Luxembourg: A Private Wealth Law Overview

Luxembourg has been a major player in the international wealth management industry for decades, as the hub of the largest financial centre in Europe and through the presence of a large professional community dedicated to the private wealth industry.

From a general point of view, there are many explanations for Luxembourg’s attractiveness as a country of residence, but it is primarily its political and tax stability that are key to the emergence of the industry and that at the same time continue to safeguard the necessary conditions for its permanent successful development. Luxembourg’s public debt is among the lowest in the world (projected 24.45% of GDP in 2026 as per the official government projections in April 2026), and it is one of the few countries in Europe to meet the 3% budget deficit criteria. The country’s political stability and healthy public finances (Luxembourg has AAA credit ratings) contribute to a great extent to the social stability and overall security of Luxembourg. The unemployment rate in Luxembourg as of January 2026 amounted to 6.3%. Over the past decades, Luxembourg has maintained healthy public finances, its triple-A rating, as well as a constant rise in its GDP (which amounted to EUR86.104 million in 2024 and to EUR89.330 million in 2025, as compared to the 2020 pandemic numbers of EUR64.781 million). This political, social and tax stability, combined with the fact that Luxembourg is a founding member of the European Union, geographically lies at the heart of Europe and that its national economy has evolved and succeeded in a multicultural environment, is of increasing importance for international wealthy families, as is the safeguard afforded by the policy of investor protection promoted by the Luxembourg authorities.

From a tax perspective, Luxembourg is particularly attractive as a host country for high net worth individuals (HNWIs) for two major reasons. First, the government abolished wealth taxes for individuals in 2006. Second, for mortis causa transfers in the direct blood line, Luxembourg law provides for an exemption from inheritance taxes on the legal portion of the estate (eg, the portion to which the heirs are entitled under the ab intestat rules of the Civil Code). Another exemption from inheritance taxes applies to successions between spouses and partners bound by a partnership agreement registered for more than three years. This particularly attractive inheritance tax environment also explains why, in most cases, no advanced tax planning is required in Luxembourg.

The most significant development in 2025 was the government’s announcement, at year-end, of a comprehensive reform to the personal income tax system. The reform introduces a single progressive income tax scale independent of the taxpayer’s marital status, effectively individualising the tax system. The government has committed to substantial transitional measures designed to ensure that no taxpayer is adversely affected by the transition. Implementation of the reform is expected in 2028.

Another notable development was the carried interest reform. A draft law was published in 2025 and subsequently adopted on 22 January 2026, replacing the previous regime established under the Law of 12 July 2013. The new regime broadens the scope of eligible beneficiaries beyond employees of alternative investment fund managers and distinguishes between contractual carried interest – taxed at a quarter of the global rate – and participation-based carried interest, which follows the ordinary capital gains rules. The reform provides greater clarity and flexibility for fund managers and key personnel involved in the alternative investment industry.

Overall, 2025 was marked by forward-looking structural reforms rather than incremental adjustments. The announced individualisation of the income tax system represents a fundamental shift in Luxembourg’s approach to personal taxation, while the carried interest reform reinforces the country’s attractiveness for professionals in the alternative investment sector. Both developments underscore the government’s continued commitment to modernising the tax framework in a manner that supports Luxembourg’s position as a leading wealth management centre.

The implementation into Luxembourg law of the required European and international standards (CRS, ATAD 1 and 2, MLI, DAC 6) has assured Luxembourg of its place in the future landscape of the wealth management industry, as this industry, worldwide, moves towards greater transparency and private clients move to overall tax compliance. As far as transparency rules are concerned, Luxembourg introduced a public register of beneficial owners with the Law dated 13 January 2019 (RBO Law of 13 January 2019) and a register of trusts and fiduciary agreements (RFT Law of 10 July 2020). As a response to the European Court of Justice decisions C-37/20 and C-601/20 of 22 November 2022, which declared invalid the provision of the RBO law allowing for the information contained in the RBO to be available to any member of the general public, Luxembourg amended its RBO legislation so that information may only be accessible to persons demonstrating a legitimate interest and a link to the fight against money laundering and terrorist financing. We praise the decision of the European court, which we consider a landmark case with respect to the protection of individuals’ and related families’ fundamental rights to privacy and to protection of personal data. Luxembourg’s amended legislation will further strengthen the financial centre and reinforce the country’s reputational tradition of promoting a client-focused approach.

Finally, to give an international outlook for future challenges impacting the private client sector, it should be highlighted that the recently adopted Council Directive (EU) 2023/2226 (DAC 8) amending Directive (EU) 2011/16/EU extends the scope of the automatic exchange of information between member states to crypto-assets and, most significantly, to tax rulings for wealthy individuals (provided that certain conditions are met). The Directive has been implemented into Luxembourg domestic legislation by a law dated 27 March 2026. Moreover, in May 2024, the Council adopted the new EU package of anti-money laundering rules. With this new package, rules applying to the private sector will be included in a directly applicable regulation, whereas a directive will regulate the organisation of national competent authorities fighting against money laundering and countering the financing of terrorism. The regulation exhaustively harmonises anti-money laundering rules for the first time throughout the EU. The anti-money laundering rules are extended to new obliged entities such as the crypto-sector and traders of luxury goods. The regulation does provide for stricter due diligence requirements, regulates the concept of beneficial ownership and sets a limit of EUR10,000 to cash payments. The new AML package sets up a European Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) which will have direct and indirect supervisory powers over high-risk obliged entities in the financial sector. In addition to its supervisory powers, in case of serious, systematic or repeated breaches of directly applicable requirements, AMLA will be entitled to impose pecuniary sanctions on obliged entities. Finally, and most important, the new anti-money laundering directive prescribes that EU member states make information from centralised bank account registers, containing data on who has which bank account and where, available through a single access point. As the AML Directive foresees access to the single access point only for FIUs, a separate directive enables access to the registers by national law enforcement authorities via the single access point. This directive also provides for the harmonisation of bank statement formats.