accounting, legal and tax environment

Transcription

ACCOUNTING, LEGAL
AND TAX ENVIRONMENT
Luxembourg
ACCOUNTING, LEGAL AND TAX ENVIRONMENT Luxembourg
CREDIBLE
RELIABLE
CONNECTED
This guide has been prepared by alterDomus S.à r.l.
to provide general background information
on Luxembourg both for investors wishing to establish
a company in the Grand Duchy of Luxembourg
and for those already operating on the local market.
What follows is an overview of the regulations applying
to companies (often known as soparfi – sociétés
de participation financière) from a legal, accounting
and tax perspective. Also discussed in this context
are the following vehicles :
• investment company in risk capital (SICAR),
• specialised investment fund (SIF),
• securitisation vehicle,
• private wealth investment vehicle (SPF).
The guide takes into account the main legal provisions
in force as of 1st January, 2013.
Although the greatest care has been taken in preparing
this guide, it is not intended as a complete study on all
applicable legislation nor has it been written with a view
to providing legal advice on any matter. Furthermore,
the data furnished is subject to continuous change.
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PREFACE 3
INTRODUCTION TO LUXEMBOURG
History General Political environment Advantages offered by Luxembourg 8
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SECTION I - CORPORATE LAW
1. FUNDAMENTALS OF CORPORATE LAW
1.1. General framework
1.2. Overview of different company structures
1.2.1. Société anonyme (S.A.) – Public company limited by shares
1.2.2. Société européenne (S.E.) – European company 1.2.3. Société en commandite par actions (S.C.A.) – Corporate partnership limited by shares 1.2.4. Société à responsabilité limitée (S.à r.l.) – Private limited company 1.2.5. Société en commandite simple (S.C.S.) – Limited corporate partnership 1.2.6. Société en nom collectif (S.N.C.) – General corporate partnership 1.2.7. Société civile (S.C.) – Civil company 1.2.8. Société coopérative (S.Coop.) – Cooperative company 1.3. Dividend distribution 2. OTHER APPLICABLE LAWS 2.1. Protection of personal data 2.2. Anti-money laundering 2.3. Domiciliation of companies 2.4. CBL Reporting Obligations 12
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SECTION II - ACCOUNTING LAW
1. FUNDAMENTALS OF ACCOUNTING LAW 1.1. Regulatory accounting framework 1.2. Statutory accounts 1.3. Consolidated accounts
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1.4. Filing and publications 23
2. AUDIT AND CONTROL 2.1. Audit of annual accounts 2.2. Contributions in kind (other than cash) 2.3. Issue of a convertible bond 2.4. Changes in the company’s legal form 2.5. Other mandatory controls 24
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1.3.1. Obligation to consolidate 1.3.2. Exemption from the obligation SECTION III - BASIC PRINCIPLES OF TAXATION IN LUXEMBOURG
1. LUXEMBOURG TAX ADMINISTRATION 2. CORPORATE TAXATION 2.1. Direct taxes 28
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2.2. Withholding taxes 31
2.1.1. Dividend income 2.1.2. Capital gains 2.1.3. Deductible expenses 2.1.4. Intellectual Property (IP) revenues 2.1.5. Net wealth tax 2.2.1. Dividends and liquidation proceeds 2.2.2. Interest 2.2.3. Royalties 2.2.4. Directors’ fees 2.3. Indirect taxes
2.3.1. Value-added tax (VAT)
2.3.2. Capital duty
2.3.3. Other transfer duties
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3. SECURITISATION VEHICLE
3.1. General overview
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3.2. Regulatory and Accounting Framework
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3.3. Corporate Framework
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3.4. Tax Aspects
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4. PRIVATE WEALTH INVESTMENT VEHICLE (SPF)
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4.2.1. Supervision and control
4.2.2. Annual report
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4.4. Tax Aspects
4.4.1. Income taxes and net wealth tax
4.4.2. Other taxes
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SECTION IV - TRANSFER PRICING REGIME IN LUXEMBOURG
1. GENERAL FRAMEWORK
2. TREATMENT OF COMPANIES CARRYING OUT INTRA-GROUP
FINANCING TRANSACTIONS
2.1. Definition of intra-group financing transactions
2.2. Application of the “arm’s length” principle
2.3. Requirements in case of request of an Advance Pricing Agreement
2.4. Content of a request for an Advance Pricing Agreement
2.5. Validity of an Advance Pricing Agreement
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SECTION V - SPECIFIC VEHICLES IN LUXEMBOURG
1. INVESTMENT COMPANY IN RISK CAPITAL (SICAR)
1.1.1. Definition and purposes
1.1.2. Parties involved
1.1.3. Investment rules
1.1.4. Valuation of the assets
1.2.1. Authorisation and supervision by the CSSF
1.2.2. Annual report and prospectus
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1.3.1. Legal forms
1.3.2. Share capital and legal reserve
1.3.3. Dividend distributions
1.4. Tax Aspects
1.4.2. Other taxes
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2. SPECIALISED INVESTMENT FUND (SIF)
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2.4. Tax Aspects
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2.1.4. Valuation of the assets
2.2.2. Annual report and paudit
2.3.1. Legal forms
2.3.2. Share capital
2.4.2. Other taxes
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3.2.2. Annual report
3.2.3. Reporting Obligations
3.3.1. Legal forms
3.3.2. Share capital
3.4.2. Other taxes
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APPENDIX
APPENDIX I – DOUBLE TAX TREATIES
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INTRODUCTION
TO LUXEMBOURG
GENERAL
Though one of the smallest countries in Europe, a combination of shrewd politics (it is a founding member
of both the European Union and the OECD) and a central location have given Luxembourg an importance
that belies its size. It has borders with France, Belgium and Germany, putting it within easy reach of some
of the largest and most important European financial and industrial centres.
Luxembourg is a demographically and linguistically diverse country. Out of a population of approximately
520,000, 43.8% of Luxembourg residents are foreign nationals. The majority of native citizens speak
Luxembourgish, though French and German are the main languages for administrative purposes.
English is also widely used as a business language.
The Grand Duchy is the largest centre for private wealth management in the European Union. Around
one hundred fourty-seven international banks have been established within its borders, and numerous
investment funds are domiciled in the country. The official unit of currency is the Euro.
HISTORY
The history of Luxembourg can be traced back to the fortress built by Siegfried,
Count of Ardennes, in 963. Thanks to its strategic position and political importance,
Luxembourg became a desirable territory in the centuries which followed.
POLITICAL
ENVIRONMENT
ADVANTAGES OFFERED
BY LUXEMBOURG
Since 1839, Luxembourg has been a representative
democracy in the form of a constitutional
monarchy. The constitution provides for division
of power among the executive, legislative,
and judiciary branches. The three dominant parties,
which alternate as coalition partners,
are the Christian Socialists, Socialists and
Liberals. Although a coalition, the government
is stable and strong, with a well-established
pro-business agenda. It is quick to make the
necessary legislative changes to assist the business
community and encourage economic growth.
Executive power is in the hands of the Grand
Duke and a cabinet consisting of Ministers and
Secretaries of State. Legislative power rests with
the chamber of deputies, elected by citizens over
the age of eighteen. Luxembourg has a reputation
for political stability and economic prosperity, with
solid growth, low inflation and low unemployment.
These aspects make Luxembourg an attractive
investment centre : In order to promote
the economic growth of the country and maintain
full employment, the policies adopted by
the Luxembourg authorities are flexible, pragmatic
and responsible.
The Duchy is an important financial centre, where
investment funds, banks, reinsurance businesses
and holding companies have expanded rapidly
during the last fifteen years. Measures are in place
to prevent money laundering, supporting
the integrity of the marketplace.
Luxembourg offers a multicultural and multilingual
environment, as well as a pool of employees
with high level professional qualifications.
Transport and communication links with other
financial centres in Europe and elsewhere are well
developed and easily accessible.
In 1684, the Duchy of Luxembourg was conquered by the Maréchal de Vauban. He recognised the natural
advantages of its surrounding cliffs and, with the assistance of approximately 3,000 labourers, created
an impregnable fortress. Known as the Gibraltar of the North, it sparked numerous battles among wouldbe conquerors, changing hands frequently.
With the Treaty of Vienna, the Duchy of Luxembourg acquired autonomy as a Grand Duchy in personal
union with the Netherlands. After the creation of Belgium, a much-reduced Luxembourg gained
independence in 1839, and in 1867 the Treaty of London was signed, guaranteeing the permanent
existence and neutrality of the Grand Duchy. As part of the treaty, Luxembourg was required to dismantle
its fortress and destroy its fortifications. Neutrality was not an absolute protection, however, as the Grand
Duchy was annexed in both World Wars. Despite suffering terrible damage in the famous Battle of the
Bulge, the country emerged as a founding member of a united Europe, exemplified by its membership in
the UN, NATO and the EU. Members of Luxembourg’s present royal family, the house of Nassau-Weilburg,
have been the heads of state since 1890 when William III, King of the Netherlands died without a male heir.
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SECTION I
CORPORATE
LAW
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1. F UNDAMENTALS
OF CORPORATE LAW
1.1. GENERAL FRAMEWORK
Luxembourg companies are in particular subject
to the law of 10th August, 1915 on commercial
companies as amended and to the law of 19th
December, 2002 on trade and company register,
accounting and annual accounts.
