AGEFI Luxembourg - septembre 2025

AGEFI Luxembourg 26 Septembre 2025 Fonds d’investissement T he Luxembourg tax authorities’ Circular provides pivotal clari- fications on the application of the reverse hybrid entity exemption for collective investment vehicles. This article outlines the key items and their far-reaching implica- tions, aiming to provide cla- rity and guidance for all stakeholders involved. Through Circular LIR n°168quater/2 dated12August2025,theLuxembourg tax authorities have provided long- awaited clarifications on the require- mentsthataninvestmentfundqualifying as collective investment vehicle (CIV) mustmeet tobe exempt fromthe reverse hybrid entity (RHE) rule. This rule, introduced inLuxembourgby the law implementing Council Directive 2017/952 (known as ATAD 2) and effective since tax year 2022, treats Luxembourgpartnerships (typicallyaLuxembourg limited partnership (SCS) or Luxembourg special limited partnership (SCSp)) as RHE if certain con- ditions are met. Where a Luxembourg investment fundestablishedas apartnership is characterizedas RHE, its net income, which is not otherwise taxed under Luxembourg tax lawor the lawof any other jurisdiction (e.g., the jurisdictions where the in- vestors are located), is subject to Luxembourg cor- porate income tax. In linewithATAD2, the Luxembourg law foresees a specificcarve-outforCIVsmeetingcumulativelythree conditions, i.e., being “ widely held” , holding a diversi- fied portfolio of securities and being subject to in- vestor-protection regulations in the country inwhich they are established. However, since the adoption of the law, asset man- agershavefacedsomeuncertaintyaroundthepracti- cal application of this exemption due to a lack of guidance on the interpretationof these criteria. Scope of eligibility The first question that the Circular answers is the scope of eligibility for theCIVcarve-out. In linewith the parliamentarydocuments of theATAD2 imple- mentation law, the Circular confirms that i) under- takings for collective investmentwithin themeaning oftheamendedlawof17December2010concerning undertakings for collective investments, ii) special- ized investment funds within the meaning of the amendedlawof13February2007relatingtospecial- ized investment funds, and iii) reserved alternative investment funds within the meaning of the amended lawof 23 July 2016 relating to reserved al- ternative investment funds, always qualify for the CIVcarve-out. This iswelcome news as theCircular clarifies, once and for all, that a reserved alternative investment fund (RAIF SCS or a RAIF SCSp) will benefit from the exemption, regardless of whether thethreeconditionsmentionedabovearemetornot. Asaresult,onlyothertypesofLuxembourgCIVs(i.e., thosenotcoveredbyoneoftheaforementionedprod- uctlaws)suchasLuxembourginvestmentsfundses- tablishedasSCSorSCSpandqualifyingasalternative investment funds (AIF) managed by a Luxembourg or EU-based AIF manager (AIFM), would have to meet the three conditions set forthby the lawand for which theCircular provides useful guidance. Criterion ofwidely held ACIVis widelyheld if its shares or units aremarketed for distribution to multiple unrelated investors. A look-throughapproachisadoptedinamaster-feeder fundstructure;thecriterionmustconsequentlybeas- sessed at the level of the feeder fund. The Circular clarifies that factual and intentional elements should beconsideredandthatalimitednumberofinvestors does not necessarily constitute a breachof the condi- tion of widely held . Thisconfirmationintroducesawelcomeflexibilityin assessing the multiplicity of investors. Notably dur- ing the launch phase of a fund the number of in- vestorsmaybe very limited,which in thepast raised theconcernthatthiscouldjeopardizetheapplication of theCIVcarve-out. This is no longer the case as the Circular confirms that the condition of widely held is not breached if it is reasonable to consider that it will bemetwithin 36months fromthedate of authoriza- tionorestablishmentoftheCIV.TheCircularalsoac- knowledges anexception to thepresenceofmultiple investors during thewind-down phase of the fund. Asmentionedabove,the widelyheld criteriondoesnot onlyrequirethepresenceofmultipleinvestorsbutalso requires themtobeunrelated. TheCircular considers two investors tobe related if oneholds, directlyor in- directly, a participation of 50 percent or more of the voting rights or capital of the other. The same applies when two in- vestorshavea commonshareholder, i.e., if an individual or another entity holds, di- rectlyorindirectly,aparticipationof50per- cent ormore of the voting rights or capital of both investors. Members of the same family are also considered to be related. Finally, the Cir- cular also considers two in- vestors not to be unrelated if, considering all relevant facts and circumstances, one con- trols the other or both are under the control of the same individuals or entities. It should be noted that the definition of related investors asprovidedbytheCircularonly appliestoassessingthe widelyheld cri- terion and should not be confused with the