Agefi Luxembourg - mars 2026

AGEFI Luxembourg 28 Mars 2026 Fonds d’investissement By Guilhèm BECVORT, Partner & Pierrick ROMANCANT, Associate, White & Case T he EuropeanDirective (EU) 2022/2523 introducing a global mi- nimumeffective taxation of 15% for large groups, commonly referred to as “Pillar Two”, has applied in Luxembourg since 1 January 2024. Two years into its appli- cation, one point has become increasingly clear in the in- vestment funds space: Pillar Two is not only a technical tax issue. It is also, and in many cases primarily, a ques- tion of fund documentation. In practice, the key question is often not simply whether the GloBE rules may apply as a matter of principle, but where the resulting economic burden may arise within the structure, how it may affect re- turns and, ultimately, who should bear it. That is where funddocumentationbecomes critical. This article does not revisit the GloBE rules compre- hensively. It focuses insteadon themainpractical les- sons that have emerged when negotiating and reviewing funddocumentation in light of Pillar Two. Pillar TwoCreates an Economic andContractual Risk The principal risk created by Pillar Two is economic. Whereanentitybelongingtoagroupwithinthescope of the rules is taxed below the 15%minimum rate, a top-up tax may arise. That tax may be collected by thejurisdictionofthelow-taxedentityitselfthrougha Qualified Domestic Minimum Top-up Tax, or QDMTT, by the jurisdiction of the ultimate parent entity through the Income Inclusion Rule, or IIR, or, failing that, by other jurisdictions through the UndertaxedProfits Rule, or UTPR. Froman investor perspective,however,theplaceofcollectionisnotthe central issue. The central issue is that an additional layer of taxmay reduce returns. Thatissuebecomesmoreacuteinpooledorco-invest- ment structures. If a top-up tax arises belowa fund, a parallelvehicleorajointventurevehicle,itseconomic impact may affect all investors participating through thatvehicle,includingthosethatplayednoroleintrig- gering the application of Pillar Two to the structure. The tax cost is not the only concern. Pillar Two also generates potentially significant compliance costs. In larger cross-border structures, thesemay include ad- ditional reporting systems, external advisory fees, in- ternal resourcing and recurringGloBE computations acrossmultiplejurisdictions.Ininvestmentstructures, those costs are another potential drag on returns and shouldbeaddressedaspartofthebroadercontractual allocationof Pillar Two risk. TheRulesMatter, but the Practical Issue IsWhere theCost Sits PillarTworeliesonthreemainchargingmechanisms. The QDMTT allows the jurisdiction of a low-taxed constituent entity to collect the top-up tax itself. The IIRgenerallygivesthejurisdictionoftheultimatepar- ent entity the right tocollect that tax. TheUTPRoper- ates as a backstopwhere the other charging rules do not fully apply. These rules apply tomultinational enterprise groups and largedomestic groupswithannual consolidated revenuesexceedingEUR750millioninatleasttwoof the four preceding fiscal years. In Luxembourg, the IIR and the QDMTT apply for fiscal years beginning onorafter31December2023,whiletheUTPRapplies for fiscal years beginning on or after 31 December 2024. For sponsors, managers and counsel, however, thepractical issue isnot simply the architectureof the rules themselves. It is identifying where within the structurethecostmayarise,whetherthatcostmaybe pushed into a common investment vehicle and whether the relevant documentation allocates that burden in an economically coherentmanner. Being inScope IsOnly Part of the Problem PillarTworiskisnotlimitedtogroupsthatarealready withinscopeonastandalonebasis.Italsoariseswhere a structure becomes associated, directly or indirectly, with an investor or group that is itself within scope. Theanalysismustthereforebecarriedoutontwolev- els.First,onemustassesswhethertherelevantinvest- ment platformor fundstructuremay itself fallwithin the GloBE perimeter. Second, one must consider whether the presence, entry or subsequent evolution of an investor group could cause Pillar Two conse- quences to arisewithin the structure. This point is critical inpractice.Afund structuremay appear outside the Pillar Two risk zone at inception butbecomeexposedlater,forexamplebecauseanin- vestor group grows, crosses the EUR 750 million threshold, undergoes an acquisition or internal reor- ganisation, or transfers its interest to a purchaser al- ready within scope. The documentation should thereforeaddressnot only thepositiononadmission, but also subsequent changes in circumstances. This is not a question confined to the fund context. Similarquestionsariseintransactionaldocumentation morebroadly.Inthefundcontext,however,theneed for forward-lookingcontractual protection isparticu- larly acute, given the duration of the investment and themultiplicity of parties involved. FundStructuresAreNot Outside the Pillar TwoRiskZone It is sometimes assumed that investment funds are broadlyprotectedfromPillarTwobyvirtueoftheex- cluded entity rules. That assumption