Agefi Luxembourg - octobre 2025

Octobre 2025 27 AGEFI Luxembourg Fonds d’investissement By Jeremy PAGES, Partner, Stephen MITZEL, Director, Shadjiah MOONIARUCH , Director &Yi XU, Senior, Deloitte Luxembourg B usinesses today aremore in- terconnected than ever, and theworldhas truly become a global village, drivenby rapid ad- vances in technology and capital mobility. In this environment, US GAAPhas become increasingly re- levant for European companies en- gaged in transatlantic activity, whether raising capital, entering joint ventures, or reporting toUS stakeholders. Finance leaders across Europe are recog- nizingthatUSGAAPismorethanacom- pliance exercise, it is the language of the world’s largest capitalmarket. Thisarticleexploresthegrowingadoption and practical application of US GAAP among Luxembourg-based entities oper- ating in an increasingly interconnectedfi- nancial landscape. A leap for the fund sector With a robust regulatory, legal and tax framework, Luxembourg’s fundecosys- tem serves as a gateway for US fund managers, facilitating both the chan- nelling of capital from European in- vestors intoUS investment opportunities and from US investors into European markets. According to ALFI’s 2024 An- nual Report, fund initiators originated fromtheUS representedonly5%of new launches, yet accounted for 20% of total net assets. Though relatively fewinnum- ber,US-linkedvehicles tend tobedispro- portionately large and complex. As theworld’s leading cross-border fund hub, Luxembourg has long recognized the importance of accommodating US GAAP.A2021amendmenttotheLawon Alternative Investment Fund Managers authorizedAlternativeInvestmentFunds (AIFs) structuredas Special LimitedPart- nerships(SCSp)topreparetheirstatutory annual reports under USGAAP. This amendment eliminated theneed for qualifying SCSps to produce dual sets of accounts or reconcile US GAAP with local GAAP in the annual reports. The change supports US fund managers in managing cross-border operations by aligning accounting policies, valuation aspects, and other key elements with thoseof theirUS- basedfundandparallel funds. It enhances flexibility, improves comparability of Luxembourg vehicles with global funds, and creates a level playingfield,allowingUSinvestorstoas- sess the performance of their Luxem- bourg-based investments efficiently and without GAAP adjustments. Howbig conglomerates useUSGAAP Once a metaphor, the notion of a global village now finds tangible expression in the cross-border movement of investors andcapital.UnderLuxembourgaccount- ing regulations, groups meeting the con- solidation criteria are required to prepare consolidated statutory accounts either under Luxembourg Generally Accepted Accounting Principles (Lux GAAP) or IFRS as adopted by the EuropeanUnion. The use of IFRS is mandatory where the group includes undertakings with listed instruments. Inadditiontotheirstatutoryaccounts,itis common for groups to produce special- purposeconsolidatedfinancialstatements under US GAAP. This may be done for multiple reasons, such as meeting the needs of their US investors, fulfilling groupreportingrequirements,complying withspecificlendingarrangements,orre- sponding to regulatory or other contrac- tual obligations. PursuanttoArticle27oftheLawof19De- cember 2002 (Accounting Law), theMin- ister of Justice may, in exceptional cases and subject to reasoned opinion from the CommissiondesNormesComptables (CNC), authorize the preparation of statutory ac- counts under a GAAP other than Lux GAAPorIFRS.Insuchcases,theMinister mayalso require a reconciliationof share- holders’ equity and results from US GAAP to IFRS or LUXGAAP for the rel- evantfinancialperiod.AccordingtoCNC Q&A 15/004(R), a Luxembourgish sub- group that is consolidatedwithin a larger group of undertakings reporting under USGAAPmaybeexemptfrompreparing consolidated annual reports in Luxem- bourg.Suchentitiesoftencontinuetopro- duce US GAAP figures for group reporting and consolidationpurposes. In 2021, the Luxembourg TaxAuthorities (LTA) issued clarifications regarding the application of the interest deduction limi- tation rules (IDLR), introduced under the 2019 tax reform that implemented the Anti-Tax Avoidance Directive (ATAD) and other anti-Base Erosion and Profit Shifting (BEPS) measures into Luxem- bourg tax law. The LTA confirmed that a corporate LuxemboACDurg taxpayer— or Luxembourg companies forming part ofataxgroupunderArticle164bisLITL— that is fully consolidated within a group preparing their consolidated financial statements