Alternative Investment Funds and UCITS Luxembourg update. London, 16 November 2012

Transcription

1 Alternative Investment Funds and UCITS Luxembourg update London, 16 November 2012

2 Agenda Stream 1 : Private Equity and Real Estate Funds Stream 2 : UCITS and Hedge Funds 2

3 Stream 1: Private Equity and Real Estate Funds Camille Bourke, Partner, London Representative Office Gilles Dusemon, Partner, Co-Head of Private Equity Thierry Lesage, Partner, Tax Law London, 16 November 2012

4 2013 Luxembourg challenges & opportunities Challenges in Luxembourg Integration of AIFMD into Luxembourg legal framework Domestic and international tax developments Opportunities for Luxembourg AIFMD and UCITS: convergence of servicing models and infrastructure Modernisation of LP regimes 4

5 AIFMD IMPLEMENTATION UPDATE 5

6 AIFMD Implementation Update Bill implements AIFMD 1 to 1 Bill levies depositary function option for real assets funds Bill introduces AIF classification for Luxembourg regulated fund products (UCI, SIF, SICAR) Bill modernises existing Luxembourg partnership regimes Bill introduces special limited partnership Bill introduces carried interest regime Bill extends VAT management services exemption to AIF 6

7 AIFMD APPLICATIONS 7

8 Question n 1: Do we have an AIF (*)? (*) Definition AIF = collective investment undertaking which raises capital from a number of investors in order to invest it in accordance with a defined investment policy 8

9 Question n 2: Do we have an AIFM (*)? NO: the AIF is the AIFM (= self-managed) YES: who is it? Go to Question N 3 (*) Definition AIFM= means legal persons whose regular business it is to manage one or more AIFs 9

10 Question n 3: Who is the AIFM? GP(*) SCA(**) * = AIFM GP(*) SCA(**) GP(*) SCA(**) AIFM (*) GP: managing general partner (associé commandité gérant) (**) SCA: corporate partnership limited by shares (société en commandite par actions) 10

11 Question n 3: Who is the AIFM? * = AIFM GP SCS/CLP GP(*) SCS/CLP GP(*) SCS/CLP AIFM (*) GP: managing general partner (associé commandité gérant) (**) SCS: common limited partnership/clp (société en commandite spéciale) 11

12 Question n 3: Who is the AIFM? * = AIFM GP SCSp./SLP GP(*) SCSp./SLP GP(*) SCSp./SLP AIFM (*) GP: managing general partner (associé commandité gérant) (**) SCSp.: special limited partnership/slp (société en commandite spéciale) 12

13 Question n 3: Who is the AIFM? * = AIFM MANCO FCP MANCO(*) FCP(**) MANCO(*) FCP(**) AIFM (*) MANCO: management company (société de gestion) governed by Chapter 15/16 of the 2010 UCI Law (**) FCP: common fund (fonds commun de placement) 13

14 Question n 3: Who is the AIFM? * = AIFM SA(*) / SARL(**) (SIF/SICAR/UCI) AIFM SA(*) / SARL(**) (SIF/SICAR/UCI) (*) SA: public limited liability company (société anonyme) (**) SARL: private limited liability company (société à responsabilité limitée) 14

15 Structuring Challenges Delegation letter-box rule: WAITING FOR Level 2 AIFM Passport structuring issues 15

16 Structuring Option (I) * = AIFM Lux. GP Lux SCS Lux. AIFM Lux. Depositary Lux SPV London Branch UK Adviser 16

17 Structuring Option (II) * = AIFM Lux. GP Lux SCS London AIFM Lux. Depositary Lux SPV Luxembourg Branch 17

18 LIMITED PARTNERSHIP MODERNISATION 18

19 Modernisation of Luxembourg partnership regimes How? AIFMD Bill When? - expected Q Outcome? 1. Complete overhaul of the common limited partnership (SCS/CLP) 2. Creation of the special limited partnership (SCSp/SLP) 3. Modernisation of the corporate partnership limited by shares (SCA) Objectives? modernise/expand Luxembourg legal/product toolbox 19

