SIF
Practical useHedge funds, private equity funds, venture capital funds, real estate funds, crypto funds, infrastructure funds, distressed debt funds, Islamic finance funds, microfinance funds, socially responsible investment funds, tangible assets funds and any other type of alternative funds.
Applicable legislationLaw of 13 February 2007 (“SIF Law”).
Authorisation and supervision by the CSSFYes.
Qualification as an AIFYes, unless exempt. It is exempt if it does not raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors.
Exemption from AIFMD full regime under lighter regime (AIFMD registration regime)Possible.
External authorised AIFM requirementRequired in case the entity is an AIF that is not self-managed and above the AIFMD threshold.
Eligible investorsWell-informed investors.
Eligible assetsUnrestricted.
Risk diversification requirementsRisk diversification requirements are defined by CSSF Circular n° 07/309. Such requirements are less stringent than the ones applicable to UCITS and UCI. In particular, a SIF is not allowed to invest more than 30% of its net assets in securities of the same type issued by the same issuer.
Legal Form• FCP
• SICAV (SA, Sàrl, SCA, SCoSA, SCS, SCSp)
• SICAF (SA, Sàrl, SCA, SCoSA, SCS, SCSp)
The entities may be open-ended or closed-ended.
Umbrella structureYes.
Capital requirementsEUR 1,250,000 to be reached no later than 12 months following the authorisation by the CSSF.
Required service providers• Management company in case of an FCP.
• Depositary bank or professional of the financial sector providing depositary services, subject to conditions.
• Administrative agent.
• Registrar and Transfer Agent.
• Approved statutory auditor.
Possibility of listingYes.
European passportNo, unless it falls under the scope of the full AIFMD regime.
Net asset value (NAV) calculation and redemption frequencyAt least once a year for reporting purposes.
Overall income tax (corporate income tax and municipal business tax)No income tax.
Subscription tax (NAV: net asset value)• Rate: 0.01% of the NAV annually.
• Tax exemptions: certain money market and pension funds or SIFs investing in other funds which are already subject to subscription tax.
Wealth taxNo wealth tax.
Withholding tax on dividendsNot subject to withholding tax.
Benefit from Double Tax Treaty network• SICAV/SICAF: Limited to certain double tax treaties (see circular L.G. -A n°61 of the tax administration of 8 December 2017).
• FCP: see circular L.G.-A n°61 of the tax administration of 8 December 2017.
Benefit from the EU Parent Subsidiary DirectiveNo.
Thin capitalization rules (debt-toequity ratio)No debt-to-equity ratio.

The Specialised Investment Fund is a lightly regulated and tax-efficient regulatory regime aimed mainly but not exclusively at promoters and managers of alternative investment products including hedge funds,  private equity funds, real estate and infrastructure funds, but also financial advisers and private investment managers, family offices and high net worth individuals. At the end of November 2021, 1,376 SIFs with total assets under management  of  €694.254bn  were   authorised by the Luxembourg regulator, the Financial Sector Supervisory Authority (CSSF).

The SIF regime   was   established   in   2007 to offer fund promoters and managers an onshore, regulated alternative to traditional offshore fund jurisdictions such as the Cayman Islands, British Virgin Islands and Bermuda when deciding on the jurisdiction in which to set up a fund and the type of fund vehicle to use.

The SIF regime offers broad flexibility in terms of eligible assets and investment strategy, as well as less restrictive rules on eligible investors than earlier regimes designed for institutional investors. SIFS may be created as investment companies with   variable capital (SICAVs), investment companies with fixed capital (SICAFs) or contractual funds (FCPs), and take any legal form available under Luxembourg law.

SIFs that qualify as alternative investment funds and that are managed by an EU authorised AIFM benefit from the European passport allowing to market fund’s shares to professional investors. The Luxembourg law of 21 July 2021 which transposes Directive EU 2019/1160 on Cross border distribution of Collective investment schemes and the directly applicable cross border funds regulation (CBRD), aim to enhance the cross-border distribution of alternative investment funds by harmonising rules governing the launch and discontinuation of marketing, retail marketing and the content and supervisory review of marketing communications. It notably creates a new harmonised regulatory regime defining and implementing a notification process for pre-marketing of AIFs throughout the EU. Pre-marketing was not defined in the original AIFMD and was left to rules and guidance applicable in individual member states, leading to inconsistencies and uncertainty.