under US GAAP (which, al- though IFRS is formally required under the law and the EUDirective, is accepted as an equivalent accounting framework) may calculate its equity-asset ratio under US GAAP. This allows the taxpayer to compare its ratio with that of its consoli- datedgroup,alsounderUSGAAP,when determining whether it may deduct the full amount of its exceeding borrowing costs for tax purposes for the fiscal year. Under Luxembourg’s Pillar 2 Law, Lux- embourg constituent entities are required to determine their net qualifying income or loss for the purpose of calculating the Qualified Domestic Minimum Top-up Tax(QDMTT)basedontheapplicableac- counting framework—IFRS, Lux GAAP, or consolidated GAAP— depending on the taxpayer’s specific circumstances as defined by law. This determination is not at the taxpayer’s discretion. In contrast, the Income InclusionRule tax (IIR),effectiveforfiscalyearsstartingonor after 31 December 2023 and the Under- taxedProfitsRuletax(UTPR)effectivefor fiscal years beginning on or after 31 De- cember 2024, continue to be calculated using the accounting standards applied for the consolidation of the Ultimate Par- ent Entity (UPE), subject to certain excep- tions. Accordingly, a Luxembourg-based constituent entity that is consolidated under US GAAP by a US-based parent mayapplyUSGAAPwhencalculatingits LuxembourgQDMTT,orwhenapplying the IIRandUTPR toother constituent en- titieswithin the group. Deals, IPOs and listings Cross-borderM&Abetween Europe and theUShasremainedactiveinrecentyears, driven by private equity and strategic growth ambitions. Yet beneath the head- line numbers, deal teams face a critical challenge: aligning different accounting frameworks early in the process to avoid costly surprises. US GAAP’s nuanced rules—particularly inareassuchasrevenuerecognition,lease classification, and intangible assets— can significantly shift valuations compared with IFRS or local GAAP. These differ- encesaffectnotonlyearningsorEBITDA, butalsoliabilities,debtratiosandcovenant compliance. If not properly analyzed and communicated, such disparities can dis- tort key metrics relied upon by investors andlenders,potentiallyleading todelays, renegotiations,orevenfailedtransactions. Accountingframeworksdomorethande- termine how numbers are reported, they influencehowdealsarestructuredandex- ecuted. Fromcontract design to perform- anceincentivesandinvestorreporting,US GAAP can shape management decisions onrevenuetiming,compensationmetrics, and debt covenants. For European com- panies engaged in transatlantic markets, accountingfluencyisthereforenotmerely a back-office concern, it is strategic. Mas- tery of US GAAP expectations enhances deal execution, facilitates capital raising, and strengthens investor confidence across borders. For many European companies, listing on US exchanges such as NASDAQ or the NYSE remains a strategic objective, offering greater visibility, liquidity, and access to theworld’sdeepest capitalmar- kets.However, non-US issuersmust pre- pare financial statements under US GAAPor reconcile their local accounting standards tomeet SEC requirements. Theymustalsocomplywithongoingob- ligations, including quarterly reporting, internal control attestations under the Sarbanes-Oxley Act, and the consistent applicationof complex standards suchas segment reporting and earnings per share. These requirements are demand- ing, andhave a direct impact on investor confidence andmarket credibility. Critically,thesereportingobligationsdon’t existinisolation,theyoperatewithinarig- orous oversight framework. US-listed companiesmusthavetheirfinancialstate- ments audited in accordance with the standards establishedby thePublicCom- pany Accounting Oversight Board (PCAOB), the independent regulator re- sponsibleforoverseeingauditqualityand reinforcinginvestorconfidenceinthecap- ital markets. For audit firms outside the US—including those in Luxembourg— this entails registeringwith the PCAOB. Withestablishedinfrastructure,regulatory expertise,andPCAOB-accreditedcapabil- ities,Luxembourgauditfirmsarewellpo- sitioned tobridgeEuropeanpractices and USexpectations,ensuringalignmentinac- counting and audit standards across transatlanticmarkets.Dualreportingisin- creasingly common among European companies with dual listings, US in- vestors, or US operations. Maintaining both IFRS and US GAAP financial state- mentspresentspracticalchallenges:track- ing differences, training finance teams, and communicating transparently with global stakeholders. For Luxembourg in- vestment