The “Split-Status” Era: Luxembourg’s Anti-Hybrid Rules and Pillar Two in Light of the OECD’s Side-by-Side Package – Part 2

This two-part article explores the foundational transformation of Luxembourg’s anti-hybrid regime (articles 168ter and 168quater of the Luxembourg Income Tax Law following the release of the OECD’s Side-by-Side (SbS) Package on 5 January 2026 and its interaction with the EU Minimum Taxation Directive (2022/2523). The article analyses the transition from a “neutralization-only” model, focused on denying domestic deductions, to a “Qualified Inclusion” framework that integrates the US Global Intangible Low-Taxed Income (GILTI)/Net Controlled Foreign Corporation Tested Income (NCTI) into the Luxembourg tax perimeter. Part 1, which was published in European Taxation 7 (2026), detailed the emergence of the 2026 “Cascade of Taxation”, setting the conceptual stage for a rigorous eight-step methodology. Part 2 outlines a proposed DAC9 reporting framework.