Foreign investors can open an ETF in Luxembourg. ETF stands for exchange traded funds, which refer to any category of funds whose shares or units are traded on at least one stock exchange. According to the law in Luxembourg, the ETF will generally take the form of an UCITS fund (undertakings for collective investment in transferable securities), but other options are available as well.
Our team can help you set up an ETF in Luxembourg and present its legal framework, tax rules, and any other matter that might be of interest for investors.
| Quick Facts | |
|---|---|
| What is an exchange traded fund? | An exchange traded fund (ETF) refers to an investment vehicle that has its units/shares traded on a stock exchange. |
|
Suitable form |
Investors who plan to open an ETF in Luxembourg are advised to register the vehicle as an UCITS, as this is the most compatible structure. |
|
Authorization requirements |
The authorization is necessary for all ETFs registered as UCITS. |
| When can it be listed on the stock exchange? | The fund can be listed only after it has obtained the necessary approvals. |
| Local/foreign stock exchanges |
It is possible to list the ETF on the Luxembourg and foreign stock exchanges. |
| Institution in charge with the authorization procedure |
Financial Sector Supervisory Commission (CSSF) |
| How long does it take to list an ETF? |
Once the procedures necessary to open an ETF in Luxembourg have been completed, the fund can be listed in around 2 business days. |
| Annual subscription tax requirements |
Not applicable to this type of fund |
| Asset under management held by ETFs |
$1,515 billion on the European market / $10 trillion on the global market (at the end of 2023, according to the Association of the Luxembourg Fund Industry) |
| Types of investors | Institutional, retail |
| Luxembourg’s rank in Europe for ETF domicile |
Luxembourg is the 2nd largest market for ETF domicile. |
| Main advantages |
Investment diversification, liquidity, transparency |
| Types of ETFs |
Passive and active (The passive ETF has reduced managerial intervention and follows standard stock rules, as opposed to the active ETF.) |
| Popular ETFs in Luxembourg |
Those who want to open an ETF in Luxembourg should know that the active ETF is the preffered way of investing in this type of structure. |
| Types of assets held by ETFs | bonds, commodities, stocks |
It must be noted that those who want to open a Luxembourg fund as an ETF can confidently choose this market, as it is one of the leading financial centers in Europe. For professional assistance on the registration, our team of financial advisors remains at your service. Our consultants can also help you register a SOPARFI in Luxembourg.
Authorization obligations for a Luxembourg ETF
When you will open an ETF in Luxembourg, it is necessary to obtain an authorization for operations in this country – this is necessary for all investments fund registered as UCITS ETFs. The authorization is required so that the fund can initiate its public distribution on the market of choice (it must be noted that this obligation is imposed regardless of the jurisdiction selected by the investors).
Once the investment fund in Luxembourg is set up and it has obtained the necessary authorization, it can be listed on the Luxembourg Stock Exchange (the fund can be listed on other stock exchanges, it is not imposed to be limited only to a single exchange).
The decision to trade the fund’s assets on a single or multiple exchanges is established as a part of the distribution strategy the investors opted for. Our team of financial experts can help you list the ETF on the stock exchange following the internal rules of the exchange.
In Luxembourg, authorization must be obtained from the country’s main financial institution, the Financial Sector Supervisory Commission (CSSF). Our team can help you prepare the documentation that must be submitted to the institution. Investment funds in Luxembourg that will operate as ETFs must also:
- have portfolios that abide by the UCITS regulations concerning the eligible assets;
- all prospectuses must include the words “UCITS ETF”;
- they must also mention whether the fund is managed actively or passively.
We can also help you comply with the CSSF formalities imposed for other types of funds, such as the SICAR in Luxembourg or the RAIF in Luxembourg.
Once the registration and authorization formalities have been completed, the Luxembourg ETF can be listed on the Luxembourg Stock Exchange in just 2 days. Please know that investment funds in Luxembourg registered as ETFs are exempt from paying the annual subscription tax (calculated on the net assets), therefore investors can benefit from certain tax advantages.
Below, we invite you to watch a short video presenting how to register exchange traded funds in Luxembourg:
Obligations upon registration with the Luxembourg Stock Exchange
Investment funds in Luxembourg can be registered on the stock exchange. The registration rules can vary based on the type of fund registered and the stock exchange selected. In the case of the ETF registered with the Luxembourg Stock Exchange, the following requirements appear:
- respect the institution’s policies concerning the admission criteria;
- submit the listing documentation;
- confirmation of the UCITS status;
- regular disclosure of NAVs;
- notification of portfolio changes.
What forms can the ETF take?
Investors who open an ETF in Luxembourg will have 4 main options when launching this structure, all centered around the SICAV structure. For each option, there are different regulatory requirements, advantages and obligations, therefore we advise you to request tax and investment consultancy services from our team prior to deciding on the most convenient investment approach.
Thus, it is possible to open an ETF in Luxembourg as:
- opening a SICAV in Luxembourg as a new entity;
- opening a compartment (or a sub-fund) of an existing SICAV;
- launching an EFT share class in a compartment that has already been incorporated;
- changing a SICAV compartment into an ETF sub-fund.
Please mind that each of the 4 options above should be carefully analyzed as they have many differences in terms of benefits, the procedural challenges, the time required to market the new structures, the legislation that must be respected and many others.
For instance, investors who will opt to open a SICAV in Luxembourg operating as an ETF from ground up will have to wait the longest amount of time until they can market the fund.
This is given by the fact that CSSF has the longest procedural review of an application for a new investment fund, as opposed to the other 3 options, where the initial fund had already been approved by the said institution. At the opposite end, the 2nd and the 3rd options have the fastest approval mechanisms.
What types of services can our team offer for the registration of a Luxembourg ETF?
Our team can help investors gather the documentation for the set up of the Luxembourg ETF (we can provide the same service if you want to open a SIF in Luxembourg as well). We can assist during the licensing/authorization formalities.
Furthermore, our team can help you establish your distribution policy and initiate the listing procedure, after the registration with the stock exchange. You can also rely on us for ongoing legal services on taxation of the fund, regulatory procedures, reporting and others, services we can also offer for those who want to open a SICAV in Luxembourg. Below, you can discover the characteristics of the exchange traded fund:
Why opt for investments in ETF?
It is advisable to open an ETF in Luxembourg not only because this country is one of the largest markets for ETF investments, but also because the ETF structure is a very popular means of investment at a global level. Below, you can discover some of the recent data on ETF investments:
- by the end of 2023, the global assets under management of ETF funds had a value of $ 10 trillion (or EUR 9,3 trillion);
- by the end of the 3rd quarter of 2023 (September), European ETFs had assets under management accounting for $1,5 trillion (or EUR 1,4 trillion);
- at a European level, there were 2,074 ETFs registered in 2023;
- foreign businessmen can open investment funds in Luxembourg as ETFs, as this is the 2nd largest market in Europe, where this type of fund becomes more and more popular.
We also welcome foreign investors to address us for other types of financial services, such as private equity in Luxembourg. We invite you to contact our team of consultants for additional information on the Luxembourg ETF. You can also get in touch with us if you want to open a SPF in Luxembourg.