CHEVALIER & SCIALES

Comparison table of Luxembourg investment vehicles

The purpose of this comparison table is to set out the different investment vehicles (regulated, lightly regulated as well as unregulated vehicles) that
Luxembourg offers to foreign promoters and investors.

Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

Supervision No No (unless No Yes (light supervision) Yes (light supervision) Yes (incorporation Yes (incorporation is
continuous issue of is only allowed only allowed after
by the CSSF securities to the after obtaining the obtaining the prior
public - interpreted prior approval of approval of the
as 4 or more issues the CSSF) CSSF)
yearly)

Eligible assets Unrestricted Securitization of any Only the Unrestricted (any type of Investments in venture Restricted but has Unrestricted (subject
kind of risky assets acquisition, assets can be integrated capital and private equity been broadened by to CSSF prior
(securities, real detention, or any type of (any direct or indirect the eligible assets approval and
estate, etc.) or risks management and investment strategies investments to entities in directive application of the
disposal of may be pursued) view of their launch, their 2007/16/EC. principle of risk
financial assets development or listing on spreading as set out
(no commercial a stock exchange). No Eligible: in circular 91/75)
activity or real direct investments in real  Transferable
estate activity) estate are permitted. securities;
 Money market
instruments;
 Bank deposits;
 UCITS funds;
 Other UCIs
eligible up to 30%
;
 Financial
derivative
instruments;
 Ancillary liquid
assets eligible up
to 49% according
to market
practice;

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Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

 Hedge fund
indices

Not eligible:
 Direct investment
in commodities;
 Commodity
derivatives;
 Uncovered sales
of transferable
securities;
 Grant loans

Please note that

the eligibility of the
asset must be
ascertained on a
case-by-case basis
in view of the
applicable laws and
regulatory practice.

Main risk No No No Yes. The CSSF has No Yes : Yes (no more than
issued guidelines.  No more than 20% of the net
diversification 10% of the net assets may be
rules  In principle, a SIF may assets in invested in securities
not invest more than transferable issued by any one
30% of its assets or securities or issuer)
commitments to money market
subscribe securities of instruments
the same type issued issued by the
by the same issuer. same body (10%
This restriction does limit increased to
not apply to: 20% under
certain conditions
- investments in for ETFs / index
securities issued or tracker funds);
guaranteed by an  No more than
OECD Member 20% of its net

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Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

State or its regional assets in

or local authorities deposits made
or by EU, regional with the same
or global body.
supranational  Global exposure
institutions and to financial
bodies; derivative
instruments may
- investments in not exceed 100%
target UCIs that are of the total net
subject to risk- assets;
spreading  Counterparty risk
requirements at exposure in an
least comparable to OTC transaction:
those applicable to No more than
SIFs. For the 10% of its net
purpose of the assets when the
application of this counterparty is a
restriction, every credit institution
sub-fund of a target or 5% of its net
umbrella UCI is to assets in other
be considered as a cases regarding
separate issuer risk exposure to a
provided that the counterparty in
principle of an OTC
segregation of derivative
liabilities among the transaction.
various sub-funds
vis-à-vis third Please note that
parties is ensured. there are other risk
diversification rules
 Short sales may not in which cannot all be
principle result in the discussed in this
SIF holding a short table.
position in securities of
the same type issued
by the same issuer
representing more
than 30% of its assets.

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Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

 When using financial

derivative instruments,
the SIF must ensure,
via appropriate
diversification of the
underlying assets, a
similar level of risk-
spreading. Similarly,
the counterparty risk in
an OTC transaction
must, where
applicable, be limited
having regard to the
quality and
qualification of the
counterparty.

In principle, the above

guidelines apply to all
SIFs. The CSSF may
grant exemptions upon
appropriate justification.
Moreover, in case of
specific investment
policies, the CSSF may
require the SIF to
comply with additional
investment restrictions.

Eligible Unrestricted Unrestricted Restricted to: Well-informed investors: Well-informed investors: Unrestricted Unrestricted
investors  natural persons  institutional investor;  institutional investor;
acting in the
scope of their  professional investor;  professional investor;
management and and
of their private

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Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

assets  any other type of  any other type of

investor who has investor who has
 private assets declared in writing declared in writing that
entities (eg. that he is an informed he is an informed
trusts, investor and either (i) investor and either (i)
foundations) invests a minimum of invests a minimum of
125,000 Euro or (ii) 125,000 Euro or (ii)
 intermediaries has an appraisal from has an appraisal from
acting for the a bank, investment a bank, investment
account of the firm certifying that he firm certifying that he
above has the appropriate has the appropriate
investors (eg. experience experience
bank acting
under a
fiduciary
agreement)

