Crypto Fund in Luxembourg

Crypto Fund in Luxembourg

Updated on Saturday 12th March 2022

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Crypto-Fund-in-Luxembourg.jpgThe crypto fund is available for registration in Luxembourg starting with 2021. Investors who want to open an investment fund in Luxembourg as a crypto fund can choose only certain categories of investment vehicles.
The law regulating the crypto fund in Luxembourg is established by the Financial Sector Supervisory Authority (CSSF), which has issued in 2022 a guidance regarding the virtual currency investments and the types of assets considered crypto assets
If you need further assistance, our team of financial advisors is ready to provide more details; they can also help you in the formalities of registering a crypto fund in Luxembourg

What is the law applicable to Luxembourg crypto funds? 

For those who want to open a fund in Luxembourg as a crypto vehicle, the same law will apply, regardless of the nationality of the founders. In the list below, you can find out some of the basic rules investors should be aware of: 
  • crypto activities fall under the scope of the Financial Sector Law (law of 5 April 1993);
  • obligations can also appear from the law of 10 November 2009 regulating payment services;
  • investments in crypto funds must also respect the law on undertakings for collective investments (Luxembourg law of 17 December 2010);
  • the law on alternative investment fund managers – the AIFM Law of 12 July 2013 also applies;
  • investors must obey the rules of the Prospectus Law, issued on 16 July 2019. 

What vehicles are suitable for a crypto fund in Luxembourg?

Luxembourg is the home of the largest variety of investment fund types. Depending on the investment activity, some funds are more recommended than others. 
Our team can offer advice on all investment fund types; our financial representatives can also be of help in presenting the main vehicles you should use for a crypto fund in Luxembourg;
According to the document issued by the CSSF in January 2022, investors can use the alternative investment fund for investments in crypto activities. The fund can be used for direct or indirect investments. 
There is also the obligation to have an AIFM appointed to represent the fund, as per the current law. The fund manager must obtain an approval from the CSSF before starting the investment activities. 
Please mind that the crypto fund in Luxembourg can’t operate as a UCITS or UCIs, following the Article 1(20b) of the Law of 12 November 2004. Direct or indirect investments in crypto assets concluded through these funds are not allowed. 

What is the tax system applied to virtual currencies in Luxembourg? 

Regardless if you want to open a UCITS in Luxembourg or another type of fund, you will be liable to taxation. The same happen if you will open a crypto fund in Luxembourg
The activities and the income obtained from crypto currencies operations are taxed in Luxembourg, and the taxation system differs based on the nature of the crypto user (corporate entity or individual). 
For instance, corporate entities can be charged for the income obtained from crypto operations with the corporate income tax and the municipal business tax, which can lead to an overall tax of 24.94%. 
For individuals obtaining income from crypto operations, the personal income tax system will apply and this will lead to a progressive taxation based on the income, ranging from 0% to 42%.  
There is also a VAT exemption, following the rules of the Circular No. 787 issued in June 2018; the exemption applies if the crypto currency is used as a method of payment.  
If you need legal assistance on how to register a crypto fund in Luxembourg, do not hesitate to contact our team of financial advisors. Our specialists can help both local and foreign investors in opening a Luxembourg fund