Luxembourg's Bill 8590 seeks to lower taxes on carried interest to draw financial experts to the country. Introduced on July 24, 2025, this plan offers two main tax benefits: performance-based pay could be taxed at approximately 11%, and managers who invest their own capital can earn tax-free carried interest after six months. This initiative aims to strengthen Luxembourg's status as a global financial hub amidst a forecasted 10% increase in hedge fund investments by 2027. Approval would see these changes effective in the 2026 financial year, encouraging relocation of management teams and enhancing local financial expertise.
The new law would create a major tax cut for fund managers, whose earnings can currently be taxed as high as 45.78%. It offers two options: performance-based pay could be taxed at around 11%, or if managers invest their own money, carried interest could be 100% tax-free after six months.
Bill 8590 aims to attract top financial talent to Luxembourg, especially as institutional investors plan to increase hedge fund investments by 10% or more by 2027.
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