Luxembourg Investment Vehicles SOPARFI 2017 MILAN ROME LUXEMBOURG LONDON LUGANO DUBLIN SINGAPORE DUBAI

Size: px

Start display at page:

Download "Luxembourg Investment Vehicles SOPARFI 2017 MILAN ROME LUXEMBOURG LONDON LUGANO DUBLIN SINGAPORE DUBAI"

William Pope
6 years ago
Views:

1 Luxembourg Investment Vehicles SOPARFI 2017 MILAN ROME LUXEMBOURG LONDON LUGANO DUBLIN SINGAPORE DUBAI April 2017

2 We are what we repeatedly do. Excellence, then, is not an act, but a habit. -Will Durant- 2 On a preliminary basis and for the sake of clarity, the details shared, are of a general nature and shall not be intended as a fully comprehensive tax/legal advice but rather as a preliminary overview. Although we attempt to provide you with precise and timely updates, there can be no guarantee that the information shared is accurate as of the date it is received or it will continue to be accurate in the future. If you wish to have a more specific advice on the same or on different matters, LEXTRAY is at your disposal, to provide you with any advice you may require in connection with the above.

3 > THE LUXEMBOURG ENVIRONMENT Luxembourg is the world s second largest investment funds domicile, and is the prime location for the pan-european and global distribution of investment funds under the UCITS brand. Initially designed as a global retail funds hub under the sole UCITS brand, Luxembourg has gradually opened up to the alternative asset classes, offering personalised structuring solutions through specialized investment vehicles. Structuring flexibility, investor protection and tax efficiency are the crucial elements that have inter alia helped to convince the investors, to shift their operations and investments to Luxembourg. In addition to such a fund-friendly environment, the constant work of the legislator to promote Luxembourg as a fully-regulated on shore location (see its stringent any money-laundering regulation) has greatly contributed to its business appeal. 3

4 > SOPARFI: THE VEHICLE IN A NUTSHELL The purpose of this brochure is to provide you with a bird s eyes view of the legal framework and taxation particularities of a type of Holding Company also known under the name of Société de participations financières ( SOPARFI ). We hope that you find it useful and that it meets your expectations. A SOPARFI is a Luxembourg fully taxable ordinary commercial company whose corporate object is inter alia the holding of participations. A SOPARFI can hold all types of real estate, directly or indirectly, in Luxembourg or abroad. A SOPARFI can hold intellectual property rights (brands, patents, copyrights, designs, software and web domain names). > LEGAL FRAMEWORK Being a SOPARFI, a common-law company, it falls under the provisions of the Luxembourg Company Law of 10 August ( Company Law ). > AUTHORIZATION AND SUPERVISION SOPARFI is an unregulated vehicle which does not require authorization for its incorporation and which is not subject to the continuous supervision of any regulatory or governmental body. 4

5 > LEGAL AND REGULATORY ASPECTS 1. LEGAL FORMS SOPARFIs may use any of the forms available to corporate capital companies. The most commonly used forms of companies are the public limited liability company ( Société anonyme or SA ) and the private limited liability company ( Société à responsabilité limitée or Sà rl ), but it is also possible for the SOPARFI to take the form of a partnership limited by shares ( Société en commandite par actions, SCA ). The choice between these different legal forms depends on the specific needs of the investors. One of the main differences between the SA and the SARL is with respect to the shares and their transferability. In an SA, the shares may be issued in registered form and are freely transferable. In a SARL, the shares are issued in registered forms only and tran-sferable only upon the consent of the shareholders representing at least the three-quarters of the share capital. The capital of SA, a public company - is represented by shares that can be created in different classes (e.g. with or without voting rights). The capital of a SARL, a private company - is represented by quotas, often with transfer restrictions. 2. PURPOSE The purpose of a SOPARFI is predominantly the holding of participations in Luxembourg or foreign companies. A SOPARFI is permitted to carry on all types of commercial activities insofar as they are consistent with the articles of association and Luxembourg s statutory provisions. 3. FORMATION A SOPARFI in Luxembourg is incorporated through the recording of its articles of association by a notary public. The articles of association will subsequently be published in the Official Bulletin ( Mémorial C ) and lodged with Luxembourg s Trade and Companies Register. A natural or legal person of any nationality and residence may form a SOPARFI in Luxembourg. 5

