempt status of the investor, transfer pricing adjustments).
The hybrid mismatch rules are characterised by an extreme complexity that demands not only deep knowledge of Luxembourg tax law but also a good understanding of the tax laws of all foreign jurisdictions involved, ATAD 2 and the Final Report on BEPS Action 2 that is explicitly mentioned as a source of interpretation.
This webinar aims at providing participants with a clear overview of the new hybrid mismatch rules, analysing how these rules may impact Alternative Investments and multinational groups in Luxembourg and considering opportunities to manage adverse tax consequences.