20 SCS/CLP SCSp./SLP Legal personality Yes No Limited Partnership Agreement Covers all but if silent, statutory default provisions kick in Same Admission of LPs As per LPA Same Management Allocation of functions between GP & LPs Voting rights General Partner or designated manager (i.e., AIFM) Clarification external/internal management As per LPA: none, limited or multiple Same Same Same 20

21 SCS / CLP SCSp. / SLP Accounting/ capital accounts Approval of accounts & publication Partnership accounting Yes & Yes Same No & No Legal title to assets In the name of the CLP In the name of the SLP Contributions In kind, in cash or sweet equity, loan/capital or combination possible Same 21

22 SCS / CLP SCSp. / SLP Default, Excuse, Transfer Provisions Confirmed Same Profit allocations As per LPA Same Return of capital Unrestricted as per LPA Same Termination As per LPA Same 22

23 TAX & AIFMD 23

24 Comparative table Tax aspects UCI / SIF SICAR SOPARFI 1. Direct tax (CIT and MBT) Tax exemption (+ transparency for FCP) Tax transparent or taxable with specific exemption Taxable at 28.80% but dividends, liquidation proceeds and capital gains are exempt under certain conditions 2. WHT No No 15% on dividends (except participation exemption or treaty reduction) 3. DTT Limited access Yes in principle Yes 24

25 Comparative table Tax aspects UCI / SIF SICAR SOPARFI 4. EU aspects No access to parentsubsidiary directive Access to parentsubsidiary directive depends on other country s analysis Access to parentsubsidiary directive 5. Registration duty EUR 75 EUR 75 EUR Subscription tax 0.05% (UCI) 0.01% (SIF) subscription tax with exemptions n/a n/a 7. VAT VAT exemption on management services VAT exemption on management services No VAT registration (except performance of taxable activity) 25

26 Luxembourg Common Limited Partnership (SCS) Current tax treatment: Tax transparent vehicle in principle not subject to CIT, WHT or MBT except if business-tainted (Geprägetheorie): i. MBT applies ii. Non-resident partners are deemed to have a permanent establishment in Luxembourg Business-taint theory not applicable to SCS with SICAR or SIF status Possible structuring options: non corporate GP (SCOSA) (foreign GP is not a viable option from a corporate perspective) 26

27 SCS SIF with SCOSA as GP Lux GP Investors LP Investors LP SCS carried interest partner SCOSA GP SCS as carried interest partner with SCOSA (société coopérative sous forme de société anonyme) as GP : SCS not subject to MBT non-resident investors not SCS SIF subject to income tax or net wealth tax Lux HoldCo no WHT on distributions Target Target Target 27 AIF and UCITS, Luxembourg update 16 November London

28 SCS SICAR Lux SARL GP Investors SCS SICAR Lux HoldCo Foreign Carry LP Target Target Target SCS SICAR with Lux GP: SCS SICAR not subject to MBT non-resident investors not subject to income tax or net wealth tax no WHT on distributions no DTT access 28 AIF and UCITS, Luxembourg update 16 November London

29 SCS / SCSp proposed treatment Proposed tax changes: Assimilation of SCSp (new vehicle) to SCS Limitation of business-taint theory applicable to SCS and SCSp Business-taint only if the GP is a Luxembourg limited liability company, which holds at least 5% of the partnership interests 29

30 SCS / SCSp proposed changes Lux SARL GP <5% Investors Foreign Carry LP SCS/SCSp with Lux GP: SCS not subject to MBT non-resident investors not SCS/SCSp subject to income tax or net wealth tax Lux HoldCo no WHT on distributions Target Target Target 30 AIF and UCITS, Luxembourg update 16 November London

31 AIF established abroad Foreign countries Luxembourg Country A Country B Country C AIF AIF AIF Exemption from Luxembourg taxation (CIT, MBT and NWT) of AIF established outside Luxembourg BUT with their place of effective management or central administration in Luxembourg ManCo 31

32 AIF and VAT Proposed extension of the VAT exemption to AIF management services The question of what is an AIF and what is not is therefore essential when setting up the AIF structure: either full VAT taxation structure (with input VAT recovery) or large VAT exemption structure (without input VAT recovery) The VAT exemption does not require the AIFM to be regulated 32

