Comparison table of Luxembourg investment vehicles Chevalier & Sciales
The purpose of this memorandum is to set out the different investment vehicles (regulated, lightly regulated and unregulated) that Luxembourg offers to foreign investors such as private equity investors, real estate investors and hedge fund investors. We have drafted hereafter a comparative table outlining the main features of the different investment vehicles. Applicable legislation Law of 17 December 2010 - Part I ( UCITS Law ) Law of 17 December 2010 - Part II ( UCI Law ) Law of 13 February 2007 ( SIF Law ) Law of 15 June 2004 ( SICAR Law ) Law of 11 May 2007 ( SPF Law ) Law of 22 March 2004 ( Securitization Law ) Law of 10 August 1915 ( 1915 Law ) Eligible investors Well-informed investors Well-informed investors Restricted to: A well-informed investor shall be an institutional investor, a professional investor or any other investor who has stated in writing that he adheres to the status of well-informed investor and: he invests a minimum of 125,000 Euro in the SIF, or he has been subject of an assessment made by a credit institution, by an investment firm or by a management company certifying his expertise, his experience and his knowledge to adequately appraise an investment in the SIF. natural persons acting in the context of the management of their personal wealth; management entities acting solely in the interest of the private wealth (e.g. trusts, private foundations); and intermediaries acting for the account of the above mentioned eligible investors (e.g. bank acting under a fiduciary agreement). Eligible assets Restricted to: transferable securities; money market instruments; units of UCITS and/or UCIs; Unrestricted The investment objective and strategy of the fund is subject to the prior approval of the CSSF. Any kind of assets can be integrated or any type of investment strategies may be pursued. Restricted to investments in securities representing risk capital. According to the CSSF Circular 06/241, investment in risk capital is to be understood as the direct or Restricted to acquisition, detention, management and realization of financial assets. The SPF is not allowed to carry out commercial activities or to hold Securitization of any kind of risks relating to claims, other assets, or obligations assumed by third parties or inherent to all or part of the bank deposits; financial derivative instruments, indirect contribution of assets to entities in view of their launch, their development or their listing on a directly real estate (except for its own use or through its participations). activities of third parties. ancillary liquid assets eligible stock exchange. up to 49% according to market practice; and The SICAR is not allowed to invest directly in real estate (except for its hedge fund indices. Please note that the eligibility of the own use or through its participations). asset must be ascertained on a case-by-case basis in view of the applicable laws and regulatory practice.
Risk diversification Risk diversification requirements are Risk diversification requirements are Risk diversification requirements are No risk diversification requirements. No risk diversification requirements. No risk diversification requirements. No risk diversification requirements. requirements provided by articles 42 et seq. of the UCITS Law, e.g. (not exhaustive): defined by IML Circular 91/75 (as amended by CSSF Circular 05/177). defined by CSSF Circular n 07/309. Such requirements are less stringent a UCITS may invest no more than 10% of its assets in Such requirements are less stringent than the ones applicable to UCITS. than the ones applicable to UCITS and UCI. transferable securities or In particular, a UCI is not allowed to In particular, a SIF is not allowed to money market instruments invest more than 20% of its net invest more than 30% of its net issued by the same body; assets in securities issued by any assets in securities of the same type a UCITS may not invest more one issuer. of issuer. than 20% of its net assets in Specific restrictions concerning deposits made with the same funds adopting an alternative body; investment strategy are contained in the global exposure relating to CSSF Circular n 02/80. derivative instruments does not exceed the total net value of the UCITS portfolio. Legal Form FCP FCP FCP SA SA A securitization vehicle may be set In practice, a SOPARFI is only set SICAV (SA) SICAV (SA) SICAV (SA, Sàrl, SCA, SCoSA) Sàrl Sàrl up in the form of a company (SA, Sàrl, SCA, SCoSA) or a fund up under one of the following legal forms: SICAF (SA,SCA) All of these entities must be openended. SICAF (SA, Sàrl, SCS, SCA) The entities may be open-ended or closed-ended. SICAF (SA, Sàrl, SCA, SCoSA) The entities may be open-ended or closed-ended. SCA SCS SCoSA SCA SCoSA consisting of one or several coownerships or one or several fiduciary estates and managed by a management company. SA Sàrl SCA Segregated compartments Yes Yes Yes Yes No Yes No Capital requirements FCP: FCP: EUR 1,250,000 to be reached within EUR 1,000,000 to be reached within Depends of the form: If the securitization vehicle is set up Depends of the form: EUR 1,250,000 to be reached within 6 months from the EUR 1,250,000 to be reached within 6 months from the 12 months from the approval by the Luxembourg regulator. 12 months from the approval by the Luxembourg regulator. SA / SCA: EUR 31,000 as a company, it depends of the form: SA / SCA: EUR 31,000 approval by the Luxembourg regulator. Self managed SICAV / SICAF: approval by the Luxembourg regulator. Self managed SICAV / SICAF: Sàrl: EUR 12,500 SCoSA: no minimum capital SA / SCA: EUR 31,000 Sàrl: EUR 12,500 Sàrl: EUR 12,500 EUR 300,000 at the date of EUR 300,000 at the date of If the securitization vehicle is set up authorisation and EUR authorisation and EUR as a fund, there is no minimum 1,250,000 within 6 months 1,250,000 within 6 months capital requirement. following its authorisation. following its authorisation. Net asset value (NAV) The UCITS must make public the The UCIs must make public the At least once a year for reporting Not required. Not required. Not required. Not required. calculation and redemption frequency issue, sale and repurchase price of their units each time they issue, sell and repurchase their units, and at issue, sale and repurchase price of their units each time they issue, sell and repurchase their units, and at purposes. least twice a month. least once a month.
