Agefi Luxembourg - février 2026

AGEFI Luxembourg 26 Février 2026 Fonds d’investissement By Bruno COLMANT, Ph.D., Member of the Royal Academy of Belgium T he impending nomination of KevinWarsh as Chair of the Federal Reserve represents far more than a routine change in leader- ship: it signals a profound intellectual pivot in globalmonetary policy that will reverberate through financial markets for decades. KevinWarsh is a formidable thinkerwith a razor-sharp intellect, andhis appointment to the helmof the world’smost powerful central bankmarks a decisive end to the era of reactive, data-depen- dent fine-tuning. Tounderstand the “WarshDoctrine” is to recognize that we are moving toward a regime governed by structural conviction, one that deliberatelymirrors the high-growth, low-inflationdynamics of the late 19th century. At his core, Kevin Warsh is a sophis- ticateddisciple of the Friedmanite tradition, adher- ing strictly to the principles of Milton Friedman (1912–2006). Friedman, who was awarded the Nobel Prize inEconomics in 1976, famously assert- ed that inflation is always and everywhere a mon- etary phenomenon, a direct result of the state’s management of the money supply. Through this lens, Kevin Warsh has consistently criticized the recentmonetizationofAmericanpub- lic debt—the process bywhich the Federal Reserve refinances government deficits—viewing suchactions as adangerous distortionofmar- ket signals and a fundamental threat to the long-term stability of the dollar. In the classical Friedmanitemodel, the central bank’s primary duty is to maintain a stable monetary environment.At the same time, the private sector allocates resources and determines the distribution of wealth through efficiency and competi- tion.What KevinWarshpostulates today, with increasing rigor, is that we are entering a new indus- trial era dominated by Artificial Intelligence, a revolution that is intrinsically deflationary. In thisworldview, themassive pro- ductivity gains harvested fromAI will act as a natural brake on prices, exerting a constant downward pressure on both the cost of goods and the wages of those who produce them. Thehistorical precedent for sucha shift is both strik- ing and academically sound. If we examine the long-termarc of theAmerican economy from1870 to 2020, we observe that phases of intense capital accumulation—fromthe expansionof the railroads to the electrification of industry—have systemati- cally exerted deflationary pressure. Specifically, during the periodknown as the “Great Deflation” between 1873 and 1896, industrial pro- ductivity was so immense that price levels fell by roughly 1% to 2% annually, even as real GDP growth surged at nearly 4%. Thiswas not a depres- sion in themodern sense, but aproductivitymiracle in which the cost of living declined. At the same time, the economy expanded, a blueprint that Kevin Warsh seems intent on reviving for the 21st century. The mathematical core of this strategy rests on the relationship between productivity and inflation. Economists typicallymeasure this through theUnit Labor Cost, where inflation is roughly equal to the difference betweenwage growth and productivity growth. If theAI revolutiondelivers a productivity shock comparable to the computing boom of the late 1990s—which many analysts estimate could add between 1.5% and 2.0% to annual growth— the Federal Reserve gains an extraordinary amount of policy space. Such a gain in the “SolowResidual,” the portion of growthdrivenbypure innovation, serves as apow- erful disinflationary force, allowing the central bank to lower interest rates aggressively to stimulate growthwithout the traditional fear of triggering an inflationary spiral. The Solow Residual, often referred to as Total Factor Productivity (TFP), rep- resents the portion of an economy’s output growth that traditional increases in labor or capital inputs cannot explain. Named afterNobel laureateRobert Solow, it measures technological progress and organizational innovation, specifically the efficien- cywithwhich an economy transforms its resources into products. By lowering the benchmarkFederal Reserve Funds rate, KevinWarsh can satisfy political demands for cheaper credit while remaining intellectually hon- est to his Friedmanite roots, arguing that technolo- gy is doing thework thatmonetary restrictionused to do. However, this reasoning carries a