LUXEMBOURG Law and Practice Contributed by: Claudia Hoffmann, Daniel Krauspenhaar, Stefanie Samosny and Sascha Wiemann, Luther
to their unlimited liability for the fund’s obligations – are mostly structured as SARLs. However, personnel compensation/equity incentive arrangements struc - tured via the AIFMs rather than via dedicated carry vehicles may indeed influence their structuring and choice of legal form, with the decisive factor generally being tax aspects at the level of the recipient of such compensations/incentives. 3.3 Regulatory Regime for Managers Luxembourg AIFMs are primarily subject to the AIFM Law and Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012. Additionally, admin - istrative guidance applies (particularly in the form of circulars – notably Circular CSSF 18/698 – or FAQs issued by the CSSF). Luxembourg AIFMs are subject to prior CSSF authori - sation and ongoing supervision. They need to meet minimum capital and own funds requirements, and to have personnel with sufficiently good repute and experience in effectively conducting their business. Furthermore, they need to have adequate and appro - priate procedures and policies in place regarding (among others) remuneration, conflict of interests, liquidity management and valuation. Authorised AIFMs generally benefit from an EEA-wide marketing passport to professional investors; certain notification obligations apply. While there is no statu - torily defined “fiduciary duty” under Luxembourg law, AIFMs are required to act fairly and honestly, with due skill, care and diligence, in conducting their activities. Luxembourg AIFMs must provide extensive disclo - sures to both the CSSF and investors. Pre-contractual disclosures for each AIF they manage should include information on the AIF’s investment strategy and objective, its valuation procedure and liquidity risk management, and a description of all fees, charges and expenses and of the maximum amounts there - of that are directly or indirectly borne by investors. Ongoing disclosures include the preparation of an annual report for each AIF, and regulatory reporting such as Annex IV reporting under the AIFMD. With the implementation of AIFMD II, additional transparency requirements may apply.
On 27 June 2025, the CSSF published CSSF Circu - lar 25/894, which expands reporting obligations for AIFMs – including registered and authorised AIFMs and Luxembourg Chapter 15 management compa - nies – in relation to investment funds that they man - age which are not authorised by the CSSF (such as SCSps-AIFs, RAIFs, and AIFs established in the EEA). 3.4 Tax Regime for Managers Luxembourg AIFMs are not subject to a specific tax regime; general tax rules apply. Consequently, when established in corporate form, Luxembourg AIFMs are generally subject to corporate income tax and munici - pal business tax, with a combined effective tax rate of 23.87% in 2025 for companies established in Luxem - bourg City. Additionally, they would also be subject to net wealth tax. Services qualifying as management services for Lux - embourg VAT purposes are generally exempt from Luxembourg VAT. 3.5 Rules Concerning Permanent Establishments The mere appointment of a Luxembourg-based AIFM does not create a permanent establishment or other taxable presence for a foreign AIF in Luxembourg. 3.6 Taxation of Carried Interest Under the currently applicable regime, carried interest received by Luxembourg-resident individuals is gener - ally taxed at the progressive income tax rates, which can reach up to 45.78%. The specific tax treatment depends on the structure and timing of the carried interest payment. If structured as a capital gain on a participation held for more than six months and below the substantial shareholding threshold (typically 10%), it may benefit from a full tax exemption. However, if these conditions are not met, or if the carried interest is paid as a performance fee or bonus not linked to an actual participation in the AIF, it will be subject to ordinary rates. No special flat-rate regime currently applies; previous temporary regimes have expired and any new regime would only apply from 2026 onwards.
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