Carried interest reform in Luxembourg

At Altum, we’re committed to helping clients navigate Luxembourg’s evolving tax landscape with confidence. In this briefing note, Jean Christophe Grogna provides a summary following guidance on the new carried interest regime.

The draft bill has been submitted by the Luxembourg Prime Minister Luc Frieden and the Minister of Finance Gilles Roth.

One of the proposed changes concerns the extent of the eligibility for the regime. Until now, only resident employees of an alternative Investment Fund Manager were eligible to the former tax regime dated 2013 on Carried Interest. Now, this regime is also accessible to individuals who participate in the management of an alternative investment fund without necessarily being employees of this fund.

The draft bill distinguished two new regimes:

Carried Interest linked to an investment 

When the carried interest is linked to an investment of the fund manager into Fund, the income deriving from the carried interest the fund manager is entitled to receive will be fully tax exempt to the extent that the investment has been held during at least 6 months and does not exceed 10% of the fund capital.

Contractual Carried Interest  

Here, the right to the carried interest is given contractually without any investment of the fund Manager into the Fund. In this case the income received by the resident fund manager will be taxed at a rate that does not exceed a quarter of the normal taxation rate in Luxembourg. In Luxembourg the maximal individual tax rate being 45%, as consequence the maximum tax rate applicable to income derived from contractual carried interest will not exceed 11%.
Application of the new rule is as from 1 January 2026.

How Altum can help you

From eligibility assessments and structuring advice to compliance and reporting support. Whether you’re a fund manager or a carried interest recipient, we’re here to ensure you’re positioned to benefit from this strategic shift.