Carried Interest in Luxembourg: A Comprehensive Guide to the 2026 Tax Reforms

This article analyses Luxembourg’s reformed carried-interest regime, applicable as from tax year 2026, which significantly modernizes the tax treatment of carried interest for individuals involved in the management of alternative investment funds. It examines the refined definitions of “contractual” and “invested carried interest” for tax purposes, the broadened personal scope capturing all individuals contributing to the alternative investment fund management, the permanent reduced rate for contractual entitlements, the exemption of invested carried interest and the standalone tax characterization of carried interest irrespective of alternative investment fund tax transparency.