LUXEMBOURG Law and Practice Contributed by: Johan Terblanche, Baptiste Aubry and Michelle Barry, Maples Group
Alternative Investment Fund (RAIF) regime in 2016 added another available option, and this form is often used by private equity sponsors for pooling vehicles, especially in the context of pan-European marketing to professional investors. While there has been some movement and develop - ments at European level that impact private equity funds (AIFMD 2.0 and, to some extent, the European Long-Term Investment Fund (ELTIF) 2.0), over the past 12 months, Luxembourg has not implemented any significant changes to its laws or regulations that would impact private equity investment vehicles or their managers. In 2025, Luxembourg implemented a series of tax reforms designed to enhance its competitiveness and modernise its investment fund landscape. The Luxembourg corporate income tax rate was reduced from 17% to 16%, which has resulted in an overall aggregate corporate income tax rate of 23.87% for 2025 (in Luxembourg City), compared with the former 24.94%. Subscription tax rules were also modernised, notably introducing an exemption for actively man - aged UCITS ETFs and maintaining the exemption for ELTIFs, while sustainable investment funds continue to benefit from reduced rates. A new Luxembourg tax law clarifies that the redemp - tion of an entire share class, followed by a capital reduction within six months, qualifies as a partial liq - uidation and is not subject to dividend withholding tax, providing greater certainty for Luxembourg enti - ties with multi-share class structures. The introduc - tion of the “single entity group” concept for interest limitation rules allows certain entities to fully deduct borrowing costs under specific conditions, which is particularly beneficial to Luxembourg securitisation vehicles. Additionally, employee incentive regimes were enhanced to support talent retention in the fund sector. Luxembourg also continued to align with inter - national tax initiatives, including the OECD’s Pillar Two global minimum tax. Collectively, these tax reforms reinforce Luxembourg’s position as a leading domicile for alternative invest - ment funds by increasing certainty, operational flex - ibility, and international alignment.
The authors continue to see a growing interest in RAIF funds in non-transparent forms, such as the corporate partnership limited by shares ( société en comman- dite par actions SCA) and the public limited company ( société anonyme SA). These structures allow for more flexible navigation in the structuring and financing of downstream investments, particularly in light of anti- hybrid rules. 3. Regulatory Framework 3.1 Primary Regulators and Regulatory Issues The Commission de Surveillance du Secteur Finan- cier (CSSF) is Luxembourg’s regulator for financial services (in addition to other roles). The CSSF has regulatory oversight and, in that capacity, has respon - sibility for product-regulated investment funds such as specialised investment funds (SIFs) and investment companies in risk capital ( sociétés d’investissement en capital à risque SICARs), as well as for investment fund managers located in Luxembourg. However, the CSSF’s oversight authority does not extend to limited partnerships that are not subject to product regulation, nor does it extend to RAIFs (nev - ertheless, RAIFs’ management companies are still subject to regulatory oversight by the relevant finan - cial regulator of the home jurisdiction of the relevant management company – which would be the CSSF for all Luxembourg-based management companies). In a similar fashion, M&A activity would be subject to the relevant rules and regulations in the home jurisdiction of the target entity. There are no rules or restrictions that apply specifi - cally to private equity transactions in Luxembourg, but relevant sanctions and the usual anti-money launder - ing (AML) and “know-your-client rules” do, of course, apply in the same way as for any transaction. Where multiple AML supervisory regimes come into play in the context of a given transaction, compliance with each regime will be required by the applicable parties. Following the implementation of the Law of 19 Decem - ber 2019 and given the situation in Ukraine, there has been an increase in awareness of the need to comply with the Luxembourg sanctions regime. The Law of 20
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