1.2. O VERVIEW OF DIFFERENT
COMPANY STRUCTURES
SOCIÉTÉ
ANONYME
SOCIÉTÉ
EUROPÉENNE
SOCIÉTÉ EN
COMMANDITE
PAR ACTIONS
SOCIÉTÉ À
RESPONSABILITÉ
LIMITÉE
SOCIÉTÉ EN
COMMANDITE
SIMPLE
SOCIÉTÉ EN NOM
COLLECTIF
SOCIÉTÉ
COOPÉRATIVE
MINIMUM
SUBSCRIBED
SHARE CAPITAL
EUR 31,000
(rounded)
EUR 120,000
EUR 31,000
(rounded)
EUR 12,500
(rounded)
None
None
None
MINIMUM
PAID-UP CAPITAL
25%
25%
25%
100%
None
None
None
SHARES / UNITS
Registered,
bearer or
dematerialised
Registered
bearer or
dematerialised
Registered,
bearer or
dematerialised
Registered only
Registered only
Registered only
Registered only
MINIMUM VALUE
PER SHARE/UNIT
None
None
None
None
None
None
None
CURRENCY OF
SHARE CAPITAL EUR
Any freely
convertible
EUR
Any freely
convertible
Any freely
convertible
Any freely
convertible
Any freely
convertible
Any freely
convertible
TRANSFERABILITY
OF SHARES /
UNITS
Free, subject
to restriction
in articles
of association
Free, subject
to restriction
in articles
of association
Free, subject
to restriction
in articles
of association
Restricted
Requires
unanimous
consent of all
the partners
Requires
unanimous
consent of all
the partners
Not transferable
to third parties
NOTARIAL DEED
Yes
Yes
Yes
Yes
No
No
No
PUBLIC SHARE
ISSUE
Authorised
Authorised
Authorised
Not Authorised
Not Authorised
Not Authorised
Not Authorised
PUBLIC BOND
ISSUE
Authorised
Authorised
Authorised
Not Authorised
Not Authorised
Not Authorised
Not Authorised
SHAREHOLDER
OR PARTNER
Minimum
1 shareholder
Minimum
1 shareholder
Minimum 3 :
one general
partner and
2 limited partners
1 to
40 shareholders
Minimum 2 :
one general
partner and one
limited partner
Minimum 2
Minimum 7
MANAGER OR
DIRECTOR
Minimum
management
one tier or two
tiers (1 director if
one shareholder,
otherwise
min. 3 directors)
Minimum
management
one tier or two
tiers (min. 1
or 3 directors
depending on
situations)
Minimum
1 manager,
from amongst
the general
partners
Minimum
1 manager
If not specified,
general
partner(s).
Limited partners
excluded from
management
Minimum
1 manager
Minimum
1 director
STATUTORY AUDIT
Minimum 1
(licensed
independent
auditor* required
depending on
company size)
Minimum 1
(licensed
independent
auditor* required
depending on
company size)
Minimum 3
(licensed
independent
auditor* required
depending on
company size)
If more than 25
shareholders,
minimum 1
(licensed
independent
auditor* required
depending on
company size)
If not specified,
limited partners.
If general
partners
are limited
companies,
licensed
independent
auditor* required
depending on
company size
If partners
are limited
companies,
licensed
independent
auditor*
required,
depending on
company size
Minimum
1 statutory
auditor
*English translation for “Réviseur d’entreprises agréé”
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1.2.1.
Société anonyme (S.A.) –
Public company limited by shares
A société anonyme is a company in which
the liability of each shareholder is limited to the
amount of the share capital he has subscribed.
It may be incorporated for a limited or unlimited
period of time.
To incorporate a S. A., the founder(s), who may be
individuals or legal entities, must meet in front of a
notary. They may choose to be present in person
or represented by the holder of notarised or private
proxies. Once issued, the company’s incorporation
deed is filed with the trade and company register
and published in the Official Gazette.
Articles of association for the S.A. may be drawn
up in French, German or English. In the last case,
a French or German translation must be added.
The minimum subscribed share capital amounts
to EUR 31,000 or its equivalent in any freely
convertible currency. At least 25% of the
subscribed capital must be fully paid-up in
cash or contributions in kind. As a general rule,
contributions other than cash must be reported
upon by a licensed independent auditor (réviseur
d’entreprises agréé) and must be fully paid-up
within a period of five years.
As an exemption, a report by a licensed
independent auditor is no more required when :
• the contribution is made up of transferable
securities or money-market instruments which are
traded on a regulated market ;
• the asset to be contributed have already been
subject to a valuation by a licensed independent
auditor in the last six months prior to the
contribution ;
• the contribution is made of assets whose fair
value is derived from the audited statutory
accounts of the previous financial year.
In a société anonyme, the capital is divided into
shares of equal value, with or without an indication
of their value. Shares may be in registered or
bearer form (provided that the share capital is
fully paid-up). Following the entry in force of the
law of 6th April 2013 on dematerialised securities,
the issuing of shares in dematerialised form is now
allowed. Several classes of shares may be created,
with different rights attached to each.
The company must maintain a shareholders’
register. Transfers shall be carried out by means
of a declaration of transfer entered in the said
register. The transfer of bearer shares shall be
made simply by the delivery of the certificate.
Management of the S.A. may be organised as a one
or two - tier system.
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a. One-tier system
There must be at least three directors in case
of a plurality of shareholders, otherwise one is
sufficient. These may be, but are not required
to be, shareholders. Directors are appointed by
the general meeting for a specific period, not to
exceed six years, though they may be reelected.
No nationality or residence conditions apply and
no professional qualification is required. They may
be removed from office at any time by the general
meeting. In addition, the day-to-day management
of the company and the power to represent the
company with respect thereto may be delegated
to one or more directors, officers or managers
acting either alone or jointly (délégué à la gestion
journalière).
b. Two-tier system
A management board (Directoire) and a
supervisory board are to be put in place; the latter
is to be appointed by the shareholders. In the
case of a company with a single shareholder, it
is sufficient to elect only one supervisory board
member. This board is in charge of controlling
the management board, which is appointed either
by the supervisory board or the shareholders to
manage the company. Here also, only one member
is required if there is just one shareholder.
A oneperson management board is also allowed
if the share capital of the company amounts
to a maximum of EUR 500,000. In all other cases,
a minimum of two members are required.
One or more statutory auditors (commissaire aux
comptes) are appointed by the general meeting
for a period also not to exceed six years, though
they may also be re-elected. The statutory auditor
is in charge of the control of the business of the
company. Again, no requirement is foreseen
as far as nationality, residence or professional
qualification. Companies reaching a certain size
(see below, section II. paragraph 2.1) are required
to appoint a licensed independent auditor
registered with the Commission de Surveillance
du Secteur Financier (CSSF) to audit the annual
accounts.
At least one general meeting of shareholders
must be held each year on the date and the time
indicated in the articles of association,
in the municipality of the registered office of the
company (which must be within the Grand Duchy
of Luxembourg). Other general meetings may be
held either in Luxembourg or abroad.
1.2.2.
Société européenne (S.E.) –
European company
The law of 25th August, 2006 implementing EC
Regulation N° 2157/2001 of 8th October, 2001 on
the statute for an European company (the EC
Regulation) introduced the European company
in Luxembourg.
The S.E. is a société anonyme set up in accordance
with the rules of the EC Regulation, which has
established its registered office and its central
administration in the Grand Duchy of Luxembourg.
It has the possibility to transfer its registered office
to another member state without loss of its legal
personality. It shall be governed by the provisions
of Luxembourg company law applicable to the S.A.
and by the specific provisions of the EC Regulation.
A S.E. must have a share capital of at least
EUR 120,000.
A S.E. may be formed in the following cases :
• by the merger of sociétés anonymes, provided
at least two of them are governed by the laws
of different member states ;
• a holding S.E. may be formed by sociétés
anonymes and by sociétés à responsabilité limitée
provided at least two of them are governed
by the law of the two different member states
or have for at least two years had a subsidiary
company governed by the law of another
member state ;
• a subsidiary S.E. may be formed by companies
provided at least two of them are governed
by the law of member states or have for at least
two years had a subsidiary company governed
by the law of another member state ;
• a société anonyme governed by Luxembourg
law may be converted into a S.E. if for at least
two years it has had a subsidiary governed
by the law of another member state.
1.2.3.
Société en commandite par actions
(S.C.A.) – Corporate partnership limited
by shares
Most of the provisions applicable to a société
anonyme also apply to a société en commandite
par actions. They differ in that in a S.C.A.
the financial responsibility of the limited partners
is restricted to the amount of their contribution
to the share capital. One or more general partners
have unlimited, joint and several liability for the
company’s obligations.
The name of the company must include the name
of one or more general partners ; names of limited
partners may not appear, though a brand name
may also be added.
The management of the company is carried out
by one or more general partners, appointed
as managers by the partners in the articles of
association. The supervision of the company must
be entrusted to a board composed of at least three
statutory auditors unless a licensed independent
auditor is appointed.
1.2.4.
Société à responsabilité limitée (S.à r.l.) –
Private limited company
In a société à responsabilité limitée, as few as one
and no more than forty shareholders contribute
a specific amount in counterpart of shares
represented by non-negotiable securities,
of which the transferability is restricted.
This form of company may be created for a limited
or unlimited period of time.
Insurance, capitalisation and savings companies,
may however not be incorporated under this form.
The company must be incorporated in front
of a notary, for which event the founders may
choose to be present in person or represented
by the holder of notarised or private proxies.
As above, the company’s incorporation deed is
filed with the trade and company register and
published in the Official Gazette.
The articles of association may be written
in French, German or English. In the last case,
a French or German translation must be added.
The corporate subscribed capital of a S.à r.l.
must be at least EUR 12,500 or its equivalent in any
freely convertible currency, which must be paid
in full at the time of the incorporation.
No provision is made concerning the role
of a licensed independent auditor for contributions
other than cash. The capital is divided into shares
of equal value, and the company must maintain
a register of the shareholders. The identity
of the shareholders must be published. Transfer
of shares to non-shareholders must be approved
by the shareholders holding three-quarters
of the share capital and is subject to a private
agreement or a notarial instrument.
A société à responsabilité limitée is managed
by one or more managers appointed by the
shareholders for a limited or unlimited period.
Unless otherwise provided for in the articles
of association, they may be removed for legitimate
reasons, regardless of the method of their
appointment. General meetings are not mandatory
when the number of shareholders does not exceed
twenty-five, and resolutions may in this case be
adopted by written vote. For a company with more
that twenty-five shareholders, at least one annual
general meeting must be held at a time determined
in the articles of association. The sole shareholder
exercises the power of the general meeting.
Its decisions are recorded in minutes or drawn up
in writing.
Companies with more than twenty-five
shareholders must also appoint a supervisory
board comprised of one or more statutory auditors
unless a licensed independant auditor is appointed.
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1.2.5.
Société en commandite simple (S.C.S.) –
Limited corporate partnership
1.2.6. Société en nom collectif (S.N.C.) –
General corporate partnership
1.2.8.
Société Coopérative (S. Coop.) –
Cooperative company
A société en commandite simple is a company
created by one or more general partners with
unlimited, joint and several liability for all the
obligations of the company, as well as one or
more limited partners, whose liability for debts
and losses is restricted to the amount which they
have promised to contribute. Once created, the
company becomes a legal entity separate from its
partners. From a Luxembourg tax point of view, it
is transparent. The company may be established by
notarial deed or by private instrument. Company
deeds may be filed and published by extract.
