Global mobility and investment funds

Session Co-Chairs

Jacquie Duval, Perkins Coie, Seattle
Thierry Lesage, Arendt and Medernach

Speakers

Lukas Aebi, Lenz and Staehlin, Zurich
Patricia Allen, Ashurst, London
Imme Kam, Loyens and Loeff, Amsterdam
Eugenio Romita, Giovannelli, Milan
Adam Tejeda, K&L Gates, New York

Reporter

Natalia Roos
Altenburger, Zurich
roos@altenburger.ch

Introduction

The panel discussed the increasing importance of global mobility in the context of investment funds, focusing on the tax implications of cross-border movement of fund managers, investors and fund structures. The discussion highlighted that mobility is no longer limited to the relocation of fund entities but increasingly involves individual mobility, remote working, investor changes and structural evolution of funds.

The speakers emphasised that while mobility has traditionally not been a primary concern, it is becoming increasingly relevant due to its potential impact on tax residency, permanent establishment (PE) and fund structuring considerations. The panel explored developments across multiple jurisdictions, including Italy, Luxembourg, Switzerland, the United Kingdom, the Netherlands and the United States.

Panel discussion

Special regimes for fund managers

Eugenio Romita opened with Italy. He described two regimes that together create a particularly attractive opportunity for fund managers. First, the Italian ‘new residence’ regime provides for a flat annual tax of €300,000 on foreign source income, including carried interest where properly structured under domestic law. Second, the inbound workers regime significantly reduces taxation on Italian employment income. Most notably, until the end of 2026 these two regimes may still be combined, allowing carried interest to benefit from the flat tax while Italian employment income simultaneously receives a 50 per cent reduction. The panel noted that this combination has become especially attractive following changes to the UK tax regime.

Thierry Lesage then outlined Luxembourg’s new tax framework for fund managers, effective from 2026. The regime distinguishes between ‘investment carry’, where carried interest is embedded in an investment acquired against payment (typically via a Luxembourg SCSp or foreign partnership), and purely contractual carried‑interest rights. For investment carry, income can be fully exempt from tax if the carry units are held for at least six months. For contractual carry, the proceeds are treated as extraordinary income but taxed at only one quarter of the global tax rate, resulting in an effective rate of around 12 per cent. The panel emphasised that Luxembourg’s policy objective is clear: attracting high-income individuals and investment professionals to establish tax residence in Luxembourg.

Lukas Aebi presented the Swiss perspective. He underlined that Swiss lump‑sum taxation regime is generally not available to active fund managers. They are therefore usually taxed on an ordinary basis on worldwide income and wealth. Although Switzerland continues to benefit from generally favourable capital gains treatment, the absence of a competitive carried interest regime places Switzerland at a comparative disadvantage compared to Italy and Luxembourg.

Patricia Allen gave a detailed UK update. She stressed that, despite public focus on the abolition of the non-domicile regime, the UK has simultaneously introduced two new regimes for individuals who become UK tax resident after a consecutive ten‑year period of non‑residence, both effective from 6 April 2025: the Foreign Income and Gains (FIG) regime and a separate foreign employment income regime. More radical changes arise from the new carried‑interest regime effective from 6 April 2026. Historically, UK carried interest taxation depended largely on the character of the underlying income or gains generated by the fund. Under the new rules, however, carried interest is now treated as trading income. This represents a significant conceptual shift and creates substantial implications for internationally mobile managers. The new regime also distinguishes between ‘qualifying’ and ‘non-qualifying’ carried interest. Qualification depends primarily on average holding periods of underlying investments. Qualifying carried interest benefits from a significantly lower effective tax rate than non-qualifying carry. These holding-period calculations are highly technical and will require continuous monitoring by funds. The practical implications for non-residents were considered particularly significant. Under the new regime, non-resident managers who exceed certain UK working-day thresholds may become taxable in the UK even if they are otherwise resident abroad. Panellists repeatedly stressed the importance of carefully tracking working days and maintaining detailed records. The discussion highlighted concerns that the new UK rules may discourage internationally mobile investment professionals from conducting business activities in the UK.

Imme Kam rounded off the country tour with developments in the Netherlands. Dutch law treats heavily leveraged or performance‑linked management equity as ‘lucrative interest’. Direct holdings are generally taxed as employment or other income at progressive rates up to 49.5 per cent. By interposing a Dutch management company and ensuring that at least 95 per cent of the benefits are distributed to the individual shareholder in the same calendar year, those returns can be taxed at lower dividend/capital‑gain rates (24.5–33 per cent).