The implementation of the European Union’s UCITS III directive in Luxembourg through the collective investment legislation on December 20, 2002 resulted in the replacement of the previous legal framework for collective investment undertakings, dating back to the law of March 30, 1988. This resulted in the need to create a new regulatory framework for funds aimed at institutional and other sophisticated investors before the expiry of a transition period in February 2007.

The legislation of February 13, 2007 introduced a new investment vehicle to Luxembourg in the Specialised Investment Fund, providing a more flexible framework than the previous regime for institutional funds under Part II of the December 2002 legislation, as well as broadening the potential investor base.

The SIF legislation was amended just over five years later by the law of March 26, 2012, adapting the regime to European and international developments regarding regulation and transparency of alternative investments, including the EU’s Directive on Alternative Investment Fund Managers, in areas including delegation, risk management and the handling of actual or potential conflicts of interest.

The revisions also aligned the SIF rules in some areas with the UCITS IV directive and the Luxembourg legislation of December 17, 2010 transposing it into national law. The SIF regime was also modified in some areas by the law of July 12, 2013 adopting the AIFMD directive in Luxembourg.

The SIF legislation offers a broader scope of application regarding investor eligibility than the 1991 law on institutional funds that it replaced, replacing the notion of institutional investors with that of well-informed investors.

A well-informed investor is defined as:

  • Any institutional investor;
  • Any professional investor; or
  • Any other investor that confirms in writing that they are a well-informed investor and either invests a minimum of €125,000 in the SIF or is certified by a credit institution, investment firm or management company (as defined by EU directives) as possessing expertise, experience and knowledge to conduct an adequate appraisal of an investment in the SIF.

These restrictions do not apply to directors and other individuals involved in management of the SIF.

The SIF Law therefore extends access to these funds beyond institutional and professional investors to other investors capable of taking an informed decision to accept a lower level of protection than that offered to retail investors through their status, wealth, experience or understanding of the risks investment in a SIF can entail.

SIFs must receive approval from the regulator before they can be launched, based on approval of its constitutional documents, of its managers or directors, and of its choice of depositary bank.

Managers and directors (who do not need to be Luxembourg residents) must be able to demonstrate their professional qualifications and experience, good standing and reputation. However, there is no requirement for approval of the promoter – indeed, there is no requirement for a promoter at all. Unlike in the case of UCITS funds, the promoter does not have to meet a minimum capital requirement.

There is no requirement either for approval of the investment manager, but the CSSF does require notification of the persons responsible for management of the SIF’s investment portfolio, so that the regulator can ensure they are of good reputation and have the experience necessary to manage the type of alternative investment strategy followed by the SIF. Any changes in the identity of the fund’s portfolio managers must also be reported to the regulator.

The CSSF’s approval is required for any substantive change made to the SIF’s offering documents, such as the name of the fund or sub-funds, the replacement of the custodian, administrator, auditor or investment manager, the creation of new sub-funds or a significant change to its investment policy. The regulator may withdraw authorisation for one or more sub-funds of a SIF while maintaining the authorisation for other sub-funds within the same structure.

The 2012 amendments to the legislation stipulate that the activity of management of a SIF must comprise at a minimum management of the investment portfolio. This excludes from the SIF regime passive funds that seek to create value solely by the long-term holding of assets and to create a distinction between SIFs and private wealth management companies governed by Luxembourg’s law of May 11, 2007, but not private equity or real estate funds.

A Luxembourg depositary bank, administrator and auditor must be appointed. The depositary bank only needs to know at any time of how the assets of the SIF are invested and where, and how the assets are available. Unlike with other Luxembourg funds, the depositary (unless the SIF is managed by an authorised alternative investment fund manager and is subject to the full scope of the country’s AIFM legislation) does not have to monitor that the sale, issue, redemption and cancellation of shares or units are carried out in accordance with the law and the articles of incorporation, or that the fund’s income is allocated in accordance with the management regulations or the articles of association.

The SIF regime offers a broad scope of eligible assets; any type of asset can be held by a SIF and any type of investment strategy can be pursued. Assets may include equities, bonds, derivatives, structured products, real estate and shareholdings in unlisted companies. There are no leverage restrictions.

The approach to risk spreading is more flexible than for other types of investment scheme, under regulatory guidelines set out in CSSF Circular 07/309 of August 3, 2007, which states that in principle, a SIF may not invest more than 30% of its assets or commitments in securities of the same type issued by the same issuer, subject to certain exceptions. Equally, in principle short sales may not result in the SIF holding a short position in securities of the same type from the same issuer representing more than 30% of its assets.

