Luxembourg’s Ministry of Finance has proposed a sweeping overhaul of the country’s carried interest tax regime — a move that could have significant implications for professionals working in private equity, venture capital, and other alternative investment sectors. The changes, introduced in a draft bill submitted to Parliament on 19 July 2025, aim to bring clarity, certainty, and competitiveness to Luxembourg’s tax environment, especially in light of ongoing international scrutiny on private fund structures. What Is Carried Interest? Carried interest (often called "carry") refers to a share of profits that general partners of investment funds receive as performance compensation — typically taxed at a favorable rate in many jurisdictions. Luxembourg currently offers a preferential tax treatment for eligible carried interest income under Article 152bis of its tax law. The regime is often a deciding factor for fund professionals choosing to live and work in the country. Why the Overhaul? The government says the proposed reform is designed to: Clarify eligibility criteria Provide legal certainty on tax treatment Better align Luxembourg’s regime with international standards The goal is to make the country more attractive to global asset managers while avoiding accusations of loopholes or abusive tax planning. Key Proposed Changes Redefined Scope of Eligible Individuals Only employees or managers with a direct or indirect stake in qualifying alternative investment funds (AIFs) will benefit from the preferential rate. Clearer Definitions for Eligible Funds Carried interest must be linked to funds that fall under the EU’s AIFM Directive or equivalent regulation. Tax Rate Clarified The effective tax rate on carried interest will remain at a flat 25%, compared to Luxembourg's top marginal tax rate of around 45%. Timing of Taxation Income will only be taxed when it is actually paid — not accrued — helping reduce ambiguity. Exclusions Carried interest received by investment vehicles themselves, or passive investors, is excluded from the favorable regime. Impact on Luxembourg’s Expat Finance Community For the thousands of expats working in private equity, VC, and fund administration roles in Luxembourg, this reform is a major development: It could reassure fund managers who are paid via carried interest that Luxembourg remains a fiscally attractive hub. By tightening definitions, the reform may exclude some existing arrangements or require restructuring. Tax certainty and legal clarity may encourage more global fund professionals to move to Luxembourg or stay long-term. Law firms and tax advisors expect a wave of contract reviews, fund audits, and structural adjustments ahead of implementation. The proposed changes are now in Parliamentary review. If passed, they could become law as early as Q4 2025 or January 2026. Professionals are being advised to review carried interest arrangements now and prepare for compliance. Read more: ashurst.com/en/insights/luxembourg-proposes-major-overhaul-of-carried-interest-tax-regime Join the Luxembourg Expats luxembourgexpats.lu

Luxembourg’s Council of Ministers has approved two draft laws to align the country’s tax legislation with the European Union’s evolving administrative cooperation framework and international tax transparency standards. These measures address global tax challenges, particularly in the areas of multinational enterprise taxation and crypto-asset reporting. The first draft law transposes EU Council Directive 2025/872 into Luxembourg’s domestic legal framework, implementing the OECD’s Pillar Two global minimum tax rules. This directive establishes a standardized digital format for the automatic exchange of information (AEOI) for multinational enterprise (MNE) groups and large domestic groups. The measure ensures these entities comply with the global minimum tax framework, promoting fair taxation across jurisdictions. The second draft law incorporates EU Council Directive 2023/2226, which integrates the Crypto-Asset Reporting Framework (CARF) into Luxembourg’s tax system. This framework expands reporting obligations to include crypto-assets and digital payment methods, broadening the scope of AEOI. The inclusion of CARF aims to enhance transparency in the rapidly growing digital asset sector, ensuring tax authorities can monitor and verify transactions involving cryptocurrencies and other digital financial instruments. Additionally, the draft laws amend Luxembourg’s existing tax transparency frameworks. These updates affect administrative cooperation in taxation, the common reporting standard (CRS), country-by-country (CbC) reporting, reportable cross-border arrangements under DAC6, and information exchange obligations for digital platform operators under DAC7. The revisions strengthen Luxembourg’s compliance with international standards, facilitating cross-border cooperation and improving oversight of tax-related activities. Practical Implications for Individuals and Businesses For businesses, particularly multinational enterprises and large domestic groups operating in Luxembourg, the implementation of the OECD’s Pillar Two rules means increased compliance requirements. These entities will need to adopt the standardized digital format for AEOI, ensuring their tax reporting aligns with the global minimum tax framework. This could lead to higher tax liabilities for companies previously benefiting from lower effective tax rates in certain jurisdictions, as the rules aim to ensure a minimum 15% tax rate on profits. Businesses will need to invest in robust tax reporting systems and potentially adjust their financial strategies to comply with these regulations. For individuals and businesses engaged in crypto-asset transactions, the introduction of the CARF will significantly enhance tax reporting obligations. Crypto exchanges, wallet providers, and other service providers in Luxembourg will be required to collect and report detailed transaction data to tax authorities. This includes information on crypto-asset trades, transfers, and payments made through digital means. Individuals trading or holding cryptocurrencies will face greater scrutiny, as tax authorities gain access to comprehensive data to verify tax compliance. This could result in increased tax assessments for unreported crypto gains, requiring individuals to maintain accurate records of their transactions. The updates to existing frameworks, such as CRS, CbC reporting, DAC6, and DAC7, will further tighten compliance requirements. Businesses operating cross-border or through digital platforms will need to ensure their reporting systems are updated to meet these standards, potentially increasing administrative costs. For individuals, particularly those with cross-border financial activities or income from digital platforms, these changes mean a higher likelihood of tax authorities detecting discrepancies in reported income, emphasizing the need for accurate and timely tax filings. These legislative proposals reflect Luxembourg’s commitment to maintaining its position as a cooperative jurisdiction in global tax governance. By aligning with EU directives and OECD frameworks, the country seeks to enhance its tax compliance infrastructure while supporting international efforts to combat tax evasion and promote transparency. The draft laws now await parliamentary approval before they can take effect. Once enacted, they are expected to bolster Luxembourg’s role in fostering a transparent and equitable global tax environment. Businesses and individuals should prepare for these changes by reviewing their tax reporting processes and seeking professional advice to ensure compliance with the new regulations. Source: gouvernement.lu/fr/actualites/toutes_actualites/communiques/2025/07-juillet/24-conseil-gouvernement.html Join Luxembourg Expats — Where expats find friends, homes, news, and businesses — every day. luxembourgexpats.lu

