Bill No. 8590 aims to establish a permanent tax framework for carried interest and strengthen Luxembourg’s position in asset management.
The Luxembourg Government submitted Bill No. 8590 on 24 July 2025 to the Chamber of Deputies, introducing a permanent tax regime for carried interest aimed at strengthening the country’s attractiveness for alternative investment fund managers.
If approved, the draft is scheduled to take effect from 2026. The proposed framework distinguishes between contractual carried interest and investment-linked carried interest, each subject to different personal income tax treatments.
Under the contractual model, where carried interest is granted without any capital contribution or equity stake, the income will be taxed as extraordinary income at a reduced rate of approximately 13%. For carried interest linked to a direct or indirect participation in an AIF, or represented by such a participation, the income will be treated as speculative gain and may qualify for a tax exemption if certain conditions are met, including a minimum holding period of six months and no substantial shareholding.
The Bill broadens the definition of carried interest to include all forms of outperformance rights and applies to a wide range of beneficiaries, including employees and certain non-employees of AIFs and related entities. It also permits “deal-by-deal” carry models and disregards fund transparency for tax purposes, eliminating the risk of taxation on undistributed income in fiscally transparent vehicles.
