Luxembourg, a European hub for investment funds and wealth management. Dubai, 2 March 2014

Transcription

1 Luxembourg, a European hub for investment funds and wealth management Dubai, 2 March 2014

2 Agenda Welcome Bishr Shiblaq, Head of Dubai Representative Office, Arendt & Medernach Introduction Guy Harles, Co-Chairman of the Strategy Board, Partner, Arendt & Medernach Keynote speech H.E. Nicole Bintner, Ambassador of the Grand Duchy of Luxembourg to the U.A.E. Panel Discussions Moderator: Bishr Shiblaq, Head of Dubai Representative Office, Arendt & Medernach Investment Funds Stewart Adams, Regional Head of Investors & Intermediaries, Standard Chartered David Marshall, Senior Executive Officer, Emirates NBD AM Florence Stainier, Partner, Arendt & Medernach Private Wealth Guy Harles, Co-Chairman of the Management Board, Partner, Arendt & Medernach Marko Klein, Head of Wealth Management, Bank of Sharjah 2

3 Welcome Bishr Shiblaq Head of Dubai Representative Office Arendt & Medernach 3

4 Introduction Guy Harles Co-Chairman of the Strategy Board, Partner Arendt & Medernach 4

5 About Luxembourg Capital : Luxembourg Spoken languages: English, French, German, Luxembourgish GDP (nominal) USD 57 billion Founding member of i.a. the European Union (EU), UN, NATO, OECD, FATF Founding member of the Eurozone 5

6 Wealth Management Asset Management & Investment funds International Loans Insurance Structured Finance The Luxembourg Financial Centre Main Pillars The 5 Strategic Pillars of the Luxembourg Financial Sector Financial sector 6

7 The Luxembourg Financial Centre - Advantages Favorable business environment Political stability and strong political support for financial services industry Investor-friendly legislation (forerunner in implementing EU law) Flexible and attractive legal and tax framework Responsive, pragmatic and accessible regulatory and tax authorities Top level financial center 149 credit institutions (total balance sheet EUR 713 billion) 3,902 investment funds (EUR 2,615 billion AUM) making Luxembourg the 2nd largest investment fund center worldwide 96 insurance companies and 261 reinsurance companies Most important private banking center in the Euro zone Figures as at Source CSSF 7

8 Risk Rating The ten safest countries (considering the following risks: economic, political, structural, credit rating, debt and access to capital markets) Rank Country Points (maximum = 100) 1 Norway Luxembourg Singapore Sweden Switzerland Finland Denmark Hong Kong Netherlands Canada Standard and Poor s credit rating for Luxembourg: AAA Source: Euromoney, January

9 Corporate Taxes EU/EFTA ranking EU/EFTA ranking 1 Luxembourg 11 Spain 12 Luxembourg Cyprus 12 Netherlands 2 Cyprus 3 Ireland 3 Ireland 15 Malta 4 4 Denmark Denmark 21 Germany 55 Bulgaria 28 France 6 Switzerland 6 Switzerland 9 United 30 Italy Kingdom 9 United Kingdom The Total Tax Rate (TTR) measures the amount of all taxes and mandatory contributions borne by the business and is expressed as a percentage of commercial profits. The total amount of taxes borne is the sum of all the different taxes and contributions payable after accounting for deductions and exemptions. Source: Paying taxes 2013, World Bank, IFC and PWC 9

10 International presence in Luxembourg First private banking centre in the Eurozone, third largest in the world for international private banking Establishment of numerous multinational companies : Amazon, Arcelor Mittal, China Airlines, Dupont de Nemours, Ferrero, Procter & Gamble, SES, Skype, itunes, PayPal, SAIC, etc. First stock exchange for international bonds, largest RMB denominated bonds listed in Europe 10

11 Luxembourg Double Tax Treaty (DTT) Network 64 DTTs in force 30 DTTs pending Europe and Central Asia 1. Albania 2. Armenia 3. Austria 4. Azerbaidjan 5. Belgium 6. Bulgaria 7. Croatia 8. Cyprus 9. Czech Republic 10. Denmark 11. Estonia 12. Finland 13. France 14. Georgia 15. Germany 16. Greece 17. Guerney 18. Hungary 19. Iceland 20. Ireland 21. Italy 22. Isle of Man 23. Jersey 24. Kazakhstan 25. Kyrgizstan 26. Latvia 27. Liechtenstein 28. Lithuania 29. Macedonia 30. Malta 31. Moldova 32. Monaco 33. Netherlands 34. Norway 35. Poland 36. Portugal 37. Romania 38. Russia 39. Serbia and Montenegro America 40. Slovakia 50. Argentina 41. Slovenia 51. Barbados 42. Spain 52. Brazil 43. Sweden 53. Canada 44. Switzerland 54. Chile 45. Tajikistan 55. Mexico 46. Turkey 56. Panama 47. Ukraine 57. San Marino 48. United Kingdom 58. Trinidad and Tobago 49. Uzbekistan 59. United States of America 60. Uruguay Africa and Middle East 61. Bahrain 62. Botswana 63. Egypt 64. Israel 65. Kuweit 66. Lebanon 67. Mauritius 68. Morocco 69. Niger 70. Oman 71. Qatar 72. Saudi Arabia 73. Seychelles 74. South Africa 75. Syria 76. Tunisia 77. United Arab Emirates South and East Asia 78. Brunei 79. China 80. Hong Kong 81. India 82. Indonesia 83. Japan 84. Laos 85. Malaysia 86. Mongolia 87. New-Zealand 88. Pakistan 89. Philippines 90. Singapour 91. South Korea 92. Sri Lanka 93. Thaïland 94. Vietnam 11