A société en nom collectif is a company in which all
the partners (at least two are required) are jointly
and severally liable without limitation for all the
obligations of the company, which is a legal entity
separate from its partners. From a Luxembourg tax
point of view, this type of company is transparent.
The company’s name can only include the names
of its partners.
A société coopérative is a company made up
of a variable number of members making variable
contributions. Their shares may not be transferred
to third parties. Members are always entitled
to resign and may also be excluded under the
conditions and terms laid out in the articles of
association. A S. Coop. has no firm name and
shall use a corporate denomination. This type of
company requires a minimum of seven members.
The members may determine their liability in the
articles of association: it may be joint and several
or just several, unlimited or not.
A S.C.S. is an unlimited company. Its name must
include the name of one or more general partners,
but never a limited partner. In the event this is
not respected, they will be considered a general
partner and will become jointly and severally
liable for the obligations of the company without
limitation.
The capital of a S.N.C. is divided into units which
may, in principle, only be transferred with the
unanimous consent of all the partners. There is no
minimum contribution requirement. Management
is undertaken by one or more managers, who are
often, but not obligatorily, chosen from among
the partners of the company. Their powers are
defined in the articles of association. Conditions
for removal / resignation of managers depend on
whether they were appointed in the articles of
association or not.
No minimum capitalisation is required for the
creation of this kind of company. Units must be
issued in registered form with a nominal value,
and any profits are distributed in proportion to the
amount contributed. Unless otherwise provided
for in the articles of association, unanimous
consent of all the partners is required to transfer
shares. The transfer becomes valid after publication
in the Official Gazette.
The company may be established by notarial deed
or private instrument. Company deeds may be filed
and published in extract.
The company may be established by notarial deed
or by private instrument. The constitutive instrument
of a S. Coop. shall be published in its entirety.
No minimum capital is prescribed by the law.
A société coopérative is managed by one or more
directors who may or may not be members (there
is no requirement). The articles of association
will determine the management rules. If nothing
is foreseen in the articles, the rules related to the
société anonyme will apply.
The distribution of profits is governed by the
articles of association. If they are silent, profits will
be allocated to the partners in proportion to their
contributions to the company.
Supervision of the company is entrusted to one
or several statutory auditors, who may or may
not be members.
If not otherwise provided for in the articles of
association, the decisions of the general meeting
are valid if made by unanimous consent.
1.2.7.
Société civile (S.C.) – Civil company
Every six months, the management of a S. Coop.
must provide the trade and company register
with a full list of members. The company is also
subject to an administrative control.
The management of the company is carried out
by the general partners. The articles of association
may delegate the management to one or more
general partners or a third party and describe
the powers of the managers. Unless otherwise
provided for in the articles of association,
any manager may be removed for legitimate
reasons, regardless of the method of his or her
appointment. Limited partners are prohibited
from involving themselves in management. If they
interfere, they shall, become jointly and severally
liable to third parties for any commitments of
the company, whether they were involved or not,
if they have regularly managed the business of
the company. Limited partners have the right to
control and supervise management.
A société civile must have at least two members,
who are jointly but not severally liable for all the
obligations of the company. It may be established
by notarial deed or by private instrument
for a limited or unlimited period.
No minimum capital is prescribed by the law,
but each member must contribute or promise to
contribute to the capital of the company. Transfer
of shares requires the unanimous consent of the
members. Unless otherwise provided for in the
articles of association, the company is dissolved
upon the withdrawal or death of a member,
and profits are divided among the members
in proportion to their contribution. The company
is managed by its members or by managers
appointed by the members ; these may be
dismissed should legitimate reasons arise.
The company is supervised by its members
or by an expert appointed by the members.
Pursuant to the law dated 10th June, 1999,
a société coopérative may also be organised
as a société anonyme (S.A. Coop.). This type
of company remains a société coopérative
with respect to its legal form but it takes from
the société anonyme most of its functioning rules.
Therefore, such type of company is governed
by the legal provisions applicable to both sociétés
coopératives and sociétés anonymes, to the extent
of the provisions of the above-mentioned law.
1.3. DIVIDEND DISTRIBUTION
Any ordinary general meeting has the power
to decide to distribute a dividend. The amount
distributable is made up of the amount of profit
at the end of the last financial year, plus any
profits carried forward and any amounts from
distributable reserves, less any losses carried
forward and amounts to be transferred to legal
or other non-distributable reserves as prescribed
by law or the articles of association.
For sociétés anonymes, sociétés en commandite
par actions, sociétés à responsabilité limitée, and
sociétés coopératives, the law dictates that a sum
amounting to at least one-twentieth of the net profit
of the financial year be allocated to a legal reserve.
This ceases to be necessary when the reserve
reaches one-tenth of the subscribed share capital.
The management of a société anonyme or
a société en commandite par actions may decide
to pay an interim dividend under the following
conditions :
a) the articles of association authorise them to do so,
b) the amount to be distributed is assessed on the
basis of up-to-date interim accounts (not older
than two months),
c) the amount to be distributed does not exceed
the profits made since the end of the last
financial year for which the annual accounts
have been approved, plus any profits carried
forward and any amounts from distributable
reserves, less any losses carried forward and
amounts to be transferred to legal or other non
distributable reserves,
d) the distribution is subject to the report
of a statutory auditor or a licensed independent
auditor who verifies that the above conditions
have been satisfied.
There is no specific provision in the law dated
10th August, 1915 concerning the distribution
of an interim dividend by a société à responsabilité
limitée. It is now widely accepted that such
a company may distribute an interim dividend,
provided that it is authorised to do so by the
articles of association.
A S.C. can prepare simplified accounts. Appointing
a statutory or external licensed independent
auditor is not mandatory.
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2. O THER APPLICABLE
LAWS
2.1. P ROTECTION OF
PERSONAL DATA
When the company records the personal
information of shareholders, employees, suppliers
or customers, the law concerning the protection
of personal data applies. Company management
must notify the national commission for protection
of personal data with regard to the nature
of the data stored and related security measures.
The law on protection of personal data foresees
certain exemptions to the principle of notification.
2.2. A NTI-MONEY LAUNDERING
KYC rules in order to prevent the utilisation
of the financial system for the purpose of money
laundering and terrorist financing require
18
that Luxembourg service suppliers obtain from
their clients information enabling them to identify
and to verify the identity of their clients and of
their ultimate beneficial owners, to understand the
structure of ownership and the purpose of the local
client company, the source and destination of the
funds and to carry out a monitoring of their clients
throughout the business relationship.
2.3. D OMICILIATION
OF COMPANIES
According to the law dated 31st May, 1999, only
an authorised domiciliary agent or a professional
agent (independent auditor (réviseur d’entreprises),
licensed independent auditor, lawyer, expertcomptable, bank or other professional
of the financial sector) is authorised to provide
a registered office to a Luxembourg company.
As an exemption, a Luxembourg company can
also have its registered office at its own address
or at the address of a company which is part of
its own group, or at the address of an individual
who is himself a direct or an indirect shareholder
exercising significant influence on the management
of its affiliate.
2.4. C BL REPORTING
OBLIGATIONS
Based on a regulation introduced by the
Luxembourg Central Bank of Luxembourg (“CBL”)
on April 29, 2011, any non-regulated Luxembourg
resident company or Luxembourg branch
of a foreign company whose main activity is to (i)
contract loans (in the capacity of borrower
or lender) or (ii) issue debt securities or derivatives
instruments in order to finance the activities
of affiliated companies (the “Issuing Company”)
must report to the CBL and provide the CBL
with statistical reports.
However, CBL established a balance sheet
threshold of EUR 500 million of total assets under
which an Issuing Company is exempted from
these obligations.
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SECTION II
ACCOUNTING
LAW
20
21
1. F UNDAMENTALS OF
ACCOUNTING LAW
1.1. REGULATORY ACCOUNTING
FRAMEWORK
Following the entry in force of the law of 10th
December, 2010 amending the law of 10th August
1915 and the law of 19th December 2002; and
introducing IFRS for non-financial companies,
among others, a company may choose to prepare
its standalone and/or consolidated financial
statements from the following accounting
frameworks:
LISTED
COMPANIES1
OTHER
COMPANIES
IFRS (EU)
LUX GAAP
+ FAIR VALUE
OPTION2
LUX GAAP3
Annual
accounts
Optional
Optional
Benchmark
Consolidated
accounts
Obligation
Not possible
Not possible
Annual
accounts
Optional
Optional
Benchmark
Consolidated
accounts
Optional
Optional
Benchmark
Listed companies being undertakings whose securities are admitted to
trading on an EU regulated market
2
Fair Value Option for some financial instruments and other categories of
assets
3
LUX GAAP being the historical cost convention
1
1.2. STATUTORY ACCOUNTS
The directors/managers of a company are required
to prepare annual accounts in accordance with
the regulatory accounting framework established
in section 1.1. The currency in which the annual
accounts are prepared is generally the currency of
the share capital. Companies whose sole purpose
is to invest in and develop other companies may
disclose a balance sheet and a profit and loss
account in a format that deviates from the general
provisions of the law. Given that these companies
generally have a reduced number of staff and no
turnover, they are qualified as small companies.
Hence, they can disclose abridged notes to the
accounts and prepare a management report.
The Grand-Ducal regulation dated 10th June, 2009
has defined the content and the presentation of
a standardised chart of accounts (“SCA”). The
effective date of the SCA applies for the first
accounting year beginning after 31st December,
2010. For companies having a calendar year end,
the first set of accounts related to the year ending
31st December, 2011 and the filing was due by
31st July, 2012.
1.3. CONSOLIDATED ACCOUNTS
1.3.1.
Obligation to consolidate
Companies in Luxembourg are required to prepare
consolidated financial statements to the extent,
they:
a) have a majority of the shareholders’ or members
voting rights in another undertaking; or
b) have the right to appoint or remove a
majority of the members of the administrative,
management or supervisory body of another
undertaking and are at the same time a
shareholder in or member of that undertaking;
or
c) are a shareholder in or member of an
undertaking, and control alone, pursuant to
an agreement with other shareholders in or
members of that undertaking, a majority of
shareholders’ or members’ voting rights in that
undertaking.
