Taxation of Hedge Funds in Luxembourg

Taxation of Hedge Funds in Luxembourg

Updated on Tuesday 09th May 2017

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Taxation-of-Hedge-Funds-in-Luxembourg.jpgHedge funds are legal structures through which investors interested in starting an investment fund in Luxembourg can pool their financial assets in order to obtain the highest return on investment, which can be achieved through various investment strategies. Hedge funds in Luxembourg are taxed in accordance with the business structure chosen for incorporation and our team of financial specialists can offer in-depth advice on the tax regulations available for these types of funds
 

Taxation applicable to regulated hedge funds in Luxembourg  

 
According to the applicable legal framework, regulated hedge funds in Luxembourg are the following: 
 
hedge funds under the Part I Law on UCITS;
hedge funds under the Part II Law on UCIs and SIFs
 
In the case of the above mentioned legal forms, the taxation system is comprised of the following taxes: 
 
registration duty;
annual subscription tax
 
As a general rule, these types of funds are exempted from other taxes, such as the income tax on profits or the net wealth tax
 
In the case of hedge funds established as SICAV (investment company with variable capital) or SICAF (investment company with fixed capital), the tax regulations stipulate that they can qualify for the tax exemptions and deductions prescribed under the double tax treaties signed by the local authorities. Also, it is important to know that hedge funds in Luxembourg can be set up as FCP (common fund), in which case the provisions of the double tax treaties may not apply. However, there are certain exemptions, which can be detailed by our team of financial representatives.  
 
Those interested in setting up a SICAR in Luxembourg should know that the business structure can be established as a hedge fund as well. 
 

Subscription tax in Luxembourg  

 
For most of the investment funds in Luxembourg, the annual subscription tax is imposed at the rate of 0.05% on the fund’s net assets, but a special category of hedge funds can benefit from a subscription tax applicable at the rate of 0.01%. 
 
The following types of funds are imposed with the lower subscription tax
 
funds performing investments in money market instruments;
investments carried out in bank deposits;
hedge funds regulated by the SIF Law;
umbrella funds created under an UCI structure; 
shares of UCIs
 
Businessmen are invited to contact our team of financial consultants for more information on the taxation of hedge funds.  
 

Comments

  • Carlos 2017-05-09

    I would like to find out more information on the hedge funds that are taxed with a lower subscription tax.

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