Segregated No Yes No Yes Yes Yes Yes

compartments

Minimum Depends on the Depends on the form Depends on the For SICAVs / SICAFs: Upon incorporation : For SICAVs / For SICAVs /
form form Upon incorporation :  S.A./S.C.A.: minimum SICAFs: SICAFs:
capital  S.A.: minimum  S.A./S.C.A.:  S.A./S.C.A.: minimum 31,000 Euro Upon Upon incorporation :
 S.A./S.C.A.: 31,000 Euro minimum 31,000 Euro  S.à r.l.: minimum incorporation :  S.A.: minimum
minimum  S.à r.l.: minimum 31,000 Euro  S.à r.l.: minimum 12,500 Euro  S.A.: minimum 31,000 Euro
31,000 Euro 12,500 Euro  S.à r.l.: 12,500 Euro 31,000 Euro
 S.à r.l.: minimum
minimum 12,500 Euro  Subscribed share  Subscribed share  Subscribed  Subscribed share
12,500 Euro capital and share capital and share share capital and capital and share
premium must reach premium must reach share premium premium must
1,250,000 Euro within 1,250,000 Euro within must reach reach 1,250,000
12 months from the 12 months from the 1,250,000 Euro Euro within 6
approval by the approval by the within 6 months months from the
Luxembourg regulator) Luxembourg regulator) from the approval by the
approval by the Luxembourg
Luxembourg regulator)

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Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

For FCPs: regulator)

 Net assets must reach For FCPs: For FCPs:

1,250,000 Euro within
12 months from the  Net assets must  Net assets must
approval by the reach 1,250,000 reach 1,250,000
Luxembourg regulator) Euro within 12 Euro within 12
months from the months from the
approval by the approval by the
Luxembourg Luxembourg
regulator) regulator)

Required  Independent  Auditor (in case of  Independent  Depositary institution  Depositary institution  Depositary  Depositary
auditor supervision by the auditor institution institution
Luxembourg (depending on CSSF) (depending on  Administrative agent  Administrative agent
service company  No depositary company  Administrative  Administrative
providers form) institution (unless form)  Independent auditor  Independent auditor agent agent
subject to
supervision by the  Management  Independent  Independent
CSSF) Company in case of auditor auditor (semi-
 No administrative an FCP (semi-annual annual and
agent (if managed and annual annual report)
by the report)
securitization  Promoter
company itself  Promoter (significant capital
and if not subject (significant base)
to supervision by capital base)
the CSSF)  Management
 Management Company in case
Company in of an FCP
case of an FCP

Financial Audited annual  Audited annual Audited annual  Audited annual report  Audited annual report  Semi-annual  Semi-annual
report may be report may be report may be  Semi-annual report to report and report and annual
reports required required required the CSSF annual report report
depending on depending on the depending on the
the size and form of the size and number
number of company and of employees
employees whether it is

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Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

regulated or not

 Quarterly to the
Central Bank of
Luxembourg as
the case maybe
(subject to
derogation)

Tax treatment Income tax of  Subject to income  No corporate  No corporate income  Subject to income tax  No corporate  No corporate
28.59% but can tax of 28.59%, income tax tax at 28, 59%, BUT income tax income tax
benefit from the BUT they should income derived from
participation be able to deduct  Annual  Annual subscription transferable securities  Annual  Annual
exemption and from their gross subscription tax of 0.01% on the (for instance dividends subscription tax subscription tax of
the double tax profits their tax of 0.25% net asset value received and capital of 0.05% of the 0.05% of the NAV
treaties signed operational costs on the amount gains realized on the NAV (or of (or of 0.01% on
by Luxembourg. and the dividends of paid up  No WHT on dividend sale of shares) is 0.01% on the the net asset
or interests capital and distributions and exempt. Income that is net asset value value in certain
distributed to the issue premium interest payments not related to in certain specific case)
shareholders / (if any) (except for application investment in risk specific case)
creditors. of Savings Directive) capital is subject to  No capital duty
Therefore  No WHT on corporate income tax  No capital duty but registration
securitization dividend  No wealth tax of 28,59% (for but registration duty of EUR 75
companies should distributions example interest duty of EUR 75 Euro
not generate and interest earned on bank Euro
significant taxable payments deposits, management  No WHT on
profits and should (except for fees, etc…). There is  No WHT on dividend
therefore to a large application of no annual subscription dividend distributions
extent be tax Savings tax distributions (except for
neutral Directive) (except for application of
application of Savings Directive)
 No wealth tax;  No wealth tax Savings
Directive)
 No WHT on
distributions to
shareholders /