This restriction does not apply to securities issued or guaranteed by an OECD member state or its regional or local authorities, or by EU, regional or global supranational institutions and bodies, nor to investment in other funds subject to risk-spreading requirements at least comparable with those applicable to SIFs. Each sub-fund of an umbrella structure is considered as a separate issuer as long as the liabilities of individual sub-funds toward third parties are segregated.

The SIF must ensure a similar level of risk-spreading when investing through derivatives via appropriate diversification of the underlying assets. The counterparty risk in an OTC derivative transaction must, where applicable, be limited with regard to the quality and qualification of the counterparty.

In principle, these guidelines apply to all SIFs. The CSSF may grant exemptions where justified, although in practice it does not permit a higher level of concentration than 40%. In certain cases, the regulator may require the SIF to comply with additional investment restrictions.

The revised SIF law follows the 2010 fund legislation in allowing one sub-fund of a SIF to invest in another, clarifying that the rules set out in Luxembourg’s 1915 company law regarding a company’s investment in its own shares do not apply to SIFs. Sub-funds of the same SIF may not cross-invest in each other, and voting rights of shares held by one sub-fund in another are suspended.

Furthermore, the CSSF clarified in its FAQ on virtual assets (UCIs) that an AIF with an authorised AIFM may invest in virtual assets directly or indirectly as long as the fund’s shares or units are marketed only to professional investors, and the AIFM obtains an extension of authorisation from the CSSF for the new investment strategy.

A SIF can be created in different forms, notably as a contractual fund (fonds commun de placement or FCP), an investment company with variable capital (Société d’investissement à capital variable or SICAV) or an investment company with fixed capital (Société d’investissement à capital fixe or SICAF). The FCP has no legal personality and must be managed by a management company, while a SICAV or SICAF can be either self-managed or have an external management company.

A SICAV or SICAF may adopt most of the corporate and partnership forms available in Luxembourg, including public limited liability company (société anonyme or S.A.), private limited liability company (société à responsabilité limitée or S.àr.l.), corporate partnership limited by shares (société en commandite par actions or S.C.A.), common limited partnership (société en commandite simple or SCS), special limited partnership (société en commandite spéciale of SCSp), or co-operative company organised as a public limited liability company (société coopérative organisée comme une société anonyme or SCoSA).

This flexibility of form and structure means, for example, that a private equity fund can be established with a structure and attributes familiar to managers and investors familiar with the Anglo-Saxon limited partnership model.

These entities may be set up as a single fund or as an umbrella fund with multiple sub-funds, each with a different investment policy, if this is authorised by the SIF’s constitutional documents, denominated in different currencies, available to different types of investor or subject to different liquidity rules. A fund or sub-funds may have an unlimited number of share classes, according to the needs of the promoter or investors.

Unless otherwise provided for in the SIF’s constitutional documents, sub-funds within an umbrella fund are governed by the principle of compartment segregation, which means that each sub-fund is treated as a separate entity making distinct transactions, and the rights of creditors are applicable only to the particular sub-fund incurring the liabilities in question.

The SIF legislation sets a minimum capital requirement of €1.25m, which must be reached within the 12 months following authorisation by the CSSF, compared with six months for other funds governed by the 2010 fund legislation. An S.A. must have a minimum capital of €30,000 on incorporation and an S.àr.l €12,000.

At least 5% of the value of each share must be paid up, in cash or in kind, upon subscription. SIFs do not have to comply with any debt/equity ratio, nor are they subject to issue, redemption or distribution restrictions, but the net assets or capital may not fall below €1.25m.

The revised law requires SIFs to put in place systems to monitor, measure and manage the investment risk of its individual positions and their contribution to the portfolio’s overall risk profile. They must also be structured and organised to minimise the risk of conflicts of interest that could arise between the SIF and any person involved in its business activity, or linked to it directly or indirectly, that could have a negative impact on investors’ interests; procedures must be drawn up to manage such conflicts as do arise.

The delegation of tasks and functions to third-party providers will not affect regulation of the fund. As a rule, external providers of portfolio management services to the SIF must be approved for that function and subject to prudential regulation, although the CSSF may grant exemptions to this requirement.

The board of directors of the SIF must be able to ensure that the delegated provider is qualified and capable and must retain ultimate control over the fund’s activities. Delegation should not create conflicts of interest – investment management may not be delegated to the fund’s custodian, for instance – and the delegation of functions must be made clear in the fund’s offering documents.

