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AUDIT - TAX - ADVISORY

Luxembourg Real Estate


Investment Vehicles
2012
kpmg.lu
Luxembourg Real Estate Investment Vehicles 2012 | 1

Table of contents

Luxembourg Real Estate Investment Vehicles 2


Introduction 2
Overview 3
Undertakings for Collective Investments
(UCIs) 8
Specialised Investment Funds (SIFs) 11
Luxembourg Risk Capital Companies
(SICARs) 16
Securitization Vehicles (SVs) 21
SOPARFIs 26

Appendix 1 - Comparison of Real Estate Vehicles 34

Appendix 2 - The most popular forms


of legal entities 50

Appendix 3 - Glossary of terms 54


2 | Luxembourg Real Estate Investment Vehicles 2012

Luxembourg Real Estate


Investment Vehicles

Introduction KPMG is pleased to present its new edition of the Luxembourg Real Estate
Investment Vehicles.

Over the years, Luxembourg has developed a strong reputation as a centre


of excellence for a large variety of investment vehicles and with fund assets
under management over EUR 2 trillion, Luxembourg is the largest fund center
in the European Union and second worldwide.

Luxembourg has also been a pioneer in the structuring of real estate


investments and it has emerged as the leading domicile in Europe for
vehicles investing directly or indirectly in internationally diversified real
estate portfolios.

Next to offering fund vehicles which are supervised by the Commission


de Surveillance du Secteur Financier (CSSF), Luxembourg also offers
unregulated vehicles using a wide variety of legal forms. It has developed
a flexible, predictable and efficient legal and tax system to offer tax
neutral & tailor-made solutions to investors.

Luxembourg is a sound market place with a longstanding experience which


benefits from strong investor recognition, efficient investment products,
a qualified multi-lingual workforce and dedicated service providers involved
in industry associations aimed at constantly improving the overall
Luxembourg experience.

This brochure aims at giving you an overview for setting up real estate
investment vehicles but it does not address all possible structuring
opportunities. For further information please do not hesitate to contact any
of our senior specialists listed at the back of the brochure.

KPMG differentiates and can help you across audit, tax, accounting and
advisory services from project inception through an integrated approach to
the investment life cycle. A description of our services and approach can be
found at the end of this document.

Yours faithfully,

Pierre Kreemer
Head of Real Estate & Infrastructure, Luxembourg
Luxembourg Real Estate Investment Vehicles 2012 | 3

Overview Luxembourg offers a full range of vehicles relevant for real estate investments
which may be either unregulated investment vehicles or regulated vehicles
which are subject to registration and ongoing prudential supervision by
the CSSF.

Growth in number of Luxembourg regulated real estate fund units

Part II Institutional Funds/SIF

210
190
170
150
130
110
90
70
50
30
10 5%

2005 2006 2007 2008 2009 2010 2011

Source: CSSF Annual Report 2011


4 | Luxembourg Real Estate Investment Vehicles 2012

Regulated real estate investment vehicles


The types of regulated vehicles that do not benefit from the UCITS directive
provisions but may be used in different circumstances depending upon
investor requirements are as follows:

> Part II Fund, under the law of 17 December 2010;

> SIF, under the law of 13 February 2007; as subsequently amended

> SICAR, under the law of 15 June 2004; as subsequently amended

> Regulated SVs, under the law of 22 March 2004.

Unregulated real estate investment vehicles


The most common unregulated real estate investment vehicle is the
SOPARFI. SOPARFIs are fully taxable companies that may benefit from the
participation exemption regime on equity investments in both domestic and
foreign companies.

Investor Protection
+ -
Undertakings for Specialised Investment Risk Capital Companies Regulated Unregulated
Collective Investment Funds (SIFs) - law of (SICARs) - law of Securitization Vehicles Securitization Vehicles
SOPARFIs/Others
(UCIs) - law of 13 February 2007 15 June 2004 (SVs) - law of (SVs) - law of
20 December 2002 as amended as amended 22 March 2004 22 March 2004

Undertakings Undertakings
for Collective for Collective
Investments Investments
(UCIs) (UCIs)
Part II law of Part II law of
17 December 17 December
2010 2010

The securitization vehicles (SV) can also exist as non-regulated entities if


they only carry out (i) private placements or (ii) public placements but on an
irregular basis.
Luxembourg Real Estate Investment Vehicles 2012 | 5

Popular regulated real estate vehicles and features


The majority of real estate funds fall under the SIF law. This reflects the
popularity of this regime for real estate fund promoters for a flexible onshore
investment fund vehicle for all types of alternative investment fund products
including direct real estate funds and funds of real estate funds.