Kam highlighted a recent Dutch Court of Appeal ruling involving a German resident who worked for a Dutch company and held a direct lucrative interest in a Dutch company. The Dutch tax authorities argued that the income was disguised remuneration taxable in the Netherlands as employment income. The Court disagreed, holding that, under the Netherlands–Germany double tax treaty, the income was obtained in the taxpayer’s capacity as shareholder and therefore fell under the dividend and capital gains articles, allocating primary taxing rights to Germany.

US perspective

Adam Tejeda provided a US perspective, noting that mobility is generally understood as individual relocation rather than fund relocation. He discussed the implications of US tax rules, including withholding obligations under partnership rules and the challenges associated with determining effectively connected income.

He also emphasised that while relocation of managers to the US can trigger individual-level tax consequences, it does not necessarily change the fund’s tax profile where structures are properly designed. However, unclear governance or decision-making authority may require restructuring and increased scrutiny.

Remote work and permanent establishment risks

Another particularly interesting topic concerned the OECD’s recent commentary on remote work and home-office permanent establishments.

The panel analysed scenarios where investment professionals relocate temporarily or permanently to another jurisdiction while continuing to perform services for a management company located elsewhere. Traditionally, PE analysis for home offices focused heavily on whether the employer had the premises ‘at its disposal’. However, panellists suggested that the OECD’s recent revisions have shifted the focus toward whether there are ‘commercial reasons’ for the employee’s presence in the jurisdiction. According to the panel, where a fund manager’s presence in another jurisdiction facilitates interactions with portfolio companies or contributes to core investment activities, tax authorities may increasingly argue that a PE exists.

The panel also discussed the interaction between remote work and anti-fragmentation rules. Even where the activities of a single remote employee might appear preparatory or auxiliary, multiple employees operating together in one jurisdiction may collectively create sufficient substance for a PE. This issue is particularly relevant in the post-pandemic environment where remote work arrangements have become common throughout the financial industry.

Italy was described as taking a particularly aggressive approach to PE analysis in this context. Panellists noted that Italian tax authorities may attempt not only to assert a PE for the management company, but potentially also for the fund itself or intermediate holding entities.

The Netherlands and Switzerland appear to adopt a somewhat more pragmatic position. Published Dutch rulings suggest that no PE may arise where employees relocate primarily for personal reasons rather than for the commercial benefit of the employer.

Investor mobility and fund structures

The panel further examined how mobility affects investors and fund structures. It was noted that investor mobility becomes relevant particularly in scenarios such as secondary sales of fund interests, continuation funds, evergreen funds and retailisation.

The speakers highlighted that increased secondary market activity leads to more frequent ownership changes, placing pressure on initial tax assumptions. Continuation funds raise additional complexity due to differences in tax treatment across jurisdictions, particularly regarding tax deferral. In the US, continuation structures are often designed to permit tax-deferred rollovers and the reinvestment of carried interest proceeds. However, panellists emphasised that equivalent rollover relief may not be available in many non-US jurisdictions. As a result, globally coordinated continuation transactions can create mismatches where some participants achieve tax deferral while others trigger immediate taxable gains.

The discussion also highlighted an issue involving management-carried interest in continuation transactions. Where the buyer and seller funds are managed by related entities within the same sponsor group, some jurisdictions may question whether a genuine ‘change of control’ has occurred. This can become problematic where carried interest tax benefits depend on a qualifying disposal event. The panel suggested that economic substance and alignment-of-interest principles may nevertheless support favourable treatment in certain cases.

Evergreen funds were another major focus. Unlike traditional closed-end private equity funds, evergreen vehicles permit continuous subscriptions and periodic redemptions. This creates a fundamentally different tax environment because investor composition changes constantly over time. Panelists emphasised that evergreen structures create ongoing treaty and anti-deferral challenges. Investors relocating during the life of the fund may unexpectedly lose treaty benefits or become subject to passive foreign investment company (PFIC) or controlled foreign corporation (CFC) regimes that were irrelevant when they initially subscribed. Because evergreen structures lack a natural ‘reset point’, managers may struggle to balance investor-specific tax outcomes with the need for operational consistency across the fund platform.

The panel concluded that these developments demonstrate how investment fund taxation increasingly requires dynamic and ongoing management rather than static structuring at formation.

Conclusion

In closing, the panel agreed that the combination of internationally mobile managers, remote working arrangements, evolving OECD guidance and the dynamic nature of investor bases has fundamentally changed the tax landscape for investment funds.

Overall, the panel highlighted a clear trend: investment fund taxation is moving away from a static ‘set-and-forget’ model toward a continuously evolving framework requiring constant monitoring, flexible structuring and coordinated cross-border tax advice.