funds preparing US IPOs for their portfolio companies, early adoption of US GAAP can enhance IPO readiness, streamline SECreporting, and strengthen investor confidence. Luxembourg-based platforms, with cross-border reporting and SEC/PCAOB-facing advisory, play a critical role in helping European firms bridge the gap between IFRS and US GAAP, supporting dual listings and US market engagement. Conclusion: Embrace the standard, expand the horizon In today’s interconnectedmarkets, finan- cial fluency is no longer just a technical asset, it’s a strategic advantage. For fund managers, CFOs, andfinance profession- als operating across borders, the ability to navigate both IFRS and US GAAP en- hances credibility, comparability, effi- ciency, and access to capital. As more European businesses engage with US investors, regulators, and capital markets,understandingUSGAAPisonly part of the equation. Equally important is awareness of the broader reporting envi- ronment—from internal controls to audit expectations— shaped by institutions such as the SEC and the PCAOB. These frameworks go beyond compliance re- quirements; they define how trust is built and sustained inglobalmarkets. Ultimately,successliesnotinchoosingone standard over another, but in mastering both. In Luxembourg and beyond, orga- nizations that invest in this dual fluency are not only better equipped tomeet reg- ulatory expectations, they are better posi- tioned to seize opportunity in an increasingly global financial landscape. From Compliance to Opportunity The US GAAP shift you didn’t see coming I nvestment Funds in Luxem- bourg (colloquially referred to as the “IFL” or even more informally as the “Fund Bible”) is a technical guide that outlines Luxembourg as a location for in- vestment funds, detailing the types of fund vehicles available and providing an overview of the regulations relevant to the establishment and operation of such funds. The guide also describes the regulatory framework for both traditional and alternativemanagement companies, as well as provisions applicable to other service providers in Luxembourg. This 600-page publication has offered refer- ence information on legislative and reg- ulatory developments affecting the fund industry in Luxembourg and Europe over the previous year formore than 25 years. Nicolas Bannier, EY Luxembourg Chief Operating Officer and Wealth andAsset Management Leader, intro- duces this latest edition. “Luxembourg continues to lead the global cross-bor- der fund landscape, with nearly half of the EUR 7 trillion in cross-border assets under management as of December 2024. Its reputation for robust infrastructure, regulatory expertise and innovation keeps it at the forefront of the industry. And, with 10% of UCITS held outside Europe, the global appeal of European fund structures remains strong,” says Bannier. But, market consolidation driven by fee compression is reshaping the com- petitive landscape, especially in Europe where passive strategies and ETFs are on the rise. This trend favors larger players, pushing smaller firms to rethink their operating and distri- bution models. Private markets offer diversification and return potential but require new liquidity solutions (such as tokeniza- tion) to meet investor expectations. Meanwhile, digital-native investors are challenging traditional distribution channels, prompting Luxembourg to evolve its approach to fund access and engagement. Looking ahead, regulatory develop- ments like the ESG omnibus directive, the Savings and Investments Union, and DORA are setting the stage for a more integrated and resilient financial ecosystem. Bannier comments, “For Luxembourg to maintain its leadership, it must become not only a hub for fund oper- ations but also a center for strategic thinking and technological innovation. Building ecosystems that support both fund structuring and strategy design will be key to shaping the future of the industry. It is now time to build the ecosystems that will support the design of strategies and development of technology.” To download a digital version of the Investment Funds in Luxembourg guide, please visit www.ey.com/en_lu/investment-funds. 2025 edition of the “Investment Funds Luxembourg” report - EY Luxembourg Now is the time to build what comes next from left to right:Micaela Forelli -M&GLuxembourg, RobertWhite - EYLuxembourg, Laurent VanBurik -CommissiondeSurveillanceduSecteurFinancier(CSSF),SergeWeyland-AssociationoftheLuxembourg Fund Industry (ALFI) andNicolas Bannier - EYLuxembourg ©EY