6 4. CAPITAL REQUIREMENTS AND OTHER ASPECTS A SA in Luxembourg is permitted to issue registered shares. Said shares may be issued with or without voting rights. The mi-nimum capital of a SA in Luxembourg is 30,000 EUR and requires to be subscribed in full. It is required that at least 25% of the nominal value of each share is paid up. A SARL in Luxembourg is permitted to issue registered quotas. The said quotas may be issued with or without voting rights. The minimum capital of a SARL in Luxembourg is 12,000 EUR and requires to be subscribed and paid-up in full. The issuance of new shares is in principle decided by the shareholders. 5. MANAGEMENT SA and SARL are respectively managed by a board of directors/managers which are not necessarily shareholders. In particular, the SA may be managed by two different forms of managerial organisation: 1. single-tier system: where the board of directors is in charge of the management of the SA; and 2. two-tier system: where the management board manages the SA under the permanent control of supervisory board. A SCA is generally managed by the general partner (because of its/their unlimited liability ( Management ) or by an external manager. The limited partner of a SCA may carry out certain internal management acts without being automatically exposed to a risk of unlimited, joint and several liability alongside the general partners. There are no specific requirement regarding the members of the Management. They may be resident or non-resident, individuals or corporate entities. 6. ANNUAL ACCOUNTS SOPARFIs are required to prepare annual accounts including a balance sheet, a profit and loss account and notes to the accounts. The annual accounts are prepared in accordance with the Luxembourg GAAP (Generally Accepted Accounting Principles) with option to value certain assets at fair value or IFRS (International Financial Reporting Standards). The annual accounts are prepared by the Management and submitted for approval to the general meeting of the shareholders. 6

7 > TAXATION 1. EXEMPTION FROM TAXATION OF DIVIDENDS AND SALE AND LIQUIDATION PROCEEDS FROM INVESTMENTS The corporate income tax rate is actually equal to 19% and will be decreased to 18% from 2018 onwards. Thus, the aggregate income tax rate for companies with a registered office in Luxembourg-City would be 27.08% in 2017 and 26.01% in Furthermore, the corporate income tax rate should decrease from 20% to 15% for corporations with a taxable income below 25,000 EUR, favoring start-ups and small enterprises (resulting in an aggregate income tax rate of 22.8%). Finally, a third intermediate tax rate of 3,750 EUR plus 33% of the income exceeding 25,000 EUR (except for 2017 where a 39% rate would apply) should be introduced for companies with a taxable income between 25,000 EUR and 30,000 EUR. Notwithstanding this, under the application of the inter-corporate privilege, the dividends and sale and liquidation proceeds distributed to a SOPARFI in Luxembourg are exempt ( PEX ) from tax upon satisfaction of the same requirements listed under paragraph 3 hereunder. 2. DOUBLE TAXATION AGREEMENTS (DTA s) A SOPARFI in Luxembourg can benefit from Luxembourg s multiple double taxation agreements (DTA s) due to the tax exemptions arising from the inter-corporate privilege not affecting the general tax liability of a SOPARFI. 3. PARENT SUBSIDIARY EU DIRECTIVE (P-S EU DIRECTIVE) The parent company (SOPARFI) and the subsidiary company, in order to benefit from the P-S EU DIRECTIVE, must be either a corporation resident in Luxembourg with unlimited tax liability or the permanent establishment in Luxembourg of an EU company within the meaning of the parent sub-sidiary Directive. Furthermore, the parent company is required to hold at least 10% of the capital of the subsidiary company or to have acquired the said investment for at least 1,200,000 EUR (or 6,000,000 EUR for sale profits) and at the time of the making available of the dividends, the investment must have been held for an uninterrupted period of at least 12 months or an undertaking exists to do so. 7

8 4. DEDUCTION OF INVESTMENT-RELATED EXPENSES Investment-related expenses such as the interest on loans, incurred through the taking out of said loans, are deductible to the extent which they exceed the tax-free income generated from the investment in the respective year. This also applies to losses suffered from the sale of or value adjustment of the said investments. The exemption from taxation of the sale proceeds from investments is restricted if earlier write-offs to the going value of the investments have been made or where the expenses exceed the tax-exempt income of the investments during the period in which they were held. The tax-exempt sale profits will accordingly be adjusted for the amount of the investment-related expense which has already been deducted from the income liable to tax. 5. EXEMPTION FROM THE WEALTH TAX The net wealth tax in Luxembourg applies at a rate of 0.5% on taxable assets. Corporations having their registered office or place of central control and management in Luxembourg are liable to the net wealth tax on their entire assets, namely assets within and out with Luxembourg. In contrast, thereto, corporations which are not resident in Luxembourg are only liable to tax on those assets within Luxembourg. Notwithstanding this and under the mandatory requirement that the following requirements be fulfilled without exception, the value of an investment remains exempt from the net wealth tax. 8

