LUXEMBOURG Law and Practice Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
Specific Industries Luxembourg’s tax framework also contains multiple incentives tailored to specific industries. For that pur - pose, Luxembourg offers a wide range of investment vehicles, some of which benefit from a tax regime which differs from that applicable to fully taxable cor - porate entities. The following regulated investment funds are exempt from any taxation on their income, but are subject to a so-called “subscription tax” on the value of their net assets: • undertakings for collective investment in transfer - able securities (UCITS) within the meaning of the UCITS Directive; • alternative investment funds (AIFs) (ie, under - takings for collective investment which are not UCITS); and • specialised investment funds (SIFs), which are multi-purpose investment funds dedicated to so- called “sophisticated investors”. While the income exemption applies in the same way to all investment fund types listed above, the rate of subscription tax varies depending on the type of fund, from 0.01% to 0.05%. Some subscription tax exemptions apply in certain cases. Notably, actively managed exchange traded funds are exempted from subscription tax with effect as from 1 January 2025, aligning to the regime already applicable to passively managed exchange traded funds. Securitisation vehicles (SVs) set up as a securitisation fund (which acquires or assumes, directly or through another undertaking, risks relating to claims, other assets or obligations assumed by third parties or inherent to all or part of the activities of third parties and issues securities whose value or yield depends on such risks) are exempt from taxation on their income and are subject to the tax provisions applicable to UCIs. However, they are not subject to subscription tax. Some other types of investment vehicles are fully subject to tax on their income as any other fully tax - able Luxembourg corporate entity, but either benefit from certain exemptions on certain income categories ( sociétés d ’ investissement en capital à risque (SIC -
ARs)) or are subject to specific rules when computing their tax base (SVs in corporate form): • an investment company in risk capital (SICAR), designed for private equity and venture capital investments, must invest its assets in securities representing risk capital; and • an SV set up as a corporation (same activity as a securitisation fund) is fully subject to tax on its income like any other fully taxable Luxembourg corporate entity, but is subject to specific rules (specific deductions) when determining its taxable income. Finally, the reserved alternative investment fund (RAIF) combines the characteristics and structuring flexibili - ties of both the Luxembourg regulated SIF and the SICAR qualifying as an AIF managed by an authorised AIF manager (AIFM), except that RAIFs are not subject to prior authorisation from the Luxembourg financial regulator as they must be managed by a fully author - ised AIFM. For tax purposes, depending on the activ - ity they perform, RAIFs are subject to either the same income tax exemption regime as SIFs (and subscrip - tion tax) or the same tax regime as SICARs. 5.4 Tax Consolidation Fiscal consolidation is permitted for CIT and MBT purposes, but not for NWT. Luxembourg law allows groups to elect either vertical or horizontal tax con - solidation, with the consolidated group being bound by the regime for a minimum period of five years. A company may not simultaneously belong to more than one tax‑consolidated group. Vertical tax consolidation is available where a fully taxable Luxembourg resident company, or the Lux - embourg permanent establishment of a foreign com - pany subject to a tax comparable to Luxembourg CIT, directly or indirectly holds at least 95% of the share capital of one or more fully taxable Luxembourg resident companies, or of a Luxembourg permanent establishment of a foreign entity subject to a compara - ble tax. Both the integrating parent and the integrated subsidiaries must have the same financial year‑end. Horizontal tax consolidation applies where several subsidiaries are held, directly or indirectly, at a mini -
611 CHAMBERS.COM
Powered by FlippingBook