The consolidated accounts shall include the
Luxembourg parent company and all of its
subsidiary undertakings regardless of where
the registered office of such subsidiaries
are situated. The consolidated accounts
comprise the consolidated balance sheet,
the consolidated profit and loss account and
the notes to the accounts and are prepared
in accordance with the regulatory accounting
framework established in section 1.1.
the following three criteria during two consecutive
financial years:
a) total balance sheet : EUR 17,500,000 ;
b) total net turnover : EUR 35,000,000 ;
c) total employees : 250.
This exemption does not apply if the parent
company or one of the subsidiaries to be
consolidated is an undertaking whose securities
are admitted to trading on an EU regulated market.
1.3.2.2. Upper level exemption
If the Luxembourg parent company is also a
subsidiary of a parent company established in
an EU member state or outside the EU, it may
be exempt from the preparation of consolidated
financial statements if the following conditions
are met:
a) the exempt Luxembourg company and all of its
subsidiaries are consolidated in the accounts
of a larger group of companies drawn up in
accordance with Luxembourg law or equivalent;
b) the consolidated accounts and the consolidated
management report of the group are drawn up
and audited as prescribed in Luxembourg law;
c) the consolidated accounts, the consolidated
management report and the auditors’ report
shall be published in Luxembourg;
d) the shareholders owning at least 10% of the
share capital (20% for a société à responsabilité
limitée) of the exempt Luxembourg company
have not requested the preparation of
consolidated accounts at least six months prior
to year-end.
The directors/managers of the Luxembourg
parent company are also required to prepare a
consolidated management report which includes
among others, a fair review of the business
development and performance, the principal risks
of the group, financial risk management objectives
and policies and likely future developments.
1.3.2.3. Temporary holding exemption
When legally required, consolidated accounts must
be audited by Luxembourg licensed independent
auditor who must also verify that the consolidated
management report is consistent with these
consolidated accounts.
The Minister of Justice has issued an official
clarification on 18th December, 2009 on the
interpretation of article 317 (3) c) in a Notice
prepared by the Accounting Standards
Commission (Commission des Normes Comptables
or “CNC”).
1.3.2.
Exemption from the obligation
to consolidate
In this Notice, an unregulated company acting
in the Private Equity or Venture Capital industry
could apply the exclusion set out in article 317 (3)
c) and therefore be exempt from the consolidation
requirement if 6 conditions are met with in
particular obligation to disclose the fair value of its
investments.
Luxembourg companies are permitted to derogate
from this consolidation principle and exempt from
consolidation in the following circumstances:
a) Small group exemption
b) Upper level exemption
c) Temporary holding exemption
1.4. F ILING AND
PUBLICATIONS The Grand-Ducal regulation dated 14th December,
2011 determines the new procedures related to
the mandatory electronic filing of the accounting
package (including the annual accounts and the
trial balance prepared in accordance with the SCA).
These new requirements are applicable for most of
Luxembourg companies as from 1st January, 2012
(for all accounting years ending on or after
31st December, 2011).
For the companies within the scope of the SCA,
the annual accounts filed within the trade and
company register will include (i) a structured part,
being the balance sheet and the income statement,
prepared via the eCDF platform, and (ii) a nonstructured part being the notes to the annual
accounts, the management report and the auditor’s
report (when required).
Consolidated accounts and annual accounts
prepared in accordance with IFRS are not
concerned by the new eCDF platform.
Annual accounts must be filed with the trade and
company register within seven months after yearend and within one month of the approval of the
annual accounts by the general meeting
of shareholders.
Private or notarial deeds, as well as other
information the publication of which is required
by law must be filed with the trade and company
register and published in the Official Gazette.
Under article 317 (3) c) of the Luxembourg
Company law a parent company is allowed to
exclude a controlled undertaking where the shares
of that undertaking are held exclusively with a view
to their subsequent resale.
1.3.2.1 Small group exemption
The Luxembourg parent company is exempt from
consolidation if the undertakings that would have
to be consolidated do not together exceed two of
22
23
2. AUDIT AND
CONTROL
2.1. AUDIT OF ANNUAL
ACCOUNTS
Medium and large companies in the form of a
société anonyme, société à responsabilité limitée or
société en commandite par actions must have their
annual accounts audited by a licensed independent
auditor, in which case the appointment of a
statutory auditor is not required.
A medium or large company is determined to be
one which exceeds two of the following three
conditions during two consecutive years :
a) total balance sheet : EUR 4,400,000 ;
b) total turnover : EUR 8,800,000 ;
c) total employees : 50.
Smaller companies must be supervised by
statutory auditors or a licensed independent
auditor. For a société à responsabilité limitée with
fewer than 25 shareholders, the control may be
performed by the partners themselves.
2.2. C ONTRIBUTIONS IN KIND
(OTHER THAN CASH)
Contributions in kind to a société anonyme
and a société en commandite par actions in
connection with incorporation or subsequent
capital increase are subject to review by a licensed
independent auditor, who ensures that the value
of these contributed assets is at least equal to
the value (and number) and, where applicable,
the share premium of the shares to be issued in
consideration thereof.
This report issued by a licensed independent
auditor is also required during the first two years
following incorporation when a société anonyme
or a société en commandite par actions acquires
an asset from an individual or a legal entity that is
a signatory of the articles of association, provided
that the value of the asset acquired is at least equal
to one-tenth of the subscribed capital.
In this case, the company shall publish within one
month after the contribution in kind a declaration
containing information about the contribution
(description and valuation) and a statement
whether the value of the contributed assets is at
least equal to the value (and number) and, where
applicable, the share premium of the shares to be
issued in consideration thereof.
2.3. I SSUE OF A
CONVERTIBLE BOND
The issuing by a société anonyme or a société
en commandite par actions of convertible bonds
or bonds carrying subscription rights is subject
to a special report to be issued by a licensed
independent auditor.
2.4. C HANGES IN THE
COMPANY’S LEGAL FORM
The conversion of a company into a société
anonyme or a société en commandite par actions
is also subject to a special report to be issued by a
licensed independent auditor.
2.5. O THER MANDATORY
CONTROLS
Depending on the legal form and size of the
company, a report shall be issued by a licensed
independent auditor in the following transactions :
• mergers in accordance with article 266 of the law
and divisions in accordance with article 294;
• liquidations in accordance with article 151 of the
law;
• interim dividends in accordance with article 72-2
of the law.
However, since the law of 10th June, 2009, the
report issued by a licensed independent auditor is
no more required (under certain conditions) when :
• the contribution is made up of transferable
securities or money-market instruments which
are traded on a regulated market ;
• the assets to be contributed have already been
subject to a valuation by a licensed independent
auditor in the last six months prior to the
contribution ;
• the contribution is made of assets whose fair
value is derived from the audited statutory
accounts of the previous financial year.
24
25
SECTION III
BASIC PRINCIPLES
OF TAXATION IN
LUXEMBOURG
26
27
1. L UXEMBOURG TAX
ADMINISTRATION
2. CORPORATE
TAXATION
The tax administration is broken into three parts :
direct tax, indirect tax and customs and excise duties.
Only the most general system of taxation is
described in this section.
The direct tax administration is in charge of
individual and corporate income tax, municipal
business tax and net wealth tax. The indirect tax
administration deals with, amongst others, VAT
and registration duties.
A société de participation financière (soparfi)
is a company subject to the general tax rules
applicable to any limited company, and as such
may benefit from the tax treaties concluded by the
Grand Duchy of Luxembourg1.
In general, corporate taxes apply on the worldwide
taxable profit of any company resident in
Luxembourg and subject to the provisions of tax
treaties. A company incorporated in Luxembourg
or having its place of effective management in
Luxembourg is deemed to be resident in the Grand
Duchy. The taxable profit is determined based
on the commercial accounts (so-called principe
d’accrochement) prepared under Lux GAAP. This
tax provision will have to be adapted in order
to take into account the balance sheet of the
companies using IFRS.
The taxes are composed of corporate income tax
(impôt sur le revenu des collectivités) at 22.47%
and municipal business tax (impôt commercial
communal), the rate of which is fixed by each
municipality. For Luxembourg City, this amounts to
6.75%, making the total rate of corporate taxation
29.22% in 2013.
The minimum flat tax for Soparfis is increased from
EUR 1,575 to EUR 3,210 (including the Solidarity
Surtax).
This flat tax will apply as from 2013 to unregulated
collective undertakings subject to corporate
income tax, for which the sum of the financial
assets, transferable securities and cash at bank
(i.e. classes 23, 41, 50 and 51of the Luxembourg
Standard Chart of Accounts) exceeds 90% of the
total assets.
Regulated holding and financing entities (e.g.
SICAR, regulated securitization entities) will also
be subject to the minimum flat CIT applicable to
Soparfis as from 2013.
All other Luxembourg companies subject to CIT
will also become liable to a minimum flat tax. This
new tax will range between EUR 535 and EUR
21,400 depending on the company’s total balance
sheet. For the computation of the total balance
sheet, the net accounting value of the assets
generating or being likely to generate income
whose taxation right exclusively belongs to another
state, based on a DTT will be excluded.
28
A société en nom collectif or a société en
commandite simple is only subject – in so far as it
exercises a commercial activity – to the municipal
business tax which is deductible from its own
taxable basis. For such unlimited companies
(société de personnes) having their registered
office in Luxembourg City, the effective rate
amounts to 6.32%. Depending on the activities
of unlimited companies, an exemption to the
municipal business tax may be requested.
If the company currency is not the Euro, financial
statements generally have to be converted into
Euro for tax return purposes.
Specific exemptions are applicable for dividends
received and capital gains realised on disposal of
investments (privilège d’affiliation).
Intellectual property revenues may also benefit
from a specific 80% exemption, as explained below.
2.1. DIRECT TAXES
2.1.1.
Dividend income
Dividend income is tax-exempt in Luxembourg if
the following conditions are fulfilled :
a) the company distributing the dividend is either :
• a fully taxable resident corporation, or
• a non-resident limited company subject to
an income tax comparable to Luxembourg
income tax and calculated on a similar basis, or
• an EU resident company covered by the
Parent-Subsidiary Directive ;
b) the company receiving the dividend is either :
• a corporation fully taxable and resident in
Luxembourg, or
• a Luxembourg permanent establishment of a
limited company resident in a state with which
Luxembourg has concluded a tax treaty, or
• a Luxembourg permanent establishment of an
EU resident company covered by the ParentSubsidiary Directive, or
• a domestic permanent establishment of a
stock company or of a cooperative company
resident in an EEE country other than an EU
member state ;
c) at the date of the distribution, the receiving
company must hold or intend to hold its
participation for a period of twelve months.