SIF promoters have a choice between a tax-transparent SIF, set up in the form of an FCP, or a non-tax transparent SIF, set up in the form of a SICAV or SICAF. SIFs are subject to an annual subscription tax (taxe d’abonnement) of 0.01% on their net asset value, calculated at the end of each quarter, compared with a rate of up to 0.05% for other types of fund. The tax does not apply to SIFs investing in other funds that are subject to the subscription tax, that invest only in money-market instruments, or that are pension pooling schemes.

They are not subject to corporate income tax nor net worth tax in Luxembourg, and they enjoy an exemption from VAT on management fees. Non-resident SIF investors are not subject to Luxembourg capital gains tax; distributions are generally exempt from withholding tax.

SIFs may enjoy access to the benefits of certain double taxation avoidance treaties signed by Luxembourg that cover investment companies with fixed or variable capital.

Furthermore, the Luxembourg law of 19 December 2020, provided for a reduction in subscription tax by progressively reducing the tax from the standard rate of 0.05% of assets to just 0.01% for funds in which at least 50% of assets are classified as sustainable.

The SIF must issue an offering document and an audited annual report. The offering document, which may be a private placement memorandum, offering memorandum or prospectus, is not subject to minimum content requirements, but it must include all information necessary to enable investors to make an informed judgment about the proposed investment and in particular its risks. It is recommended that the offering document meet all legal requirements imposed on prospectuses.

SIFs are exempt from the obligation to consolidate their accounting. Valuation of the assets is based on fair value. There is no obligation to publish a half-yearly report, only an annual one, which must be provided to investors and the CSSF within six months of the end of the period to which it relates. A SIF does not have to publish its net asset value.

As result of its flexibility, the SIF offers the possibility to be used to structure a hedge fund, private equity fund, venture capital fund, real estate fund, crypto fund, infrastructure fund, distressed debt fund, Islamic finance fund, socially responsible investment fund, tangible assets fund, and any other type of alternative fund.

The SIF legislation offers a regime for the establishment of onshore regulated alternative funds that has been tried, tested and refined over more than 13 years, and that is aligned with the requirements for regulation of alternative managers, and, indirectly their funds, under the AIFM Directive as of July 22, 2013.

The establishment of a SIF does not require approval of the promoter or of the investment manager. Even with prior authorisation now required, the SIF regime offers a light-touch regulatory regime with no obligation to publish the fund’s NAV.

With the broad flexibility available to promoters regarding the fund’s investment policy and the range of qualifying options opening up a wide investor base, the SIF offers a well-established vehicle for promoters targeting European institutions and individuals while offering investors sound and effective oversight.

Our investment management team:

  • Helps you find the most suitable investment vehicle to meet your requirements and your goals from a marketing, regulatory, legal and tax perspective.
  • Introduces you to suitable service providers to meet your requirements, namely custodian bank, AIFM, administration agent, registrar and transfer agent, and auditor.
  • Provides assistance with the establishment of the fund, including drafting of the private placement memorandum, assistance with the incorporation of the fund and its general partner, and regulatory filings with the CSSF.
  • Assists with the conversion of offshore funds into SIFs.
  • Provides corporate support services throughout the lifetime of the fund, including amendment of fund documentation, restructuring, or launching and closing of sub-funds.
  • Provides help with changes of service providers including the custodian bank, fund administrator, auditor or registrar and transfer agent.
  • Assists with the listing of the fund’s shares or units on the Luxembourg Stock Exchange’s regulated or EURO MTF.
  • Provides support with the registration of the fund in other jurisdictions, in co-operation with local service providers.
  • Provides advice on AIFMD-related issues.
  • Provides advice to fund promoters on local private placement rules for marketing their funds in Luxembourg.
  • Keeps you up to date on the latest legal and regulatory developments.