12 Investment protection treaties concluded by the Belgo- Luxembourg Economic Union Treaties in force Treaties pending 1. Albania 2. Algeria 3. Argentina 4. Armenia 5. Azerbaijan 6. Bangladesh 7. Benin 8. Bolivia 9. Bosnia & Herzegovina 10. Bulgaria 11. Burkina Faso 12. Burundi 13. Cameroon 14. Chile 15. China 16. Croatia 17. Cyprus 18. Czech Republic 19. Egypt 20. El Salvador 21. Estonia 22. Gabon 23. Georgia 24. Hong Kong 25. Hungary 26. India 27. Indonesia 28. Kazakhstan 29. Kuwait 30. Latvia 31. Lebanon 32. Libya 33. Lithuania 34. Macedonia 35. Madagascar 36. Malaysia 37. Malta 38. Mauritius 39. Mexico 40. Moldova 41. Mongolia 42. Morocco 43. Mozambique 44. Paraguay 45. Peru 46. Philippines 47. Poland 48. Romania 49. Russia 50. Saudi Arabia 51. Serbia 52. Singapore 53. Slovakia 54. Slovenia 55. South Africa 56. Sri Lanka 57. Thailand 58. Tunisia 59. Turkey 60. Ukraine 61. United Arab Emirates 62. USA * 63. Uruguay 64. Uzbekistan 65. Venezuela 66. Vietnam 67. Yemen * Treaty of friendship, establishment and navigation 68. Bahrain 69. Barbados 70. Belarus 71. Botswana 72. Brazil 73. Comoros 74. Congo, DR 75. Costa Rica 76. Cuba 77. Ethiopia 78. Guatemala 79. Ivory Coast 80. Korea 81. Liberia 82. Mauritania 83. Montenegro 84. Nicaragua 85. Oman 86. Pakistan 87. Panama 88. Qatar 89. Rwanda 90. Sudan 91. Tajikistan 92. Togo 93. Uganda 94. Zambia Source: KPMG 12

13 EU Free Trade Agreements Source: EU Commission June

14 Keynote Speech H.E. Nicole Bintner Ambassador of the Grand Duchy of Luxembourg to the U.A.E. 14

15 Panel Discussion Investment Funds Stewart Adams Regional Head of Investors & Intermediaries Standard Chartered David Marshall Senior Executive Officer Emirates NBD AM Florence Stainier Partner Arendt & Medernach 15

16 Luxembourg fund industry 20 years of sustained growth billion of assets under management UCIs Figures as at 31 December 2013 Source CSSF 16

17 Luxembourg the second largest fund center worldwide 60% 50% 40% 57% Luxembourg is the second largest fund centre in the world after the USA 30% 20% 10% 10% 22% 0% 12% America Europe Africa, Asia & Pacific 17 Figures as at January 7, 2014 Source: Investment Company Institute (ICI) Worldwide Mutual Fund Market Data, third quarter 2013

18 UCITS and Non-UCITS by domicile Figures as at 30 June 2013 (Source EFAMA) 18

19 Market share of different domiciles Registrations of cross-border funds Germany Belgium UK 1% 1% 2% 68% of all cross-border funds registered in at least 3 countries (incl. home state) are Luxembourg funds France 4% Ireland 18% Luxembourg 68% 0% 10% 20% 30% 40% 50% 60% 70% 80% 19 Source: PwC analysis as at December 31, 2012 (Poster PwC March 2013)

20 Growth in cross-border distribution of European funds Region of distribution Total registration at Dec 2011 Total registration at Dec 2012 New registrations in 2012 % growth Europe 57,650 63,286 5,636 10% Asia Pacific 5,614 5, % Americas 1,775 2, % Middle East % Africa % TOTAL 65,931 72,264 6,333 10% Source: PwC analysis as at December 31, 2012 (Poster PwC March 2013) 20

