EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
Recent Searches
- The Luxembourg Parliament has adopted a law that substantially reforms the carried interest regime.
- Effective from 2026, the new law introduces two specific regimes applicable to specific types of carried interest.
- Contractual carried interest will be subject to a maximum personal income tax rate of 11.45%, while participation-linked carried interest may qualify for tax exemption under specific conditions.
- The adopted legislation broadens the scope of beneficiaries and aligns with the various carried interest models that exist in the market.
On 22 January 2026, the Luxembourg Parliament approved the legislative proposal that substantially reforms the existing carried interest regime. For more information on the proposed law, see EY Global Tax Alert, Luxembourg carried interest proposal would make significant changes, dated 4 August 2025.
The final law modifies the proposed version by defining beneficiaries. The new carried interest regime applies to individuals that either:
- Perform investment management functions (such as portfolio and risk management functions, but excluding purely administrative roles) as employees, shareholders, managers or directors of managers, management companies or alternative investment funds
- Act as service providers involved in the management of an alternative investment fund under a consultancy agreement, whether engaged directly or through one or more intermediary entities
The provisions apply to any carried interest received from 1 January 2026 onwards.
Summary
The Luxembourg Parliament has adopted a law that substantially reforms the carried interest regime.
Related articles
Luxembourg has introduced a standardized Top-up Tax Information Return (TTIR) for Pillar Two taxes through the Law of 19 December 2025 (Law) transposing European Union (EU) Directive on Administrative Cooperation (DAC9).
On 24 July 2025, the Luxembourg Government published Draft Law 8592 (Draft Law), introducing national provisions to transpose European Union's (EU) Directive 2023/2226 of 17 October 2023 (DAC8) into Luxembourg tax law.
Luxembourg carried interest proposal would make significant changes
In keeping with the political priorities and commitments outlined in the coalition agreement released following the 2023 elections, the Luxembourg Government, on 24 July 2025, submitted draft legislation (Draft Law) to Parliament that significantly reforms the existing carried interest regime.