For further information, please contact Olivier Sciales at oliviersciales@cs-avocats.lu

Compare two vehicles:


 UCITSPart II UCISIFSICARRAIFSPFSecuritisation vehicleUnregulated SCS/SCSpOrdinary Luxembourg company
Practical useHighly regulated vehicle which can be sold through a EU passport to all types of investors (such as retail investors, professional investors, institutional investors).Investment funds which could be used for investment strategies that do not meet the criteria set by the UCITS directives.Hedge funds, private equity funds, venture capital funds, real estate funds, crypto funds, infrastructure funds, distressed debt funds, Islamic finance funds, microfinance funds, socially responsible investment funds, tangible assets funds and any other type of alternative funds.Private equity and venture capital transactions.Hedge funds, private equity funds, venture capital funds, real estate funds, crypto funds, infrastructure funds, distressed debt funds, Islamic finance funds, microfinance funds, socially responsible investment funds, tangible assets funds and any other type of alternative funds.Individuals wishing to optimise their personal tax planning (private wealth management purposes).• True sale and synthetic securitisations.
• Securitisation of a portfolio of securities.
• Securitisation as structure for intra group financing activities.
• Securitisation of non-performing loans.
• Securitisation of leasing receivables.
• Securitisation of both tangible and intangible assets.
• CLOs (possibility of active management).
Private equity, venture capital and real estate investments and any other alternative investments.Holding and financing activity, commercial activity, holding of IP, etc.
Applicable legislationLaw of 17 December 2010 - Part I (“UCITS Law”).Law of 17 December 2010 - Part II (“UCI Law”).
Law of 13 February 2007 (“SIF Law”).Law of 15 June 2004 (“SICAR Law”).Law of 23 July 2016 (“RAIF Law”).Law of 11 May 2007 (“SPF Law”).Law of 22 March 2004 (“Securitisation Law”).Law of 10 August 1915 (“Company Law”).Law of 10 August 1915 (“Company Law”).
Authorisation and supervision by the CSSFYes.Yes.Yes.Yes.Non.Non.No, unless issue on a continuous basis of financial instruments offered to the public. The securitisation vehicle issues on a continuous basis when it carries out more than three issuances of financial instruments offered to the public during the financial year. All the issuances by the compartments should be added up. The issuance of financial instruments is offered to the public when it is not intended for professional clients, the denominations are less than 100,000 euros and it is not distributed as private placement.Non.Non.
Qualification as an AIFNo.Always an AIF.Yes, unless exempt. It is exempt if it does not raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors.Yes, unless exempt. It is exempt if it does not raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors.Always an AIF.In principle, no (as it would not be considered as “raising” capital from a number of investors as the structure generally serves for the investment of the private wealth of a “pre-existing group” (as defined in the Esma guidelines on key concepts of the AIFMD)).No, in case
• such vehicle meets the definition of “securitisation special purpose vehicle ” under the AIFM Law;
• it issues collateralised debt obligations;
• it only issues debt instruments;
• such entity is not managed according to an investment policy within the meaning of the AIFM Law.
Non-AIF, unless activities fall within the scope of article 1 (39) of the AIFM Law.Non-AIF, unless activities fall within the scope of article 1 (39) of the AIFM Law.
Exemption from AIFMD full regime under lighter regime (AIFMD registration regime)Not applicable.Possible.Possible.Possible.No.Not applicable.Possible.Possible.Possible.
External authorised AIFM requirementNot applicable.Required in case the entity is an AIF that is not self-managed and above the AIFMD threshold.Required in case the entity is an AIF that is not self-managed and above the AIFMD threshold.Required in case the entity is an AIF that is not self-managed and above the AIFMD threshold.Always required.Not applicable.Required in case the entity is an AIF that is not self-managed and above the AIFMD threshold.Required in case the entity is an AIF that is not self-managed and above the AIFMD threshold.Required in case the entity is an AIF that is not self-managed and above the AIFMD threshold.
Eligible investorsUnrestricted.Unrestricted.Well-informed investors.Well-informed investors.Well-informed investors.Restricted to:
• natural persons acting in the context of the management of their personal wealth;
• management entities acting solely in the interest of the private wealth (e.g. trusts, private foundations); and intermediaries acting for the account of the above mentioned eligible investors (e.g. bank acting under a fiduciary agreement).
Unrestricted.Unrestricted.Unrestricted.
