What is RAIF Luxembourg?
The name "RAIF Luxembourg" refers to the Reserved Alternative Investment Fund, created in Luxembourg with the Law of July 2016. It is a combination of the Specialised Investment Funds (SIFs Luxembourg) and the investment companies in risk capital (SICAR).
Up to now it is the most popular investment fund among investors and savers. Its popularity depends on the advantages listed below.
RAIF Luxembourg: all the advantages at a glance
RAIF is attracting many people because of the following advantages:
- It can be constituted in a very short time (from 1 up to 3 months), since it does not require supervision by the Luxembourgian CSSF (Commission de Surveillance du Secteur Financier). RAIF indeed is regulated by AIFMD and supervised by an authorized Alternative Investment Fund Manager (AIFM);
- RAIF is managed by a Management Company authorized by CSSF, pursuant to the Directive AIFM 2011/61/UE;
- RAIF does not require the approval of CSSF for being launched. meno dell'autorizzazione per il lancio del fondo da parte della CSSF. Anyway structuring and the launch of the fund are controlled by "ManCo", a private company managing the fund for all its duration;
- RAIF benefits from the European Passport, allowing all businesses invested in the fund to be marketed in all EU-countries;
- RAIF allows for diversification, consisting in an "umbrella" fund with multiple compartments, each with a specific investment policy, cost structure and distribution policy.
With regard to taxation of the above mentioned funds, it is provided that:
- An annual subscription tax of 0.01% of net assets has to be paid every three months;
- In case the Fund holds parts of other funds, the above mentioned taxation is not due, in order to avoid double taxation;
- On an international level, RAIF is only subject to 29 of 76 tax treaties between Luxembourg and the other EU-countries.
RAIF Luxembourg: how does it work?
A RAIF can be created through the following steps:
A RAIF has to be registered with the RCS ("Luxembourg Register of Commerce and Companies"), in the legal form chosen at the time of its establishment and in the appropriate section.
In case it is registered in a different legal form, it has to be registered in a new section.
Upon registration, information about name of the RAIF, inception date of the RAIF, and management company of the fund have to be provided.
2. Publishing of a notice regarding the constitution of the RAIF.
The notice certifying the constitution of the RAIF has to be registered with the RCS and published on the RESA ("Recueil Electronique des Sociétés et Associations").
3. Registration on the RAIF list.
All RAIFs have to send by registered mail a written request with all necessary information to the manager of the RCS, in to be registered on the RAIFs list filed in the RCS.
In order to function, RAIFs have to comply with all the above mentioned criteria, as well as to name an authorized manager based in Luxembourg or in another EU-country.
More in detail, the minimum capital requirement for RAIF is €1,250,000, to be reached within 12 months of creation of the fund. RAIFs are available to institutional investors, private investors and high net worth individuals.
A RAIF is created by notarial act, before a Luxembourgian public notary, who has to guarantee that the fund is registered on the RAIFs list filed in the RCS within 10 days of its creation.
All other characteristics and requirements are the same as SIFs and SICAR.
RAIF Luxembourg: the tax regime
A RAIF is subject to an annual subscription tax of 0.01% on the Net Asset Value of the fund (with some exemptions available) and are exempted from Municipal Business taxes, Corporate Income taxes, and Net Income taxes.
As regard tax matters, one of the following models can be chosen:
- SIF tax regime (default regime);
- SICAR tax regime (optional regime). In order to qualify for this tax regime, anyway, the statutory document of the fund has to specify that the same was established with regard to risk capital investments and that this specific regime is chosen. In case of a RAIF with multiple compartments, all compartments will be involved in this tax option, since it is not possible to separate them.
Management services for RAIFs, whether they be created as SIFS or SiCAR, are exempted from VAT tax.
How can we help you?
Arnone & Sicomo Law Firm provides legal assistance in matters of investments funds and alternative funds (such as RAIF) to its clients in Luxembourg.
Our qualified professionals can give advice to companies and private investors on the best investment strategies, even for tax purposes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.