Taxation of SICAV in Luxembourg

Taxation of SICAV in Luxembourg

Updated on Thursday 23rd February 2023

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Taxation-of-SICAV-in-Luxembourg.jpgInvestors who are interested in opening an investment fund in Luxembourg as a SICAV structure (which represents an investment company with variable capital) may incorporate the structure as an UCITS fund or as a SIF. A SICAV fund in Luxembourg is taxed following a specific taxation scheme, which offers a set of tax exemptions and deductions, on which our team of financial experts can provide an in-depth presentation. 
 

Taxation system of SICAV structures in Luxembourg 

 
Luxembourg represents a top investment destination for businessmen who want to open a SICAV in this country. The local taxation system provides numerous advantages in this sense, as the vehicle will not be liable to pay the income tax or the corporate tax, a situation that is available when opening a Luxembourg fund registered under other structures as well. 
 
However, as mentioned above, when opening a SICAV in Luxembourg , it can be set up as a SIF (specialized investment fund), in which case, the company will be liable to paying the subscription tax at the rate of 0.01% of its net value (imposed on a quarterly basis). In the situation of a SICAV operating as a SIF structure, the fund will be liable to capital duty, imposed at a fixed value of EUR 1,250 per each operation. 
 

Exemption on the payment of the subscription tax in Luxembourg 

 
The SICAV structures registered in Luxembourg may also benefit from certain exemptions on the payment of the subscription tax, provided that specific conditions, prescribed by the national legislation available here, are met. In this sense, the following types of situations are entitled to tax exemptions on the subscription tax: 
 
  • the assets of the investment funds that have already paid the subscription tax;
  • the investment funds and the compartments of umbrella-funds which are set up for the sole purpose of investing in collective investments of money markets instruments;
  • the above mentioned situation can be eligible only in the case in which the respective funds have received the highest rating from a rating agency;
  • investment funds that own securities for the benefit of the employees and occupational retirement. 
 
The following video offers a short presentation on the taxation of SICAV in Luxembourg: 
 

 
For other types of legal entities, the SICAV will also be liable to the subscription tax, imposed at the rate of 0.05%, paid on an annual basis. An important aspect when opening an investment fund in Luxembourg as a SICAV refers to the fact that the investors will not be imposed with the withholding tax on its distributions, which also takes into consideration the redemption of shares.
 
Our team of financial representatives can offer more information on the manner in which such taxes must be paid at the local institutions. It is also necessary to mention that SICAVs can benefit from the provisions of the double taxation treaties signed by the local authorities, as long as the vehicles are set up as SIFs. 
 

Certificates of tax residence for SICAVs in Luxembourg 

 
In December 2017, the local authorities have issued a Circular related to the types of investment funds that need a certificate of tax residence, with the purpose of obtaining tax benefits under the double tax treaties signed by the country with other contracting states. This is also applicable to SICAV structures, both local and foreign.  
 
In order to obtain a certificate of tax residence, it is necessary to submit an application with the Luxembourg Tax Authorities that will include an attestation issued by the Commission de Surveillance du Secteur Financier (CSSF), in which it will state the legal form of the fund, as well as the supervision of the institution. 
 
Tax benefits can be obtained for SICAVs in Luxembourg under the provisions of the double tax treaties signed by the local authorities in the case of 49 agreements (even though Luxembourg has signed more than 50 treaties), concluded with the following states: Armenia, Austria, Azerbaijan, Bahrain, Barbados, Czech Republic, China, Denmark, Finland, Germany, Georgia, Guernsey, Hong Kong, Indonesia, Ireland, Isle of Man, Israel, Jersey, Laos, Kazakhstan,  Liechtenstein, Macedonia, Malaysia, Malta, Moldova, Monaco, Morocco, Panama, Poland, Portugal, Qatar, Romania, San Marino, Saudi Arabia, Seychelles, Singapore, Slovakia, Slovenia, Spain, Sri Lanka, Taiwan, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, the United Arab Emirates, Uzbekistan and Vietnam. 
 
 

Tax exemptions for SICAV in Luxembourg  

 
The country also provides private wealth management services, but the net wealth tax which can be imposed on various investment structures is not applicable in this situation and those interested in wealth management in Luxembourg can request for advice on this matter from our team of consultants. As a general rule, services carried out under a SICAV are imposed with a standard value added tax (VAT) applicable at the rate of 15%, but the services provided by a management company in Luxembourg are exempted from the VAT. 
 
Investors are invited to contact our team of financial consultants, who can offer advice on other tax advantages available for the SICAV in Luxembourg. Our representatives can provide in-depth information on the taxation on any other type of investment fund that can be registered in this country, such as SICAR in Luxembourg, SICAF, RAIF and others.
 
Our consultants can present in-depth information on the types of funds that are required to pay the subscription tax. You can also rely on us if you want to learn more on the specific tax system charged to a type of vehicle, such as the SIF in Luxembourg. 
 
This structure can obtain many tax exemptions, in accordance with the tax laws and regulations applied in this country. 
 
Please mind that upon the registration of a fund, investors will be required to pay various registration fees. This is available for the SICAR in Luxembourg, which must pay a registration fee of EUR 3.500 with the CSSF (charged for the authorization of the fund). 
 
The fee increases to EUR 7.000 if the fund has more compartments. The fund must pay a yearly fee of EUR 3.000/EUR 6.000. 
 
There aren’t any registration fees for the SOPARFI in Luxembourg (fees paid to the CSSF), as this type of entity is not regulated by this institution, nor does it have any yearly reporting obligations to the institution. 
 
This is given by the fact that the fund is incorporated as a commercial company, and it follows the commercial law. It is also taxed following the rules for commercial companies. 
 
An investment vehicle required to pay the subscription tax is the RAIF in Luxembourg, which must pay a yearly subscription tax of 0.01%. This tax is calculated based on the value of the net assets of the fund. 
 
It is also exempted from the payment of the withholding tax on dividends and it benefits from many tax exemptions, such as the income taxes and it has one of the most attractive taxation systems.