Eligible assetsRestricted to transferable securities admitted or dealt on a regulated market, investment funds, financial derivative instruments, cash and money market instruments that are in compliance with article 41 of the Ucits law and the relevant EU directives and regulations. Please note that the eligibility of the asset must be ascertained on a case-by-case basis in view of the applicable laws and regulatory practice.Unrestricted. The investment objective and strategy of the fund is subject to the prior approval of the CSSF.Unrestricted.Restricted to investments in securities representing risk capital. According to the CSSF Circular 06/241, investment in risk capital is to be understood as the direct or indirect contribution of assets to entities in view of their launch, their development or their listing on a stock exchange. The SICAR is not allowed to invest directly in real estate (except for its own use or through its participations).Unrestricted, unless it invests in a portfolio of risk capital (such as a Sicar).Restricted to acquisition, detention, management and realisation of financial assets. The SPF is not allowed to carry out commercial activities or to hold directly real estate (except for its own use or through its participations).Unrestricted. The securitisation vehicle may acquire or assume, directly or through another undertaking, risks relating to claims, other assets, or obligations assumed by third parties or inherent to all or part of the activities of third parties and issues financial instruments or contracts, for all or part of it, any type of loan, whose value or yield depends on such risks.Unrestricted.Unrestricted.
Risk diversification requirementsRisk diversification requirements are provided by articles 42 et seq. of the UCITS Law, e.g. (not exhaustive):
• a UCITS may not invest more than 10% of its assets in transferable securities or money market instruments issued by the same body;
• a UCITS may not invest more than 20% of its net assets in deposits made with the same body;
• the global exposure relating to derivative instruments does not exceed the total net value of the UCITS portfolio.
Risk diversification requirements are defined by IML Circular 91/75 (as amended by CSSF Circular n° 05/177). Such requirements are less stringent than the ones applicable to UCITS. In particular, a UCI is not allowed to invest more than 20% of its net assets in securities issued by any one issuer. Specific restrictions concerning funds adopting an alternative investment strategy are contained in CSSF Circular n° 02/80.Risk diversification requirements are defined by CSSF Circular n° 07/309. Such requirements are less stringent than the ones applicable to UCITS and UCI. In particular, a SIF is not allowed to invest more than 30% of its net assets in securities of the same type issued by the same issuer.No risk diversification requirements.Risk diversification requirements are aligned with those applicable to SIFs, unless the RAIF chooses to invest in risk capital only and such choice is mentioned in its constitutive documents.No risk
diversification
requirements.
No risk
diversification
requirements.
No risk diversification requirements.No risk diversification requirements.
Legal Form• FCP
• SICAV (SA)
• SICAF (SA,SCA)
All of these entities must be open-ended.
• FCP
• SICAV (SA)
• SICAF (SA, Sàrl, SCA, SCS, SCSp)
The entities may be open-ended or closed-ended.
• FCP
• SICAV (SA, Sàrl, SCA, SCoSA, SCS, SCSp)
• SICAF (SA, Sàrl, SCA, SCoSA, SCS, SCSp)
The entities may be open-ended or closed-ended.
• SA
• Sàrl
• SCA
• SCS
• SCSp
• SCoSA
The entities may be open-ended or closed-ended.
• FCP
• SICAV (SA, Sàrl, SCA, SCoSA, SCS, SCSp)
• SICAF (SA, Sàrl, SCA, SCoSA, SCS, SCSp)
The entities may be open-ended or closed-ended.
• SA
• Sàrl
• SCA
• SCSA
A securitisation vehicle may be set up in one of the following forms:
• a securitisation company (SA, Sàrl, SCS, SCSp, SENC, SCA, SAS, SCSA); or
• a securitisation fund consisting of one or several co-ownerships or one or several fiduciary estates and managed by a management company.
• SCS
• SCSp
• SA, Sàrl, SCA
• SAS
• SCoSA
• SCS
• SCSp
Umbrella structureYes.Yes.Yes.Yes.Yes.No.Yes.No.No.
Capital requirements• FCP:
EUR 1,250,000 to be reached no later than 6 months following the authorisation by the CSSF.
• Self managed SICAV / SICAF:
EUR 300,000 at the date of authorisation and EUR 1,250,000 within 6 months following its authorisation.
• FCP:
EUR 1,250,000 to be reached no later than 6 months following the authorisation by the CSSF.
• Self managed SICAV / SICAF:
EUR 300,000 at the date of authorisation and EUR 1,250,000 within 6 months following its authorisation.
EUR 1,250,000 to be reached no later than 12 months following the authorisation by the CSSF. EUR 1,000,000 to be
reached no later than
12 months following
the auhorisation by
the CSSF.
• FCP:
EUR 1,250,000 to be reached within 12 months from the entry into force of the management regulations.
• SICAV:
EUR 1,250,000 to be reached within 12 months from the incorporation of the SICAV.
Depends on the form:
• SA / SCA: EUR 30,000
• Sàrl: EUR 12,000
• SCSA: no minimum capital.
If the securitisation vehicle is set up as a company, it depends on the form:
• SA / SCA: EUR 30,000
• Sàrl: EUR 12,000
If the securitisation vehicle is set up as a fund, there is no minimum capital requirement.
No minimum capital requirement.Depends on the form:
• SA / SCA: EUR 30,000
• Sàrl: EUR 12,000
No minimum capital requirement for other legal forms.
Required service providers• Management company in case of an FCP.
• Depositary institution.
• Administrative agent.
• Registrar and Transfer Agent.
• Approved statutory auditor.
• Management company in case of an FCP.
• Depositary institution.
• Administrative agent.
• Registrar and Transfer Agent.
• Approved statutory auditor.
• Management company in case of an FCP.
• Depositary bank or professional of the financial sector providing depositary services, subject to conditions.
• Administrative agent.
• Registrar and Transfer Agent.
• Approved statutory auditor.
• Depositary bank or professional of the financial sector providing depositary services, subject to conditions.
• Administrative agent.
• Registrar and Transfer Agent.
• Approved statutory auditor.
• Management company in case of an FCP.
• Depositary bank or professional of the financial sector providing depositary services, subject to conditions.
• Administrative agent.
• Registrar and Transfer Agent.
• Approved statutory auditor.
Registered auditor in principle not required unless two of the following criteria are met: (i) net turnover above EUR 8.8 million, (ii) balance sheet above EUR 4.4 million and (iii) average number of employees above 50. However, depending on the legal form of the company, there may be an obligation to appoint a commissaire aux comptes.• Alternative Investment Fund Manager (if the securitisation vehicle qualifies as an AIF).
• Management company (if the securitisation vehicle is set up in the form of a fund).
• Independent auditor.
• No depository institution (unless for regulated securisation vehicles).
• No administrative agent.
For SCS:
• Alternative Investment Fund Manager (if the SCS qualifies as an AIF).
• No requirement to appoint a depositary (except if the SCS qualifies as an AIF and is managed by a duly authorised AIFM).
For SCSp:
• Alternative Investment Fund Manager (if the SCSp qualifies as an AIF).
• No requirement to appoint a depositary (except if the SCSp qualifies as an AIF and is managed by a duly authorised AIFM).
Registered auditor in principle not required unless the company is an AIF managed by an AIFM with AUM above the threshold or two of the following criteria are met: (i) net turnover above EUR 8.8 million, (ii) balance sheet above EUR 4.4 million and (iii) average number of employees above 50. However, depending on the legal form of the company, there may be an obligation to appoint a commissaire aux comptes.
Possibility of listingYes.Yes.Yes.Yes, but difficult in practice.Yes.No.No. In principle, no. The SCS/SCSp may however issue debt securities that are eligible to be listed on the stock exchange.Yes.
European passportYes.No, unless it falls under the scope of the full AIFMD regime.No, unless it falls under the scope of the full AIFMD regime.No, unless it falls under the scope of the full AIFMD regime.Yes.No.
No, unless it falls under the scope of the full AIFMD regime.No, unless it falls under the scope of the full AIFMD regime.No, unless it falls under the scope of the full AIFMD regime.
Net asset value (NAV) calculation and redemption frequencyThe UCITS must make public the issue, sale and repurchase price of their units each time they issue, sell and repurchase their units, and at least twice a month.The UCIs must make public the issue, sale and repurchase price of their units each time they issue, sell and repurchase their units, and at least once a month.At least once a year for reporting purposes.Not required. At least once a year for reporting purposes.Not required. Not required. Not required.Not required.
Overall income tax (corporate income tax and municipal business tax)No income tax.No income tax.No income tax.• General aggregate rate: 24.94%.
In certain cases, reduced corporate income tax rates may apply. Income derived from transferable securities (e.g. dividends received and capital gains realised on the sale of shares) is exempt. Income on cash held for the purpose of a future investment is also exempt (for one year).
No income tax, unless investing only in risk capital, then SICAR tax regime applicable.No income tax.• General aggregate rate for taxable securisation companies: 24.94%.
Securitisation vehicles should be able to deduct from their gross profits their operational costs and the dividends or interests distributed to the shareholders/creditors. Therefore securitisation companies should not generate significant taxable profits and should therefore to a large extent be tax neutral.