profound and perhaps darker implication for the social con- tract: the “Great Decoupling” of labor and capital. IfArtificial Intelligence canperformcognitive tasks at near-zeromarginal cost, the labor share of nation- al income will undergo unprecedented compres- sion. In this scenario, the traditional bargaining power of human workers is eroded by an infinite supply of “digital labor.” Consequently, the wealth generated by these 1.5% annual productivity surgeswill not be redistributed through higher salaries. However, it will instead be captured almost entirely by the owners of capi- tal—the investors and corporations that own the AI infrastructure, algorithms, and hardware. Kevin Warsh’s anticipated policy of lower interest rateswill, inadvertently yet effectively, amplify this concentration of wealth, as cheaper credit dispro- portionately benefits asset owners and technology firms relative to salaried employees. We are wit- nessing the emergence of a new “Gilded Age” in which technological progress radically redefines the sharing of value. By appointing Kevin Warsh, the Federal Reserve is effectively institutionalizing a return to “Supply-Side” dominance. This is not merely a forecast for 2026: it is a return to the spirit of the late 1800s, an era of rentier capi- talismandhigh-techproduction, when the Federal Reserve facilitated a massive shift toward capital- intensive growth. In the end, KevinWarshdoes not just represent a new face at the Federal Reserve: he represents the validation of an intuition that tech- nology, and the capital that controls it, will be the sole engine of the American economy for the next generation. Federal Reserve: The Warsh doctrine, a 19th-century model for theAI age O n 3 February 2026,Arendt held a taxwebinar addres- sing key international and domestic tax developments, with a focus onPillar 2 and its implica- tions for Luxembourg entities. The session, ledby JanNeugebauer (Partner), Caroline Partoune (Counsel), andCharlotteDeman- geat (SeniorAssociate) ( pictures ), coveredPillar 2 updates, changes to theOECDModel TaxConvention, EU initiatives, newandproposed domestic taxmeasures, and recent Luxembourg accounting guidance. Pillar 2: OECD Side-by-Side Package The US position on taxation of multina- tionals has prompted a major Pillar 2 development. The US argued that US- parented groups should be excluded fromPillar 2, as theyalreadypayaglobal minimum tax through the GILTI (1) tax and the corporate alternative minimum tax. Applying Pillar 2 on top of these domestic rules could create double taxa- tionand increase complianceburdens for USmultinationals. Following extensive G7 negotiations, an agreement was reached in June 2025 to provide relief for US-headed groups. The OECDimplementedthisagreementinthe “side-by-side” package released on 5 January 2026. On 12 January 2026, the EuropeanCommissionconfirmedthatno changes to the Pillar 2 Directive were requiredfortheapplicationofthepackage. The package includes a side-by-side safe harbour for full IIR (2) andUTPR (3) exemp- tion, a UPE (4) safe harbour for UTPR exemption in the UPE jurisdiction, a per- manent simplified ETR (5) safe harbour, a one-year extension of the transitional CbCR (6) safe harbour, and a substance- based tax incentives safe harbour. Side-by-Side SafeHarbour andUPESafeHarbour The side-by-side safe harbour allows eli- gibleMNE (7) groups to elect for a deemed top-up tax of zero for both the IIR and UTPRinthejurisdictionsofallconstituent entities and joint ventures in which they operate. However, the UPE must be in a qualifying jurisdiction listed in the OECD’s central record, which requires (i)aneligibledomestictaxsystem(atleast 20% corporate tax rate and a QDMTT (8) or alternative minimum tax of at least 15%), (ii) an eligible worldwide tax sys- tem (including a comprehensive foreign income inclusion regime), (iii) a foreign tax credit for QDMTTs, and (iv) fulfil- ment of certain timing requirements. TheUSiscurrentlytheonlyjurisdictionon the central record. However, US-headed groups account for nearly a quarter of all in-scopePillar2groups,makingthisasig- nificant carve-out. The UPE safe harbour, requiring only an eligible domestic tax system, deems the UTPR in the UPE jurisdiction to be zero and replaces the transitional UTPR safe harbourwhichexpiredat the endof 2025. Both safe harbours allowelections for