Luxembourg

On 28 May 2025, the European Commission adopted its EU Startup and Scaleup Strategy (the "Strategy") -  a coordinated EU-level framework designed to support the creation, growth and internationalisation of innovative startups and scaleups. The Strategy sets out 26 legislative, regulatory and financial measures intended to transform Europe into a global leader in tech-driven entrepreneurship. The Strategy in a nutshell Between 2008 and 2021, nearly 30 % of European unicorns relocated outside the EU, and only 8 % of global scaleups are Europe-based. In response, the Strategy focuses on five priority areas: fostering innovation-friendly regulation, improving access to finance, accelerating market uptake, attracting and retaining talent, and ensuring startups can access infrastructure and innovation ecosystems across Europe. Regulatory and structural reforms To address fragmentation within the Single Market, the Commission will propose an optional “28th regime”: a standalone EU-wide corporate legal framework tailored to startups and scaleups. This regime will operate in parallel with national company laws and offer simplified procedures across Member States. It is expected to reduce the cost of failure, streamline legal and tax obligations, and allow for incorporation within 48 hours (Q1 2026). A European Business Wallet will be introduced by Q4 2025. This tool will provide all EU economic operators with a digital identity and a secure way to share verified data and credentials, facilitating cross-border interaction with administrations. The upcoming European Innovation Act (Q1 2026) will create an EU framework for regulatory sandboxes – supervised environments where new products, services or models, can be tested without triggering all regulatory requirements. This may offer fund managers opportunities to support early-stage ventures in sensitive sectors (e.g. fintech, AI, biotech), under some conditions. The Act will also introduce a voluntary Innovation Stress Test. This tool will help Member States assess whether new or revised laws could unintentionally hinder innovation. Further reforms are planned in strategic sectors. The Commission will introduce or revise legislation to reduce regulatory complexity in biotechnology, life sciences, advanced materials and defence (starting 2025). It will also revise the Standardisation Regulation by Q2 2026 to make EU standards more accessible to startups and SMEs. Better finance for startups and scaleups The Strategy confirms that access to late-stage and scaleup capital remains a structural weakness across the EU. To address this, the Commission will support the launch of the Scaleup Europe Fund in 2026. This fund will be structured as a market-based, privately managed and co-financed vehicle. It will focus on direct equity investments in strategic sectors such as deep tech, AI, semiconductors, and biotechnology—areas typically requiring funding rounds above EUR 50 million. These are capital-intensive technologies where EU companies still rely heavily on non-European investors. The Scaleup Europe Fund will complement existing initiatives such as InvestEU and the European Tech Champions Initiative (ETCI), and will be anchored operationally and financially by the European Investment Bank Group (EIB). This initiative seeks to help EU-based scaleups stay and expand within the Single Market. In parallel, the Commission will develop a European Innovation Investment Pact, expected in 2026. Coordinated with the EIB Group and institutional investors (notably pension funds and insurers), the Pact will encourage long-term voluntary commitments to invest in EU venture capital funds, fund-of-funds structures and unlisted scaleups. Its objective is to channel private capital into high-growth sectors and deepen the EU private investment ecosystem. Finally, the Commission will revise the definition of “undertaking in difficulty” under EU State aid rules (Q2 2025), which currently excludes many growth-stage companies—particularly in capital-intensive industries—from public support schemes. The reform aims to enable these companies to benefit from co-investment mechanisms without being mischaracterised as distressed entities. The Commission will report on the implementation of the Strategy by end-2027 and calls on the European Parliament, the Council and Member States to fully support the 26 announced measures. Authors: Evelyn Maher, Partner and Mikail Ceylan, Senior Associate

Gender balanced boards | Luxembourg moves to implement “Women on boards” Directive Mar 31, 2025 - The long-awaited transposition into Luxembourg law of Directive (EU) 2022/2381 on improving the gender balance among directors of listed companies and related measures (the “Directive”) is now on track. Draft law No.8519 setting a quantitative target for gender balance among directors of listed companies (the “Draft Law”) was submitted to the Luxembourg Parliament (Chambre des Députés) on 28 March 2025. For further insights into the Directive, refer to our 2023 Newsletter. This legislative proposal establishes binding requirements to ensure gender balance within the boards of directors of listed companies. It also outlines measures for compliance, reporting, and enforcement. Scope and objectives  The Draft Law shall apply to all companies whose registered office is in Luxembourg