CMS Luxembourg/media/Files/RegZone... · - Project to create under Luxembourg laws a Fondation...
Transcript of CMS Luxembourg/media/Files/RegZone... · - Project to create under Luxembourg laws a Fondation...
CMS Luxembourg The Private Foundation
CMS DeBacker Luxembourg | The Private Foundation | May 2014
- Project to create under Luxembourg laws a Fondation
Patrimoniale (Private Foundation) - Bill of Law N° 6595;
- To complete the range of vehicles and/or products dedicated to
the management of private wealth or wealth planning;
- To align Luxembourg with other jurisdictions such as Germany,
Switzerland or The Netherlands;
- Philosophy:
Two concepts: Will theory (“Autonomie de la volonté”) and Third
Party Beneficiary (“Stipulation pour autrui”).
The Private Foundation
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Practical use
i. Management of private wealth / wealth planning;
But...
ii. Orphan structuring for securitisation SPV is also possible;
iii. Protection against take-over and public bidding should not
be neglected.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
Director / BoD
Founders
Assets
Beneficiaries
Supervisory Board
(upon conditions)
Private Foundation « Fondation Patrimoniale »
Certificates
The Private Foundation - Overview
Intervening parties of a Private Foundation:
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Formation
- The Private Foundation has the legal personality;
- Formed by a notarial deed (also possible to adopt internal regulations);
- The future law will impose the minimal content of the notarial deed;
- An initial contribution of EUR 50,000 (cash or CIK);
- Formed for a fixed or an unlimited term; Clean break: legal transfer of the
assets contributed into the Foundation / clean break from the estate of
the foundatory;
- May have one or several foundatories and beneficiaries (with connection
or not);
- Publication of extract of the deed to ensure appropriate confidentiality but
all KYC must be available at the registered seat of the foundation;
- Orphan structure (no shareholder and no shareholders meeting).
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Governance
- The Foundation has usually three parties:
• The Foundatory
• A Director or a Board of Directors (and a Supervisory
Board – upon conditions) and
• The Beneficiaries
- Director / Board of Directors has / have similar powers and is / are
subject to a similar responsability regime as in a company (to
validly engage / represent the Private Foundation, etc…).
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Activities
- A private Foundation is the legal owner of the assets contributed;
- It cannot proceed to commercial/industrial activities;
- It may have all type of tangible and intangible assets, securities
(listed or not, equity, derivatives), LP interests, IP rights,
receivables, art works, precious metals, real estate properties etc.;
- It may have a majority shareholding in an entity and may exercise
its right as shareholder but may not intervene in the management
(cannot act as director for instance);
- It can issue certificates that represent economic rights while
retaining the legal ownership of the assets. It allows to achieve the
split between legal ownership of the assets (the Private
Foundation) and the transfer of economic rights connected with
the assets (the certificate holder(s)).
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Focus on Certificates
- Article 12 of the Bill of Law;
- To operate the distinction between the legal ownership of the
assets by the foundation and the economic property of the assets;
- The transfer of assets representative of the certificate may be
irrevocable unless otherwise provided in the constitutive
documentation;
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Focus on Certificates
- Features of the certificates:
• registered certificate / no certificates at the bearer;
• transferability of the certificates in accordance with the
constitutive documentation;
• must be foreseen by constitutive documents of the Foundation;
• different categories of certificates possible but always linked with
specific assets;
• issued against contribution in kind and reverse process possible;
• restriction for the transferability to a limited number of holders
(founders, beneficiairies, entities for private estate);
• allow the allocation of cash generated by underlying assets
lodged into the Foundation.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Focus on large Private Foundations
- If a Private Foundation meets any of the two criteria it qualifies as
a « large » private foundation:
• More than 5 beneficiaries or
• A valuation in excess of EUR 20 Mio.
- « Large » Private Foundations must:
• Form a Supervisory Board; and
• Appoint an audit firm.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Focus on Confidentiality
- Assets are lodged into the Private Foundation (opacity);
- There is no shareholder;
- Publication of extract of the notarial deed only (Art. 9);
- Must have annual accounts deposited at the Trade and
Companies Register but without publication (Art. 26);
- Compliance with AML legislation and regulations but all the
documentation remains at the registered seat of the Foundation
(Art. 28);
- Cooperation with authorities (Art. 28).
