Carried interest taxation: the European landscape
Over the past 15 years, many European countries (including the UK) have introduced specific regimes for taxing carried interest. The UK’s statutory regime for taxing carried interest was introduced in 2015 in the form of the disguised investment management fee (DIMF) rules and carried interest rules. The UK carried interest regime supplements rather than replaces the general UK tax rules, meaning that both sets of rules need to be considered when determining the UK tax treatment of carried interest. France, Germany, Italy and Spain have also implemented specific regimes for taxing carried interest. While each regime has different conditions, qualifying carried interest is typically taxed at between 25% and 30%. The UK regime is largely an anti-avoidance regime, whereas European regimes, by contrast, were developed in order to attract international capital and fund managers to those jurisdictions, resulting in tax regimes that are at least as attractive as the UK rules.