I. Legal structure of a Specialised Investment Fund (SIF) in Luxembourg

1. Concept

A Specialised Investment Fund (SIF) in Luxembourg is a type of investment fund which is regulated and which is not intended for the general public. In contrast to UCITS Funds (Collective Investment of Transferable Securities) which fall within the scope of application of the EU Directive and which invest in securities such as shares and bonds, the Specialised Investment Fund (SIF) offers greater flexibility.

2. Investment policy

A Specialised Investment Fund (SIF) in Luxembourg is permitted to deal with all types of assets including traditional and alternative investment strategies. This includes, for example, securities or money market Funds; real estate; private investment capital; infrastructure; private equity and hedge Funds.

A Specialised Investment Fund (SIF) in Luxembourg must comply with the diversification principle when choosing its investments in order to protect the investors and is subsequently not permitted to invest more than 30% of its assets in securities of the same type and from the same issuer.

3. Investor

The Luxembourg investment vehicle which is the Specialised Investment Fund (SIF) is reserved for  “qualified investors”, namely professional investors and institutional investors as well as all those investors investing at least 125,000 EUR. The latter are required to submit written proof of their well-informed investment status (e.g. in the form of a letter from the bank).

4. Formation

A Specialised Investment Fund (SIF) is formed either in contractual form and consequently as an Investment Fund represented by a Managing Company (fonds commun de placement, FCP) or in the form of a company, namely as an Investment Company whose capital is  variable (SICAV) or fixed  (SICAR). If a SIF is formed as a company, it may be formed as a Public Limited Company (PLC., Corp./SA); a Limited Liability Company (LLC., Ltd./SARL); a Partnership Limited by Shares (SCA)  or as Co-operative in the form of a Public Limited Company (SCOSA). A SIF in Luxembourg may take the structure of a Holding Fund constituted by several sub-funds, each of which are independent of the others.

The registered office and main place of central management and control of a Specialised Investment Fund (SIF) under its articles of association must be located in Luxembourg. If a Specialised Investment Fund (SIF) is formed as an Investment Fund FCP in Luxembourg, it will be managed by a Management Company in Luxembourg. Moreover, the assets of a Specialised Investment Fund (SIF) are to be transferred to an independent custodian (financial institute) resident in Luxembourg.  This ensures that the subscription price of shares in the company will be received on time, that transactions involving equivalent assets are transferred or paid and that its proceeds are used in accordance with the founding documents.

Furthermore, the management of a Specialised Investment Fund (SIF) in Luxembourg or the Management Company (in the case of an Investment Fund FCP) and the custodian require to be sufficiently qualified and to provide proof of their corresponding professional experience. Notwithstanding this, a Specialised Investment Fund (SIF) must not necessarily  have a “Sponsor/Promoter”.

Beginning from the date when a Specialised Investment Fund (SIF) in Luxembourg was approved by Luxembourg's Financial Market Authority (CSSF), the net assets of a SIF must amount to at least 1.25 million EUR within 12 months. Furthermore, a minimum share capital is required for the formation of a Specialised Investment Fund (SIF) and is dependent upon the business form chosen.

5.    Issuance and distributions policy

The provisions contained in the articles of association are wholly authoritative with regard to the issuance of new shares due to the SIF law containing no specific provisions thereon. This is also the case for the regulation of the formal criteria for the distribution of dividends or other repayments to the investors. Furthermore, a Specialised Investment Fund (SIF) in Luxembourg is not required to create reserves.

Provisions regarding the method of valuation of the assets of a Specialised Investment Fund (SIF) in Luxembourg should be regulated in the founding document. This is despite a SIF in Luxembourg having a degree of freedom in the regulation thereof.

6. Supervision

A Specialised Investment Fund (SIF) is subject to the permanent supervision of Luxembourg's Financial Market Authority (CSSF). A Specialised Investment Fund (SIF) requires a licence prior to commencing business. Notwithstanding this, a SIF may commence activity before such time if its application for the said licence was submitted within 1 month following its formation. A SIF can be quoted on Luxembourg's stock market directly following obtaining the said licence from Luxembourg's CSSF. Moreover, its annual accounts require to be audited by an independent auditor and must be published no later than 6 months after the close of the year.

Moreover, a Specialised Investment Fund (SIF) in Luxembourg is required to prepare a sale prospectus which must contain, among others, the founding documents in order to provide investors with the opportunity of carrying out an informed evaluation of the investment and the associated risks.

II. Tax structure of a Specialised Investment Fund (SIF) in Luxembourg

1. Corporate taxation

A Specialised Investment Fund (SIF) is neither subject to income tax nor corporate taxation. A SIF is liable to „subscription tax“ annually at a rate of  0.01% on its net worth. Notwithstanding this, several investments are not liable to the said tax.

2. Tax exemptions

A SIF in Luxembourg is exempt from the net wealth tax as well as from withholding tax on the distribution of dividends to non-resident investors. Moreover, value-added tax (VAT) is not payable by a Management Company in Luxembourg for Fund management services. Notwithstanding this, other services may remain liable to value-added tax in Luxembourg at a rate of 15%.

LEGAL and TAX ADVICE and SUPPORT

Our lawyers and tax experts stand ready to advise you personally and free of charge during the decision-making process and throughout the formation/incorporation/setting up process of a Specialised Investment Fund (SIF) in Luxembourg.

Please contact us by telephone through the following telephone number

00352 250 345 27

(Monday - Friday between 9am and 4pm)

or by e-mail at the following e-mail address
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or simply use our online contact form.

LUXEMBOURG LINKS

Chambre de Commerce 
Luxembourg's Chamber of Commerce
www.cc.lu

Chambres des Métiers
Luxembourg's Chamber of Trade (only in French)
www.cdm.lu

Ministère des Classes Moyennes et du Tourisme
Luxembourg's Ministry of the Middle Classes, Tourism and Housing
www.mcm.public.lu

Registre de commerce et des sociétés de Luxembourg
Luxembourg's Trade and Companies register
www.rcsl.lu

Administration des Contributions directes
Luxembourg's Direct Tax Administration (only in French)
www.impotsdirects.public.lu

Administration de l ́Enregistrement et des Domaines
Luxembourg's Land Registration & Estates Department (Indirect Tax)
www.aed.public.lu

Centre commun de la sécurité sociale
Luxembourg's Joint Social Security Centre
www.ccss.lu

Commission de Surveillance du Secteur Financier Luxembourg's Financial Market Authority
www.cssf.lu

Inspection du Travail et des Mines
Luxembourg's Inspectorate for Labour & Mines
www.itm.lu