concept of related enterprise as used for transfer pricing pur- poses or the concept of associatedenterprises as used forapplyinge.g.,thehybridmismatchrules.Theclar- ifications on the concept of CIV provided in the Cir- cular exclusively relate to the application of the exemptionfromtheRHEruleanddonotaffectinter- pretationsunder otherprudential or regulatory laws. TheCircular also introduces ahelpful widely held pre- sumption.ACIV is deemed to be widely held if no in- dividualinvestorultimatelyownsorcontrols,directly orindirectly,morethan25percentofthevehicle’scap- ital or voting rights or controls it byothermeans. The Circular also innovates as regards verifying the ab- sence of such investor, insofar as it foresees the possi- bility for the relevant taxation office to rely on the information from the Register of Beneficial Owners. As a reminder, investment funds must, where rele- vant,filethedetailsoftheirbeneficialownerswiththe LuxembourgRegisterofBeneficialOwnerstocomply with anti-money laundering regulations. Diversification of securities portfolio The Circular clarifies that the concept of “securities” should be understood in the broadest sense, so as to includenotonlytheobvious,suchassharesandother securitiesgivingorcapableofgivingaccesstothecap- ital of a legal entity, but also assets such as debts (e.g., loans) for which the classification as “securities” ap- peared less evident. According to the Circular, this conceptalsoencompassesderivativefinancialinstru- ments, provided that theunderlyingconsists of secu- rities, as well as beneficiary shares, bonds, units in othercollectiveinvestmentvehiclesanddepositswith credit institutions. Thediversifiednature of the securities portfolio is as- sessedbasedontheinvestmentpolicyassetoutinthe management regulations or constitutive documents andtheexposuretomarketrisk(includingdirectand indirectcounterpartyrisk),takingintoaccountthein- vestment policy followed. Asset managers should therefore pay particular attention to the legal docu- mentationandtotheglobalexposuretoriskofthein- vestment entity or fund to ensure that this condition is met. Additionally, the diversification should align with the requirements for specialized investment fundswithin themeaning of the 2007 law. As an example of non-compliance the Circular pro- videsthecaseofafundthatinvestsmorethan30per- cent of its assets or subscription commitments in securities issued by the same issuer, unless there is adequate justification allowing for a higher propor- tion of investments in securities issued by the same issuer. Derivative financial instruments not involv- ing a comparable risk distribution, meaning an ap- propriate diversification of the underlying assets, does not, inprinciple, constitute a portfolio of diver- sified securities. Compliancewith investor-protection regulations TheCircularnotablyremovesoneuncertaintythatex- isted in the market, being the application of the ex- emptiontoAIFsmanagedbyanAIFmanagerlocated outside Luxembourg. The Circular confirms that the conditionforaCIVtobesubjecttoinvestorprotection regulationintheircountryofestablishmentisdeemed tobemetwheretheAIFismanagedbyadulyauthor- izedAIFM in accordance with the provisions of Di- rective 2011/61/EU and of the Council of 8 June 2011 onAIFM.Inotherwords,anAIFmanagedbyaman- ager approved by the Luxembourg Commission de SurveillanceduSecteurFinancierorbyanotherregu- latorintheEuropeanEconomicAreaisconsideredto meet the investor protection requirement. The carve-out going forward AfternearlythreeyearsofapplicationoftheRHErule, the Circular allows asset managers to plan future in- vestments and structures with greater certainty. It is now clear that Luxembourg investment funds cov- ered by their respective product laws qualify as CIVs for the purpose of the carve-out from the RHE rule. Fortheotherinvestmentfunds,theCircularprovides helpfulguidanceoneachofthethreeconditionstobe met tobenefit fromthe exemption.Notably in taking theapproachtorelyoncircumstantialelementsrather than on a determined (minimum) number of in- vestorsforassessingtheconditionofbeing widelyheld , the Luxembourg tax authorities provide asset man- agerswithacertainflexibilityintimeswheretherais- ingoffundsmaynotbeachievedasfastasitmayhave beenacoupleofyearsago.Existingstructures,includ- ingfunddocumentation,shouldbereviewedconsid- eringtheclarificationsthatarenowavailabletoensure that theymeet the requirements. Silvia BERDOTE, EY Luxembourg Partner, Global Compliance &Reporting (GCR) Vincent REMY, EY Luxembourg Partner, Private Debt Leader New clarifications and their significance Reverse hybrid entity exemption for investment funds Par Pablo R IVEROLL , Gestionnaire de fonds et Responsable de la Recherche actions et CharlotteW OOD , Responsable de l'Innovation et desAlliances Fintech, Schroders L 'intelligence artificielle (IA) conquiert rapidement le monde de la finance, y com- pris dans le domaine de la re- cherche en investissement.Alors que de nombreuses analyses de routine peuvent déjà être automati- sées, Schroders considère que l'IA vient