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the taxation of savings and, in particular, in theevent of payments made by a Luxembourgpaying agent to individuals who are residents inLuxembourg or in another EU Member State)Agreements or transaction documents relatingto a securitisation transaction do not need to beregistered (except agreements transferringrights in respect of real estate located inLuxembourg or ships, airplanes or boatsregistered in Luxembourg).Management services provided to asecuritisation vehicle are VAT-exempt.10. Applicability of AIFMSecuritisation special purpose entities areexpressly excluded from the scope of the AIFMLaw.C. THE SICARIn a further effort to meet market expectations inthe Luxembourg financial sector and to boost itscompetitiveness vis-à-vis its Europeanneighbours in that space, Luxembourgintroduced in 2004 a risk capital regimespecifically targeting private equity and venturecapital (the “SICAR Law”). The Parliamentsought to encourage private equity and venturecapital vehicles by combining light regulatoryoversight with reasonable investor protectionand a favourable tax status.1. Purpose of the SICAR Regime andEligible InvestmentsThe purpose of the SICAR (sociétéd'investissement en capital à risque) regime isto promote the pooling of funds fromsophisticated investors in a single vehicle, whichthen invests in securities (of entities) having acertain risk profile deemed to be “risk capital”.Investment in “risk capital” is defined by theSICAR Law as the direct or indirect investmentin entities with a view to their launch,development, or listing on a stock exchange.The CSSF, the regulatory body with oversight ofSICARs, has provided some clarification of theconcept of risk capital in a circular of April 2006.2. Necessity of Risk CapitalThe CSSF specifically identifies the elements ofhigh risk and the intention to develop the targetentities as characterising investments in “riskcapital”. In practice, the SICAR is often at somelevel actively involved in the management of thetarget entities in an advisory capacity or asBoard representative with a goal to createadded-value, maximise profits, and to sell theinvestments at a profit.In terms of the form of investment, the CSSFconstrues this very broadly, although hedgefunds are specifically excluded. All types of exitare permissible, and there are no restrictionsregarding risk diversification. Therefore, unlikeinvestment funds, SICARs can invest in only onetarget company.3. Investments in Real EstateSICARs cannot hold real estate directly.However, it is permissible for a SICAR to holdreal estate indirectly through affiliate companies,provided that the real estate has risk capitalcharacteristics. In this respect, the underlyingreal estate assets must be shown to represent aparticular risk (above the normal real estate risk)and be developed to create added value(construed in a broad sense). Generally, theCSSF has indicated that “opportunistic” realestate investment strategies characterised bythe transformation of the premises or thebuilding of new premises (rather than a simplerental strategy) are acceptable.4. Eligible InvestorsInvestment in SICARs is limited to sophisticatedinvestors that the law defines as (i) institutionalinvestors, (ii) professional investors, and (iii)investors confirming in writing that they are wellinformedinvestors and either invest €125,000 orproduce an evaluation by a financialprofessional attesting to their expertise andinvestment knowledge. Nevertheless, for anindividual a minimum investment of €125,000 iseffectively the threshold for investment in aSICAR.5. Organisation of SICARsLike most Luxembourg regimes, the SICAR isnot a type of company, but, rather, an electedstatus, which must appear in the company'sArticles of Incorporation. In this respect, there isa wide range of business forms eligible forSICAR status, including the typical capitalcompanies (public limited company, privatelimited company, partnership limited by shares,and cooperative company), as well as thelimited partnership (société en commanditesimple or “s.c.s.”), which is not a capitalcompany, but a vehicle that is treated from a taxperspective as a look-through entity, and aspecial limited partnership (société encommandite spéciale or s.c.s.p.), which issimilar to an s.c.s., except that it is created bycontract between the partners and has no legalpersonality (in this sense, it is similar to theAnglo-Saxon notion of a limited partnership)(see below.). The public limited company(société anonyme) and partnership limited byshares (société en commandite par actions)have historically been the preferred vehicles forSICARs.7