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Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

creditors

 VAT exempt

Benefit from Yes Yes No Certain double tax In principle yes but it Certain double tax Certain double tax
treaties (if set-up in the depends on the treaties (if set-up in treaties (if set-up in
double tax form of a SICAV) jurisdiction of the the form of a the form of a SICAV)
treaty investors and the target SICAV)
network and companies

European
directives

European Not applicable Not applicable Not applicable No Not applicable Yes No
passporti

Thin There is no No debt-to-equity  0.25% tax on No debt-to-equity ratio No debt-to-equity ratio  Borrowing of up Borrowings of up to
provision in ratio the debt that to 10% of net 25% of net assets
capitalization Luxembourg law. exceeds 8 assets to finance without any
rules (D/E However the times the paid- redemptions (it restrictions are
ratio) Luxembourg up capital should be a allowed
authorities use a increased by short term
85/15 the issue borrowing and
debt/equity ratio. premium cannot be for
If this ratio is not investment
respected, and purposes);
an interest is  Borrowing of up
paid on the to 10% of net
excess debt on a assets to buy
loan this may be real estate for its
considered as a business;
hidden dividend  The total
distribution borrowing under

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Unregulated Lightly regulated Regulated

Soparfi Securitization SPF (private SIF (specialized SICAR (risk capital UCITS (part I of UCI (part II of the
vehicle wealth investment fund) investment company) the Law of 2002) Law of 2002)
management
company)

subject to a the above may

WHT of 15% and not exceed 15%
such interest is of its assets
then not
deductible

Filing duties Not applicable Not applicable, Not applicable  1.500 Euro for a  1.500 Euro for a  Up to 5.000  2.650 Euro for a
unless distributed to single compartment single compartment Euro for a single single
with the CSSF the public SIF SICAR compartment compartment UCI
UCITS
 2.650 Euro for a  2.650 Euro for a  5.000 Euro for a
multiple compartment multiple compartment  5.000 Euro for a multiple
SIF SICAR multiple compartment UCI
compartment
UCITS

Listing Yes Yes No Yes Yes Yes Yes

Practical use Can be used for  Securitization of a Individuals  Hedge funds; Private equity and Investment funds Investment funds
various reasons portfolio of wishing to  Private equity and venture capital which meet the which do not meet
such as a securities optimize their venture capital transactions. criteria set by the the criteria set by the
holding company personal tax  Real estate EU Directives and EU
or for private  Securitization as planning (private transactions therefore eligible Directives.
equity structure for intra wealth for sale in EU
investments group financing management Member states.
through the use activities purposes)
of hybrid
financial  Real estate
instruments securitizations
(such as PECS,
TPECs, etc.)

The choice between one of the above vehicles will be made on a case-by-case basis and can be influenced by different parameters such as ruling practice
(amount of taxable margins that differ with regard to the different vehicles and instruments used), use of hybrid financial instruments, type of investments,
investment policy and strategy, geographical location of investors and target companies, etc.).

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We set out here under some basic advantages of Luxembourg financing structures:

 No domestic WHT on interest payments (whoever is the beneficiary, unless application of the EU Savings directive);
 No thin capitalization rules for the financing of receivables;
 Taxation on a spread basis for back-to-back financing activities;
 Taxation on a spread basis with the use of hybrid financial instruments (such as PECS, TPECS, etc.). Under Luxembourg law, payments made under
the PECs or TPECs are (subject to approval of the tax authorities), similar to interest payments, deductible from the tax base of the Luxembourg
entity. Based on our experience, the tax laws of at least some jurisdictions treat payments received under PECs and TPECs as dividend income
falling within domestic tax exemption or tax benefits.

i European passport: A fund which qualifies for the European passport is a fund (approved in one Member State of the European Union) can market its units in any other Member State of the
European Union following notification to the host Member State authorities.

This publication has been prepared by the law firm Chevalier & Sciales and is for general guidance only. The contents hereof are not intended to constitute legal advice and do not substitute for the
consultation with legal counsel required before any actual undertakings.

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for further information please contact:

olivier sciales, partner

Email: oliviersciales@cs-avocats.lu

rémi chevalier, partner

Email: remichevalier@cs-avocats.lu

www.cs-avocats.lu

CHEVALIER & SCIALES

LUXEMBOURG DUBAI
51, route de Thionville Twin Towers
L-2611 Luxembourg Bldg. Baniyas Road,
Luxembourg Deira, Dubai,
P.O. Box 4404, Office
Tel : +352 26 25 90 30 #217, 2nd Floor,
Fax : +352 26 25 83 88 United Arab Emirates

Tel: +971 4 2937033

Fax: +971 4 2088699

www.cs-avocats.lu