During this time, the participation may not fall
below 10%, or the acquisition price below EUR
1,200,000.
If the company does not benefit from the full
exemption on the dividends received, it may still
benefit from an exemption on 50% of the dividends
received, as long as the company distributing the
dividends is either :
29
a) a fully taxable resident corporation, or
b) a limited company subject to an income
tax comparable to Luxembourg income tax
calculated on a similar basis and resident in a
state with which Luxembourg has concluded a
tax treaty, or
c) an EU resident company covered by the ParentSubsidiary Directive.
2.1.2.
Capital gains
A participation exemption also applies for capital
gains under the following conditions :
a) the investment disposed of is :
• a fully taxable resident corporation, or
income tax calculated on a similar basis, or
b) the transferor company realising the capital gain
is either :
• a corporation fully taxable and resident in
Luxembourg, or
• a Luxembourg permanent establishment of a
limited company resident in a state with which
Luxembourg has concluded a tax treaty, or
EU resident company covered by the ParentSubsidiary Directive, or
• a domestic permanent establishment of a
stock company or of a cooperative company
member state ;
c) on the date of the transaction, the transferor
company must hold or intend to hold its
participation for a period of twelve months.
During this time, the participation may not fall
below 10%, or the acquisition price below EUR
6,000,000.
2.1.3.
Deductible expenses
Luxembourg tax rules provide for the tax
deductibility of the expenses (e.g. interest) related
to a dividend received by a company, to the extent
that these expenses exceed the received dividend
during the accounting year.
In addition, the exempted amount of capital gains
on disposal of investments is reduced by any prior
writedowns deducted over previous years and by
any expenses related to the investment sold which
were previously deducted from the taxable basis
(recapture rule).
30
2.1.4.
Intellectual Property (IP) revenues
Luxembourg tax law provides for an 80%
exemption on the net positive income derived from
software copyrights, patents, trademarks, service
marks, designs and models. The exemption will also
be given to taxpayers who have created a patent
and use it for their own business purposes.
Capital gains realised on the sale of the IP will also
benefit from the 80% exemption.
The following conditions must be fulfilled to benefit
from the exemption :
• The IP has to be created or acquired after 31st
December, 2007.
• Any expenses, depreciations and deductions in
relation to IP must be recorded as an asset and
accounted as income of the year.
• The IP must not have been acquired from a
related company. The IP transferor and the
company generating the IP are considered
related companies if :
– the IP transferor holds at least a direct 10%
shareholder interest in the Luxembourg
company generating the IP revenue, or
– 10% of the share capital of the IP transferor
is held directly by the Luxembourg company
generating the IP revenue, or
– a third company has at least a 10% shareholder
interest in both the IP transferor and the
company generating the IP revenue.
2.1.5.
Net wealth tax
Companies resident in Luxembourg are subject to
a net wealth tax calculated on their worldwide net
assets as of 1st January of each year.
Both sociétés en nom collectif and sociétés en
commandite simple are transparent for net wealth
tax purposes. Their tax bases are added to those
of their partners in proportion to their respective
holdings in the company. Non-resident companies
are subject to net wealth tax on assets allocated to
their Luxembourg permanent establishments.
The net wealth tax rate is 0.5% with a minimum
of EUR 25 for a société à responsabilité limitée
and EUR 62 for a société anonyme or a société en
commandite par actions. This tax may be reduced
by up to one-fifth of the amount allocated to a
special reserve and maintained on the balance
sheet over five years. In any case, this reduction
may exceed neither the income tax due for the
related year nor the amount of the net wealth tax.
Luxembourg law provides for the exemption of
participations from the taxable basis provided that
the following conditions are met :
a) the subsidiary is either :
• a fully-taxable resident limited company, or
income tax and calculated on a similar basis, or
b) the parent is either :
• a fully taxable resident limited company, or
• a local permanent establishment of a company
resident in a country with which Luxembourg
has concluded a tax treaty, or
EU resident company covered by the ParentSubsidiary Directive ;
c) the participation of the parent company must
reach at least 10% of the share capital of the
subsidiary or an acquisition cost of at least EUR
1,200,000.
• a permanent establishment of a stock
company or a cooperative company resident
in an EEE country other than an EU member
state ;
c) on the date of distribution, the beneficiary must
hold, or commit to hold for a period of twelve
months, a 10% participation or an investment
representing an acquisition cost of at least EUR
1,200,000.
Luxembourg law also provides for the exemption
of IP from the net wealth tax basis.
Interest payments executed by Luxembourg
companies might also be subject to the application
of the Savings Directive, as detailed below.
Debts related to the acquisition of exempted assets
are not deductible from the company’s net assets.
2.2. WITHHOLDING TAXES
2.2.1.
Dividends and liquidation proceeds
A withholding tax of 15% is applied on dividends
paid by Luxembourg companies. Subject to the
respective tax treaties signed by Luxembourg1,
the above rate may be reduced. In addition, the
law includes an exemption from withholding tax
applicable for dividends paid under the following
conditions :
a) the company distributing the dividend is a fully
taxable limited resident company ;
b) the company receiving the dividend is either:
• a limited company fully taxable and resident in
Luxembourg, or
• a fully taxable EU-resident company covered
by the Parent-Subsidiary Directive, or
• a company subject to an income tax
comparable to Luxembourg income tax, which
is resident in a state with which Luxembourg
has concluded a double tax treaty, or the
Luxembourg permanent establishment of such
a company, or
• a Luxembourg permanent establishment of
a limited company covered by the ParentSubsidiary Directive, or
• a stock company resident in Switzerland and
fully subject to tax in Switzerland without
benefiting from an exemption, or
• a stock company or cooperative company
member state, or
No withholding tax is levied on the distribution of a
liquidation surplus without condition.
2.2.2.
Interest
As a general rule, no withholding tax applies
on interest payments performed by Luxembourg
companies, unless the interest is considered as
profit participating for Luxembourg tax purposes.
On 3rd June, 2003, the Council adopted a directive
on taxation of savings income in the form of
interest payments (council Directive 2003 / 48 / EC)
to individuals residing in the Community. This
measure formed one of the elements of a tax
package aimed at tackling harmful tax competition
in the European Community. The Council adopted
a Decision establishing an effective date of 1st July,
2005 (Council Decision 2004 / 587 / EC).
Under the terms of the Directive :
a) All member states will ultimately be expected to
automatically exchange information on interest
payments made by paying agents established
in their territories to individuals resident in
other member states. All EU countries other
than Belgium, Luxembourg and Austria will
immediately introduce a system of information
reporting.
b) Belgium, Luxembourg and Austria will introduce
a system of information reporting at the end
of a transitional period, during which they will
levy a withholding tax at a rate of 15% for the
first three years and 20% for the following three
years and 35% thereafter. They will transfer
75% of the revenue of this withholding tax
to the investor’s country of residence. These
three member states will be entitled to receive
information from the other member states.
c) Belgium, Luxembourg or Austria may elect to
introduce automatic exchange of information at
any time during the transitional period, in which
case they will no longer apply the withholding
tax and share revenue.
d) The scope of the Directive is broad, covering
interest from debt claims of every kind, whether
obtained directly or indirectly via collective
investment undertakings and other similar entities.
31
Luxembourg transposed the savings directive
through the law of 21st June, 2005.
When executing an interest payment in favour
of an EU individual, the Luxembourg economic
operator, otherwise known as a paying agent, will
have to either :
a) Levy a withholding tax directly on the interest
payment (35% as of 1st July, 2011) ;
b) Not levy a withholding tax, which itself results in
two options. The paying agent :
• enters, with the agreement of the beneficial
owner, into an exchange of information
with the tax authorities of the member state
concerned regarding the interest payment, or
• obtains, from the individual beneficiary of
the interest, a certificate from the tax
authorities of the relevant member state
confirming their knowledge of the source
of the interest income.
The paying agent has to leave the choice between
one of the two options mentioned above to the
beneficial owner.
The law of 23rd December, 2005 introduced a final
withholding tax rate of 10% on saving income. This
law concerns all resident individuals. On 17th July,
2008, the law was modified as follows :
a) it was extended to non-Luxembourg paying
agents ;
b) the withholding tax must be declared and paid
by the beneficiaries ;
c) the declaration, including information about
taxes already withheld in foreign jurisdictions,
shall be made no later than 31st March of the
following year.
These provisions are applicable from 1st January,
2008 and also concern interest accrued as from
1st July, 2005.
In addition, as from 1st January, 2010, the Savings
Directive does not apply if it is proven that the
beneficial owner is exempt from income tax.
2.2.3.
Royalties
Royalties are not subject to withholding tax in
Luxembourg.
2.2.4.
Directors’ fees
2.3. INDIRECT TAXES
2.3.1.
Value-added tax (VAT)
The VAT status of a holding depends on its
activities performed.
When the activity of a company is limited to
the holding of participating interests in other
companies without involving itself directly or
indirectly in the management of those companies,
it has no VAT taxable activity and may not be VAT
registered. As a consequence, it may not recover
the VAT paid on the goods and services acquired.
2.3.3.
Other transfer duties
Duties are levied upon the registration of deeds
and transactions, regardless of whether this is
mandatory or voluntary. The taxable basis for this
transaction is the fair market value of the asset
transferred, or the value indicated in the deed if not
lower than the market price.
The duty may either be fixed or proportionate,
depending on the nature of the transaction.
When the activity of a company includes the
supply of administrative, accounting, IT services,
the transfer and assignment of IP, the interest
on loans granted to non-EU recipients with
commercial or business purposes and the aim of
maximising the capital invested, it has a taxable
activity and has to be VAT registered. The VAT
paid on the goods and services acquired that are
linked to these activities is fully deductible.
When the activity of a company includes the
interest on loans granted to EU recipients with
commercial or business purposes and the aim
of maximising the capital invested, the recharge
of insurance or banking services, the leasing
of immovable property, the management of
investment funds (under conditions), it has an
exempt activity (i.e. activity without input VAT
deduction right) and is not obliged to register.
The VAT paid on the goods and services acquired
that are linked to these activities is not deductible.
Nevertheless, as soon as the company receives
goods or services from abroad for which it is liable
to account for VAT in Luxembourg under the
reverse-charge mechanism, the company has to
register for VAT and pay Luxembourg VAT at 15%
on these services. The VAT administrative burden
is limited as the filing of a “simplified” VAT return is
possible in Luxembourg. The various Luxembourg
VAT returns and EU sales lists may be filed
electronically (“e-VAT” system). From
1st January 2013, this system will be mandatory for
periodical VAT returns. The electronic filing shall be
done in PDF or XML files.
