Since 1 January 2020 the amended anti-hybrid rules of EU Directive 2017/952 of 29 May 2017 (the “AntiTax Avoidance Directive 2” or “ATAD 2”) are in force in Luxembourg. These rules constitute most probably one of the most complex pieces of Luxembourg tax legislation and their practical application raises a lot of issues which still remain to be clarified, pending the release of administrative guidelines. One of these issues is the practical application of the undefined concept of “acting together”, a concept to be applied when determining whether a specific situation involves “associated enterprises” which is one of the conditions required for being in the scope of the anti-hybrid rules. The Luxembourg legislator was wise enough to introduce some “safe harbour” rules deeming no “acting together” in certain situations. However, there are still many circumstances in which the acting together concept will have to be analysed, but the question is: how?
The concept of “acting together” appeared in the various discussion drafts and in the final report on Action 2 (Neutralising the Effects of Hybrid Mismatch Arrangements) of the OECD project on Base Erosion and Profit Shifting “BEPS”) . It was then incorporated into the EU legal framework on anti-hybrid mismatch rules in ATAD 2 and is now part of the Luxembourg legislation since Article 168ter of the Luxembourg Income tax law (“ITL”) was amended with effect as from 1 January 2020. Although the concept is part of 2 different pieces of legislation (ATAD 2 and Article 168ter of the ITL), it is not defined, which makes it all the more difficult to analyse and apply in practice. However, reference to this concept and explanations are included in the BEPS Action 2 report, which are useful to better understand the meaning of the concept and how to apply it.