fis- calyearsstartingonorafter1January2026. Thismeansthatfiscalyears2024and2025 remain fully in scope,with fullGloBEcal- culations and filing obligations. Impor- tantly, all MNEs remain subject to the QDMTT in all QDMTT jurisdictions in which they operate. Whilst the IIR and UTPR may be deactivated, the QDMTT continues to apply in Luxembourg and other jurisdictions where it has been im- plemented. Luxembourg Implementation and Impact Luxembourg is expected to implement thesesafeharboursintodomesticlawwith retroactive effect from 1 January 2026. Once implemented, Luxembourg entities of US-headed groups may elect not to apply the IIRandUTPR from2026, while Luxembourg entities of non-US groups will remain subject to the IIR and UTPR. This creates a difference in treatment be- tweenUS-headedandothermultinational groups, although the QDMTT will con- tinue to apply to all groups. Additional SafeHarbours The permanent simplified ETR safe har- bour aims to reduce compliance costs for MNEgroupsandadministrativeburdens forjurisdictionswithlowriskoftop-uptax being due, deeming top-up tax to be zero when a jurisdiction has a simplified ETR of at least 15%. It generally applies as of 2027. The transitional CbCR safe harbour has been extended by one year and now covers fiscal years beginning on or before 31December2027,withthetransitionrate remaining at 17%for 2026 and 2027. The substance-based tax incentives safe harbourallowsMNEstoaddcertainqual- ified tax incentives to the amount of cov- ered taxes of the constituent entities in a jurisdiction,withanoptiontotreataqual- ifiedrefundabletaxcreditoramarketable transferabletaxcreditasaqualifiedtaxin- centive if the credit qualifies as an expen- diture- or production-based tax incentive. Theadjustmentiscappedateither5.5%of the greater of eligible payroll costs or de- preciation of tangible assets in a jurisdic- tion, or 1% of the carrying value of depreciable tangible assets. Luxembourg Compliance Framework On 17 December 2025, the Luxembourg Parliament voted through legislation in- troducing the framework for reporting and exchanging Pillar 2 information (bill of law8591 implementingCouncil Direc- tive(EU)2025/872onadministrativecoop- eration in the field of taxation (DAC 9)). Luxembourg has introduced a standard- ised top-up tax information return based on the GloBE information return, to be filed centrallyby theUPEor adesignated entity and automatically exchangedwith relevantjurisdictionswithinthreemonths (orsixmonthsforthefirstyear).Simplified filingisavailableforjurisdictionswhereno top-uptaxisdue,andtherulesapplyfrom 1 January 2026. Registration for Luxembourg entities in a Pillar 2 group opened on 6 January 2026 via the MyGuichet platform. All con- stituent entities (including JVs (9) and JVaf- filiates) in Luxembourg that belong to a Pillar 2 groupmust registerwith the Lux- embourgtaxauthoritieswithin15months aftertheendofthereportingfiscalyear,or within 18months for the transitionyear. For calendar-year companies, the first fil- ingdeadlineis30June2026,coveringreg- istration, notifications, and the top-up tax informationreturn.Forthesecondreport- ing year, calendar-year companies must file the top-up tax return by 31 March, withpayment due onemonthafter filing. Private Equity ConsolidationExemption On 2 December 2025, the Luxembourg Accounting Standards Board issued new guidance on the “PE consolidation ex- emption”,clarifyingwhenparentcompa- nies holding subsidiaries solely for resale may qualify for the exemption. This up- date makes it important for groups to re- view the entities concerned, as the structure of consolidated subsidiaries can influence Pillar 2 scope and reporting. The webinar emphasised that Luxem- bourg-based groups should evaluate availablesafeharbours,reviewconsolida- tion exemptions, and ensure compliance with Pillar 2 reporting obligations. Early identification of impacted entities, proper documentation,andunderstandingfiling requirements are essential to manage compliance risks and administrative bur- dens effectively. 1) Global Intangible Low-Taxed Income. 2) Income InclusionRule. 3) Undertaxed Profit Rule. 4) Ultimate Parent Entity. 5) Effective Tax Rate. 6) Country-by-Country Reporting. 7)Multinational Enterprise. 8) QualifiedDomesticMinimumTop-up Tax. 9) Joint Ventures. Arendt tax webinar Latest Pillar 2 Developments and Compliance Framework for Luxembourg