Real Estate & Private Equity workshop Moderator: Panelists: Joseph Hendry, Managing Director, Brown Brothers Harriman Gautier Despret, Senior Manager, Ernst & Young Patrick Goebel, Counsel, Allen & Overy Yves Knel, Managing Director, Deloitte
Real Estate and Private Equity Key Figures Private Equity Leading European PE center Over 300 Private Equity Funds, large number of unregulated PE Structures Unregulated? Real Estate Leading European RE center 185 SIF and 27 Part II Structures a/o July 2011 Unregulated?
RE & PE Structures 4
RE & PE Funds Parties Involved in Servicing
Organization of an RE/PE Fund Operating Model FUND MANAGEMENT External Advisor Investment Committee INVESTORS Private Equity House Real Estate Investment Trust (General Partner / Investment Manager) REGULATORY Insurance Co s Pension Funds Banks Business Angels HNWIs Corporate investor Fund of funds Family offices Sovereign wealth funds Fund raising / Commitments Capital calls Distribution Selection Monitoring Development Mgt + Perf. Fee Private Equity / Real Estate Fund Investments Divestment Light Supervision Custody Audit CSSF Depositary Bank Auditor DI DI DI PE / RE Fund PORTFOLIO DI DI DI
Taxation of PE&RE Fund vehicles & SPV Tax treatment Tax Transparenc y available? WHT paid on dividend to investors Treaty & EU directives access Other tax considerations SIF Fully exempt Yes No Limited treaty access: (36) Max. 1bp on NAV, with exemption SICAR Fully taxable but favourable regime for income and gains Yes No Full treaty access: (64) EU directives : (case by case) - Part II Fund Fully exempt Yes No Limited treaty access : (36) Max. 5bps levy on NAV with reduction & exemption SPV Fully taxable but 0% ETR for shareholding and limited spread for financing No Usually avoided through domestic participation exemption or use of efficient instruments Full treaty access : (64) EU Directives : yes Tax certainty available
Luxembourg double tax treaty network 64 DTTs in force 20 DTTs pending 1. Albania 9. Denmark 17. Iceland 25. Lithuania 33. Portugal 41. Sweden America 48. Argentina 50. Brazil 52. Mexico 54. Trinidad &Tobago 56. Uruguay 2. Armenia 10. Estonia 18. Ireland 26. Macedonia 34. Romania 42. Switzerland 49. Barbados 51. Canada 53. Panama 55. United States 3. Austria 4. Azerbaijan 11. Finland 12. France 19. Italy 20. Jersey 27. Malta 28. Monaco 35. Russia 36. San Marino 43.Tajikistan 44. Turkey Africa and Middle East 57. Bahrain 60. Lebanon 63. Oman 66. Seychelles 69. U.A.E. Europe and Central Asia 58. Israel 61. Mauritius 64. Qatar 67. Syria 70. South Africa 5. Belgium 13. Georgia 21. Kazakhstan 29. Moldova 37. Serbia 45. Ukraine 59. Kuwait 62. Morocco 65. Saudi Arabia 68. Tunisia 6. Bulgaria 14. Germany 22. Kirgizstan 30. Netherlands 38. Slovakia 46. Un. Kingdom 71.China 74. Indonesia 77. Mongolia 80. South Korea 83. Thailand 7. Cyprus 15. Greece 23. Latvia 31. Norway 39. Slovenia 47. Uzbekistan South and East Asia 72. Hong-Kong 75.Japan 78. Pakistan 81. Sri Lanka 84. Vietnam 8. Czech Republic 16. Hungary 24. Liechtenstein 32. Poland 40. Spain 73. India 76. Malaysia 79. Singapore 82. Taiwan
RE & PE Funds Tax Considerations Investor tax considerations + anti-abuse rules INVESTORS Accommodate investors tax needs INVESTORS - Minimum Tax leakage on CG and income - Usually same result as if direct investments LOCAL SPV OFFSHORE FUND PE Target LUXEMBOURG FUND & or SPV LOCAL SPV PE Target - Tax neutral platform - Ease of cash repatriation - Local substance - Tax certainty around tax exposure Local taxes : income tax, transfer tax, capital gain tax, withholding tax, etc.. Reduction of local taxes - Reduction of local taxes through traditional techniques - No or reduced WHT on interest and dividends - Possibly no CGT locally and no transfer tax
Typical Real Estate fund tax structuring Investors tax efficiencies Carried interest / Fund manager structuring Assets tax efficiencies
How Luxembourg compares with? Hong Kong? Large double tax treaty network? Singapore? The Netherlands? Tax certainty Access to EU directives?.? Potential areas of tax comparison for real estate and private equity Investor tax needs? Holding & Financing? Cash repatriation?
AIFMD Compliant RE & PE Funds - Solution 1: AIF appointing an AIFM 12
AIFMD Compliant RE & PE Funds - Solution 2: Self-managed AIF 13
Thank you.
Closing Drink