Legal regime and structure combined

Part II (2010 law) SICAF Part II (2010 law) FCP SIF (2007 law) FCP
SIF (2007 law) SICAV-SCA SIF (2007 law) SICAV-SA SIF (2007 law) SICAF-SA
SIF (2007 law) SICAV-S. r.l. SICAR-SA SICAR-SCA etc
SICAR-S. r.l.

Source: ALFI: Luxembourg Real Estate Fund Survey 2011, Data as of 31 December 2010
6 | Luxembourg Real Estate Investment Vehicles 2012

Net assets under management in Luxembourg real estate funds

Part II (2002 Law / 2010 Law) Institutional Funds / SIF


(Law of 13 February 2007)

25,000
20.036
14.746 17.580
14.839
20,000
8.131
15,000

10,000 3.307

1.557
5,000 280 850
146 369 522
3.235 469 1.927 2.343 2.280 3.730 4.705 7.315 6.180 4.126 3.846 3.047
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: ALFI: Luxembourg Real Estate Fund Survey 2011

Investment Style

Opportunity

Core

Value-Added

Source: ALFI: Luxembourg Real Estate Fund Survey 2011 - Direct Funds

Accounting Standards

IFRS
LUXGAAP

Source: ALFI: Luxembourg Real Estate Fund Survey 2011 - Direct Funds
Luxembourg Real Estate Investment Vehicles 2012 | 7

Frequency of NAV calculation


Monthly

Annual

Quarterly

Semi-Annual

Source: ALFI: Luxembourg Real Estate Fund Survey 2011 - Direct Funds
8 | Luxembourg Real Estate Investment Vehicles 2012

Undertakings Undertakings for collective investment, established in accordance with


Part II of the law of 17 December 2010 are those destined to the retail market.
for Collective Following the introduction of the specialised investment fund regime,
the Part II fund as a real estate vehicle has significantly declined.
Investments Further details relating to Part II funds are outlined below.

(UCIs) Part II UCIs may take the form of a SICAV, SICAF or FCP,
certain characteristics being outlined in the table below.

Under Part II of the law


of 17 December 2010

SICAV/SICAF FCP
Legal structure Legal entity Not a legal entity. The FCP is a
contractual fund structure managed
by a management company.
Legal requirement for Management No Yes
Company
Governance body Board of directors of SICAV/SICAF Board of directors of the management
company
Voting rights Investors are always entitled to vote as Investors are entitled to vote to the extent
they are shareholders of the company. that the management regulations provide
the possibility.
Annual general meetings Yes For management company only
Tax transparency Not tax transparent Tax transparent
Responsibility of depositary Standard Additional oversight and control
responsibilities compared to a
SICAV/SICAF
Decision to liquidate Annual or extraordinary general meeting Management company
Luxembourg Real Estate Investment Vehicles 2012 | 9

Legal and regulatory requirements


The creation of a Part II fund is subject to prior approval by the CSSF.
The fund promoter, required in order to ensure an appropriate level of
investor protection, must have sufficient financial resources and appropriate
experience. The promoter submits an application which includes the articles
of incorporation or management regulations (if an FCP), the prospectus and
the principal agreements with service providers. The application must also
include the choice of depositary bank and auditor as well as details of the
directors of the fund or of the Management Company and directors of the
depositary bank.

As part of the approval process, the CSSF validates the investment strategy
and objectives which must comply with the risk diversification criteria outlined
in CSSF Circular 91/75 which specifically addresses real estate investments,
and which requires real estate UCIs to invest no more than 20% of their net
assets in one single property except during the start up phase.
Other restrictions such as borrowing or other rules are specified inter alia in
chapter I and III of the Circular.

Reporting
Annual and semi-annual reports are required to be submitted to investors
and the CSSF within 4 and 2 months of the year/period end respectively,
with monthly statistical reporting to be submitted to the CSSF.
The annual report must be audited by an approved statutory auditor (rviseur
dentreprises agr). A long form analytical report must also be submitted
to the CSSF within 4 months of the year end.

Appendix 1 provides a comparison of the requirements of Part II funds with


other real estate investment vehicles.

Please refer to our brochure Undertakings for Collective Investment


for more detailed information on the legal framework of UCIs.

Risk Management
The risk management function of Part II funds is not regulated.

