KPMG Luxembourg Report Highlights Upcoming Tax Changes in 2026

KPMG Luxembourg published the latest version of its “Luxembourg Tax Alert” report on Friday 19 December 2025, highlighting a number of tax changes and developments which will come into force in 2026.

The report detailed the approval of a series of measures set by Luxembourg’s tax authorities and parliament to reshape the country’s fiscal landscape in 2026, affecting individuals, businesses and investors. KPMG said these changes emphasised Luxembourg’s ongoing commitment to maintaining its competitive tax framework within the European Union.

One of the proposals is a new carried interest regime, intended to modernise the personal tax treatment of carried interest income for alternative investment fund professionals. This regime aims to distinguish clearly between ordinary returns and outperformance returns for tax purposes. 

Once enacted, the new regime will only tax the outperformance portion of carried interest as speculative gain, potentially exempt from personal tax under specified conditions. KPMG said this reflected Luxembourg’s efforts to retain and attract top talent in asset management.

KPMG also noted 2026 will see the introduction of a new tax credit for start-ups, enabling individuals who invest in qualifying young innovative companies to claim a twenty per cent credit on eligible investments from €10,000 upwards. This credit, which is subject to a ceiling of €1.5 million per entity and a holding period of at least three years, is part of broader measures aimed at bolstering Luxembourg’s start-up ecosystem and encouraging long-term investment.

The Budget Law for 2026, passed by the Luxembourg Parliament on Wednesday 17 December 2025, also introduced enhancements to tax reliefs, including an increased maximum CO₂ tax credit for individuals and adjustments to excise duties on biofuels.

In addition, a suite of further individual and corporate tax measures has been tabled, including pension reforms and incentives for investment in government defence bonds, which KPMG said signalled a continued focus on social policy and fiscal support measures.

KPMG emphasised that Luxembourg’s implementation of DAC9 and Pillar Two amendments followed wider EU and OECD tax transparency and reporting standards. These changes are designed to ensure fair taxation and international cooperation on tax matters.

The tax alert also confirmed upcoming international tax treaty updates and compliance obligations, with new double tax treaties entering into force and expanded reporting requirements expected to affect multinational groups operating in Luxembourg.

The full KPMG Luxembourg report can be found at: https://kpmg.com/lu/en/home/insights/2025/12/everything-you-need-to-know-2026