should be treatedwithcaution.UnderArticle 1.5.1of theGloBE Model Rules, an Investment Fund or Real Estate In- vestment Vehicle may qualify as an excluded entity, but only where it is the Ultimate Parent Entity of the relevantMNEGroup.Article1.5.2furtherextendsex- cluded-entity treatment to certain entities owned by excluded entities, notablywhere the relevant owner- ship and activities conditions aremet. In practice, however, these exclusions often provide narrowerprotectionthanisinitiallyassumed.Certain fund structures holdminority or non-controlling po- sitions and therefore do not consolidate their invest- ments for accounting purposes. In those cases, they may fall outside the GloBE rules not because an ex- cluded-entity exemptionapplies, but because the rel- evant consolidationconditions arenotmet in thefirst place. Conversely, where a fund controls portfolio companies, as is often the case in private equity, the fund itselfmayqualifyas anexcludedentitywhere it is the Ultimate Parent Entity, while the consolidated subsidiariesmaynonethelessremainexposedtotop- up taxation. Just as importantly, excluded entity status does not solve the separate issue of associ- ation with an in-scope investor group. A fund may therefore still face Pillar Two consequences within the structure even where the fund itself benefits froma formal exclusion. In short, the relevance of the excluded entity framework should not be overstated. In the fund context, the position remains highlyfact-specificandrequiresadis- ciplined case-by-case review. DocumentationMust Address the Risk at Entry The first level of protection is pre- ventive. Fund documentation should seek to identify and contain Pillar Two risk before investors enter the structure. The first line of protection lies in information rights. The fund’s governing documents, subscrip- tion documentation and related side letter frame- work should include appropriate disclosure obligations requiring investors to provide relevant information on their Pillar Two position and that of their group, both on admission and on an ongo- ing basis. Such information may be essential not only to assess current exposure, but also to identify subsequent changes in circumstances. More importantly, the funddocumentation should confer sufficient flexibility on the relevant govern- ing body, sponsor or manager to respondwhere a Pillar Two issue arises, or is likely to arise. Depend- ing on the structure, thismay include powers to re- organise the relevant holding or investment chain, require the use of alternative participation chan- nels, restrict transfers, refuse a proposed transferee or, inmore serious cases, require the exit, redemp- tion or restructuring of an investor whose partici- pation gives rise to unacceptable tax or compliance leakage for the wider investor base. Such powers should not be viewed as merely de- fensive or theoretical. In a long-datedvehicle, Pillar Two exposure may evolve materially over time. Documentary flexibility is therefore not optional. It forms part of the fund’s core legal and contrac- tual architecture. DocumentationMustAlsoAllocate the Cost During the Life of the Fund Evenwhererobustentryprotectionsareinplace,Pil- lar Two exposuremay still arise during the life of the fund. This may result from the admission of a new investor, an existing investor becoming part of a larger group, a transfer toanacquirer alreadywithin scope, or a group previously outside scope crossing the relevant revenue threshold. Where that occurs, thedocumentationshouldnotleavetheresultingeco- nomicburdentogeneralprinciplesordefaultprorata allocationmechanics. Absent specific provisions, top-up tax and related compliance costsmay inpractice be borne across the investor base. That may be commercially difficult to justifywhere the relevant exposure is attributable to one investor, or to a limited subset of investors only. Fund documentation should therefore include tai- lored allocation provisions making clear that Pillar Two-related costs should, to the extent possible, be borne by the investor or investors whose status, ac- tions or subsequent changes in circumstances gave rise to them. This should cover not only the top-up taxitself,butalsotheassociatedcompliancecosts,in- cluding reporting, advisory and implementation ex- penses.Thisisoftenwherenegotiationsbecomemore delicate. The issue is no longer purely technical from a tax perspective. It also becomes a question of fair- ness among investors and of preserving the agreed economics of the structure. Post-Exit Liabilities Should BeAddressedExpressly Particular care is requiredwherePillarTwo liabilities arise after an investor has exited. A top-up tax or compliancecostmaybeassessedinrespectofafiscal year during which a former investor caused the structure to fall within scope or otherwise con- tributed to the relevant exposure. If the documenta- tion is silent, the resultingburdenmayultimately fall on the remaining investors. That outcome is difficult to justify. Where the eco- nomicburdenisattributabletoaformerinvestor’ssta- tusoractions,thedocumentationshouldpreservethe