and whose shares are admitted to trading on a regulated market in one or more EU Member States. However, in alignment with the Directive, the Draft Law excludes from its scope listed companies that qualify as micro, small, and medium-sized enterprises (“SMEs”). One of the key objectives of the Directive is faithfully mirrored in the Draft Law by introducing a minimum requirement: at least 33% of board positions, both executive and non-executive, must be held by the under-represented gender by 30 June 2026. The Luxembourg angle While largely aligned with the Directive, companies should be aware of several Luxembourg specific elements introduced by the Draft Law: Supervisory authority The CSSF shall be designated as the competent authority, tasked with overseeing compliance, collecting data, and publishing an annual list of companies that meet the target. Procedural adjustments Where companies fall short of the target, they must adapt their director selection procedures. Clear and neutral criteria must be applied and documented during the selection process, with preference given to equally qualified candidates from the under-represented gender—unless objective diversity-related or legal considerations justify otherwise. Candidate rights Candidates involved in the selection process may request access to the evaluation criteria used and any factors that influenced the final appointment decision. Public reporting Companies shall be required to report annually on gender representation. This data must be disclosed to the CSSF, published on their websites, and, where relevant, included in their corporate governance statements. After the Draft Law enters into force, the CSSF will submit a report on its application to the Luxembourg government every two years, starting on 1 December 2025. This report will subsequently be forwarded to the European Commission, as mandated by the Directive. Coordination with equality authorities The gender equality observatory, established under the law of 7 November 2024, will work alongside the CSSF to monitor progress and promote best practices. The Draft Law will enter into force upon its official publication and shall expire on 31 December 2038. Enforcement The CSSF shall be granted robust supervisory and enforcement powers, including the authority to issue warnings and reprimands, to publish public statements identifying non-compliant companies, and to impose administrative fines of up to EUR 250,000; additionally periodic penalty payments may be levied on companies that repeatedly fail to comply with the obligations (up to EUR 1,250 per day; capped at EUR 25,000). What’s Next? As the Draft Law progresses through Luxembourg’s legislative process—its timeline contingent on the speed and degree of consensus among stakeholders—companies which will fall within its scope are encouraged to take proactive steps in anticipation of its entry into force. On this basis, listed companies can already start conducting a gap analysis to evaluate current board gender representation; review and formalize director selection policies, ensuring alignment with the transparency and fairness standards set by the Draft Law; prepare internal processes for reporting obligations and consider developing or refreshing a broader diversity policy. Authors: Nuala Doyle, Partner, Deniz Güneş Türktaş, Senior Associate

Nov 04, 2024 - Filings with the Luxembourg Trade and Companies Register (“RCS”) must observe new substantial requirements and formalities as of 12 November 2024 (the “Implementation Date”). Change of format of the RCS filing forms from offline PDF to online HTML In order to address the practical issues associated with the PDF format of the RCS filing forms that are well known by the users of the Luxembourg business registers portal, and  implement a more user-friendly interface for such filings, the format of the RCS filing forms will change, as of the Implementation Date, from PDF forms that needed to be downloaded, filled out offline, and re-uploaded to the RCS portal, to HTML forms that will need to be directly filled out online via the RCS portal. The RCS administrator already indicated in this respect that, as of the Implementation Date, any new filing request initiated via a new online HTML filing form will need to be filled out by the applicant only, i.e., the latter will no longer be able to forward the request to a third party for data entry purposes (as opposed to the offline PDF forms previously used that could be passed along to third parties for such purposes). A new requirement for the natural persons registered with the RCS: the registration of a LNIN Taking the opportunity of the change of format of the RCS filing forms from offline PDF forms to online HTLM forms, the authorities also decided that the persons and entities registered with the RCS will now have to communicate, as of the Implementation Date, the Luxembourg national identification number (the “NIN”, a.k.a. matricule number or CNS number, as provided for by the amended law of 19 June 2013 relating to the identification of natural persons) for any natural person registered with the RCS that are related to such persons and entities. Who is concerned? Essentially all natural persons registered within the file of an entity registered with the RCS are concerned, in any capacity whatsoever (e.g., as