Corporate income tax No corporate income tax No corporate income tax No corporate income tax Rate: 28,80% No corporate income tax Rate: 28,80% Rate: 28,80% Since 1 st January 2011, the applicable rate is 28.80%: 22.05% Corporate income tax (21% plus 5% unemployment surcharge thereon) 6.75% municipal business tax applicable in the municipality of Luxembourg In 2013, the applicable rate will be Income derived from transferable securities (e.g. dividends received and capital gains realized on the sale of shares) is exempt. Income on cash held for the purpose of a future investment is also exempt (for one year). Securitization vehicles should be able to deduct from their gross profits their operational costs and the dividends or interests distributed to the shareholders / creditors. Therefore securitization companies should not generate significant taxable profits and should therefore to a large extent be tax neutral. 29,22%. Subscription tax (NAV: net asset value) Rate: 0.05% of the NAV Reduction: 0.01% of the NAV in certain specific cases) Rate: 0.05% of the NAV Reduction: 0.01% of the NAV in certain specific cases) Rate: 0.01% of the NAV Tax exemptions: certain money market and pension No subscription tax. Annual subscription tax of 0.25% on the amount of paid up capital and issue premium (if any). No subscription tax. No subscription tax. Tax exemptions: special institutional money market cash funds, special pension funds Tax exemptions: special institutional money market cash funds, special pension funds funds or SIFs investing in other funds which are already subject to subscription tax. (including pension pooling (including pension pooling vehicles) and funds investing in vehicles) and funds investing in other funds which are already other funds which are already subject to subscription tax. subject to subscription tax. Wealth tax No wealth tax No wealth tax No wealth tax No wealth tax No wealth tax No wealth tax Rate: 0.5% of the NAV Withholding tax on dividends / interests and capital gains Dividends distributed by a Luxembourg company are in principle subject to withholding tax at a rate of 15%, unless a domestic law exemption or a lower tax treaty rate applies. Benefit from Double Tax Treaty network Limited to funds set-up in the form of a SICAV / SICAF only. Limited to funds set-up in the form of a SICAV / SICAF only. Limited to funds set-up in the form of a SICAV / SICAF only. Yes (only if the SICAR is set up as a corporate entity, except SCS) No Yes Yes Limited to certain double tax Limited to certain double tax Limited to certain double tax treaties. treaties. treaties. Benefit from the EU Parent Subsidiary Directive No No No In principle yes, but certain jurisdictions where the target companies are located may challenge the application of the directive. No Yes Yes
Authorisation and supervision by the CSSF Yes Yes Yes Yes No No (unless continuous issues of securities to the public) No Possibility of listing Yes Yes Yes Yes, but difficult in practice. No Yes Yes European passport Yes No No (but will be introduced, under certain conditions, by the transposition of the AIFM Directive) No No No No Thin capitalization rules Borrowing of up to 10% of net Borrowing of up to 25% of net No debt-to-equity ratio. No debt-to-equity ratio. Tax of 0.25% on the debt that No debt-to-equity ratio. No provision in Luxembourg law. (debt-to-equity ratio) assets to finance redemptions (it should be a short term borrowing and cannot be for investment purposes) or to buy real estate for its business. assets without any restrictions are allowed. exceeds 8 times the paid-up capital increased by the issue premium. However the Luxembourg authorities use a 85/15 debt-toequity ratio. If this ratio is not respected and an interest is paid on the excess debt on a loan, this may The total borrowing under the above be considered as a hidden dividend may not exceed 15% of net assets. distribution subject to a withholding tax of 15% (such interest is then not deductible). Required Luxembourg service providers Management Company in case of an FCP Management Company in case of an FCP Management Company in case of an FCP No Management Company (if the securitization vehicle is set up in the form of a fund) No depository institution (unless subject to approval by Independent auditors (depending on the form of the company). the CSSF) No administrative agent (if managed by the securitization company itself) Practical use Highly regulated vehicle which can Investment funds which do not meet Hedge funds Private equity and venture capital Individuals wishing to optimize their Securitization of a portfolio of Can be used for various reasons be sold to all types of investors and cross-border into any other EU Member State. the criteria set by the EU Directives. Private equity and venture capital Real estate transactions transactions. personal tax planning (private wealth management purposes). securities Securitization as structure for intra group financing activities such as a holding company or for private equity investments through the use of hybrid financial instruments. Real estate securitizations The choice between one of the above vehicles will be made on a case-by-case basis and can be influenced by different parameters (such as amongst others the type of investments, investment policy and strategy, geographical location of investors and target companies, etc.). Copyright Chevalier & Sciales 2013
For more information, please contact: Olivier Sciales Partner Email address: oliviersciales@cs-avocats.lu Rémi Chevalier Partner Email address : remichevalier@cs-avocats.lu Chevalier & Sciales Law firm 51 Route de Thionville, L-2611 Luxembourg Tel : +352 26 25 90 30 Mobile : +352 621 531 146 Website : www.cs-avocats.lu The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Copyright Chevalier & Sciales 2013