On 22 August 2025, Luxembourg's tax authorities published Circular L.I.R. n°168quater/2, providing long-awaited guidance on the collective investment vehicle (CIV) carve-out from the reverse hybrid rule.
The Circular brings welcome certainty to RAIFs, SIFs and other Luxembourg funds by:
- Confirming that UCITS, Part II UCIs, SIFs and RAIFs are automatically treated as CIVs.
- Clarifying the "widely held" condition and its application to unregulated partnerships.
- Broadly interpreting "diversified portfolio" to include loans alongside other securities.
These clarifications resolve key areas of uncertainty, enabling Luxembourg funds to navigate tax rules with greater confidence and further strengthening Luxembourg's position as a leading European fund domicile.
In this article, Guilhèm Becvort, White & Case partner in Luxembourg, analyses the implications of the Circular and its impact on market practice.
The article is reproduced with permission from AGEFI Luxembourg. For more information, please visit www.agefi.lu
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