2.3.2.
Capital Duty
Capital duty is abolished in Luxembourg since
2009, but a fixed registration fee of EUR 75 is due
on incorporation of a Luxembourg company.
Directors’ fees are subject to a withholding tax of
20% and are not tax-deductible.
32
33
SECTION IV
TRANSFER
PRICING REGIME
IN LUXEMBOURG
34
35
1. G ENERAL
FRAMEWORK
Luxembourg domestic law does not currently
provide with a comprehensive set of rules
regarding transfer pricing documentation (except
for companies carrying out intra-group financing
transactions). Nevertheless, arm’s length principle
is stated under Section 171 of the general tax law,
all taxpayers are required to justify the information
figuring in their tax declarations, including transfer
prices fixed within the framework of controlled
transactions, i.e. transactions between associated/
group companies.
Moreover, Luxembourg Income Tax Law makes
mainly reference to the arm’s length principle in
article 56 and in article 164-3. Both articles provide
for an adjustment of the taxpayer’s tax base if
the latter conducts transactions being not in
accordance with the arm’s length principle:
a) Article 56 of the Luxembourg Income Tax Law
authorizes the Luxembourg tax authorities to
adjust a tax payer’s tax base for transactions not
in line with the arm’s length principle.
b) Article 164-3 provides for hidden dividends
distributions being added back to a company’s
tax base.
2. T REATMENT
OF COMPANIES
CARRYING OUT
INTRA-GROUP
FINANCING
TRANSACTIONS
Circular N° 164/2 dated 28 January 2011 (hereafter
“the Circular”) provides guidance for companies
carrying out intra-group financing transactions. In
particular, this Circular provides essential guidance
on how to apply the arm’s length principle in
such transactions as well as guidance is case a
tax payer wishes to obtain a binding confirmation
(e.g. Advance Pricing Agreement “APA”) by
the Luxembourg tax authorities on the arm’s
length character of a company’s remuneration
in connection with its intra-group financing
transactions.
2.1. D EFINITION OF INTRAGROUP FINANCING
TRANSACTIONS
An intra-group financing transaction is any activity
consisting of the granting of loans or advances to
associated companies and refinanced by financial
resources and instruments such as the issue of
public or private loans, advances or bank loans.
2.2. A PPLICATION OF THE
“ARM’S LENGTH” PRINCIPLE
As Article 9 of the OECD Model Tax Convention
concerning income and capital, constitutes the
international standard adopted by OECD member
states that must be used to establish transfer
pricing between associated companies carrying
out cross-border transactions, Luxembourg tax
authorities follows related OECD developed
guidelines.
2.3. R EQUIREMENTS IN CASE OF
REQUEST OF AN ADVANCE
PRICING AGREEMENT
An Advance Pricing Agreement will only be given
to companies that fulfil minimum substance
requirements, that is, they must have established
a real presence in Luxembourg and demonstrated
true assumption of risks on the financing activity.
36
A company carrying out an intra-group financing
activity has a real presence in Luxembourg if it
fulfils all of the conditions listed in the Circular.
Most notably, the following conditions have to be
met:
a) The majority of the members of the board
of directors or managers empowered to
engage the group financing company are
either residents or non-residents carrying out
a professional activity in Luxembourg and are
taxable in Luxembourg as regards at least 50%
of the entirety of said income.
b) The equity of the company has to be sufficient
for the functions performed (in terms of the
assets implemented and the risks assumed).
Generally speaking, a group financing company is
considered to effectively bear the risks linked to
the financing transactions if its equity corresponds
to at least 1% of the nominal value of the loans
granted or to EUR 2,000,000. If so, it is accepted
that the financing company assumes the risks
linked to its activity as a lender provided that it
is able to demonstrate that it is actually obliged
to use its equity when the risks relating to the
transactions materialise.
2.4. C ONTENT OF A REQUEST
FOR AN ADVANCE PRICING
AGREEMENT:
Depending on the facts and circumstances specific
to each individual case, all requests for information
must contain at least the information listed within
the Circular and must be supported by a transfer
pricing analysis meeting the standards set out by
the OECD in this field and consisting in particular
of a full description of the proposed methodology
and detailed information and analyses in support
of this methodology, such as the identification
of comparables and the range of results that are
expected to be obtained.
2.5. V ALIDITY OF AN ADVANCE
PRICING AGREEMENT:
APAs granted by the Administration des
Contributions Directes last for a period of 5 taxable
years and possible to be extended for another
period of 5 years upon request.
APAs granted cease its effects if legal prescriptions
(internal or international) upon which have been
based are modified or if one of the essential
characteristics of a transaction is amended.
APAs become invalid if the descriptions of the
transactions in the reports are incomplete, inexact,
or, if, after APAs’ approval a critical condition is
modified or is not in compliance with the original
request
37
SECTION V
SPECIFIC
VEHICLES IN
LUXEMBOURG
38
39
1. I NVESTMENT
COMPANY IN RISK
CAPITAL (SICAR)
The Law also expressly provides that any manager
or any other person who is involved in the
management of a SICAR, regardless of its legal
form, is assumed to have met the eligibility criteria
and is therefore not required to provide certification.
The Société d’Investissement en Capital à Risque
(SICAR) was created in 2004 to offer competitive
solutions to sophisticated private equity and
venture capital market players. The SICARs
are governed by the law of 15th June, 2004 as
amended on 18th December, 2009 (the Law) in the
light of the experience gained by private equity
practitioners, adapting the SICAR to the needs of
the industry.
1.1.2.2 Management of the SICAR
1.1. G ENERAL OVERVIEW
The SICAR must designate a depositary who will
take responsibility for the custody of its assets. The
depositary must be a credit institution according
to the definition given in the law of 5th April, 1993
concerning the financial sector. It must either
have its registered office in Luxembourg or be
established as a Luxembourg branch.
1.1.1.
Definition and purposes
Investment in risk capital is defined as the direct or
indirect contribution of assets to entities while they
are in development, at launch or at the initial public
offering. A SICAR is therefore any company whose
object is to invest in securities representing risk
capital in order to provide well-informed investors
with the potentially large payoffs of these assets.
In order to be considered as a SICAR, the articles
of incorporation of the company must ensure that
it is subject to the provisions of the Law and should
adopt one of the legal forms proposed in the Law.
1.1.2.
Parties involved
1.1.2.1 Eligible investors
Due to the high risk associated with the
investments made by a SICAR, it is open only to
well-informed investors meeting the following
criteria :
a) institutional investors, which under current
guidance would include banks, insurance
companies, pension funds, commercial
companies, investment funds and certain
holding companies ;
b) professional investors defined as “clients
who possess the experience, knowledge
and expertise to make their own investment
decisions and properly assess the risks that they
incur”; and
c) any other investor who meets certain conditions :
1. confirmation in writing of well-informed
investor status, and
2. minimum investment of EUR 125,000 in the
company, or
3. certification from a credit institution, financial
professional or management company of
experience, expertise and knowledge to
adequately assess an investment in risk capital.
40
The Management of the SICAR must be of sufficiently
good repute and have sufficient experience for
performing their functions. To that end, their identity
must be communicated to and their appointment
must be preapproved by the Commission de
Surveillance du Secteur Financier (CSSF).
1.1.2.3 Depositary
1.1.2.4 Statutory seat and central administration
According to the Law, the registered office and
central administration of a SICAR must be situated
in Luxembourg. The central administration is the
place where the company carries out its day-to-day
activities. Normally central administration activities
are outsourced to a regulated service provider in
Luxembourg. Though frequently both are located
in the same place, they may be separate.
1.1.3.
Investment rules
SICARs are not subject to investment restrictions
and limitations. They are also exempted from risk
diversification requirements and therefore as long
as the investments qualify as risky they can be
made in a very narrow sector or even in a single
company. SICARs must meet the two requirements
of high risk and the intention to develop and create
added value at the level of the target companies.
In so doing, these companies may employ a wide
range of investment strategies, including buyouts,
secondaries, mezzanine, opportunistic real estate,
fund of funds, microfinance and the provision
of venture capital (start-up and early stage). In
the absence of any prescribed debt-to-equity
ratios, the SICAR is able to finance its investments
investments as it wishes.
1.1.4.
Valuation of the assets
The Law provides for a fair valuation of the assets
of a SICAR. Furthermore, according to parliament
proceedings, the articles of incorporation should
provide information on the methodology that
the SICAR will apply to determine the fair value of
its assets.
1.2. R
EGULATORY AND
ACCOUNTING FRAMEWORK
1.2.1.
Authorisation and supervision by the CSSF
In order to carry out its activities, the SICAR must
obtain approval from the CSSF before launch or
constitution of the vehicle.
The authorisation process is relatively simple as it is
limited to the approval by the CSSF of the SICAR’s
constitutive documents (articles of incorporation,
Private Placement Memorandum), the directors as
well as the choice of service providers (depositary
bank, central administration and auditor).
It must further demonstrate that its statutory
seat and central administration are located in
Luxembourg. Once authorised, the CSSF adds the
SICAR to its official list.
Any changes to the Private Placement
Memorandum, the articles of incorporation, the
directors or the depositary bank need to be
submitted to the CSSF for approval.
1.2.2.
Annual report and audit
1.3.1.
Legal forms
SICARs can adopt the form of a S.C.S., S.C.A.,
S.à r.l., S.A. or S.A. Coop.. If provided for in the
articles of incorporation and prospectus, multiple
sub-funds or compartments can be created.
Each one has its own assets and liabilities which
are totally segregated from those of the others,
achieving a partition between the net assets of
the different sub-funds. Each sub-fund can also
be launched and liquidated fully independentlyof
the others. The investment strategy per sub-fund
has to be covered in the articles as well as in
the prospectus.
The Law requires that any SICAR include the word
“SICAR” or “société d’investissement en capital à
risque” in its legal denomination.
1.3.2.
Share capital and legal reserve
In a deviation from normal corporate law, the
subscribed capital (including share premium) of
a SICAR may not be less than one million Euros
and must be fully subscribed within twelve months
following the SICAR’s authorisation from the CSSF.
Each share should be paid-up at least 5% in cash
or by contribution in kind (except for SICARs
operating as a S.C.S.).
