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By Opalesque:

The small central European country has just introduced a series of coordinated regulatory and tax reforms to strengthen its position as the continent's premier investment fund hub.

Luxembourg is indeed Europe's largest investment fund domicile and the second largest globally after the U.S.; it oversees more than €7.45tln (US$8.65tln) in fund assets, much of it managed on a cross-border basis, according to EY. It is the domicile for over 52% of funds marketed on a cross-border basis, and US managers hold 25% of the net assets.

Carried interest reform

Last summer, Luxembourg's government started planning changes in the carried interest tax regime. Carried interest is a share of the profits of an (alternative) investment paid to the manager.

As from 1st January 2026, the reform confirms the existing exemption for invested carry and meaningfully improves treatment of non-invested carry schemes, which will now benefit from a reduced rate of one-quarter of the ordinary tax rate. The scope of eligible beneficiaries has been broadened, and legal certainty enhanced through clearer guidance on fund tax transparency and deal-by-deal models. The changes are designed to attract and retain inve......................

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