Guilhèm Becvort and Pierrick Romancant discuss two years of experience with the EU's Pillar Two global minimum tax rules and their impact on Luxembourg investment funds. The article highlights key lessons for fund sponsors, managers, and counsel, including:
- Pillar Two creates significant economic and contractual risks for investment funds, affecting returns and compliance costs.
- The importance of robust fund documentation to identify, allocate, and manage Pillar Two risk, both at entry and throughout the fund's life.
- The need for tailored provisions to ensure that tax and compliance costs are fairly allocated, especially when triggered by specific investors or post-exit.
- Recent OECD developments, such as the Side-by-Side Package, do not remove the need for strong contractual protections.
The article is reproduced with permission from AGEFI Luxembourg. For more information, please visit www.agefi.lu.
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