ability to recover the relevant amount from that in- vestor following its exit. This may require tailored claw-back, indemnity or hold harmless provisions, coupledwithappropriatesurvivallanguageforinfor- mationandcooperationobligations.Absentsuchpro- visions, the practical ability to reallocate the cost following exitmay bemateriallyweakened. The Side-by-Side PackageChanges Part of theAnalysis, Not theNeed for Contractual Protection On5January2026,theOECDpublishedtheso-called “Side-by-SidePackage”,reflectingagreementreached within the Inclusive Framework following, inter alia, the political understanding announced by the G7 on 28 June 2025. Among other features, the package in- cludesaSimplifiedETRSafeHarbour,namelyasim- plificationmechanismintendedtoreducecompliance burdens by allowing, in certain cases, a simplified ju- risdictional effective tax rate test tobeused inplaceof afullGloBEcomputation.Italsoincludesanextension of the Transitional Country-by-Country Reporting safe harbour by one year, a Substance-based Tax In- centive SafeHarbour and a Side-by-Side System. Itspractical significancemaybe considerable, partic- ularly for certain US-parented groups. That said, its effect shouldnot be overstated fromthe perspective of funddocumentation. The package does not elim- inateexposuretodomesticQDMTTs,includingLux- embourg’s; it does not apply retroactively to fiscal years 2024 and 2025; and its practical operation re- mains dependent on jurisdictional status, domestic implementation and further political and technical developments. For those reasons, the package changes part of the technical analysis, but it does not remove the need for robust contractual protections. The response re- mains the same: the fund documentation should be designed to identify risk early, preserve flexibility and allocate economic burden appropriately. Pillar TwoMust NowBe Built into FundDocumentation Two years into its application, Pillar Two has be- come a structural documentation issue for the funds industry. The technical tax analysis remains neces- sary, but it isno longer sufficient on its own. The real questions arepractical:whetherPillarTwoexposure mayarisewithin the structure,whether the resulting economic burden may dilute returns across the in- vestor base, andwhether thedocumentationallows that burden tobe identified, containedandallocated in a coherent manner. The excluded entity rules offer useful protection in some cases, but not nearly as broadly as is some- times assumed. Likewise, more recent develop- ments, including the Side-by-Side Package, may reduce exposure incertainscenarios, but theydonot justify a lighter contractual approach. The lesson from the last two years is straightfor- ward. In fund structures, Pillar Two should no longer be treated as a peripheral tax point. It should instead be built into the legal and contractual archi- tecture of the vehicle from the outset. Pillar Two and Investment Fund Documentation: TwoYears of Lessons N orman K., plate- forme de gestion de fortune indé- pendante dédiée aux entrepreneurs internatio- naux et aux grandes familles, a officiellement inauguré son nouveau bureau à Luxembourg ce 4 mars 2026. La soirée d'inauguration orga- nisée au Tero House17 Luxem- bourg a marqué une étape importante pour le Groupe Norman K, qui a eu le plaisir d'accueillir dans ce lieu d'ex- ception plus d'une centaine de professionnels de la place financière luxembourgeoise. Leur présence témoigne de l'énergie, de la confiance et de l'élan collectif qui animent notre écosystème. « Cette mobilisation confirme la résonance des valeurs que nous portons et la soliditédes relations que nous construisons avec nos partenaires au Luxembourg », a déclaré Nicolas L'Hermite, CEO de la filiale luxembourgeoise de Norman K. Le groupe entretenait, depuis de nombreuses années déjà, des relations étroites avec l'écosys- tème luxembourgeois, notam- ment bancaire et assurantiel, faisant de cette nouvelle implantation une évolution naturelle et stratégique. Avec plus de 10 milliards d'eu- ros d'actifs supervisés et une équipe de plus d'une soixan- taine de collaborateurs engagés en Europe, le Groupe Norman K consolide ainsi sa mission : offrir une plateforme perfor- mante, innovante et résolument tournée vers les besoins des actionnaires familiaux, des hol- dings patrimoniaux et des investisseurs institutionnels. Cette mission s'articule autour de quatre verticales complémen- taires, développées et opérées en interne : la gestion d'actifs, le financement, le Corporate Advisory, ainsi que les solutions de Family Office. L'implantation dans la capitale luxembourgeoise lui permettra, en outre, d'accélérer sa crois- sance par le biais d'acquisitions externes. L'organisation de Norman K. en plateforme inté- grée permet au groupe d'enri- chir en permanence les solu- tions proposées à ses clients, tout en attirant des talents reconnus et expérimentés. Coup d'envoi du nouveau bureau de Norman K. au Luxembourg Nicolas L'Hermite, CEO et NicolasMayer, Sales Director NormanK.