Luxembourg's securitization regime is evolving. By permitting the active management of debt as well as alternative investments, Bill 8761 expands the range of structuring options available to asset managers and fund sponsors. This insight explains the key changes, their practical implications and how firms can position themselves ahead of enactment.
Broader financing means
The Bill proposes an extension of financing means for securitization transactions to any type of financing and not only through borrowing and/or issuance of financial instruments.
Tax considerations to watch
Securitization companies established as corporate bodies are generally subject to the same corporate income tax (CIT) and municipal business tax (MBT) as other Luxembourg tax-resident companies, which have resulted in a CIT rate of 17.12% (including the unemployment fund surcharge), plus an MBT rate, which varies by municipality at 6.75% for Luxembourg City in 2026.
However, in line with their securitization activity and intended tax neutrality, profits that a company commits to distributing, can generally be treated as tax-deductible expenses, keeping the effective taxable base minimal. Interest-limitation rules and anti-hybrid rules should also continue to be monitored, as these general Luxembourg tax rules still apply. Securitization companies established as corporate are exempt from the annual 0.5% net wealth tax, although they remain subject to the annual minimum net wealth tax. Dividend distributions and interest expenses made by a Luxembourg securitization vehicle are generally not subject to Luxembourg withholding tax.
When combined with the Bill’s extension of active management into private equity and other alternative strategies, this tax framework could create structuring opportunities for a broader range of market participants rather than being confined to pure private debt players.
If adopted in its current form, Bill 8761 is expected to make Luxembourg securitization vehicles better suited to complex private transactions, without turning the 2004 Securitization Law into a new regime. The proposed reforms are particularly relevant for private capital sponsors and alternative asset managers. Together, the extended active management with the vehicle’s existing tax-neutral profile could make Luxembourg’s securitization structures a lucrative alternative for private equity, real assets and other non-debt strategies, beyond their traditional use by private credit players. The Bill is expected to be passed before the end of 2026.
