On 15 December 2015 the Luxembourg bill n°6929 creating a new type of Luxembourg alternative investment fund referred to as a RAIF or “reserved alternative investment fund” …
On 15 December 2015 the Luxembourg bill n°6929 creating a new type of Luxembourg alternative investment fund referred to as a RAIF or “reserved alternative investment fund” was published.
What is a RAIF?
RAIF stands for “reserved alternative investment fund.” This new type of Luxembourg alternative investment fund will allow promoters to propose flexible, tailor-made yet cost efficient solutions to sophisticated investors.
The RAIF is not subject to approval and supervision by the Commission de Surveillance du Secteur Financier (CSSF), but nevertheless benefits from the structuring and tax advantages afforded to CSSF-supervised funds such as SIFs and SICARs.
What are the criteria for establishing a RAIF?
An investment fund which seeks to be established as a RAIF must be an AIF and be managed by an authorized AIFM (as such terms are defined in the AIFM Directive) established in Luxembourg, in another Member State of the EU or, once the AIFM Directive passport becomes available for third countries, in a third country in accordance with the AIFM Directive.
What types of investors qualify?
Well-informed investors: institutional investors, professional investors or investors who invest a minimum of EUR 125,000 and qualify themselves as well-informed investors.
In what types of investments may a RAIF invest?
The RAIF is subject to risk spreading requirements (similar to SIF) unless it exclusively invests in risk capital (similar to SICAR).
Which legal forms are available for a RAIF?
- Mutual fund
- Investment company with variable share capital
- Public limited liability company, private limited liability company or corporate partnership limited by shares
- Simple partnership or special limited partnership
What are the administrative requirements?
- Share capital in the amount of EUR 1,250,000 within 12 months of incorporation
- A depositary/custodian bank and an auditor must be appointed
- The RAIF must be registered on the list created to that effect with the Luxembourg Trade and Companies register within 10 days of incorporation
- An issuing document and an annual report must be prepared for investors (with special mention of non-supervision of the CSSF on the issuing document)
What is the tax regime applicable to a RAIF?
In principle, RAIFs are subject to the same tax regime as SIFs: they are exempt from corporate income tax (CIT), municipal business tax (MBT), withholding tax on distributions and net wealth tax (NWT). They are subject to a 0.01% subscription tax levied on their net asset value, with some exemptions applicable under certain conditions.
However, RAIFs which only invest in risk capital are subject to the same tax regime as SICARS: they are fully subject to CIT and MBT but income deriving from transferable securities is exempt and distributions of dividends are also exempt from withholding tax, both without any condition. They are exempt from NWT but subject to the minimum NWT (which will replace the minimum CIT as from 2016).
Jeremie Schaeffer and Gaelle Bernard
ATOZ Tax Advisers