Luxembourg is one of the primary securitization hubs in Europe. Its outstanding and flexible legal and tax framework, which is adapted to fit the needs of investors and SVs and provides a wide collection of efficient structuring tools, are some of the factors that contribute to this.
The Luxembourg law of 22 March 2004 on securitisation, as amended (by the law of 25 February 2022) the Securitisation Law) legislating Luxembourg securitisation vehicles (SVs) has been in force for years now and it has become a cornerstone of success for Luxembourg as a prominent center for securitisation and structured finance transactions.
The Law defines securitisation as a system by which a securitisation vehicle attains or takes on the risks associated with claims, to other goods, or to liabilities of third parties or inherent to all or part of the activities conducted by third parties by issuing securities whose value or return depends on such risks.
Features of Securitisation in Luxembourg
| The Securitisation Law | The Securitisation Law encourages securitisation business in Luxembourg with a comprehensive, adaptable and competitive legal, regulatory and fiscal framework. The practical use of Securitization includes but not limited to: Securitizationof a portfolio of securities, and real estate securitization |
| Applicable legislation | The Luxembourg law of 22 March 2004 on securitisation, as amended (the Securitisation Law) |
| Eligible investors | Generally unrestricted, as the vehicle can be regulated or unregulated. |
| Eligible assets | Generally unrestricted. |
| Legal Form | An SV can be structured as a company or as a fund consisting of one or several ownership. A Securitization vehicle (SV) in the form of a company may be set up as the following: public limited liability company (société anonyme) corporate partnership limited by shares (société en commandite par actions) private limited liability company (société à responsabilité limitée) common limited partnership (société en commandite simple) simplified public limited liability company (société par actions simplifiées) special limited partnership (société en commandite spéciale) cooperative company organised as a public limited liability company (société coopérative organisée comme une société anonyme) orunlimited company (société en nom collectif) |
| Risk diversification | Not required |
| Segregated compartments | Yes, there is a possibility to create segregated compartments within an SV, each representing a certain part of the assets and liabilities of the Securitization vehicle (SV). |
| Capital requirements | There is no minimum capital requirement, if the securitization vehicle is set up as a fund. But the minimum share capital for a société anonyme and a société à responsabilité limitée is EUR 31,000 and EUR 12,500 respectively. |
| Entitled to double tax treaties and EU Directives | Yes. |
| European passport | No ( unless it falls under the scope of the full AIFMD regime) |
| Taxation | Securitization vehicle (SV) in the form of a company is fully subject to Luxembourg corporate income tax (CIT) and municipal business tax (MBT) on its worldwide income. It’s general aggregate rate is 24.94%. SVs are not subject to subscription tax and wealth tax. They are also not subject to withholding tax except if EU Savings Directive applies. |
| Authorisation and supervision by the CSSF | Not required, unless securities are issued to the public on a continuous basis. |
| Possibility of listing | Yes, there is a possibility of listing. |
| Management | SVs may be managed by a management board, a board of directors, one or more managers, partners, a chairman or a director. |
| Required service providers | Management Company Independent auditor |
Jointly with the Luxembourg law of 10 August 1915 on commercial companies, as amended (the Companies Law), the Securitisation Law has established a reliable and investor-friendly legal and tax framework for securitisation transactions achieved by Luxembourg SVs featuring a high degree of flexibility.
Damalion offers a range of services, including but not limited to the setting up of your investment fund in Luxembourg. To establish and administrate your operations from Luxembourg, contact your Damalion expert now.
