Luxembourg AIF Direct and Indirect Tax Aspects

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1 Luxemburg AIF Direct and Indirect Tax Aspects Carline Brmans Tax Partner

2 Why using Luxemburg? Distributin advantages EU institutinal investrs - Passprt Legislative plicy investment fcussed laws, regulatry and fiscal regimes EU funder member & DTA netwrk Cncentratin f industry Substance regulatry + tax residence

3 Wh is using Luxemburg? Fund dmiciles Onshre EU - Luxemburg (PE/RE) Onshre EU - Ireland (Hedge) Onshre EU - UK, France, Germany (Asset managers) Offshre - Channel Islands (PE/RE) Offshre - Cayman Islands

4 Investment fund vehicles Onshre regulatin wide range f investment fund vehicles UCITS and UCI: retail prducts Specialised Investment Funds (SIF) since 2007 Investment vehicles in risk capital (SICAR): Private Equity, Venture Unregulated Limited Partnerships New: Reserved Alternative Investment Funds (RAIF) Law f 23 July 2016

5 The Luxemburg tlbx Supervisin UCITS III Eligible assets Traditinal assets + certain alternative assets Risk Capital (Venture + private equity) All asset classes Mst asset classes (with restrictins) All asset classes UCITS Part I UCI Part II SIF SICAR sec * LP Structuring flexibility *sec: securitisatin vehicle sec * LP RAIF SLP/ CLP

6 SIF/SICAR/RAIF/Unregulated SLP Typical structure Investment Advisr, eg -US SEC/UK FSA Eligible investrs -Institutinal, prfessinal, sphisticated Investment Manager/AIFM General Partner Lux S.à r.l.(3) Management Cmpany(2) Carry LP Fund vehicle - Limited partnership -Crprate -FCP(1) (cntractual fund) Custdian Bank/Depsitary Internal crprate finance Qualifying Auditr Bank: Acquisitin finance security package Asset A- hlding cmpanies -Luxemburg Cmpany -unregulated -SOPARFI Asset B- hlding cmpanies -Luxemburg Cmpany -unregulated -SOPARFI Asset C- hlding cmpanies -Luxemburg Cmpany -unregulated -SOPARFI Fund Administratr, transfer agent + registrar Investments Asset A - Prtfli C.(4) Asset B - Prtfli C.(4) Asset C - Prtfli C.(4) 1 Available fr SIF /RAIF nly 2 Required fr FCP Funds nly 3 Applicable fr Partnerships 4 Either EU r DTA jurisdictins

7 Fiscal Envirnment Fund level Direct Taxatin T be achieved: Tax Neutrality A. Regulated Vehicles Subjective tax exemptin by virtue f a specific prduct law (e.g. SIF, RAIF) B. Unregulated vehicles i. Objective tax exemptin ii. Tax transparency

8 Fiscal Envirnment Fund level Direct Taxatin Unregulated vehicles Objective tax exemptin Taxable entities but de-fact minr taxable base (e.g. SICAR, SV) Tax transparency Natinal CIT Partnerships are tax transparent by virtue f the tax law Lcal MBT if the fund perfrms i. cmmercial activities - exceptin fr AIF ii. deemed cmmercial activities mitigatin thrugh 5% interest-rule fr GP

9 Fiscal Envirnment Fund level Indirect Taxatin Standard VAT rate in Luxemburg : 17% Funds are within the scpe f VAT The fund activity is an ecnmic but exempt activity i.e. n right t deduct input VAT Required t register fr VAT in Luxemburg if taxable services are received frm abrad Reverse charge mechanism (B2B) : applicatin f Luxemburg VAT

10 Fiscal Envirnment Fund level Indirect Taxatin Management services t special investment fund vehicles are exempt Regulated and indirectly regulated vehicles (e.g. SIF, RAIF) SV / SICAR Unregulated AIF Exemptin applies als t delegated r utsurced management services distinct whle (e.g. investment/prtfli management, risk management) specific and essential fr the functining f the fund

11 Fiscal Envirnment Tax Structuring Backgrund 80+ Tax Treaties 20+ Tax Treaties in Pipeline BEPS/Anti-tax avidance rules/exchange f infrmatin Turning cnstraints int pprtunities: nn-tax pprtunities (e.g. substance)

12 Questins

13 Carline Brmans Partner, Tax E: T: M: Carline specializes in all aspects f crss-brder crprate tax advisry services including internatinal investment structures, direct and indirect tax structuring f investment funds and related matters (such as carried interest, fee structures, etc.), mergers & acquisitins, relcatin f cmpanies (inbund and utbund), intellectual prperty rights, crprate restructuring and direct tax cmpliance including tax due diligence wrk. Prir t jining Ogier in 2014, Carline wrked fr six years in anther Luxemburg crprate law firm, seven years at leading, glbal accuntancy / prfessinal services firms, and then at her wn butique law practice, fcusing n tax and crprate law. Over this time, Carline has gained a brad experience assisting private equity and venture capital firms, investment funds, multinatinal crprate grups and high net wrth individuals. Carline graduated frm the University KU Leuven and University UC Luvain-la-Neuve (Belgium) in 1999 with a Master in Law (cum laude), and in 2000, she achieved her Master in Tax Law (cum laude) at the University KU Leuven. In 2006, she cmpleted the 'Cycle de frmatin en Drit Fiscal luxemburgeis' and hlds a certificatin in Finance and Managerial Accunting frm Bstn University. Carline is a member f the Luxemburg and Brussels Bar and is registered as a freign lawyer at the Law Sciety f Hng Kng. She regularly prvides external presentatins n varius Luxemburg tax and legal tpics, acts as a sessin reprter t the Annual Tax Planning Strategies Cnference US and Eurpe and published in, amngst thers, Internatinal Tax Review, Internatinal Finance Center, etc. Finally, Carline hlds a Belgian and Luxemburg passprt but is based in Hng Kng. She speaks fluently English, Dutch, French, German and Luxemburgish.

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