Taxation of UCIs
Mutual funds (FCPs) are fiscally transparent and are therefore not subject to
Luxembourg income or net wealth tax.

Although investment companies operating as public limited companies with


fixed or variable capital (SICAF or SICAV) are basically treated as resident
taxpayers, they are specifically exempt from income and net wealth tax.

While investors resident in Luxembourg are subject to normal income tax on


their income from investment funds, there is usually no Luxembourg tax on
foreign investors. Luxembourg levies no withholding tax on distributions paid
10 | Luxembourg Real Estate Investment Vehicles 2012

by investment funds, except where the EU Savings Directive applies.


In this case, withholding tax of 35% is levied unless information is exchanged.
A distribution has to be made depending on the form of the investment fund
and distribution notice. (Distinction has to be made depending on the form of
the investment fund and distribution nature). However, tax may be levied by
the foreign unit holders country of residence or citizenship.

Income earned by a Luxembourg investment fund may be subject to


withholding tax in the country of source. Tax treaties between Luxembourg
and other countries may provide for partial exemption from or refund of any
withholding tax levied.

Given that the availability and application of treaty benefits varies between
treaties, it is important to seek advice before undertaking these investments.

> FCPs are generally excluded from tax treaty benefits because of their
fiscal transparency (except for the treaty with Ireland). The treaty may be
applied to an FCP unit holder according to the treaty that exists between
the unit holders country of residence and the country where the FCPs
investments are located.

> As a SICAV does not pay income tax, it is usually not entitled to obtain
treaty benefits unless the contracting parties decide differently.
SICAVs currently benefit from the following treaties: Armenia, Austria,
Azerbaijan, Bahrein, China, Denmark, Finland, Georgia, Germany,
Hong Kong, Indonesia, Ireland, Israel, Malaysia, Malta, Moldova, Monaco,
Mongolia, Morocco, Poland, Portugal, Qatar, Romania, San Marino,
Singapore, Slovak Republic, Slovenia, South Korea, Spain, Thailand, Trinidad
and Tobago, Tunisia, Turkey, United Arab Emirates, Uzbekistan and Vietnam.

An annual subscription tax (taxe dabonnement) of 0.01% or 0.05% of the


funds net worth is payable by the fund. The rate at which the subscription tax
is levied depends on the type of investment carried out by the fund and on the
type of investor in the fund. The annual subscription tax has been set at one
basis point (i.e. 0.01%) for the SIF with certain exemptions being available.
To avoid double taxation, funds that exclusively hold units in other investment
funds already subject to subscription tax are exempt from the subscription tax.

Luxembourg UCIs qualify as taxable persons for VAT purposes. A case-by-


case analysis is required to assess whether this status should result in the
registration for VAT. Management services rendered to a UCI are, in principle,
VAT exempt.
Luxembourg Real Estate Investment Vehicles 2012 | 11

Specialised The SIF was introduced by the law 13 February 2007, as subsequently
amended. It offers a flexible regime for well-informed investors (namely
Investment institutional, professionals and other investors under conditions) to undertake
collective investments. The SIF law is essentially characterized by flexibility in
Funds (SIFs) view of investment policy, the investor circle and a lightly regulatory regime.

Legal and regulatory requirements

Authorisation process
The creation of a SIF is subject to prior approval by the CSSF. An authorization
file must be submitted to the CSSF which includes the articles of
incorporation or management regulations (if an FCP), the prospectus,
the principal agreements with service providers and information on the
honorability and expertise of the persons that will perform the portfolio
management activities.The application must also include the choice of
depositary bank and auditor as well as details of the directors of the fund or
of the Management Company.

The CSSF will grant authorisation subject to the approval of the constitutional
documents and the choice of the custodian, of the persons in charge of the
portfolio management and of the auditor.

No promoter requirement
Unlike investment funds aimed at retail distribution, where investor protection
is the main concern, the SIF may not always be set up by an institutional
promoter with significant financial resources.

The CSSF will however require notification of the identity of the directors of
the SIF or of the Management Company or of the general partner depending
on the legal form of the SIF. The CSSF will ensure that they are of sufficiently
good repute and have sufficient experience, related to the type of specialised
investment fund concerned.

Central administration
The SIF must have a Luxembourg central administration.

Eligible assets and the principle of risk-spreading


In comparison to Part II funds, the SIF offers more flexibility with respect to
the permitted investment assets.

