LUXEMBOURG Law and Practice Contributed by: Frédéric Feyten, Alejandro Dominguez Becerra, Gérard Maîtrejean and Pawel Hermeliński, CMS
The Specialised Investment Fund (SIF) SIF may be an alternative to structure families’ wealth. The SIF is not subject to CIT, MBT and NWT. Distri - butions made by the latter are not subject to WHT. The SIF is, however, subject to a subscription tax of 0.01%. Exemptions are available under certain condi - tions. Access to DTTs signed by Luxembourg will need to be assessed on a case-by-case basis. As exempt entities, the SIF is not entitled to EU tax directives. Investment Company in Risk Capital (SICAR) The SICAR is in principle subject to CIT and MBT, but they benefit from an objective exemption on income derived from investment in risk-bearing capital. The SICAR is subject to the minimum NWT and not to the standard annual NWT. Distributions made by a SICAR are not subject to WHT. Being fully taxable companies, SICARs benefit from a Luxembourg tax perspective from EU tax directives and DTTs signed by Luxembourg. Finally, non-resident shareholders are not subject to Luxembourg income tax on gains real - ised upon disposal of the SICAR’s shares. Recent developments in AML regulations, benefi - cial ownership disclosure, tax reforms which include measures to prevent tax avoidance and ensure fair taxation have impacted the benefits and usage of cer - tain of these entities. 3.2 Recognition of Trusts Luxembourg ratified the Hague Convention of 1 July 1985, on the law applicable to trusts and their rec - ognition, by the Law of 27 July 2003 (“2003 Law”), to facilitate the use of all forms of trusts governed by foreign jurisdictions. For the implementation of the Convention, the 2003 Law specifies, as regards assets subject to a trust and located in Luxembourg, that the situation of the trustee will be determined by reference to that of an owner without this affecting the principle of separa - tion between the assets formed by the trust’s assets and the assets constituted by the personal assets of the trustee. Any trust constituted abroad is then recognised by Luxembourg law which gives it full legal effect to the extent that it is validly constituted under a foreign law,
the Soparfi is also entitled to the benefits of the DTTs signed by Luxembourg. Luxembourg Private Wealth Management Company (SPF) The SPF is the vehicle designed for private wealth management. It is a non-commercial company that can hold and manage financial assets for individu - als and families. The SPF benefits from a favourable tax treatment including an exemption from CIT, MBT and NWT although it is subject to subscription tax of 0.25%. In addition, distributions made by the SPF are not subject to WHT. As a result, the SPF is not entitled to EU tax directives nor to the DTTs signed by Lux - embourg. Finally, non-resident shareholders are not subject to Luxembourg income tax on gains realised upon disposal of the SPF’s shares. Luxembourg Common Limited Partnership (SCS) and Special Limited Partnership (SCSp) The SCS and SCSp are both tax transparent entities for CIT and NWT. Under certain conditions, they are also tax transparent for MBT. In the presence of a SCS and SCSp, the Luxembourg reverse hybrid mismatch rule needs to be monitored given that under certain conditions, these entities may become liable to CIT only (including the solidarity surcharge) with respect to the portion of their net income that is not taxed under Luxembourg domestic law or under the laws of any other jurisdiction. Distributions made by an SCS and SCSp are not subject to WHT. Being a tax transparent entity, the SCS and SCSp are generally not entitled to EU tax directives nor to the DTTs signed by Lux - embourg. Finally, due to their tax transparency, the disposal of the units of the SCS and SCSp is deemed to be the disposal of their underlying assets pro rata to the units held by the partners therein. Non-resident partners who have neither a permanent establishment nor a permanent representative in Luxembourg to which the units of the Luxembourg SCS or SCSp are attributable, are only taxed in Luxembourg on gains derived from Luxembourg real estate or from the dis - posal within six months of its acquisition of a substan - tial participation (more than 10%) in a Luxembourg company, subject to an applicable DTT.
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