lunes, 19 de septiembre de 2016

Luxembourg: Changes to investment vehicles and company law approved

The Luxembourg parliament voted to approve a law to introduce a new alternative investment fund vehicle, the Reserved Alternative Investment Fund (RAIF), on 14 July 2016. Additionally, on 13 July 2016, the parliament approved a law to modernize the law on commercial companies (the Company Law). The RAIF law has entered into force, and the Company Law will enter into force three days after publication in the official gazette. These laws should enhance the tax and legal framework for investors seeking to structure their investments through Luxembourg.

RAIF vehicle
The new RAIF regime significantly expands the options for private equity, real estate and hedge fund managers in Luxembourg.

The regime aims to provide all the existing benefits associated with the specialized investment fund (SIF) or Société d’investissement à capital variable (SICAR) regimes, with an efficient regulatory structure. One of the key benefits of the RAIF regime for fund managers is the absence of overlapping regulations at the product and manager levels, which offers increased go-to-market capabilities compared to offshore fund regimes or other existing onshore fund regimes.

A main objective of the new regime is to offer a tax-neutral vehicle to investors, allowing fund managers to accommodate various investments and/or investors’ tax needs or constraints.

The applicable tax regime depends solely on how the fund is set up, i.e. whether it is similar to a SIF or a SICAR:

  • A RAIF vehicle relying on the SIF tax regime will be exempt from corporate income tax, municipal business tax and net worth tax. There will be no withholding taxes on any distributions, and no nonresident tax on “speculative” capital gains (gains that, under certain conditions, are subject to taxation in Luxembourg upon the sale of a participation and to which no tax treaty is applicable) for investors. A one basis point subscription tax, with exemptions available that are similar to those for a SIF, will be applied.
  • If a RAIF invests in risk capital benefits, then, like a SICAR, it may be subject to corporate income tax and municipal business tax, although not to net worth tax (except for the minimum net worth tax). However, any income from transferable securities or income from temporary investments (investments made for less than 12 months) will be exempt. There will be no withholding taxes on any distributions, and no nonresident tax on speculative capital gains for investors.

In both cases, it is possible to set up the fund as a tax-transparent vehicle, whether this is as a mutual fund in the case of a RAIF-SIF, or as a partnership for a RAIF-SIF or a RAIF-SICAR.
VAT generally is also a factor when deciding upon the location of a fund, especially in comparison to offshore funds.

The fees paid in consideration for the management of the fund vehicle, in principle, are eligible for the Luxembourg VAT exemption, whether the RAIF opts for the SIF or the SICAR tax regime.

Company Law
The modernization of the Company Law will confirm existing practices, recognize the contractual freedom of shareholders and provide legal certainty regarding third parties. The public limited company (SA) and private limited liability company (Sàrl) regimes will be modified in some areas, and a new form of company will be introduced.

For an SA, the modernization aims to relax the regime involving shares without voting rights, to preserve the rights of shareholders seeking to hold only economic rights in a company. In addition, SAs will be able to issue shares below par value, or even with unequal values.

The rules relating to the functioning of a Sàrl also will be subject to important structural modifications, which will cause a Sàrl to begin to resemble an SA in certain aspects. Such changes include, among others, an increase of the maximum number of shareholders from 40 to 100, confirmation of the ability to issue tracking shares and an option to include an authorized share capital clause allowing the board of managers to increase the share capital, subject to certain limitations. Additionally, a Sàrl will be able to issue both redeemable and profit shares, with or without voting rights. The issuance of profit shares will provide greater flexibility for investors.

A new form of company (société par actions simplifiée (SAS)) also will be introduced in the amended Company Law, which will mainly be based on the same rules that govern the SA, but will offer greater contractual freedom.

Source: Deloitte

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