Luxembourg is the world’s second-largest fund domicile after the USA, and in respect of this, there are numerous structures available for different types of investment fields, as well as for several types of investors in Luxembourg. Among these are the undertakings for collective investments (UCI) – which is a type of investment fund in Luxembourg that offers investors the chance to generate income, access a portfolio with multiple investments, and share the associated costs.
The main characteristics of UCIs in Luxembourg
| UCI | an investment fund that can invest in all types of assets which doesn’t meet the standards set by the EU Directive |
| Applicable legislation | UCI Law – The Luxembourg law of 17 December 2010 on undertakings for collective investment Part I (“UCITS Law”) |
| Eligible investors | Unrestricted |
| Eligible assets | Unrestricted by law but specific restrictions are applied by the CSSF. |
| Risk diversification requirements | Risk diversification requirements are defined by IML Circular 91/7 The CSSF employs the following risk diversification requirements (unless a derogation is approved of by the CSSF during the approval process) (non-exhaustive list): maximum 20% in securities issued by one issuer; andmaximum 20% in one real estate property |
| Legal Structure | Fonds Commun du Placement (FCP), Societe d’Investissement a Capital Variable (SICAV) Societe d’Investissement a Capital Fixe (SICAF) |
| Segregated compartments(yes/no) | Yes |
| Capital requirements | the net assets held by an UCI registered as an FCP must have at least a value of 1,250,000 euros and must be achieved in 6 months after authorization. in the case of a SICAV and SICAF company, the minimum value is 300,000 euros at the time of the authorization. |
| Net asset value (NAV) calculation and redemption policy | The Net Asset Value (NAV) is the UCI’s subscription or saving price. It is evaluated by dividing the fund’s net asset value by the number of units in issue. This can be done daily, weekly or monthly, etc. |
| Subscription tax | annual subscription tax is set at a rate of 0.05% on the net value of the assets evaluated on the last days of each calendar quarter. A reduced rate of 0.01% applies to funds marketing cash and institutional funds. UCI funds can also gain from tax exemptions if they invest in special pension funds or in funds which already gains from exemptions from the subscription tax |
| Taxation | Exemption | Corporate income tax | Wealth tax | Withholding tax (except if EU Savings Directive applies to it) |
| Authorisation and supervision by the CSSF | Yes, must be authorised and supervised by the Commission de Surveillance du Secteur Financier (CSSF) before and after commencing activities |
| Possibility of listing | Yes |
| European passport | A UCI may, or may not, have a European passport enabling it to be marketed freely throughout the European Union, depending on whether it acknowledges European Directives or not. |
| Thin capitalization rules (debt-to-equity ratio) | Can borrow up to 25% of net assets without any restrictions. |
| Required Luxembourg service providers | a sponsor or initiator;a management company;an investment adviser and a managera domiciliation agent;a distributor and a candidate. |
Investors choose to invest their assets in a undertakings for collective investments (UCI) because the assets raised from a large number of investors can be fused. And due to the size of the funds raised, the fund manager can access a broad range of different securities and stock markets that personal investors could not access on their own.
Its funds are also so diverse that they can meet the certain needs of every investor. Also, UCI benefits from the double tax treaty network.
To set up your investment fund in Luxembourg, let’s go ahead and contact your Damalion expert now.
