LUXEMBOURG Law and Practice Contributed by: Evelyn Maher, Gaston Aguirre Draghi and Djelloul Mansour, BSP
scription tax at an annual rate of 0.05% of the NAV, reduced to 0.01% or exempted in certain conditions. In addition, the SIF, RAIF-SIF and Part II UCI in the form of a SICAV or SICAF may benefit from the double tax treaties that have been concluded by Luxembourg. The SIF, RAIF-SIF or Part II UCI in the form of an FCP do not, in principle, have access to double tax treaties. To encourage investment into ELTIFs, the Law of 21 July 2023 modernising the Luxembourg fund toolbox (the “Modernising Law”) provides that RAIFs, Part II UCIs and SIFs (or sub-funds thereof) authorised as ELTIFs are exempt from subscription tax. SICAR and RAIF-SICAR The tax regime applicable to a SICAR and a RAIF- SICAR will depend on the legal form adopted. Those taking a corporate form are fully taxable entities (corporate income tax and municipal business tax) but benefit from an exemption for income derived from transferable securities and income from cash held for a maximum period of one year prior to its investment in risk capital. Those taking the form of an SCS or SLP are tax- transparent under Luxembourg law. Luxembourg withholding tax does not apply to distributions made by these entities to investors. These entities also benefit from a VAT exemption on management services. The SICAR and RAIF SICAR are not subject to an annual subscription tax. They are however subject to a minimum amount of annual net wealth tax. SICARs and RAIF SICARs in corporate form have full access to double tax treaties from a
Luxembourg perspective. Those in the form of SLPs, or SCSs and RAIFs in the form of an FCP, do not. SLP An SLP is tax-transparent and is not subject to subscription tax, net wealth tax or withholding tax. Corporate income tax is not applicable. Municipal business tax of 6.75% (for an SLP reg - istered in Luxembourg City) may be applicable if the SLP carries out, or is deemed to carry out, a commercial activity. SLPs do not benefit from the EU Parent-Subsid - iary Directive and have no access to double tax treaties signed by Luxembourg. UCITS funds and undertakings for collective investment subject to Part II of the UCI Law (Part II UCIs – together with UCITS funds, the “retail funds”) are the two main investment funds for retail investors. Retail funds are subject to direct supervision by the CSSF and require prior CSSF approval before they can be set up. A retail fund may be set up as a standalone fund or an umbrella fund. However, the umbrella fund structure is most often used as it is cost-effec - tive if several sub-funds are launched. Each retail fund may issue classes and sub- classes of shares (or units depending on the legal form chosen; see 3.2.2 Legal Structures Used by Fund Managers ), enabling the retail 3. Retail Funds 3.1 Fund Formation 3.1.1 Fund Structures
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