Luxembourg has emerged as a prime location for securitisation vehicles (SVs) due to an attractive and flexible environment.
An attractive tax environment
Tax neutrality
SVs are subject to corporate income tax. However, their taxable basis including income from securitized assets is reduced by payments of interests or dividends made to securities holders. As a result, their taxable basis is likely to be nil or close to nil.
No Withholding tax
There is no withholding tax on dividend distributions, payments on fund units and interest payments on debt securities except for the potential application of a 35% withholding tax on interest payments made to individuals or so-called residual entities, within the meaning of the EU Savings Directive, resident in the EU or in certain associated territories unless the beneficiary of such payments has opted for the procedure of exchange of information or for the "tax certificate procedure".
Exemption from Net Worth Tax
No capital/stamp duty
Only a fixed capital duty of €75 is due upon incorporation of the SV and any further capital increase. For regulated SVs, additional registration duties are due to the CSSF.
Daily management services rendered to an SV are generally VAT exempt
Stable and consistent demand from the multi-billion dollar luxury goods and pharmaceuticals sectors, worth circa USD 45 billion and USD 300 billion respectively.
Eligibility to Luxembourg double tax treaties network subject to confirmation beforehand with the Luxembourg tax authorities.
Possibility to obtain advanced tax clearances
SVs created as a securitisation fund are considered as transparent vehicles, i.e. their income or distributions are not subject to taxation.
A flexible legal environment
SVs benefit from a flexible legal and regulatory environment. Here is a list of the main features:
Supervision by the CSSF in limited circumstances
Only SVs issuing securities to the public on a continuous basis are subject to the supervision of the CSSF.
Eligibility of all asset classes, all investors and all types of instruments to be issued
No risk diversification required Possibility to set-up:
• multi-compartment structures
• true sale or synthetic transactions
• two-level structures (acquisition and issuing vehicles)
• bankruptcy remote structures