The Law enables a SICAR – whatever its form – to
provide in its articles of incorporation that its share
capital is always equal to its net asset value. It is
not obliged to create a legal reserve.
SICARs shall draw up an annual report and a
prospectus for each financial year.
A licensed independent auditor must be appointed
to audit the annual accounts. Through a special
exemption from Luxembourg corporate law, the
appointment of a statutory auditor (commissaire
aux comptes) is removed. SICARs are also
exempt from the obligation to prepare
consolidated accounts.
The annual report and the licensed independent
auditor’s report need to be made available to
investors and the CSSF within six months of the
year-end.
1.3.3.
Dividend distributions
Dividend distributions, including interim dividend
distributions and other reimbursements to
investors are only governed by the rules provided
for in the articles of association and the prospectus
of the SICAR. Such flexibility and the absence of
a legal reserve allows them to distribute all their
profit.
1.4. TAX ASPECTS
1.3. CORPORATE FRAMEWORK
Except if provided otherwise in the Law, a SICAR
is subject to the general provisions of Luxembourg
corporate law as amended.
1.4.1.
Income taxes and net wealth tax
1.4.1.1. Transparent SICAR
If operating as a S.C.S., the SICAR is considered a
tax-transparent entity. Its income is taxed at the
investors’ level. Therefore, the transparent SICAR
is subject neither to corporate income tax nor net
41
wealth tax. Moreover, it is not considered to be
carrying out a commercial activity in Luxembourg,
and so is not subject to municipal business tax.
Finally, there is no Luxembourg withholding tax
on distributions made by a transparent SICAR.
Given their tax transparency if incorporated as a
S.C.S., double taxation of the income generated by
these companies will be avoided at the level of the
investors in so far as the double tax treaty between
their countries of residence and the country of
residence of the target company could be applied.
1.4.2.3. VAT
1.4.1.2. Corporate SICAR
Indeed, if the SICAR does not receive goods or
services from abroad for which it is liable for
VAT in Luxembourg under the reverse-charge
mechanism, it is released from VAT registration.
All other forms of SICAR are subject to taxation in
Luxembourg at the global corporate income and
municipal business tax rate of 28.80%. Even so,
the Law provides for some specific exemptions
that render the tax regime of the corporate SICAR
very attractive :
a) it benefits from an exemption from corporate
income tax and municipal business tax on
income resulting from transferable securities
or deriving from the transfer, contribution or
liquidation of its assets (i.e. dividend, interest
and capital gains). In addition the exemption
is granted to income arising from funds held
for a period of twelve months pending their
investment in risk capital ;
b) it is not subject to net wealth tax ;
c) there is no withholding tax on distributions
(dividends and liquidation proceeds) realised by
a corporate SICAR ;
d) foreign investors are not subject to taxation in
Luxembourg on any capital gains realised upon
the sale of the shares of the SICAR.
As a fully taxable entity, a corporate SICAR
benefits in principle from any double tax treaties
between Luxembourg and the domiciles of the
investors/target companies. Additionally EU
investors/target companies should benefit from
the participation exemption regime on distributions
made from/to the SICAR. This has however to be
reviewed on a case by case basis.
Services provided for the management of one or
several SICARs are exempt from Luxembourg VAT.
Circular No. 723 of 29th December, 2006, from the
Luxembourg VAT authorities confers a taxable
status on SICARs. However, they are considered
fully exempt entities (i.e. without input VAT
deduction right) and benefit from lesser VAT
administrative obligations.
If the SICAR receives goods or services from
abroad for which it is liable to account for VAT in
Luxembourg under the reverse-charge mechanism,
it has to register for VAT. The SICAR has to file
a simplified annual VAT return. This implies that
the SICAR should pay 15% Luxembourg VAT
when filing the VAT return (in principle, by 1st
March of the following year) instead of being
charged foreign VAT, which is very attractive as
Luxembourg has the lowest standard VAT rate
within the EU.
1.4.2.4 Others
In accordance with the Grand-Ducal decree dated
September 29, 2012, a fixed annual fee of EUR
3,000 is due by SICARs to the CSSF. This amount
is increased to EUR 6,000 for vehicles with
multiple compartments. Moreover, the application
for authorisation made to the CSSF triggers the
levy of a registration fee of EUR 3,500 . This
amount is increased to EUR 7,000 for vehicles with
multiple compartments.
1.4.2.
Other taxes
1.4.2.1. Subscription tax
SICARs are not subject to any subscription tax.
1.4.2.2. Capital duty
on the incorporation of the vehicle.
42
43
2. S PECIALISED
INVESTMENT FUND
(SIF)
2.1.2.3. Depositary
On 13th February, 2007, the law on Specialised
Investment Funds (“the Law”) introduced a new and
flexible investment vehicle for eligible investors.
2.1.2.4. Statutory seat and central administration
2.1. GENERAL OVERVIEW
2.1.1.
A SIF shall be any Luxembourg UCI whose object
is to invest in accordance with the principle of risk
diversification, whose securities are reserved to
qualified investors, and whose constitutional and
offering documents stipulate explicitly that they
are subject to the provisions of the Law.
2.1.2.
Parties involved
2.1.2.1. Eligible investors
In the meaning of the Law, qualified investors are :
a) Institutional investors ;
b) Professional investors ; and
c) any other investor who meets certain conditions :
• confirmation in writing of well-informed
investor status, and
• minimum investment of EUR 125,000 in the
company, or
• certification from a credit institution, financial
professional or management company of
experience, expertise and knowledge to
adequately assess the investment into such
a specialised investment fund.
It is expressly provided that such conditions are
not applicable to managers or people involved in
the management of the SIF ; these individuals are
automatically considered eligible for investment in
the SIF.
2.1.2.2. Management
The managers of the SIF must be of sufficiently
good repute and have sufficient experience for
performing their functions.
To that end, their identity must be communicated
to and their appointment must be preapproved by
the CSSF.
44
The custody of the assets of the SIF must be
entrusted to a depositary that has its registered
office in Luxembourg or is established as a
Luxembourg branch.
2.1.4.
Valuation of the assets
Assets must be appraised at fair value unless the
articles of association/partnership agreement or
management regulations provide differently.
According to the Law, the SIF’s registered office
and central administration must be situated
in Luxembourg.
2.2. R EGULATORY AND
Among the functions performed by the central
administration are the activities of transfer
and administrative agents. Most visibly, the
administrative agent will calculate the net asset
value of the company at least once a year.
2.2.1.
The transfer agent may be the administrative
agent or this may be delegated to an external
specialist. This party will maintain the register of
shareholders, identify the investors (KYC), manage
distributions (dividends, capital reimbursement),
issues and redemptions. All of these activities must
be kept in Luxembourg.
2.1.3.
Investment rules
In order to carry out its activities, the SIF must
obtain approval from the CSSF. The authorisation
process is relatively simple as it is limited to the
approval by the CSSF of the SIF’s incorporation
documents, the directors as well as the choice of
depositary and auditor. It must further demonstrate
that its statutory seat and central administration
are located in Luxembourg. Once authorised, the
CSSF adds the SIF to its official list.
Any changes to the Private Placement
Memorandum, the articles of incorporation,
the director, the management company or the
depositary bank need to be submitted to the CSSF
for approval.
SIFs may invest in any type of assets and may
therefore be used for any types of investment.
SIFs are, however, legally required to diversify their
risk by maintaining a balanced portfolio. The key
diversification limits set forth in Circular letter CSSF
07/309 are as follows :
a) a SIF may in principle not invest more than
30% of its assets (or of the aggregate value of
its investors’ commitments) in securities of the
same type issued by the same issuer ;
b) short sales may in principle not result in the
SIF holding a short position on securities
of the same type issued by the same issuer
representing more than 30% of its assets ;
c) a SIF using financial derivative instruments is
also bound by the 30% restriction described
above for direct investment. This is achieved
through an appropriate diversification of the
derivatives’ underlying assets. Furthermore,
the counterparty risk of the SIF under OTC
derivatives must be limited with regard to
the quality and qualification of the relevant
counterparty.
2.3.1.
Legal forms
A SIF may be structured as :
a) f onds commun de placement (FCP), or common
contractual funds ;
b) s ociété d’investissement à capital variable
(SICAV), or variable capital investment
company ;
c) s ociété d’investissement à capital fixe (SICAF),
or fixed capital investment company.
Possible legal forms for the SICAV and/or the
SICAF are S.A., S.à r.l., S.C.A., and a S.A. Coop..
Moreover, the SIF may be set up as an umbrella
fund with multiple compartments and/or different
share classes.
2.3.2.
Share capital
The share capital of the SIF must amount to EUR
1,250,000 by, at the latest, twelve months after
authorisation from the CSSF. In determining this
amount the share premium is taken into account.
2.4. TAX ASPECTS
2.2.2.
Annual report and audit
An annual report must be issued for each
financial year.
The annual report of the SIF must be audited
by a licensed independent auditor authorised
to practice in Luxembourg.
The SIF is exempt from the obligation to consolidate
the companies for investment purposes.
The annual report and the licensed independent
auditor’s report need to be made available to
investors and the CSSF within six months of the
year-end.
2.4.1.
The SIF is exempt from corporate income, business
and net wealth taxes. Distributions are also exempt
from Luxembourg withholding tax. Due to their
tax status, SIFs are excluded from the ParentSubsidiary Directive. Moreover, if incorporated
as a FCP, it is transparent for tax purposes and
therefore has no access to double tax treaties.
In contrast, a corporate SIF has access to some
double tax treaties concluded by Luxembourg.
2.4.2.
Other taxes
The SIF is subject to a subscription tax of 0.01% on
its net asset value, except for :
a) investment in other Luxembourg UCIs which
have already been subject to subscription tax ;
b) institutional cash UCIs ;
c) pension pool funds.
45
2.4.2.3. VAT
Management services rendered directly to
investment funds are VAT exempt.
Luxembourg VAT Authorities confers a taxable
status on SICAVs and SICAFs. In case
the SIF is structured as a FCP, the taxable status
is conferred on the management company, as it is
deemed to perform the activity of constituting and
managing the portfolio of securities of the fund.
These vehicles are considered fully exempt entities
(i.e. without input VAT deduction right) and benefit
from lessened VAT administrative obligations (as
described in this section under 1.4.2.3).
3. S ECURITISATION
VEHICLE
2.4.2.4. Others
The law of 22nd March, 2004 (the “Law”)
introduced an attractive legal, tax and regulatory
framework for Luxembourg-based securitisation
vehicles.