compléter l'expertise hu- maine, et non la remplacer. La culture détermine en grande partie l'efficacité de l'IA L'efficacité des applications de l'IA dans lesinvestissementsdépendnonseulement de la technologie, mais aussi de la culture de l'équipe d'investissement. Les équipes qui font preuve d'un 'growth mindset' (état d'esprit de croissance) et d'une atti- tude ouverte envers l'innovation sont mieuxplacéespourmaximiserlepotentiel de l'IA. Cela nécessite une coopération étroite entre les techniciens et les investis- seurs. Plusieurs maisons de fonds élabo- rent des outils d'IA en interne et collabo- rent avec des entreprises technologiques externes. Cela crée un écosystème qui répond aux besoins des équipes d'inves- tissement et de leurs clients. L'IA renforce différentes parties duprocessus d'investissement Lacollecteetl'analysed'informationspro- venant de rapports annuels, de déclara- tionsfiscalesd'entreprise,derecherchedu côté vendeur, de conférences télépho- niques et d'actualités prennent tradition- nellementbeaucoupdetemps.Maisgrâce à des outils tels que ChatGPT Enterprise et Document Search and Analysis (DSX) deBloomberg,cettephasepeutdésormais être considérablement accélérée. La division des marchés publics de Schroders utilise ainsi ChatGPT Enterprise pour l'analyse initiale des entreprises, des pays et des secteurs. La fonction 'Deep Research' (recherche approfondie)permetd'effectueruneana- lyse en profondeur à partir de sources publiques. Dans le même temps, les équipes développent des applications propriétaires pour analyser les données internes et externes combinées, ce qui accroîtencorelaqualitédesinformations. L'une des principales innovations est le 'Model Context Protocol' (MCP) : une sorte de connecteur universel qui relie les systèmes d'IA aux sources de données et aux applications. Cela rend les outils comme ChatGPT non seulement plus puissants, mais aussi plus intégrables dans le flux de travail quotidien des ana- lystes. Il existe également Contex AI, un outil interne utilisé spécifiquement pour les analyses approfondies de durabilité (ESG). Il permet aux analystes, par exem- ple, d'évaluer l'impact environnemental etsocialdesentreprisesdemanièrestruc- turée et standardisée. Trois avantages concrets de l'IApour les investisseurs Le déploiement de l'IA offre des avan- tages tangibles aux équipes d'investisse- ment, qui se répartissent grossomodo en trois catégories : 1. Analyse initiale plus rapide et plus efficace : L'IA aide les investisseurs à comprendre plus rapidement les nouvelles entreprises etlesnouveauxsecteurs.Alorsqu'uneana- lyse traditionnelle peut aisément prendre deux semaines, l'IA permet de réduire ce processus de moitié. Cela démocratise la connaissance et abaisse le seuil d'explora- tionde nouveauxmarchés. 2. Univers d'investissement plus large : Le fait de gagner du temps lors de l'ana- lyse initiale permet d'examiner davan- tage d'idées. Dans le même temps, les analystes peuvent se concentrer sur des questions qualitatives plus complexes plutôt que sur la collecte de données à forte intensité demain-d'œuvre. 3. Suivi plus efficace des positions exis- tantes : Concernant les investissements existants, l'IA permet un suivi plus rapide et plus ciblé des évolutions. L'investisseur peut ainsi voir immédiatement si l'hypothèse d'investissementsous-jacenteesttoujours valable - et procéder le cas échéant à des ajustements. Infine,cetteapprochedoitpermettred'ob- tenir un meilleur rapport risque/rende- ment que les concurrents. Enpratique : dudiagnostic à l'action Unbon exempled'applicationde l'IAest l'analyse d'une entreprise dont les ren- dements chutent soudainement. Il fallait auparavant des jours, voire des semaines pour déterminer si cela était dû à des facteurs cycliques, à de nou- veaux concurrents ou à une évolution des conditions du marché. Désormais, grâce à l'IA, les investisseurs peuvent poser les bonnes questions plus rapide- ment et déterminer plus vite s'il est utile de poursuivre l'analyse. Que nous réserve l'avenir ? Actuellement, près de 300 analystes et investisseurs de la division des marchés publics de Schroders utilisent ChatGPT Enterprise etContexAI. BloombergDSX est également en cours de déploiement à grande échelle. Alors que 2024 était encore une année d'introduction et de familiarisation, 2025 devrait être l'année de pleine intégration de l'IAdans la pra- tique quotidienne. Autrement dit, les équipes d'investisse- ment commencent de plus en plus sou- vent leurs analyses sur la base d'infor- mationspré-agrégéespar l'IA. Elles com- mencent donc leurs recherches avec un niveau de connaissances plus élevé. En outre, à mesure du développement de l'IA, il deviendra possible de répondre à des questions d'investissement plus complexes, telles que les facteurs suscep- tibles de restaurer la rentabilité d'une entreprise et la question de savoir s'ils sont déjà visibles. Le rôle de l'homme consistera alors de plus en plus à distinguer ce qui est vrai- ment important de ce qui vient parasiter l'analyse. L'IArend les investisseurs plus forts ©Freepik