Luxembourg: Draft legislation to modernize carried interest tax regime
Bill No. 8590 submitted to Chamber of Deputies on July 24, 2025
The government on July 24, 2025, submitted Bill No. 8590 to the Chamber of Deputies—draft legislation aimed at modernizing the tax regime for carried interest.
The bill seeks to introduce a permanent and comprehensive framework that better aligns manager incentives with investor performance, and includes:
- Clear distinction between ordinary returns and “outperformance” returns
- Replacement of the enumeration of holding types with a broad, catch-all reference that encompasses all forms of holdings, including both corporate and partnership structures
- Two income tax treatments depending on whether the carried interest is contractual (granted without any capital contribution or equity stake) or investment-linked (tied to a direct or indirect ordinary participation in the alternative investment fund)
Read a July 2025 report prepared by the KPMG member firm in Luxembourg