9 6. EXEMPTION FROM WITHHOLDING TAX In general, dividends distributed by a corporation in Luxembourg are subject to withholding tax at a rate of 15%. However, the said tax will not be levied on a SOPARFI if the following requirements are satisfied. 6.1 Requirements for the distributing company The SOPARFI distributing the dividends must be resident with unlimited tax liability. 6.2 Requirements for the receiving company The receiving company must be a resident corporation with unlimited tax liability, a corporation resident in an EU member state within the meaning of the parent subsidiary Directive, a resident permanent establishment of a European Company within the meaning of the parent subsidiary Directive or a resident permanent establishment of a parent company which has its registered office in a country which has agreed a DTA with Luxembourg. Moreover, the receiving company is required to have an investment in the SOPARFI in Luxembourg amounting to at least 10% of the company s share capital or of a purchase price amounting to at least 1,200,000 EUR which has been held for a period of 12 months or an undertaking exists to do so. If a SOPARFI in Luxembourg distributes dividends to companies outwit the EU, these will most often be liable to withholding tax at the reduced rate of 5% insofar as there exists a DTA between Luxembourg and the relevant country. 7. WITHHOLDING TAX ON ROYALTY PAYMENTS, INTEREST AND LIQUIDATION PROCEEDS In Luxembourg, no withholding tax requires to be paid on royalty and interest payments as well as, in the case where a SOPARFI is liquidated, on the distribution of liquidation proceeds. 8. VAT If the business activity of a SOPARFI in Luxembourg is not exclusively limited to the holding of investments, it will be liable to value-added tax (VAT) and is consequently required to register for value-added tax (VAT). Luxembourg s rate of value-added tax (VAT) is 17%. 9

10 Presentation of the Firm LEXTRAY is committed to providing the highest quality legal and tax services. Our team is at your service in 6 different languages (English, French, Italian, German, Spanish and Arabic), directly active in 7 jurisdictions (Luxembourg, Italy, Switzerland, UK, Ireland, Singapore and Dubai) and indirectly through our associates in the Netherlands, Spain, USA, Argentina and Brazil, to provide you with the finest tailor-made work products and solution. Our widespread territorial coverage allows us to remain in constant contact with you, 24h24 and 7/7, guaranteeing a first-rate standard and rapid execution as well as a clear, practical and up-to the minute advice. Considering the fast moving and aggressive business environment we nowadays facing, we are committed to a relentless professional skill update and are outmost attentive to tuning to the clients wishes and adapting to new laws and regulations. EMPHASIS ON OUR INVESTMENT VEHICLES PRACTICE AREA Our Luxembourg team has a robust expertise in all areas of Luxembourg investment vehicles law. This includes among others: (i) support in finding the ideal investment vehicle to meet your requirements and your goals from a governance, regulatory and tax perspective; (ii) support in setting up the vehicle; (iii) tax structuring support; (iv) providing ongoing corporate support service throughout the lifetime of the vehicle; (v) keeping you updated on the new regulatory developments. 10

CONTACT We would love to hear from you. Don t hesitate to get in touch with one of our professionals or dedicated departments. info@lextray.lu Lextray Corporate and Tax S.à r.l. 2, Boulevard de la Foire L - 1528 Luxembourg Tel.

11 CONTACT We would love to hear from you. Don t hesitate to get in touch with one of our professionals or dedicated departments. info@lextray.lu Lextray Corporate and Tax S.à r.l. 2, Boulevard de la Foire L Luxembourg Tel Fax Lextray Legal S.à r.l. 5, Rue Aldringen L Luxembourg Tel Fax Talk to us about your concerns and find out more by visiting us at

Luxembourg Investment Vehicles SV 2017 MILAN ROME LUXEMBOURG LONDON LUGANO DUBLIN SINGAPORE DUBAI

Luxembourg Investment Vehicles SV 2017 MILAN ROME LUXEMBOURG LONDON LUGANO DUBLIN SINGAPORE DUBAI April 2017 We are what we repeatedly do. Excellence, then, is not an act, but a habit. -Will Durant- 2