Investment in start-ups and the Juncker Plan - Partnership zero taxation - Securitisation interesting case study

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 24/09/2015


Latest news Luxembourg


Corporate, Funds and Family office


Corporate - Start-ups - Venture Capital - Business Angels - SOPARFI - SLP -  Luxembourg Tax Regime


Funds - Securitisation - Bonds and Securities Issuance - Case Study - Receivables


Family Office - Special Limited Partnership - SLP - Taxation - SIF - SICAR - AIF - Private Assets Management




CORPORATE


Investment in Start-ups and the Juncker Plan


Agreements have been signed in 2015 between the European Investment fund (EIF) and two banks in Luxembourg in order to provide to small and medium sized companies incorporated in Luxembourg a total of EUR 111 million of loans for investments, working capital and business transfers.This program will be spread over two years. The EIF will cover 50% of all the losses that BIL and ING might incure on any loan backed by Guarantee.


 


Target beneficiaries for such Guarantee are research-based and innovative SMEs, companies with a real commitment into innovation and companies having already raised funds. These companies have thus the opportunity to get access to cheap capital, the most competitive interest rates, a high level of transparency and a facilitated access to funding at an earlier stage. Moreover, guarantee backed loans may be complementary to angel investor or venture capital funding (e.g. business angels might team-up with the banks offering Guarantee backed loans).


Eligible borrowers have to fulfil some innovation relative criteria.


Request our Creavision on the Juncker Plan


 


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FAMILY OFFICE


Partnership zero taxation


In its circular on January 2015, Luxembourg Tax Authorities provides clarification on the tax treatment of Limited Partnerships ("LPs").


Here are a reminder of the main principles:


 


 


 


SLP is non-regulated by the Luxembourg Financial Services Regulator (CSSF)


If the SLP carries out commercial activities, LPs (resident or not) is taxable in Luxembourg


If the SLP manages private assets, LPs are not taxable in Luxembourg, except if the General Partner ("GP") owns more than 5% of the Capital of the SLP


SLP is regulated: SIF, SICAR, UCITs are always exempt of tax (except if the GP owns more than 5% of the Capital of the SLP)


If SLP is set-up as alternative investment funds, non-regulated, but managing assets like a fund, LPs are non taxable in Luxembourg (except if the GP owns more than 5% of the Capital of the SLP)


Read more




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  Accounting, Legal, Corporate and Tax Advisory


 


FUNDS


Securitisation interesting case study


A promoter based in the UK has good connexions with some financial institutions active in the area of credit cards issuance. These institutions whish to sell their portfolio of receivables they are unable to recover from their clients. This is a burden for them in their balance sheet as these unrecoverable debts are to be provionned in their accountings and they are ready to sell their debt portfolios on a mass scale.


As a Corporate and Trust company, our client asks Creatrust to structure this acquisition he intends to get financed by pension funds and other Family Offices interested in investing their cash in a financial product, which will pay a regular coupon. Our client thus negotiates with the credit card issuers a contract by which the entity we helped him to create repurchases the receivables (aged of more than 30 days) for 40% of the value of the debts to be recovered.


After several years of activity, the institution ’s portfolio reaches a nominal amount of EUR 80 Mio, and the purchase price of the debts has then been sold at a price of 80 x 40% = EUR 32 Mio by our client.


 


We incorporated for our client a Luxembourg management company, which has created a securitisation fund. This securitisation undertaking issues bonds with the following properties:


Nominal EUR 33,000,000 (EUR 32 Mio for the purchase of the portfolio and EUR 1 Mio for the necessary cash to set up the process of the debts recovery)


Quaterly coupons payable to the investors


Variable return and linked to the debts recovery


Maturity : 60 months (after that, non-recovered debts will be written off)


 


The Luxembourg Management Company (our client) is remunerated


by the investment management fee based on the total assets under management


and a performance fee linked to the results realised on the recovery of the receivables


 


As the fund issues securities to qualified investors, it is not regulated by the CSSF (Commission de Surveillance du Secteur Financier). The fund is composed of several sub-funds intended to repeat the operation with other institutions, like car rental firms, commercial leasing companies, companies with a regular cash flow wanting to sell forward to investors whose risks are assumed against a return.


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  Securitisation Vehicle Set-up and Security Issuance


  Bond Issuance


  Securitisation Undertakings


 


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