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We will try to put every important definitions in this section, better your knowledge is quicker you will ask us to put in place these services for you ;-)
Une Soparfi est une société holding luxembourgeoise qui peut :
Voici les avantages fiscaux de la Soparfi luxembourgeoise :
SICARs are Venture Capital or Private Equity type investment structures.
SICARs are formed as limited liability companies, with a minimum capital of €1 million, by "qualified investors" and are ideal vehicles for venture capital investment.
Income from venture capital investments is not taxed. Income from financial investments is taxed at the normal companies’ rate. There is no registration tax, nor tax on capital invested.
SICARs are simple structures, easy to set up, with flexible management and little or no tax. This is a solution that is much sought after by professional venture capital investors...
There is no requirement to appoint a promoter to launch a SICAR. If the SICAR has a promoter, the promoter is not required to have any minimum amount of equity, or to apply for accreditation with the CSSF financial markets regulator.
SICARs, which are limited companies, can take the following forms:
Whichever form is chosen, SICARs can be formed as single or umbrella structures made up of several separate compartments, each with its own investment policy. The SICAR, and each of its compartments, can have an unlimited number of shares or different classes of share, according to investors’ needs.
A SICAR’s net assets must not fall below €1,000,000. It must be fully paid-up within 12 months of receiving authorisation. Eligible assets and diversification policy.
SICARs can only invest, directly or indirectly, in transferable securities representing venture capital type activities. These are high risk investments acquired for the purpose of starting up businesses, expanding them or preparing for IPO. SICARs can, exceptionally and to a marginal extent, hold derivative products.
There is no risk diversification requirement and no regulation over the risk management function.
Since SICARs are supervised by the CSSF financial markets supervisor, they must obtain authorisation from that supervisory body.
SICARs can start carrying out their activities without waiting for this authorisation, but the authorisation application must be submitted within one month of the company being formed.
SICARs must appoint a custodian bank to be responsible for holding the SICAR’s assets and for supervising the structure and its investment company, if any.
The individuals representing the custodian bank must be of good standing and must have sufficient experience in the field of Private Equity.
SICARs must report half yearly to the CSSF, although they are not required to provide a ’half-year report’.
SICARs must prepare an annual report, which must be audited by an independent auditor with sufficient professional experience.
SICARs do not have a UCITS-type European passport.
SICARs are not liable to any capital contribution levy or annual registration tax.
SICARs are exempt from tax on income from their venture capital investments, and for one year on financial income from cash held for investment. Other income is taxed as for ordinary companies.
SICARs do not systematically benefit from tax treaties. For a more detailed, up-to-date overview, go to: http://www.impotsdirects.public.lu/conventions/opc/sicav/index.html
A SICAR’s central administration must be in the Grand Duchy of Luxembourg. Some functions can be subcontracted to third parties for purposes of efficiency. These include bookkeeping, calculation of net asset values, keeping the shareholders’ register and preparation of the financial statements.
To explain this complex concept simply, it is best to give an example:
A bank has granted many loans and wants to raise cash to grant new loans. A possibility is to borrow more, if it can, but the new loans granted will be aggregated with the previous ones and will raise its risk level (supervised by the authorities).
Out of prudence, our bank decides to make use of securitisation.
It starts by setting up an SPV* (a company) *SPV = Special Purpose Vehicle
It sells this SPV some of the receivables (loans) that it granted to its clients.
To be able to pay the bank, the SPV invites investors to subscribe capital.
The investors subscribe for the SPV’s shares (it is a company).
Using the investors’ money, the SPV pays the bank for the receivables (loans) that it has bought.
The benefit for investors: the return on the loans is higher that the interest on deposits.
The benefit for the bank: it receives the cash it needs to keep on lending. In addition, it takes a commission on the sale of the SVP’s shares and it receives management commission from the SPV because it still administers the loans that it has sold on behalf of the SPV. All these new additional types of income count as "risk-free" income.
Luxembourg was slow to introduce securitisation into its financial marketplace. It did so in the Law of 22/03/2004.
Securitisation had been carried out in the USA since the 1960s and France introduced its legislation in 1988.
Although Luxembourg may have been a latecomer, it learned from the experience abroad, so Luxembourg’s legislation is particularly well thought out and very well-suited to the needs of its financial marketplace.
We should observe as a matter of interest that the technique of securitisation is deeply implicated in the toxic products developed by US banks, based on "sub-prime" loans (low quality real estate loans). It could be said that the problem is not with the technique, it is the way unscrupulous financiers have used it that makes these products toxic.
Securitisation, although described simply above, is a complex operation. It uses a special vocabulary that you need to know before you can understand the subtleties of this technique.
the company (bank or other institution) which assigns the receivables (or other assets) to the open-ended investment company (the securitisation vehicle).
the person or company whose debt has been securitised.
company (bank or other) responsible for keeping the documentation evidencing the existence of the securitised assets (for example: receivables).
company responsible for administration (recovering the principal and interest) of the receivables (or other income if other assets are securitised). This may be the assignor (bank).
company originating the securitised receivable (often the assigning bank).
amount kept back by the securitisation vehicle to meet payments (commission) when they fall due, but not for covering defaults (non-payment).
