Mutual Funds in Luxembourg

Mutual Funds in Luxembourg

Updated on Wednesday 23rd June 2021

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Mutual-Funds-in-Luxembourg.jpgInvestors seeking to register mutual funds in Luxembourg can do so by opening a fonds commun de placement (FCP). The investment legislation in Luxembourg generally refers to the FCP as a common fund, but it is also known as a mutual fund and it does have the characteristics that are accepted at a global level for a mutual fund. 
 
Below, we have prepared a short presentation on the main characteristics of the fund and, therefore, in this article investors will be able to find out important details on this type of fund. Investors who need assistance on the process of registering mutual funds in Luxembourg are invited to address to our team of financial specialists.  
 

The characteristics of the FCP in Luxembourg 

 
One of the main aspects investors should take into consideration when opening an investment fund in Luxembourg as a FCP is that this type of fund does not have a separate legal entity than its founders. This is why it is compulsory to appoint a Luxembourg based management company that will be in charge with managing the fund. Below, our team has prepared a short description on the main characteristics of FCPs, which operate as mutual funds in Luxembourg: 
 
  • this type of fund can be incorporated under most of the investment laws applicable here (Part II Fund Law with registered/authorized AIFM, under the SICAR law, under the SIF Law with registered/authorized AIFM, etc.);
  • the FCP is organized as a structure in which its owners are liable to the extent of their capital participation;
  • as a general rule, investors of a FCP do not have voting rights, an aspect that investors should be aware of when opening a Luxembourg fund;
  • however, they may be able to benefit from voting rights in the case in which the constitutive documents of the FCP prescribe provisions related to this;
  • it is common to open an investment fund in Luxembourg as a FCP when opting to set up a retail fund. 

 

During the registration of a FCP, investors should know that they can register the fund as a single fund, or as an umbrella fund (or multiple compartments funds); the strategy selected can have an important impact on the overall investment activity as, through the fund operating with multiple compartments, investors will have the right of carrying multiple investment strategies at the same time. 

 

What are the latest requirements for FCPs in Luxembourg?

 
Investors who want to register mutual funds in Luxembourg as FCPs must also verify the latest regulations that are applicable to this structure, as new rules were imposed in the last years. If you are not sure on what rules apply to the FCP, you can also address to our team of financial specialists for in-depth information; below, you can find few important aspects pertaining to the law on FCPs: 
 
  • starting with 1 June 2016, all mutual funds in Luxembourg incorporated as FCPs are required to be registered with the Luxembourg Trade and Companies Register;
  • a new law on transparency was published on 13 January 2019, which is also applicable to FCPs;
  • the new rule, which became applicable starting with 1 March 2019, implements the EU Directive 2015/849/E, Article 30, with procedures against money laundering;
  • through this law, investment funds must provide information on their beneficial owners, which are referred to as persons or entities which own 25% or more of the fund’s ownership interest;
  • in most of the cases, the capital requirements for mutual funds in Luxembourg can be of minimum EUR 1 million or EUR 1,25 million. 
 

What are the tax requirements for mutual funds in Luxembourg? 

 
The tax system applicable to mutual funds in Luxembourg (or FCPs) depends on the law under which the fund in incorporated. However, all funds operating as FCP are not entitled to gain access to the double tax treaties signed by Luxembourg; there is an exemption in this sense and it is applicable solely to Ireland. 
 
Investors who will open an investment fund in Luxembourg will also have the right to list their fund with the Luxembourg Stock Exchange. Those who want to know more on the procedure of listing a fund with the Stock Exchange can receive legal and tax advice from our team of financial representatives. 
 
For more details on the fees that have to be paid when opening mutual funds in Luxembourg, as well as information on the registration requirements (capital, documents, residency requirements, etc.), we invite you to contact our team of financial advisors. Our team can help you take a suitable investment decision and can represent you throughout the entire registration process and can also provide information on the taxes that you will need to pay through your mutual funds in Luxembourg.