September 29, 2012, a fixed annual fee of EUR
3,000 is due by SIFs to the CSSF.This amount
will range between EUR 6,000 and EUR 30,000
depending of the number of the compartments.
Moreover, the application for authorisation made to
the CSSF triggers the levy of a registration fee of
EUR 3,500. This amount is increased to EUR 7,000
for vehicles with multiple compartments.
3.1.1.
According to the Law, securitisation is the
transaction by which a securitisation vehicle
acquires or assumes, directly or via another
undertaking, risks relating to claims, other assets
or obligations assumed by third parties, by issuing
securities (shares, bonds…) the value or yield of
which depends on such risks.
46
The Law defines securitisation vehicles as “those
which carry out securitisation in full, andvehicles
which participate in these transactions by assuming
all or part of the securitised risks (the acquisition
vehicles) or by issuing securities to ensure their
financing (issuing vehicles) and whose articles of
incorporation, management regulation, or issue
documents provide that they are subject to the
provisions of the Law”.
3.1.2.
Investment rules
The Law allows for the securitisation of “risks
relating to the ownership of all assets, movable or
immovable, tangible or intangible, as well as risks
resulting from commitments that were assumed
by third parties or that are inherent to all or part
of the activities undertaken by third parties”. The
securitisation vehicle may take on risk by acquiring
assets, guaranteeing commitments or in any other
manner.
47
3.2.1.
Securitisation vehicles are subject to CSSF
supervision on a voluntary basis, or on a mandatory
basis if they are engaged in the continuous
issuance of securities to the public.
In this context the CSSF shall have to approve
the incorporation documents, the management
company (when applicable) and any members of
the administration, management and supervisory
bodies of the securitisation vehicle.
Once authorised, the CSSF adds the securitisation
vehicle to its official list.
3.2.2.
Annual report
The annual accounts of a corporate securitisation
vehicle are subject to accounting rules applicable
to Luxembourg commercial companies. Annual
accounts of a securitisation fund are subject to
similar accounting rules to those provided for
an investment fund.
The accounts of all securitisation vehicles are
audited by one or more independent auditors
designated by the board of the securitisation
company, or by the management company in case
of a securitisation fund.
For a regulated vehicle, the auditor must be
authorised by the CSSF.
3.2.3.
Reporting Obligations
Regulated and unregulated securitisation vehicles,
qualified as financial vehicle corporations engaged
in securitisation transactions, have to comply with
quarterly reporting obligations further to the :
• Circular BCL 2009/224 of the Luxembourg
Central Bank (the “LCB”) dated June 8, 2009
on statistical data collection for securitisation
vehicles ;
• Regulation (EC) Nr 24/2009 of the European
Central Bank of December 19, 2008 in relation to
statistics on the assets and liabilities of financial
vehicle corporations engaged in securitisation
transactions.
The LCB may grant derogations to certain
reporting obligations.
48
3.4.1.2. Securitisation company
3.4.2.4. Others
3.3.1.
Legal forms
The securitisation company is subject to tax in
Luxembourg at the global corporate income and
municipal business tax rate of 29.22%. Besides
the general applicable rules of income taxation,
starting 2013 a minimum flat CIT of EUR 3.210 is
applied to all securitisation companies subject to
some investment criteria.
29th September, 2012, a fixed annual fee is due
for regulated securitisation vehicles to the CSSF.
Moreover, the application for authorisation made
to the CSSF triggers the levy of a registration fee.
These amounts are increased for vehicles with
multiple compartments.
A securitisation vehicle can take the form of
• a fund run by a management company, or
• a company.
A securitisation fund can take the form of a joint
ownership or a fiduciary property. A securitisation
company can be incorporated as a S.A., S.C.A.,
S.à r.l., or a S.A. Coop..
Both company and fund may have multiple
compartments with segregated classes of assets
and liabilities.
3.3.2.
Share capital
3.3.2.1. Securitisation fund
The Law provides that any commitment (interest
or dividend) to investors is considered a deductible
expense. Dividends paid by a securitisation
company are treated in Luxembourg as interest
for tax purposes, so that distributions of income
to investors are fully deductible from the tax basis
of the securitisation company, and they are not
subject to Luxembourg withholding tax (however
the impact of the Savings Directive should be
considered).
As a fully taxable entity, the securitisation
company should in principle benefit from the
double tax treaties concluded by Luxembourg.
Finally, the securitisation company is exempt from
net wealth tax.
A securitisation fund is not subject to any
requirement in terms of minimum share capital. The
share capital of the management company of the
fund must meet the minimum requirement set forth
in Luxembourg’s corporate laws.
3.4.2.
Other taxes
3.3.2.2. Securitisation company
A securitisation company is not subject to a
specific minimum share capital. The amount will
depend on the legal form, in accordance with
Luxembourg’s corporate law.
A securitisation vehicle – whatever its form – is
exempt from subscription tax.
3.4.TAX ASPECTS
2009 but a fixed registration fee of EUR 75 is due
3.4.1.
3.4.2.3. VAT
3.4.1.1. Securitisation fund
The securitisation fund is a tax-transparent entity,
and its income is taxed at the level of the investors.
Therefore, the securitisation fund is not subject to
corporate income, business or net wealth taxes.
Given the tax transparency of the securitisation
fund, double taxation of the income generated
by the fund might be avoided at the level of the
investors in so far as the double tax treaty between
their country of residence and the country of
residence of the debtor of the underlying income
would be applicable.
Management services provided to securitisation
vehicles are VAT exempt.
Luxembourg VAT Authorities confers a taxable
status on securitisation vehicles.
However, these vehicles are considered
fully exempt entities (i.e. without input VAT
deduction right) and benefit from lessened VAT
administrative obligations (as described in this
section under 1.4.2.3).
Finally, there is no Luxembourg withholding tax on
distributions made by a securitisation fund.
49
4. P RIVATE WEALTH
INVESTMENT
VEHICLE (SPF)
4.2.1.
Supervision and control
A law dated 11th May, 2007 (the Law) introduced
a new investment vehicle for private wealth
investment, the Société de gestion de patrimoine
familial (SPF) designed for private investors and
individuals.
Supervision and control of the SPF are
the responsibility of the Administration de
l’Enregistrement et des Domaines, which may also
revoke SPF status from companies failing to meet
one of the conditions set forth by the Law.
4.2.2.
Annual report
4.1.1.
The SPF must respect the provisions of the
company law.
The activity of the SPF is strictly limited to the
acquisition, holding, management and disposal
of financial assets. The assets in which the SPF
can invest include shares, bonds and other
debt instruments, cash but also investments in
structured products, derivatives as well as put/call
options on securities, indexes and currencies.
4.3. C ORPORATE FRAMEWORK
The SPF cannot engage in commercial activity. It
may hold participations in other companies, but
only to the extent that the SPF does not involve
itself in the management of these companies. It is
also not allowed to render any kind of services nor
to grant interest-bearing loans to companies in
which it holds a participation.
4.1.2.
Parties involved
4.1.2.1. Eligible investors
The shares of the SPF must be exclusively held by
eligible investors, i.e. :
a) Individuals managing their private wealth, or
b) Private wealth entities (including trusts,
foundations or any other type of entity) acting
for one or several individuals, or
c) Intermediaries acting on behalf of the first two
categories of eligible investors.
4.1.2.2. Domiciliation agent/licensed
independent auditor/expert-comptable
Each year, the domiciliation agent, a licensed
independent auditor or an expert-comptable must
certify :
a) that the SPF is held only by qualified investors ;
b) that the SPF respected its obligations as a
paying agent with respect to the withholding
tax on interest ;
c) that the SPF respected its obligations as a
paying agent with respect to the withholding tax
on interest.
In terms of its legal form, an SPF can be
incorporated as a S.A., S.à r.l., S.C.A., or a S.A. Coop..
4.4. TAX ASPECTS
4.4.1.
The SPF is not subject to corporate income tax,
business tax or net wealth tax. With the exception
of the withholding tax on interest under the
EU Savings Directive, it is also exempt from
Luxembourg withholding tax on distributions to
non-residents.
Due to its tax regime, the SPF cannot benefit from
double tax treaties ; it is also excluded from the
Parent-Subsidiary Directive.
4.4.2.
Other taxes
The SPF is subject to a subscription tax of 0.25%
per year with a minimum value of EUR 100 and a
maximum of EUR 125,000, payable quarterly. The
tax base is the paid-up capital, the share premium
and the debt exceeding eight times the paid-up
capital and share premium.
4.4.2.3. VAT
VAT registration is not possible.
50
IT’S PEOPLE
WHO MAKE
THE DIFFERENCE
Alter Domus Luxembourg S.à r.l.
Société à responsabilité limitée au capital social de 31.752.500 Euro
R.C.S. Luxembourg B. 136 477
Domiciliataire de sociétés • Expert comptable (Autorisation N° 10015756/0)
51
© Alter Domus 2016
5, rue Guillaume Kroll
L-1882 Luxembourg
T+352 48 18 28 1
[email protected]
www.alterDomus.com
APPENDIX I
DOUBLE TAX TREATIES
TREATIES CURRENTLY IN FORCE
Austria
Armenia
Azerbaijan
Bahrain
Barbados
Belgium
Brazil
Bulgaria
Canada
China
Czech Republic
Denmark
Estonia
Finland
France
Georgia
Germany
Greece
Hong Kong
Hungary
Iceland
India
Indonesia
Ireland
Israel
Italy
Japan
Latvia
Liechtenstein
Lithuania
Malaysia
Malta
Mauritius
Mexico
Moldova
Monaco
Mongolia
Morocco
Netherlands
Norway
Panama
Poland
Portugal
Qatar
Romania
Russia
San Marino
Singapore
Slovak Republic
Slovenia
South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
Trinidad and Tobago
Tunisia
Turkey
United Arab Emirates
United Kingdom
United States
Uzbekistan
Vietnam
SIGNED OR UNDER NEGOTIATION – NOT YET IN FORCE
Albania
Argentina
Cyprus
Croatia
Kazakhstan
Kirghizstan
Kuwait
Lebanon
Macedonia
New Zealand
Niger
Oman
Pakistan
Saudi Arabia
Serbia and
Montenegro
Seychelles
Sri Lanka
Syria
Tajikistan
Ukraine
Uruguay

accounting, legal and tax environment

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