21 Luxembourg funds: the vehicle of choice for crossborder distribution Luxembourg market share of foreign cross-border funds registered for sale Sweden 68% UK 57% France 65% Germany 63% Switzerland 67% Bahrain 77% South Korea 96% Japan 60% Taiwan 76% Hong Kong 72% Peru 98% Singapore 69% Chile 68% South Africa 60% 21 Source: Lipper LIM and PwC analysis, December 31, 2012

22 Panel Discussion Private Wealth Guy Harles Co-Chairman of the Strategy Board, Partner Arendt & Medernach Marko Klein Head of Wealth Management Bank of Sharjah 22

23 Luxembourg largest wealth management centre in the Eurozone Mitigation of political risks Asset protection Mitigation of criminal & economic risks Mitigation of tax costs Succession planning Tax structuring Family planning Control & managing tax risks Efficient transfer of wealth to future generations Managing risks Diversification Wealth optimization 23

24 Overview of available vehicles in the private wealth sector SOPARFI SPF Corporate Tools SIF SICAR Private Wealth Structures Family foundation Fiduciary Agreements Contractual Tools Insurance Products 24

25 Corporate vehicles available 25

26 SOPARFI Holding Company Non supervised and non regulated corporate vehicle governed by the Luxembourg law of 10 August 1915 on commercial companies, as amended Contract based No restrictions regarding eligible investors No restrictions regarding eligible assets No restrictions regarding investment strategies No risk diversification rules Possibility to create hybrid financing instruments, classes of shares 26

27 SOPARFI Holding Company (cont ) Tax regime: Fully taxable regime but participation exemption regime (on dividends, liquidation proceeds and capital gains deriving from qualifying participations) Benefice of double tax treaties (DTTs) and EU Directives Large choice of legal forms e.g.: Public limited company (S.A.) Private liability company (S.à r.l.) Civil partnership (S.C.) Corporate partnership limited by shares (S.C.A.) 27

28 SOPARFI Holding Company (cont ) Other tax advantages No WHT on royalties payments No WHT on interest payments made to individuals (except for the Saving Directive) No capital duty on incorporation of companies through contributions in cash (except a fixed registration duty of EUR 75) No stamp or registration duty on disposal of shares (except a fixed registration duty of EUR 12 in case of voluntary registration) Losses may be carried forward indefinitely Fiscal consolidation regime available Functional currency available No CFC rules No legal thin cap rules but debt-to-equity ratio of 85/15 usually required by tax authorities for holding activity Advance tax confirmations and advance pricing agreements available 28

29 Family Wealth Management Company (SPF) Non supervised and non regulated corporate vehicle governed by the Luxembourg law of 11 May 2007 on the Family Wealth Management Company, as amended Investment vehicle dedicated to the management of private, family wealth of individuals No family link between the shareholders Eligible shareholders: Any individual acting within the framework of the management of his private wealth Any wealth management entity acting exclusively in the interest of the private wealth of individuals (Family Office Trust Private Foundation) Any intermediary entity holding the shares on a fiduciary basis on behalf of the investors 29

30 Family Wealth Management Company (SPF) (cont ) SPF may acquire, hold, manage and sell any financial assets to the exclusion of any commercial activity No risk diversification rules A SPF company must be set up in the form of: private limited liability company (S.à r.l.) public company limited by shares (S.A.) cooperative in the form of limited company (Coop S.A.) or partnership limited by shares (S.C.A.) 30

31 Specialised Investment Fund (SIF) Regulated corporate vehicle (under the supervision of the Luxembourg supervisory authority CSSF) governed by the law of 13 February 2007 relating to specialised investment funds, as amended Eligible investors are well-informed investors: institutional investors professional investors other sophisticated investors, such as HNWI, who: Adhere to the informed investor status Either invest a minimum of or have been subject to an assessment made by a bank, an investment firm or a management company certifying their expertise, experience and knowledge in adequately apprising an investment in the specialised investment fund 31

32 Specialised Investment Fund (SIF) (cont ) The «umbrella fund» / «multi-compartments» fund might be an appropriate tool for wealth management purposes One single legal entity with separate and segregated investment cells Assets and liabilities of one compartment will be ring-fenced from the other compartments but only one operational entity Advantages for high net worth families: Cost reduction (a single board of directors, the same distributor, same custodian, same transfer and paying agent, same issuing documents, etc.) High degree of investment diversification Very flexible placement strategy for family members Flexibility and global coverage of investments (market sectors and assets) 32

33 Specialised Investment Fund (SIF) (cont ) 1 st scenario: Board of Directors Family member A Family member B Family member C Custodian Bank Administrator Auditor Compartment Compartment Compartment A B C SIF 33

