Only a few months after the entry into force of the government’s comprehensive tax package to boost competitiveness, these new measures are designed to accelerate the digitalisation of the financial sector and reinforce the alternative investment funds industry.
A Competitive Carried Interest Regime
Over the past decade, Luxembourg has witnessed strong growth in alternative fund activity. Luxembourg today has a 12% market share in private assets, while Luxembourg funds accounted for nearly 60% of private capital raised in Europe by alternative funds in 2022. To maintain and further strengthen its appeal to international fund managers, the Finance Minister said that he intends to modernise the carried interest regime, aligning it more closely with jurisdictions that offer favourable tax treatment. This regime allows fund managers to receive a share of net profits above their standard remuneration, and the proposed adjustments aim to make Luxembourg a more attractive home for the private asset industry.
Extending Favourable Treatment of Stock Options
In a complementary move to attract financial talent, the Finance Minister also confirmed plans to introduce a favourable tax regime applicable to stock options for start-ups. This measure is intended to improve Luxembourg’s appeal for foreign professionals and start-up employees, reinforcing the country’s reputation as a dynamic and forward-looking financial and FinTech hub.
These latest reforms build on recently announced tax measures designed to attract skilled professionals from abroad and support young talent (more information). Collectively, they underscore Luxembourg’s commitment to remaining a leading international financial centre in Europe and a key hub for financial technology innovation.
Accelerating the Digital Transformation of the Fund Industry
In collaboration with the Ministry of Finance, the Luxembourg House of Financial Technology (LHoFT), and venture capital firm Middlegame Ventures, Luxembourg will also soon see the launch of a FundTech Accelerator to support the digital transformation of the investment fund sector.
This new initiative will connect start-ups, fund managers, and technology providers. Its primary objective is to support early-stage firms developing digital solutions tailored to the needs of the fund industry, thereby enhancing the sector’s competitiveness. Key areas of focus will include fund accounting, regulatory compliance, and tokenisation technologies.
Finally, Minister Roth announced the creation of an AI Experience Centre at the LhoFT, in line with the government’s national AI strategy.