LUXEMBOURG Trends and Developments Contributed by: Claudia Hoffmann, Daniel Krauspenhaar, Stefanie Samosny and Sascha Wiemann, Luther
• carry out liquidity stress tests (on an annual basis) that assess both the asset and liability sides sepa - rately; and • monitor the liquidity management on an ongoing basis to ensure that the liquidity management sys - tem remains compatible with the AIF’s investment strategy and redemption policy. Implementation of AIFMD II Into Luxembourg Law Luxembourg is in the process of transposing AIFMD II into its national legislation. This involves (among other things) updating the amended Luxembourg law of 12 July 2013 on alternative investment fund managers. The purpose of the reform is to align Luxembourg legislation with evolving European standards. On 3 October 2025, the Luxembourg government depos - ited Draft Bill No 8628 to implement AIFMD II into Luxembourg law. As anticipated, Draft Bill No 8628 mainly mirrors AIFMD II without gold-plating. If imple - mented as such, Draft Bill No 8628 is expected to further strengthen Luxembourg’s position as a lead - ing investment funds hub by increasing legal clarity, reinforcing supervisory co-operation and ensuring consistency with related European financial legisla - tion. Luxembourg-domiciled AIFs and their manag - ers must carefully observe these developments and adjust to the new legislative measures, where required (including as regards transfer pricing policies). New Carried Interest Tax Regime As part of its ongoing efforts to strengthen Luxem - bourg’s appeal for fund managers and sponsors, and to address certain gaps in the existing framework, the Luxembourg government recently introduced a new bill of law aimed at modernising the carried interest tax regime. Under the proposed legislation – which, if adopted, would take effect from the 2026 tax year – carried interest would benefit from significantly more favour - able tax treatment. Specifically, contractual carried interest – meaning amounts not linked to an equity participation – would be taxed at only one quarter of the standard progressive income tax rate, resulting in a maximum effective tax rate of approximately 11.45%. In parallel, participation-linked carried interest could be fully exempt from taxation, provided that the par -
ticipation has been held for more than six months and does not exceed 10% of the overall participations. The bill also expands the scope of eligible benefi - ciaries under the regime. Whereas the current rules largely apply to employees, the revised framework would extend eligibility both to employees and to non-employees. Taken together, these measures reinforce Luxem - bourg’s competitive positioning in the international fund landscape, and provide fund managers and sponsors with a more predictable and tax-efficient framework for structuring carried interest. Revival of Regulated Fund Structures A trend towards regulated vehicles and the opening of alternative strategies to retail investors is observ - able, a development that is strongly supported by the revised European Long-Term Investment Fund (ELTIF) framework. The new ELTIF regime, applicable since January 2024 and supplemented by Commission Del - egated Regulation (EU) 2024/2759 of 19 July 2024, has significantly strengthened the appeal of ELTIFs by broadening the range of eligible assets, introduc - ing greater flexibility in diversification requirements, concentration and borrowing rules and expanding structuring options (including ELTIF fund-of-fund and master-feeder structures). This modernised frame - work has rapidly translated into market uptake: 2024 alone saw a record 55 new ELTIFs launched, of which 37 were domiciled in Luxembourg. With 131 of 221 ELTIFs established in Luxembourg to date, the juris - diction clearly consolidates its position as the leading European hub for ELTIFs. Additionally, as of April 2025, a new “e-Identification” system replaces the existing VISA procedure for pro - spectuses of undertakings for collective investment in transferable securities (UCITS), Part II UCIs, invest - ment companies in risk capital (SICARs) and special - ised investment funds (SIFs), featuring a new unique identification number and e-Identification date. This new system aims to streamline administrative proce - dures and enhance efficiency for the benefit of market participants. The new electronic VISA “stamp” proce - dure is expected to significantly reduce approval time - lines, thereby underscoring Luxembourg’s regulatory
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