No corporate income tax applicable. Municipal business tax of 6.75% applicable in very limited circumstances, namely in case the SCS/SCSp (i) carries out a commercial activity or (ii) is deemed to carry out a commercial activity. A SCS/SCSp is deemed to carry out a commercial activity if its general partner is a Luxembourg public or private limited liability company holding at least 5% of the partnership interests. With a proper structuring of the GPs partnership interest it should be possible to avoid the deemed commercial characterisation of the SCS/SCSp.General aggregate
rate: 24.94%, but
100% exemption for
dividends, liquidation
proceeds and capital
gains from qualifying
participations.
Subscription tax (NAV: net asset value)• Rate: 0.05% of the NAV annually.
• Reduction: 0.01% of the NAV annually in certain specific cases.
• Tax exemptions: special institutional money market cash funds, special pension funds (including pension pooling vehicles) and funds investing in other funds which are already subject to subscription tax.
• Rate: 0.05% of the NAV annually. • Reduction: 0.01% of the NAV annually in certain specific cases.
• Tax exemptions: special institutional money market cash funds, special pension funds (including pension pooling vehicles) and funds investing in other funds which are already subject to subscription tax.
• Rate: 0.01% of the NAV annually.
• Tax exemptions: certain money market and pension funds or SIFs investing in other funds which are already subject to subscription tax.
No subscription tax.• Rate: 0.01% of the NAV annually.
• Exemptions apply.
Annual subscription tax of 0.25% on the amount of paid up capital and issue premium (if any).No subscription tax.No subscription tax.No subscription tax.
Wealth taxNo wealth tax.No wealth tax.No wealth tax.No wealth tax.No wealth tax.No wealth tax.No wealth tax.No wealth tax.0.5% on the NAV on 1 January. Since 2017, this minimum net wealth tax for holding and finance companies (known as the Soparfis)—the fixed financial assets, intercompany loans, transferable securities and cash at bank of which exceed both 90% of their gross assets and EUR 350,000—is fixed at EUR 4,815 per year. The minimum net wealth tax for all other corporations has not changed; in other words, it is EUR 535 for companies with a total balance sheet up to EUR 350,000.
Withholding tax on dividendsNot subject to withholding tax.Not subject to withholding tax.Not subject to withholding tax.Not subject to withholding tax.Not subject to withholding tax.Not subject to withholding tax.Not subject to withholding tax.Not subject to withholding tax.Dividends distributed by a Luxembourg company are in principle subject to withholding tax at a rate of 15%, unless a domestic law exemption or a lower tax treaty rate applies.
Benefit from Double Tax Treaty network• SICAV/SICAF: Limited to certain double tax treaties (see circular L.G. -A n°61 of the tax administration of 8 December 2017).
• FCP: see circular L.G.-A n°61 of the tax administration of 8 December 2017.
• SICAV/SICAF: Limited to certain double tax treaties (see circular L.G. -A n°61 of the tax administration of 8 December 2017).
• FCP: see circular L.G.-A n°61 of the tax administration of 8 December 2017.
• SICAV/SICAF: Limited to certain double tax treaties (see circular L.G. -A n°61 of the tax administration of 8 December 2017).
• FCP: see circular L.G.-A n°61 of the tax administration of 8 December 2017.
Yes in case the SICAR is set-up as a corporate entity (except if set-up under the form of a SCS/SCSp).• RAIFs investing in a portfolfio of risk capital (such as a SICAR)
Access if set-up as a corporate entity (except if set-up under the form of a SCS/SCSp).
• RAIFs not investing in a portfolio of risk capital (such as a SICAR), but set-up as:
SICAV / SICAF: Limited to certain double tax treaties (see circular L.G. -A n°61 of the tax administration of 8 December 2017).
FCP: see circular L.G.-A n°61 of the tax administration of 8 December 2017.
No.Yes for securitisation
companies.
No.Yes.
Benefit from the EU Parent Subsidiary DirectiveNo.No.No.In principle yes, but certain jurisdictions where the target companies are located may challenge the application of the directive.No, unless RAIF that invests in a portfolio of risk capital (such as a SICAR).No.Yes.No.Yes.
Thin capitalization rules (debt-toequity ratio)Borrowings of up to 10% of net assets to finance redemptions (it should be a short term borrowing and cannot be for investment purposes) or to buy real estate for its business. The total borrowing under the above may not exceed 15% of net assets.Borrowings of up to 25% of net assets without any restrictions are allowed.No debt-to-equity ratio.No debt-to-equity ratio.No debt-to-equity ratio.Tax of 0.25% on the debt that exceeds 8 times the paid-up capital increased by the issue premium.No debt-to-equity ratio.No debt-to-equity ratio.No provision in Luxembourg law. However, there is a specific administrative practice.