Luxembourg’s Parliament has recently approved a new tax-advantaged alternative fund structure as an addition to the jurisdictions impressive range of such vehicles.
On 14 July 2016, the Reserved Alternative Investment Fund (RAIF) law was approved by the Parliament and is currently due to come into force. The new structure compliments Luxembourg’s existing attractive range of investment fund products.
The RAIF model is similar to the Luxembourg Specialized Investment Fund (SIF), which are more flexible over investment policies in comparison to standard funds and are subject to a looser regulatory regime but can only be marketed to experienced investors. The RAIF model however, differs from a SIF as it does not require approval of the Luxembourg regulator, the CSSF.
Instead, a RAIF is supervised as an alternative investment fund under the European Union alternative investment fund manager directive (AIFMD) and must submit regular reports to the regulator.
RAIFs are also tax efficient as they are exempt from income tax, net wealth tax and withholding tax on distributions. Also, management services provided by a RAIF are exempt from value-added tax in Luxembourg. The model needs to pay an annual subscription tax of 0.01% percent on the net asset value of the fund.
The RAIF model can also adopt a similar structure to a Luxembourg Societe d’investissement en capital a risqué (SICAR) and in this care it will be exempt from the annual subscription tax and tax on income from transferable securities, and as a form of investment company, SICARs can take advantage of Luxembourg’s network of double tax treaties.
The Vice-Chairman of the Association of the Luxembourg Fund Industry (ALFI) Freddy Brausch, with responsibility for national affairs commented that in order to ensure sufficient protection and regulation via its manager, a RAIF must be managed by an authorised external AIFM, whereas the latter can be domiciled either in Luxembourg or in any other state of the EU.
He explained: “If it is authorised and fully in line with the requirements of the AIFMD, the AIFM can make use of the marketing passport to market shares or units on a cross-border basis”.
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Source: Tax-news.com 20 July 2016