On 8 December 2017, the Luxembourg tax authorities issued a new circular (the “Circular”) relating to the issuance of tax residency certificates for undertakings for collective investment (“UCI”). The Circular replaces the circular that had been issued on 12 February 2015 on the same topic.
The Circular clarifies the circumstances under which the tax authorities will issue a tax residency certificate to Luxembourg UCIs, and therefore whether the relevant UCIs can benefit from the double taxation treaties.
Scope
In addition to UCIs subject to the Luxembourg law of 17 December 2010 on undertakings for collective investment, as amended (“Law of 2010”), and the Luxembourg law of 13 February 2007 on specialised investment funds, as amended (“Law of 2007”), the Circular now also covers UCIs subject to the Luxembourg law of 23 July 2016 on reserved alternative investment funds, as amended (“Law of 2016”).
It should be noted that the Circular does not apply to UCIs that are subject to the law of 15 June 2004 relating to the investment company in risk capital, as amended, or to reserved alternative investment funds subject to the Law of 2016 whose exclusive object is the investment of their funds in assets representing risk capital.
Tax status of Luxembourg UCIs
A Luxembourg UCI can take the form of an investment company with variable capital (société d’investissement à capital variable - SICAV), an investment fund with fixed capital (société d’investissement à capital fixe - SICAF) or a common fund (fonds commun de placement - FCP).The Luxembourg tax authorities consider that SICAVs and SICAFs subject to the Law of 2010, the Law of 2007 or the Law of 2016 qualify as Luxembourg residents (as they have their registered office or central administration in Luxembourg) and are taxable entities (even if they are tax exempt in Luxembourg).
However, certain countries take a different approach and do not treat entities that are tax exempt as taxable entities. Under this approach, such entities cannot benefit from the double taxation treaties.
Issuance of a tax residency certificate
The Luxembourg tax authorities will issue a tax residency certificate either if there is a double taxation treaty that applies to UCIs or on the basis of national law. In each of these cases, the Circular mentions which countries are concerned. The Circular will be updated on the basis of new tax treaties or amendments to existing tax treaties.
The double taxation treaty applies to UCIs
The Luxembourg tax authorities will issue a tax residency certificate if there is a double taxation treaty that applies to UCIs as a result of one of the following:
- an express consent between the relevant authorities of two countries
- the interpretation of a clear text
- the interpretation by the Luxembourg tax authorities (which may however be challenged by the other member state).
Notwithstanding the general principle that UCIs organised as FCPs or as another transparent entity cannot, under normal circumstances, obtain a tax residency certificate as they are tax transparent, FCPs and other UCIs that do not have a legal personality can nevertheless obtain a tax residency certificate if the double taxation treaty fulfils one of the following conditions:
- expressly states that it is applicable to FCPs
- provides that it covers all types of UCIs (whether they are tax transparent or not)
- expressly states that a UCI that does not have a legal personality is considered a resident of the relevant member state.
A tax residency certificate is issued on the basis of Luxembourg law
The Circular provides that a tax residency certificate evidencing the residence of the UCI in accordance with Luxembourg law can always be issued when the registered office or central administration of the UCI is in Luxembourg. As a consequence, such a tax residency certificate can be issued in the following cases:
the double taxation treaty does not apply to UCIs as a result of :
- an express consent between the relevant authorities of two countries
- the interpretation of a clear text
- an express provision in the treaty to that effect
- the interpretation of the tax authorities
- the double taxation treaty does not expressly state that it applies to SICAVs or SICAFs
- the other country does not grant treaty benefits to SICAVs or SICAFs
- there is no double taxation treaty
- the double taxation treaty expressly grants treaty benefits to SICAVs or SICAFs.
