1E9Ct5D

LUXEMBOURG ALTERNATIVE INVESTMENT VEHICLESI. The Favourable LuxembourgEnvironment for InvestmentTransactionsThe Grand-Duchy of Luxembourg offersinvestors and promoters a very efficient andflexible jurisdiction for investment vehicles.Although Luxembourg is well-known forregulated investment funds of the UCITSvariety, this brochure covers the alternativeinvestment regimes available in Luxembourgand their salient features as well as the impactof the transposition of the AIFMD Directive intoLuxembourg law.Luxembourg provides a favourable taxenvironment with numerous attractivecharacteristics, such as no withholding tax onmost interest payments and exemptions fromcorporate taxation of dividends and capital gainsreceived on the holding of significant equityparticipations.Moreover, Luxembourg enjoys a very flexibleregulatory environment that encourages theundertaking of investment transactions througheither (a) unregulated vehicles (unregulatedspecial purpose vehicles, securitisation vehicles,and private wealth management companies) or(b) vehicles subject to reasonably lightregulatory supervision (SICARs and SpecialInvestment Funds).II. The Five Key Vehicles forInvestment TransactionsA. UNREGULATED SPECIAL PURPOSEVEHICLES IN CORPORATE FORM (SPVs),INCLUDING HOLDING COMPANIESLuxembourg has a long-established reputation asa favourable jurisdiction for holding companies(which are often known as SOPARFIs, orsociétés de participations financières). In additionto holding equity stakes in portfolio companies, aSOPARFI can hold other assets, such asintellectual property as well as real estate, andcan undertake financing and investmentmanagement activities. Moreover, the sharestructure can accommodate different classes ofshares as well as tracking shares that “track”identified underlying assets. A SOPARFItypically requires neither a business license norother regulatory approval (see applicability ofAIFM, infra.); however, a VAT identificationnumber may be necessary, depending on thecircumstances.1. Legal Forms of SPVAlthough a variety of legal forms are available inLuxembourg, the three most common legalforms for SPVs are the public limited company(société anonyme, or S.A.), the private limitedliability company (société à responsabilitélimitée, or SARL), and the partnership limited byshares (société en commandite par actions, orS.C.A.).The fundamental differences between an SARLand an S.A. are that (i) the initial capital for theSARL, which must be paid in in its entirety, is€12,400, whereas the initial capital of an S.A. is€31,000 (but only 25% need be paid in uponcreation), (ii) an S.A. may issue bearer shares,whereas an SARL may not, and (iii) an S.A. maylist securities, whereas as SARL may not do so.There are no significant differences between thetwo forms in respect of corporate governance ormanagement, assuming that there is a soleshareholder. The S.C.A. is quite similar to anS.A. in most respects, but requires a generalpartner with unlimited liability that is responsiblefor managing the S.C.A. The general partner willoften take the form of an SARL.The choice of corporate form depends oncorporate law and corporate governanceconsiderations. The flexibility of Luxembourg'slaw on commercial companies allowscustomised solutions on a case-by-case basis.2. Regulatory AspectsThe setting-up of an SPV does not require aregulatory license, approval or authorisation solong as its activity is not deemed by theLuxembourg financial sector regulator(Commission de Surveillance du SecteurFinancier, or “CSSF”) to constitute bankingactivity or another regulated activity of thefinancial sector. SPVs will also typically notrequire a business license from the LuxembourgMinistry of Middle Classes, which is required ofcompanies carrying out commercial activities inLuxembourg.3. Tax AspectsUpon incorporation, there is a modestregistration duty of €75, but no capital duties arepayable in Luxembourg. There is also aminimum annual corporate income tax in theaggregate amount of €3210, if the holdingcompany’s financial assets, transferablesecurities, and cash exceed 90% of thecompany’s balance sheet.The income generated by the SPV (if any) issubject to corporate/municipal income tax at therate of 29.22%. However, there is a broadexemption from corporate tax on dividends,capital gains, and liquidation proceeds receivedby the SPV (as described below under“Participation Exemption”).The SPV is also subject to net worth tax4