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securitization in luxembourg
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client memorandum banking & finance
client memorandum securitization
summary
This publication has been prepared by the law firm Chevalier & Sciales and is for general guidance only. The contents
hereof are not intended to constitute legal advice and do not substitute for the consultation with legal counsel required
before any actual undertakings.
into liquid assets. The investors investing in taxable profits and should therefore to, a large
the securitization vehicle have the benefit of extent, be tax neutral. They will need to leave
acquiring a significant interest in a portfolio a very small margin to be negotiated and
of securities without having to bear the full approved with the Luxembourg tax authorities
investment of this portfolio alone. in a Luxembourg tax ruling.
• VAT exempt: The management of
• Securitization as structure for intra group
securitization vehicles are exempt from VAT.
financing activities
• No Luxembourg wealth tax: Securitization
It enables a group company to find a financing
vehicles are exempt from net wealth tax. This is
source within the securitization vehicle. Holders
an important advantage as normal Luxembourg
of the securities of the securitization vehicle will
companies (soparfi) are subject to a wealth tax
be paid profits owed to them on the financing
of 0,5 % on the net assets of the company.
activity. Unlike normal Luxembourg companies,
there is no debt equity ratio that needs to be • Benefit from Luxembourg’s double tax
maintained on a securitization vehicle. A treaty network: As securitization companies
securitization vehicle can thus be financed are fully taxable companies, they can benefit
without having to maintain any minimum capital from Luxembourg’s double tax treaty network.
requirement. This substantially reduces the • Liquidation / tax exempt: The liquidation of
costs of financing. securitization companies is tax exempt.
• Registration tax: Any agreement executed
ii. tax benefits and other in the context of a securitization or any deed
advantages related thereto is exempt from the registration
formality unless it relates to real estate situated
4
• No debt equity ratio: As above mentioned,
in Luxembourg, aircraft or vessels recorded
in a Luxembourg public register. In case of
there is no debt-to-equity ratio obligation that
voluntary registration, such agreements and
needs to be maintained for a securitization
deeds are subject to a fixed registration duty
vehicle. This is not the case when using a
of 12 Euro. It is important to note that for the
common Luxembourg company (soparfi), where
registration of any agreement or deed relating
there is a 85/15 debt equity ratio.
to a securitization, documents written in English
• Withholding tax: Interests and royalties are accepted without the need for a translation
paid by securitization vehicles are not subject to into French or German.
any withholding tax (except for the application
of the EU Savings Directive). Furthermore
• Listing on the Luxembourg Stock
Exchange: The securities issued by a
payments made to holders of shares (for
Luxembourg securitization vehicle may be listed
instance dividends) of a SPV are not subject
on the Luxembourg Stock Exchange (either on
to any withholding tax. This is an important
the Regulated Market as on the Euro MTF).
advantage in comparison with a common
Luxembourg company (soparfi) where there is • Possibility to have segregated
a 15% withholding tax on dividends. compartments: The Luxembourg
• Deductibility of expenses and payments
securitization company can establish
segregated compartments. The Luxembourg
to investors of the Luxembourg SPV: All
securitization vehicle constitutes one single
expenses related to the management of the
legal entity. However, each pool of assets may
SPV are fully deductible and the payments
be invested for the exclusive benefit of the
made to investors of the SPV (whether in the
relevant shareholders of the compartment and
form of interests or dividends) are further
each compartment shall only be responsible
fully deductible from the taxable basis of the
for the liabilities which are attributable to
SPV. Therefore Luxembourg securitization
such compartment. All the rights of investors
companies should not generate significant
iii. conclusion
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