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Dissolution
- Amendments / modifications of the notarial deed are exclusive
rights of the Foundatory;
- Voluntary dissolution and liquidation of the Private Foundation is
the exclusive competence of the Directors / Board of Directors;
- A director may be appointed as the liquidator.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Tax aspects
1. Direct taxation
1.1. The Private Foundation
- Fully taxable to income tax - CIT/MBT (i.e. 29,22%);
- Tax exemption of income from movable property (e.g. interest payments,
dividends, etc.) as well as capital gains arising from the sale of the assets
generating that income;
- No withholding tax on the « distributions » made to the beneficiaries;
- Exempt from net worth tax.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Tax aspects
1.2. The founder
- Luxembourg resident founder: may be taxed on the transfer of certain
assets to the foundation;
- Non-resident founder: may be taxed depending on the tax regime applicable
in his country of residence.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Tax aspects
1.3. The Beneficiaries
(i) Luxembourg tax residents
- Taxation of the « distributions » (in cash or in kind) as miscellaneous
income;
- Tax exemption of 50% of income arising from the foundation;
- No withholding tax based on the law of 23 December 2005 (RELIBI).
(ii) Non-Luxembourg tax residents
- No subject to Luxembourg taxation on income arising from the
foundation;
- No withholding tax based on the Savings Directive.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Tax aspects
2. Indirect taxation
- Contribution made to create the Foundation and subsequent
payments: fix registration duty;
- Transfer made by the Foundation in the founder’s life time: transfer
tax computed based on the family relationship between the founder
and the beneficiary (i.e. registration duty ranging from 1.8% to
14.4%);
- Upon founder’s death: inheritance taxes due by the beneficiaries at
the rate of 0%, 12% or 40% based on the family relationship
between the founder and the beneficiary.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation - Tax aspects
3. International aspects
- Foundation and foreign tax legislations on trust or trust-like entities;
- Access to the double tax treaties?
- Withholding taxes and Parent-Subsidiary Directive;
- Absence of inheritance and gifts tax treaties.
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation vs Other vehicles
Lux
Foundation
Trust
(general concept) S.A. SPF
Legal Personality
Third Party Management
Confidentiality
Freedom of Governance
Third Party Beneficiary
Tax Neutrality Depends
Opacity / Transparency Opaque Transparent Opaque
CMS DeBacker Luxembourg | The Private Foundation | May 2014
The Private Foundation vs Other vehicles
Lux
Foundation Jersey Foundation Dutch Foundation
Belgian
Foundation
Legal Personality
Third Party
Management
Confidentiality
Freedom of
Governance
Third Party Beneficiary
Tax Neutrality Depends Depends
Opacity / Transparency Opaque Opaque Opaque Opaque
CMS DeBacker Luxembourg | The Private Foundation | May 2014
Summary
Unregulated Regulated
Non-AIF AIF
Private Foundation,
Holding & Securitisation
vehicle (conditions)
Part I SIF
Part I SICAR
Part II SIF
Part II SICAR
Part II UCI
+ De minimis regime
registration of AIFM
UCITS
CMS DeBacker Luxembourg | The Private Foundation | May 2014
Vivian Walry Partner
Cédric Buisine Senior Associate
French – English – German French – English
T +352 26 27 53 21 T +352 26 27 53 31
F +352 26 27 53 53 F +352 26 27 53 53
E [email protected] E [email protected]
Contact details
Investment Funds Team
Contact details
Tax Team
Vincent Marquis Head of Tax
Jean-Philippe Monmousseau Senior Associate
Viviana Raymond Senior Associate
French – English French – English Spanish – English – French –
Portuguese - Italian
T +352 26 27 53 24 T +352 26 27 53 29 T +352 26 27 53 34
F +352 26 27 53 53 F +352 26 27 53 53 F +352 26 27 53 53