4 Questions to: Ayzo van Eysinga

What regulatory or legal tax developments have been keeping you occupied in the past months?

The Reverse Hybrid rules introduced by ATAD 2 and effective as per 2022 appeared to have had much more impact than initially anticipated for typically the unregulated or sub-threshold partnership structures. We have received many questions asking for confirmation that a partnership structure was not affected by these new rules. This topic is quite technical and complex and there is very little experience so far. It is therefore difficult to anticipate and predict how uncertainties will be dealt with in practice.

What challenges do you face in your current work streams?

Timing! Timing is always our biggest enemy, especially as time is money. No alternative investment fund structure is the same, but they all seem to share the same desire to be set up rather sooner than later. If tax was not involved from the very first beginning, the tax input and advice may cause unexpected delays. Indeed, it is instrumental to get tax input on all different levels at the very beginning of the structuring process.

Can you describe the impact of global economic trends on your work and how do see these economic trends developing?

The Luxembourg investment industry market is a very international market and therefore definitely exposed to global economic trends. If global economy or politics are uncertain or even instable, this will cause investment managers to be less keen to set up a new investment structure. That directly affects the workload. Luxembourg is in the enviable position that there is always a lot of work to be done on the existing structures, so that a global downturn does not immediate has to lead to drastic measures. That makes me say that if global economic and political trends remain uncertain, Luxembourg will be affected but can relatively easily survive such downturn until better times arise.

From a tax perspective, what tips would you give to a management team looking to launch alternative investment fund in Luxembourg?

It is essential to carefully navigate the tax landscape to maximize tax benefits. Choosing the most appropriate (and tax neutral) fund structure, taking into account the investors taxation principles, is typically on the radar screen as Luxembourg has a wide range of options to choose from. Also, the structuring of the carried interest is generally addressed at an early stage. However, managing the VAT and the need for a Luxembourg Master Holding Company is often addressed at a later stage where it should be addressed at a very early stage to avoid complexities.