Luxembourg: New carried interest tax regime enacted
Revised carried interest tax regime expands eligibility and clarifies tax treatment
The Chamber of Deputies adopted the new carried interest tax regime on January 22, 2026, with full adoption on February 3, 2026.
The amended law, effective for the 2026 tax year, replaces “capital gains” with “outperformance” for clarity and expands eligible beneficiaries to include individuals involved in alternative investment fund (AIF) management. It also distinguishes between contractual carried interest, taxed at 11.5%, and carried interest linked to fund participation, with tax treatment based on holding periods.
The transitional regime for contractual carried interest is now permanent, ensuring continuity of tax advantages.
For more information, contact a KPMG tax professional in Luxembourg:
Benjamin Toussaint | benjamin.toussaint@kpmg.lu
Sacha Thill | sacha.thill@kpmg.lu