Special Purpose Vehicle or Company (SPC) is the generic name (irrespective of the structure’s form) of the vehicle that buys the securitised assets from the assignor and issues the securities bought by the investors.
securities, regardless of form, payment of which takes priority over all other payments. These securities therefore have the lowest risk, and also the lowest return.
securities, regardless of form, payment of which is subordinated to all other payments. These securities have a higher risk.
To be done
Some of the assets most commonly used for securitisation are:
SPVs can issue various types of transferable security:
"Securitisation is an operation by which a securitisation body, in the form of a company or a fund (managed by an investment company) acquires or accepts, directly or through the intermediary of another body, the risk arising on receivables, and other assets or on commitments accepted by third parties or inherent in all or part of the activities carried out by the third parties, through issuing transferable securities, the value of or return on which depends on these risks".
As stated, since the Luxembourg Law of 22/03/2004 is based on experience learned abroad, it allows a very wide range of assets to be securitised: movable or immovable property, tangible assets, intangibles or those simply linked to or inherent in third-party commitments. The law contains no restrictions on the nature of the securitisable rights, risks or assets. The law even allows securitisation of business activities providing they have certain and reasonable intrinsic value or that they generate future income streams.
The law provides for two types of securitisation vehicle:
Each of these two vehicles can be formed as a single unit or with many compartments. The risks are restricted to compartments individually, and a single compartment can be liquidated without any impact on the other compartments.
Depending on its form, its requirements and the structure of its equity and liabilities, each SPV can issue transferable securities, as stated above, which can be individually registered or held on share accounts, and are freely tradable and transferable. The securities can be listed, subject to CSSF approval.
The formation of a securitisation vehicle requires CSSF approval if the vehicle is to "continuously" issue transferable securities intended for the general public. This is to protect savers
The tax treatment differs depending on the particular form of the securitisation vehicle.
Securitisation companies are not eligible for SOPARFI (art 166 LIR) treatment and they are exempt from VAT.
Securitisation vehicles have no restriction on the borrowing ratio, which enables them to finance themselves without having to raise large amounts of equity.
As defined in article 1 of the Law of 11 May 2007, to be considered as an SFP company, a company must:
Acquisition, holding, management and disposal of financial assets :
Since 1 January 2012, an SFP can receive dividends from all its foreign subsidiaries with no restriction.
• No tax on profits made
• Not liable to wealth tax
• Annual registration tax of 0.25% (with a minimum of €100 and a maximum of €125,000) – payable quarterly -
Tax base = paid-up share capital
+ share premium account
+ excess debt (= above eight times paid-up share capital + share premium account).
• Not liable to VAT, because not required to be VAT registered.
• Distribution of income.
Salaries and directors’ remuneration are taxed under the ordinary tax system.
A S.I.F. is a specialised investment structure, standing for Specialised Investment Fund.
S.I.F. structures are formed as open-ended investment companies or mutual funds, with a minimum capital of €1.25 million, by ‘qualified investors’. They can invest in all types of asset without restriction.
The sole tax applicable is a registration tax of 0.01% of the market value of fund net assets on the last day of the calendar month.
This collective investment vehicle, which is easy to set up, with flexible management and low taxation, is a solution much sought after by professional investors...
Investors in a S.I.F. must be ’qualified investors’. Article 2 of the Law of 13 February 2007, on S.I.F. formation specifies that ’qualified investors’ are to be understood as:
There is no requirement to appoint a promoter to launch a S.I.F. If the S.I.F. has a promoter, the promoter is not required to have a minimum amount of equity, or to apply for approval from the CSSF financial markets regulator.
A S.I.F. may take two forms:
Whichever form is chosen, the S.I.F. can be formed as a single fund or as an umbrella fund made up of several separate compartments, each with its own investment policy.
The fund, and each of its compartments, can have an unlimited number of shares or different classes of shares, according to investors’ needs.
The fund can be ’open’ or ’closed’ to new investment.
In a S.I.F., net assets must not fall below €1,250,000. Of this, only 5% needs to be paid up on subscription, but it must be fully paid up within 12 months of authorisation.
Minimum formation capital for a S.I.F.: For an SA €31,000 is required, for a SARL €20,500.
For a S.I.F. there are no restrictions on eligible assets. Risk diversification details are given in CSSF circular no. 07/309 and are less restrictive than for funds covered by section I and section II of the law on UCITS.
Since S.I.F. funds are supervised by the CSSF financial markets supervisor, they must obtain authorisation from that supervisory body.
S.I.F. funds can start carrying out their activities without waiting for this authorisation, but the authorisation application must be submitted within one month of the company being formed.
Authorisation involves:
S.I.F. funds must appoint a custodian bank to be responsible for holding the S.I.F. fund assets and for supervising the structure and its management company, if any.
The S.I.F. must prepare an annual report which must be audited by an independent auditor approved by the CSSF.
S.I.F. funds do not have a UCITS-type European passport.
The sole tax applicable to a S.I.F. is a registration tax of 0.01% of its net assets calculated on the last day of the calendar quarter.
The central administration of a S.I.F. must be in the Grand Duchy of Luxembourg. Some functions can be subcontracted to third parties for purposes of efficiency. These include bookkeeping, calculation of net asset values, keeping the shareholders’ register and preparation of the financial statements.
If you have more questions and you do not find them here, please contact us!
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