On 9 June 2023, the Luxembourg tax authorities (the “LTA”) published a long-awaited circular (L.I.R. n°168quater/1) providing clarifications on the Luxembourg reverse hybrid mismatch rules (“RHMR”) along with a frequently asked questions (“FAQ”) in relation to a newly introduced tax form 205.
The form 205 should be filed as from tax year 2023 (in relation to fiscal year 2022) by Luxembourg tax transparent undertakings and arrangements that mainly derive net income from movable capital or miscellaneous net income. In case the conditions of the RHMR are met, this income may be fully or partially subject to Luxembourg corporate income tax (“CIT”).
This form notably aims to inform the LTA (i) on the entity’s profit allocation between partners which is subject to uniform determination and Luxembourg income tax at their level and (ii) whether the concerned entity has realized income subject to CIT under the RHMR.
The form must be filed by all transparent entities that have been requested to do so in a correspondence received by the LTA, but also by transparent entities that have not been formally contacted and where the conditions to be subject to CIT are met.
The non-filling of this form before the end of the year may trigger fines for late submission.