a partner, agent, auditor, etc…) and whether such natural persons are new natural persons to be registered or natural persons already registered in the file of the entity concerned. NIN will need to be requested and filled out when a natural person registers themself with the RCS, or  filing a modification with the RCS (it will be mandatory when filing a modification for a change on natural persons and, during a transitional period only, optional when filing a modification not aiming at a change on natural persons). A couple of exceptions will however exist where the NIN shall not be communicated, especially (i.) in case of a judicial representative appointed in the framework of a procedure registered with the RCS or when the natural person is an agent of a foreign entity’s branch opened in the Grand Duchy of Luxembourg). Quid for the persons who do not already hold a NIN? Although all the persons living and / or working in the Grand Duchy of Luxembourg have been granted a NIN, a number of natural persons registered with the RCS (especially foreign natural persons) do not. In such a case, the creation of a NIN will have to be requested as part of the filing to be carried out with the RCS and the following information will need to be filled out in the requisition – HTML! – form: Last Name; First Name(s) (as indicated in the supporting documentation); Date, Place and Country of Birth; Gender (male, female or unknown); Nationality; and Private home address (number, street, postal code, locality, country). It shall be noted that the authorities already confirmed that the information relating to the gender, nationality, and private domicile will not be registered with or disclosed by the RCS but rather sent over to the State Center of Information Technologies (Centre des technologies de l’information de l’Etat) in order to be registered in the National Register of Natural Persons. Likewise, the NIN will not be publicly disclosed. Last but not least, it is also important to note that supporting documentation must also be attached as proof in order to: prove the identity of the person - i.e., by providing a copy of a national identity card or passport, and prove the address of the private residence - i.e., by providing official certificates of residency issued by a municipality, a declaration of honor from the person concerned stamped or countersigned by the regional authority responsible for confirming residential addresses such as an embassy, notary or police station, or, if none of these documents can be produced, a water, electricity, gas, telephone or internet access bill. This seems to be a strict list of supporting documents and the authorities already confirmed that a number of other documents will not be accepted such as criminal records, lease contract, tax statement… which we sometimes see in practice in the framework of certain AML / KYC situations. Changes that enable a control of the Luxembourg addresses In addition to the above, another substantial change relates to the Luxembourg addresses of the registered offices of the entities registered with the RCS, and persons and entities registered in a file and who are resident in the Grand Duchy of Luxembourg, which will be automatically checked and controlled by the Luxembourg authorities. Essentially, such a control will consist in the Luxembourg authorities checking the consistency of the Luxembourg addresses filed with the RCS, that will, from the Implementation Date on, need to comply with and match the information contained in the National Register of Towns and Streets (Registre national des localités et des rues) available at “https://www.services-publics.lu/caclr/building_listing_form.action”. Any Luxembourg address indicated in an RCS filing form will be automatically checked for consistency and, in the event of inconsistency, an error message will be displayed and the applicant will need to correct such address. https://www.lbr.lu/mjrcs/jsp/webapp/static/mjrcs/en/mjrcs/pdf/FAQ_Natio… Author: Linda Harroch, Partner

Jul 25, 2025 - On 24 July 2025, Draft Law No 8590 was submitted to the Luxembourg Parliament (Chambre des Députés) intending to update and render more attractive the tax regime for carried interest granted to managers of alternative investment funds (“AIF”). The proposed changes aim at attracting more front office employees to Luxembourg by increasing the scope of beneficiaries and taking into account various forms of carried interest. Background The proposal is in line with the 2023-2028 coalition program of the government that committed to provide for an attractive framework for alternative investment funds and their managers including a review of the carried interest tax regime. The existing carried interest tax regime was introduced by the Law of 12 July 2013 relating to alternative investment fund managers transposing the AIFM directive 2011/61/EU including a standard regime and a temporary favourable regime. The standard regime is dedicated to employees of the alternative investment fund manager (“AIFM”) or management company and provided for the full taxation of the carried interest based on a profit-sharing right and the application of the ordinary regime for capital gains (which could result in the tax exemption of the capital gains realized after a 6-months holding period) on the portion of the