Sweeping changes to the UK’s inheritance tax (IHT) system, set to take effect from April 2027, are prompting a wave of affluent Britons to consider relocating to Portugal, drawn by its favorable tax regime and lifestyle advantages. The UK Treasury’s decision to include unspent pension funds in IHT calculations is expected to significantly increase tax liabilities for families, spurring interest in tax-efficient jurisdictions. Under the new rules, unspent pension pots will be subject to a 40% IHT rate upon the death of the pension holder, in addition to income tax for heirs if the deceased was over 75. This marks a departure from the current system, where such funds are exempt from IHT, incurring only income tax in certain cases. The Treasury projects these changes will generate £1 billion annually by 2030, but for high-net-worth individuals (HNWIs), the reforms are a catalyst for reevaluating their financial strategies. Broader IHT reforms, effective from April 2025, will introduce a residence-based system, applying the 40% IHT rate to worldwide assets for individuals who have been UK tax residents for at least 10 of the past 20 years. However, Britons who establish non-residency for 10 years or more may exempt their non-UK assets—such as property, savings, and investments—from IHT, creating a strong incentive to relocate. Portugal has emerged as a prime destination for those seeking to mitigate these tax burdens. The country’s Non-Habitual Residency (NHR) program, replaced by the NHR 2.0 scheme in 2025, offers a 20% flat tax rate on Portuguese-sourced income and a 0% tax on foreign passive income, including dividends and capital gains. These benefits, coupled with Portugal’s lower cost of living, mild climate, and high quality of life, make it an attractive haven for retirees and HNWIs. Portugal Pathways, an organization specializing in expatriate investment and tax planning, reports growing inquiries from Britons exploring relocation. “The UK’s tax changes are pushing affluent individuals to seek jurisdictions that offer both financial security and lifestyle benefits,” a spokesperson said. “Portugal’s stable environment and tailored tax incentives are hard to ignore.” Effective cross-border tax and wealth management is critical for navigating these complex regulations. Experts emphasize the need for strategic planning to optimize tax liabilities and ensure compliance, particularly for those considering permanent relocation. As the UK tightens its fiscal policies, Portugal’s allure as a tax-friendly destination is expected to grow, drawing Britons eager to preserve their wealth while enjoying a sunnier, more relaxed lifestyle. Join the Luxembourg Expats network online, sign up free luxembourgexpats.lu

If you’re an American living abroad, you know that managing your finances and staying compliant with US laws can be tricky. With a second Trump term, there are likely to be new developments that could affect your life overseas. Let’s look at what’s changing, what to watch for, and how you can make the best of your expat experience. What’s Shifting for American Expats? A second Trump administration could bring changes to tax policies, financial regulations, and even the way US citizens are treated by foreign banks. These shifts might make it harder or easier to manage your money, depending on where you live and how you handle your finances. Tax Rules: Still Complicated The US is one of the few countries that taxes its citizens no matter where they live. This means you have to file a US tax return every year, even if you haven’t set foot in the States for ages. Under Trump, there could be new tax rules or enforcement priorities, so it’s important to stay updated. Missing a filing or misunderstanding a rule can lead to headaches and penalties. Banking and Investments: More Hurdles Many foreign banks are cautious about working with Americans because of strict US regulations. You might find it tough to open a new account or invest in local funds. Some US investment firms also restrict accounts for clients living overseas. This can make it challenging to save for retirement or invest for your family’s future. A Real-World Scenario Take Sandra, who moved to Luxembourg for work. She tried to open a local investment account, but the bank turned him away because he’s American. Her US brokerage also limited his trading options. Sandra had to search for a financial advisor who understood both US and Luxembourg rules to help him sort things out. Practical Steps for Expats - Stay Informed: Keep an eye on US policy changes, especially those affecting taxes and banking. - Find the Right Help: Look for advisors who specialize in helping Americans abroad. They can guide you through the maze of rules. - Don’t Skip Tax Filings: Even if you owe nothing, you still need to file. Set reminders so you don’t miss deadlines. - Review Your Accounts: Before moving, check if your US accounts will stay open and if you’ll have access from overseas. - Join Expat Communities: Other Americans abroad can share tips and recommend trusted professionals. luxembourgexpats.lu hello? Looking Ahead Living abroad as an American is rewarding, but it comes with unique challenges—especially during times of political change. By staying proactive and seeking expert advice, you can avoid common pitfalls and enjoy your expat journey with confidence. Connect, Belong, Thrive: Your Expat Community in Luxembourg - Sign Up Free! luxembourgexpats.lu