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Carried interest, i.e., the share of profits from a private investment fund (like private equity or venture capital) that is paid to the fund manager as an incentive linked to the performance of the fund, has been and continues to be a contentious point of discussion in tax policy across various jurisdictions. Changing political landscapes and worsening economic climates have put carried interest regimes and private capital under significant pressure. Some governments are seeking to cut back on favorable regimes for carried interest and private funds. Thus, governments are increasingly scrutinizing these types of regimes, viewing them as overly favorable compared to regular taxation regimes, such as the taxation of employment income.
In response to these pressures, several countries are considering measures to reduce the preferential tax treatment of carried interest. Other countries, such as Luxembourg, are currently reviewing the taxation of carried interest in view of an attractive framework. These changes could significantly impact fund managers, potentially reducing the net income related to carried interest and altering the attractiveness of private capital as a career.
This updated article delves into specific developments in the US, the UK, the Netherlands, Spain, Belgium, France, Switzerland and Luxembourg, providing a comparative analysis of how each jurisdiction is addressing the matter. By examining these aspects, the article aims to provide a comprehensive overview of the current state and future direction of carried interest taxation in these key regions.
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