33 AIF and VAT Definition of AIF for the purposes of the VAT exemption: is VAT exempt the management of AIFs as defined by article 1, point (39) of the Luxembourg AIFM law article 4 of AIFMD: AIFs means collective investment undertakings which ( ) Exclusions: holding companies (multinationals) quid Soparfis? undertakings investing the private wealth of investors without raising external capital 33

34 AIF and VAT Broad scope of interpretation of fund management services concept in Luxembourg: administrative management portfolio management, including investment advisory services Attention: C-275/11 to be continued except legal, audit, isolated services and set-up costs 34

35 AIF and VAT Conclusions: importance to qualify the status of the vehicle (as AIF or not) impact of the VAT status of the vehicle on the structuring of the fee flows global assessment of the VAT costs in the entire structure (including any sub-contracting party) new VAT issues (new service providers) 35

36 Taxation of carried interest Scope: Luxembourg resident individuals, employed by AIF or by AIFM/ManCo Carried interest : extraordinary income, taxable at 1/4 of the global rate Capital gains realised after 6 months: not taxable, except if substantial shareholding (direct or indirect holding of 10% of capital at any time during the 5 preceding years taxable at 50% of the global rate) 36

37 Contact us Camille Bourke Partner Investment Funds Tel : camille.bourke@arendt.com Gilles Dusemon Partner Co-Head of Private Equity Tel : gilles.dusemon@arendt.com Thierry Lesage Partner Tax Law Tel : thierry.lesage@arendt.com

38 Stream 2: UCITS and Hedge Funds Claude Kremer, Partner, Head of Investment Management Michèle Eisenhuth, Partner, Investment Funds Isabelle Lebbe, Partner, Investment Funds London, 16 November 2012

39 Statistics Number of Funds Number of Management Companies SICAR SIF Part II Chapter 15 Mancos Chapter 16 Mancos 500 Part I Source: CSSF 39 AIF and UCITS, Luxembourg update 16 November London

40 CSSF Circular 12/546: Luxembourg Rules on Substance Conducting officers Board composition SIAG and administrative center Organizational rules Promoter requirement Recognition by foreign countries 40 AIF and UCITS, Luxembourg update 16 November London

41 AIFMD Status of Luxembourg implementation Draft Bill of Law Beyond AIFMD? Tax matters Specific rules under AIFMD relating to Prime Broker Interaction with depositary Super ManCo combining UCITS and AIFMD licenses Advantages and drawbacks 41 AIF and UCITS, Luxembourg update 16 November London

42 Latest Evolution of UCITS Framework VAT and advisory fees ESMA Guidelines on ETF and other UCITS issues dated 25 July 2012 Status Effectiveness Implementation in Luxembourg Key points UCITS V and UCITS VI Timeline for UCITS V proposal Timeline for UCITS VI Consultation Key points of UCITS VI 42 AIF and UCITS, Luxembourg update 16 November London

43 2 points of interest confirming the attractiveness of Luxembourg 1) The Luxembourg VAT Law is proposed to be amended so as to extend the scope of the VAT exemption for fund management services to the AIFs: The VAT exemption does not require the AIFM to be regulated The question of what is an AIF and what is not is essential when setting up the AIF structure: Either full VAT taxation structure (with input VAT recovery) Or large VAT exemption structure (without input VAT recovery) 43 AIF and UCITS, Luxembourg update 16 November London

44 2) Conclusions of the AG in C-275/11 dated 8 Nov 2012: The VAT exemption for fund management services also applies to investment advisory services which are specific and distinct in nature, and provided that the service is found to be autonomous and continuous in respect of the activities actually performed by the recipient of the service Still to be confirmed by the CJEU in the first quarter AIF and UCITS, Luxembourg update 16 November London

45 Contact us Michèle Eisenhuth Partner Investment Funds Tel : michele.eisenhuth@arendt.com Isabelle Lebbe Partner Investment Funds Tel : isabelle.lebbe@arendt.com Claude Kremer Partner Investment Funds Tel : claude.kremer@arendt.com