34 Specialised Investment Fund (SIF) (cont ) 2 nd scenario : Board of Directors Family Custodian Bank Administrator Compartment Compartment Compartment A B C SIF Auditor Hedge Funds PE Real Estate Shares Shares 34

35 Specialised Investment Fund (SIF) (cont ) SIF offers investment opportunities to sophisticated retail or private investors, including HNWI: No restrictions regarding eligible assets (e.g. gold, works of art and wine are eligible) No restrictions regarding investment strategies Not subject to sector specific investment restrictions Risk-spreading rules 35

36 Investment Company in Risk Capital (SICAR) Eligible investors : Institutional investors Professional investors Other sophisticated investors, such as HNWI Specifically designed for private equity : allows to contribute assets to entities in view of their launch, development or listing on a stock exchange Investments must show the typical characteristics of risk capital investments (in particular liquidity risks), e.g. venture capital investments No diversification rules 36

37 The Luxembourg family foundation A New bill regarding the Luxembourg family foundation has been submitted to Parliament on 22 July 2013 The family foundation is limited to the management of private wealth of individuals and patrimonial entities No involvement in any commercial, industrial, agricultural or liberal activity An orphan structure set up through a notorial deed Capital contribution of min Eur paid up in cash or in kind to be made by individual founder or wealth management entities (e.g. trusts, foundations) 37

38 Luxembourg family foundation- legal framework The family foundation may: - own any movable and immovable property, tangible or intangible assets - Enter into insurance contracts as a subscriber or beneficiary - Set up other public or private foundations or trusts or be the beneficiary of such foundations or trusts - Hold shares in a company as long as it is not involved in the company s management The family foundation may further issue certificates representing rights on certain assets owned by it: - The certification mechanism grants certificate holders certain economic rights on the assets - The assets remain under the legal control of the family foundation 38

39 Individual and / or Patrimonial entity Board of Management settlor proceeds Certificate holders / Beneficiaries (including settlors) Management Family Foundation Orphan structure Supervisory Board Assets Securities Life insurance 39

40 Luxembourg family foundation- taxation framework Fully taxable entity Tax exemption on income deriving from: - Securities (dividends, profit sharing, interest payments) - Gains on the disposal and transfer of movable properties - Gains on the transfer of assets in favour of beneficiaries, certificate holders or settlors of the family foundation or their successors Net wealth tax exemption Registration duty or gift tax depending on the kinship 40

41 Asset protection and estate planning 41

42 Fiduciary agreement Luxembourg law of 27 July 2003 on fiduciary contracts Continental trust although no unilateral deed but a contractual agreement Definition: A fiduciary contract is a contract by which a person, the fiduciant (principal), agrees with another person, the fiduciary, that subject to the obligations determined by the parties, the fiduciary becomes the owner of the assets which shall form the fiduciary assets Limited scope of professionals acting as fiduciary: credit institutions investment firms securitisation companies pension funds, etc

43 Fiduciary agreement (cont ) Transfer of ownership Segregation of the assets (outside the scope of the personal assets of the fiduciary in case of bankruptcy, insolvency): the fiduciary assets are segregated: from the personal assets of the fiduciary from any other fiduciary assets Fiduciary agreements may be used for various purposes: Management purposes (fiducie gestion); Guarantee purposes (fiducie sûreté); Credit purpose (fiducie crédit); Carrying purpose (fiducie portage); Gift or inheritance purpose (fiducie donation). 43

44 Insurance products Luxembourg has developed a strong experience in using insurance products as private wealth tools Luxembourg insurance sector under the supervision of the Commissariat aux Assurances (CAA) Definition: a contract pursuant to which, the stipulator, receives from another person, the promising party, the promise that the promising party will perform a certain task for the benefit of a third party, the beneficiary Certain flexibility: as long as the beneficiary has not accepted the contract: Policy holder remains in control of the assets ( transfer of ownership) Policy holder remains in control of the investment policy (especially if unit-linked insurance products) Policy holder benefits from great protection and confidentiality of assets 44

45 Insurance products (cont ) Efficient vehicles for estate planning purposes. Insurance products benefit from tax advantages, a favourable tax treatment and from broad international tax recognition. 45

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47 Contact us Guy Harles, Partner Private Wealth Tel : guy.harles@arendt.com Florence Stainier, Partner Investment Funds Tel : florence.stainier@arendt.com Bishr Shiblaq, Head of Dubai Representative Office Bank Lending, Structured Finance Tel : bishr.shiblaq@arendt.com Disclaimer This presentation of Arendt & Medernach is designed to provide with summarized information and illustrations regarding the topics covered by such a presentation. This information and those illustrations are not intended to constitute legal advice and do not substitute for the consultation with legal counsel required before any actual undertakings.