carried interest that could be linked to the disposal of a participation held by the manager in an underlying corporate entity. The temporary favourable tax regime provides for a reduced taxation of the carried interest for a period of 10 years at the quarter of the applicable global tax rate under the condition that the beneficiary redomiciled to Luxembourg before 2018. The Draft Law draws from this regime and the feedback it received thereon to propose amendments that increase legal certainty and broaden the scope of eligible persons and forms of carried interests. Proposed tax regime The Draft Law broadens the scope of eligible persons and provides for a different tax regime depending on whether the carried interest is a contractual arrangement only or involves the holding of an interest. Eligible individuals  Eligible persons are broadly defined as including any natural person who can be the manager or any other person at the service of the manager or the management company of an AIF. Commentaries to the Draft Law mention that the beneficiary can be employed by another entity than the AIFM, such as an advisor, and be in a relationship other than employment with the AIFM, such as an independent director. Compared to the existing regime, the scope of the proposed regime is broader and not limited to employees of the AIFM or the management company. Contractual arrangements Carried interest definition: The Draft Law refers to a participation in the fund’s “outperformance” on the basis of a profit-sharing arrangement granting specific rights over the fund’s net assets and income in order to include the broadest possible definition of carried interest. Commentaries to the Draft Law clarify that “outperformance” refers to the performance exceeding a pre-determined hurdle rate. It is also mentioned that such hurdle rate shall correspond to market practice to steer clear from any requalification under the abuse of law concept. Form: The carried interest is solely based on a contractual arrangement (e.g., provided for in the Limited Partnership Agreement). Under this form, the beneficiary is not required to acquire an interest in the AIF nor hold an interest mirroring the AIF’s performance. Payment: The commentaries to the Draft Law provide that the remuneration can be paid by the AIF or another entity (e.g., the general partner). The preexisting requirement that investors shall be repaid their invested amounts first is removed considering that AIF investors are informed and contractual arrangements generally provide sufficient protection (such as claw back clauses). Thus, carried payments on a deal-by-deal basis would now be eligible to the regime. Reduced taxation: The remuneration under those types of carried interest will be subject to a quarter of the global tax rate applicable to the taxpayer. Eligibility to such tax regime is not time limited as under existing rules which provide for a favourable tax treatment for only up to a 10-year period. Participation based arrangements Form: The participation based carried interest covers two forms. First, the above-described contractual interest when it is accompanied with the requirement to hold a direct or indirect participation in the AIF. The commentaries add that the link between the carried interest and the participation should have an economic reality in terms of amount and duration to avoid steer requalification under the abuse of law concept. The second form is where the individual can acquire a participation in another vehicle entitling the holder of said participation to a carried interest. Taxation: The remuneration representing the carried interest follows the ordinary rules applicable to capital gains and is not considered as a taxable income if received more than 6 months after the investment (unless it represents a participation in a corporate entity exceeding a stake of 10% in the capital of such entity). Income resulting from the participation and not representing the carried interest remains subject to the ordinary tax regime. Legal forms of the investment vehicle: For the taxation of the participation based carried interest at the level of the beneficiary, the legal form of the interest issuer is disregarded. This is a welcome simplification as applying the tax transparency of partnerships or mutual funds could complexify the tax qualification at the level of the carry beneficiary. Interaction with existing carried interest regime The Draft Law that should come into force, if approved by the parliament, in 2026 intends to abolish the existing carried interest tax regime as from fiscal year 2026. The commentaries provide that the new rules are sufficiently broad provide for a more favourable taxation of all beneficiaries under the current carried interest regime. Key Takeaways The current carried interest tax regime is being phased-out as some shortcomings were identified. The Draft Law provides for a favourable tax regime to a larger variety of carried interest arrangements available in the market. In addition, it enlarges the scope of eligible beneficiaries previously limited to AIFM employees. In addition, it should limit preexisting difficulties pertaining to the qualification of the income received when the beneficiary is also an employee. Author: Pol Mellina, Partner, Daniel Riedel, Partner, Ali Ganfoud, Senior Counsel