Luxembourg Funds

Luxembourg is a traditional European investment center. It has been recently ranked second as the place with the biggest number of registered investment funds, just after the USA. It is characterized by having necessary business infrastructure and the advantages of onshore jurisdiction.

There are the most common collective investment tools of Luxembourg:

• Investment company with fixed capital – société d’investissement à capital fixe (SICAF);
• Investment company with variable capital – société d’investissement à capital variable (SICAV);
• Special investment fund – fonds d’investissement spécialisé (SIF).

SICAF and SICAV

These funds can be implemented only for professional institutional investors, for example insurance companies and banks.

Form of business organization

Société d’Investissement à Capital Variable (SICAV) – is a legal entity in a form of joint-stock company; its capital according to regulations is equal to the amount of capital account.

Société d’Investissement à Capital Fixe (SICAF) – is a legal entity with fixed capital; it can act like a public fund or a closed one.

Taxation

These funds are tax-neutral. They are exempt from an income tax, a capital gains tax and withholding tax. The annual subscription tax (tax d’Abonnement) is paid; its rate is 0,05% on their net assets (it is paid quarterly). The investments to other collective investment funds are excluded from the basis of taxation. The capital duty is charged at a fixed rate of 1250 euro per operation.

Supervision

SICAF and SICAV activity is possible only after approval by Commission de Surveillance du Secteur Financier (CSSF). The depositary bank supervises the property of funds and controls share operations.

The minimal capital is 1.25 million euro and is paid during 6 months from the day of CSSF approval. Keeping the register of investors, calculating net assets etc. should take place in Luxembourg. The decisions about investments can take place out of Luxembourg.

There is a law on anti-money laundering: financial brokers have to identify personalities of fund investors.

Reports

The audited accounts are published every year including the calculation of net asset value. The unaudited accounts are published every six months.

SICAF and SICAV’s shares can be freely sold within the European Union.

Special Investment Fund (SIF).

The new Law on Specialised Investment Funds (SIFs) was adopted on 13 February 2007 and offers greater flexibility and broader sphere of investors.

Form of business organization: company with fixed or variable capital (SICAV/SICAF), unit investment fund (fonds commun de placement (FCP)), partnership limited by shares (SCA), special limited partnership (SCSp), limited liability company. This list is open.

Investors

• Institutional investors;
• Professional investors;
• Other informed investors (should confirm the status of well-informed investors in writing and invest not less than 125 thousand euro or provide the confirmation of the relevant experience from bank or financial provider)

Financing

SIFs are permitted to invest in all types of assets including securities or money market Funds; real estate; private investment capital; infrastructure; private equity and hedge Funds.

Taxation

SIFs are exempt from a corporate income tax, a capital gains tax and withholding tax. The annual subscription tax (tax d’Abonnement) is paid; its annual rate is 0,01% on their net assets (it is paid quarterly). The investments to other collective investment funds are excluded from the basis of taxation. The capital duty is charged at a fixed rate of 1250 euro per operation.

The treaties on avoidance of double taxation are applicable.

Supervision

SIFs are under permanent supervision of Luxembourg‘s Financial Market Authority (CSSF). CSSF approves constituent or emissive documents (and all the changes), the appointment of directors, portfolio managers, depositary and auditors.

On receipt of the approval from CSSF the minimum amount of net assets for 12 months shall be 1,25 million euro. Fund’s assets must be valued at fair market value.

Reports

The annual accounts should be audited by an independent auditor. It must be published within six months after the end of the financial year. Furthermore, SIF in Luxembourg must prepare a sale prospectus which contains all the necessary information necessary to enable investors to carry out an informed evaluation of the investment policy and the risks of investing.