BEPS opportunities for Luxembourg Marketing shares of AIF in Europe - Foundation Case studies

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 22/10/2015


Latest news Luxembourg


Corporate, Funds and Family office


Corporate -  BEPS - Tax Exemption - Tax Compliance - Transfer Pricing


Funds - AIFM - Reverse Solicitation - Marketing activities - Investment Fund


Family Office - Luxembourg private Foundation - Permanent Establishment - Assets Holding - Assets Protection




CORPORATE


BEPS opportunities for Luxembourg- three principles:


Increase coherence:


Standards rules have been elaborated to:


avoid hybrid measures


precise components of an efficient regime applicable to foreign controlled companies


build a common approach for the question of interest deductibility


Best practices on mandatory communication of information was also defined and exchanges of information on some tax rulings set up.




Reinforce regulatory on substance:


improvement of rules applicable for transfer pricing to be sure that results are adapted to the reality of economic activity,


due to the difficulty of evaluation of intellectual property rights, finalisation of a method of assets estimation particularly for assets which are difficult to assess,


proposition of simplification mechanisms for transactions on raw materials and low value added services, and particularly those at destination of developing countries,


establishment of a minimum standard in the domain of possible treaty abuse, in order to be sure of the right utilisation of treaties,


review of the definition of permanent establishment.




Ensure more transparency and legal protection:


definition of indicators on magnitude and economic impact of BEPS trends. They will be used to proceed to an evaluation of the effectiveness of the measures implemented,


recommendation formulation on  the content of the rules on the mandatory communication of information,


review of the requirements on transfer pricing documentation and establishment of a template form for declaration country by country, which indicates the location of the economic activities,


adoption of minimum standards in the area of treaties abuse, country by country declaration, conflicts settlement and harmful tax practices.


 


OCDE’s opinions are only recommendations which then need to be transposed into national laws.


Request our Creavision


 


Read Also :


  Tax Compliance


  Transfer Pricing


  Tax Consolidation and Optimisation


 


FUNDS


Reverse solicitation and non-marketing activities of Alternative Investment Fund shares


Reverse solicitation consists in providing information regarding an AIF and making units or shares of that AIF available for purchase to a potential investor. This follows an initiative of that investor (or an agent of that investor) made without any solicitation by the AIF or its AIFM (or an intermediary acting on their behalf) in relation to the relevant AIF. Reverse solicitation is not marketing under the AIFMD if the following elements are met:


the investor or agent has approached the AIFM or the AIF on its own initiative, with the intention of investing in (or initially in receiving information regarding) AIF(s) managed by such AIFM;


neither the AIFM, nor the AIF (nor any intermediary acting on their behalf) has solicited the investor to invest in the relevant AIF.


The AIFM has the burden of proof with respect to the two criteria above. Evidence can include written confirmation by the investor of its decision to invest on its own initiative or, initially, requesting information regarding the relevant AIF(s).


 


Non marketing activities:


investments made in AIFs in the context of a discretionary mandate for the management of individual portfolios (at the initiative of the investment manager) - vis-à-vis the investment manager and its client


proposal to invest in an AIF in the context of an investment advisory agreement (at the initiative of the advisor) - vis-à-vis the advisor and its client


investments in targeted AIFs made in the context of collective portfolio management of an AIF (at the initiative of such AIF or of its management company, AIFM, portfolio manager or other agent) - vis-à-vis the AIF and the portfolio manager


secondary trading of units or shares of an AIF is not considered marketing unless there is an indirect offering or placement through one or more intermediaries acting at the initiative or on behalf of the AIFM or the AIF.


Read more


 


Read Also :


  Special Investment Fund - SIF


  Venture Capital Fund - SICAR


  Investment Fund Set-up




FAMILY OFFICE


Foundation Case studies


A 62 year old entrepreneur contacted us. In the past, he had created a company in the trading sector that he sold fifteen years ago to launch a consulting company in the same area. The latter has strongly grown up since the crisis of 2008, while our client expected a limited activity. He has now many international clients and is leading 150 employees based all around the world. Our client has two sons eventually interested in the takeover of the company and a daughter who is involved in the research area and not interested in her father’s business. Managers of the consulting company were thanked with the allocation of stock options and shares of the company. Our client wants our advice on:


Development of the consulting company


Taking in account of the characteristics of the consulting company, employees based all over the world can be considered as a “permanent establishment” involving tax obligations in some countries, under certain conditions. Our Corporate Department considered with our client the issue of the declaration of some company revenues in countries in which a consulting activity realised by the company employees directly to clients becomes a permanent establishment. We also advised our client on the creation of a Holding company aiming at holding the company and creating subsidiaries instead of overseas permanent establishments.


Transfer of this company, taking account of the family structure.


Transfer pricing between group companies for the know-how used by one or other companies was discussed and the company brand has been transferred to the Holding established in Luxembourg.


Assets holding and management he already owns, and their transfer:


Our client will create a Foundation, which will be the vehicle detaining the Holding company, which will itself hold the consulting companies. Our client will bring the proceeds of the sale of his first company and assets he inherited in the past. All these assets will be contributed to the Foundation. Our client will appoint a Board of Directors, composed of himself, his lawyer and a chartered accountant. The Charter of the Foundation provides that beneficiaries are our client and his spouse until their decease. Children are mentioned as second beneficiaries, but only after their parents. Our client creates a supervisory board of which is a member and appoints Creatrust as protector of the assets and of their destination.The Foundation regulates the transfer of the company assets in harmony, without letting children intervene in the succession rules, avoiding arguments. All the assets are listed and allocated from the beginning by the founder who reserves the right to modify this list at any time.


The governance within the family, his and the family’s rights protection, including those of his wife. 


The governance within the family is sorted out due to the Foundation Board. Our client also asks us to take in charge the organisation of the periodic reporting on all the Foundation assets, using our Private Assets Consolidation tool. We thus create each month a reporting to the Board of the Foundation, allowing them to visualise at every moment assets, their value (including investment funds in which the Foundation is invested, private equities and co-investments realised by our client over the years), sector and geographic exposure, currency exposure, and private properties.


 


We are also in charge of making the several tax returns of these entities and providing the necessary reporting to each members of the family in order to allow them to fulfil tax obligations in the country where they hence are resident.




Read more case studies




Read Also :


  Luxembourg Private Foundation


  Private Assets Consolidation


  Wealth Protection Plan


 


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