Retail investment funds in Luxembourg: a regulation, the establishment and a management

Retail investment funds in Luxembourg: a regulation, the establishment and a management

Luxembourg is considered a home to the investment fund industry, which is associated with the development of advanced legislation. There are many professional investors in this jurisdiction, who can open various types of investment funds.

It is popular to register a retail fund in Luxembourg such type, as:
  1. Regulated retail funds:
    1. Securities joint ventures are governed by Part I of the UCI Law;
    2. Joint investment ventures are governed by Part II of the UCI Law.
  2. Non-regulated retail funds:
    1. Variable equity companies (SICAV);
    2. Investments in fixed assets (SICAF);
    3. General investment funds (FTP).

An authorized capital of SICAV is equal to net assets. For SICAF, capital changes require compliance with the requirements of the Companies Act.

The establishment of the investment fund in Luxembourg

Regulated retail funds are controlled by CSSF. A registration of an unregulated retail fund in Luxembourg does not require CSSF approval.

To open a retail fund in Luxembourg, you need to select a type of company and register in the Commercial Register. For authorization, you must provide in CSSF:

  • An application for authorization;
  • Registration documents;
  • Management rules;
  • A prospect;
  • An agreement with a depositary;
  • An information about the Board of directors;
  • A description of risk management procedure.
To establish an unregulated investment fund in Luxembourg, you will need to register an investment company in Luxembourg of such types:
  • SICAV;
  • SICAF;
  • FCP.

YB Case company provides personal advice on the most appropriate forms of investment in Luxembourg.

A taxation of Luxembourg retail funds

FCP is not subject to corporate income tax. The income of the investor of such a fund is taxed. SICAF is taxed on net capital, income tax 35%.

Non-resident investors can claim exemption from income tax or can return full income tax if at least 80% of the fund’s income is received from foreign sources.

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Asset protection in Luxembourg

You must entrust the custody of the assets to a custodian bank, which must obtain a banking license in Luxembourg. A role of the custodian bank includes a storage of the assets of a fund in deposit, issue and redemption units, as well as the processing of payments. If the bank goes bankrupt, the assets are separated from a bankruptcy state in favor of the fund management company FCP or SICAV.

A management of Luxembourg retail funds

A regulated investment fund should be included in the list of CSSF controlled entities. To make changes, a foundation must obtain the prior approval of the CSSF. Retail funds must have a Board of directors (at least 3), half of which are residents of Luxembourg. Foreign investment funds must appoint administrative and payment agents for operating in Luxembourg.

Final word

As we have already noted, Luxembourg is an engine for introducing regulations regarding funds, that is why this jurisdiction is so attractive for registering investment companies.

Despite a flexibility of Luxembourg legislation, it would be advisable to entrust experienced specialists for registering an investment fund in Luxembourg. This article has been prepared for informative purposes, and should not be construed as legal advice.

If you need more information, YB Case staff provide comprehensive professional advice on establishing investment funds in Luxembourg. Moreover, our specialists are ready to provide support services in registering investment companies and their authorization in CSSF.

You can find out details about our services and order qualified advice on the establishment of an investment fund in Luxembourg by leaving a request through the feedback form, or by calling us directly at the contacts below.

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