A SIF may invest in principle in any type of assets and may pursue any type
of investment strategy, i.e. in traditional investments as well as alternative
investments - for example transferable securities, money market instruments,
real estate, hedge fund strategies and private equity.
12 | Luxembourg Real Estate Investment Vehicles 2012

The SIF law does not provide for investment restrictions but refers to the
concept of risk-spreading. This concept is more fully described in CSSF
Circular 07/309 relating to risk-spreading in the context of SIFs, which clarifies
that not more than 30% of its assets can be in a single investment.

Flexible corporate rules

Several legal and corporate forms


As per the SIF law, the fund may be established as a contractual fund (FCP)
or an investment company with variable share capital (SICAV) or fixed share
capital (SICAF).

The SIF law offers several possible corporate forms for the SICAV and other
incorporated entities:

> Public limited company (S.A.), > Private limited company (S. r.l.),

> Partnership limited by shares (S.C.A.) or,

> Cooperative in the form of a public limited company (S.C.o.S.A.).

Availability of umbrella structures


SIFs may be set up as an umbrella fund with multiple sub-funds and/or
multiple share classes so as to accommodate investor needs.
The ring-fencing rule applies to the various sub-funds so that the assets of
one sub-fund are exclusively available to satisfy the rights of creditors
and investors of that sub-fund.

Shareholding

Well-informed investor
The SIF law reserves the SIF for well-informed investors. Within the meaning
of this law, a well-informed investor must be either:

> An institutional investor

Undertakings or organizations, that manage an important amount of funds


and assets. This concept covers inter-alia credit institutions and other financial
sector professionals, insurance and re-insurance undertakings, welfare
institutions and pension funds, industrial and financial groups and structures
put in place by these entities to manage an important amount of funds and
assets; or

> A professional investor


Luxembourg Real Estate Investment Vehicles 2012 | 13

Any professional investor within the meaning of Annex II of the Directive


2004/39/EC on markets in financial instruments; or

> An investor who has adhered in writing to the status of well-informed
investor and complies with one of the following conditions:

- He invests at least EUR 125,000 in the fund; or

- His expertise, experience and knowledge are confirmed by a credit


institution as defined in Directive 2006/48/EC, by an investment firm
as defined in Directive 2004/39/EC or by a management company as
defined in Directive 2001/107/EC.

In this respect, the SIF law enables access to a broad investor base to a range
of products, which were, before the SIF law, predominantly reserved for an
institutional circle of investor base, such as insurance companies or banks.

Flexible capital structure


The minimum share capital of a SIF amounts to EUR 1,250,000 to be reached
within twelve months of authorisation by the CSSF.

Capital calls may be made by way of capital commitments or through the


issue of partly paid units or shares. For FCPs, the law does not prescribe the
percentage to which each unit must be paid up, but for SICAVs, at least 5%
of each share must be paid-up.

Reporting
The offering document and the annual financial statements are the only
mandatory documents prescribed by the SIF law. The SIF has therefore no
obligation to prepare a simplified prospectus, a semi-annual report nor a
long-form report as is required for Part II funds.

The SIF law does not prescribe a specific format for the offering document
but indicates that it must include the information necessary for investors to
be able to make an informed judgment of the investment proposed to them
and, in particular, the risk attached thereto. An ongoing update of the offering
document is not required but it must however be updated whenever new
shares are issued to new investors.

The annual financial statements must be available to investors within six


months from the end of the period to which they relate. This goes beyond
the normal four month period for other fund types and thus accommodates
investment strategies for which the compilation of the financial statements
may be difficult within the regular four month period. In addition, no detailed
information on the investment portfolio must be disclosed; reduced
qualitative and/or quantitative information enabling the investors to make
an informed judgment on the development of the activities and the results
is required.
14 | Luxembourg Real Estate Investment Vehicles 2012

Another interesting feature of the SIF is the exemption for the SIF and its
subsidiaries from the obligation to consolidate the companies owned for
investment purposes.

Flexible administrative requirements


The SIF law provides a very flexible regime in terms of valuation of assets,
frequency of NAV calculation and price of the shares/units issued or redeemed.

The minimum frequency of NAV calculation is annual in line with the


requirement to prepare annual financial statements.

The valuation of the assets shall be based on fair value unless provided
for differently in the documents constituting the SIF. This allows SIFs
holding more specific investment types to select a more appropriate
valuation methodology.

Furthermore, the issue and redemption of shares/units must not necessarily


be made at the NAV per share of the day but will follow the conditions and
procedures set forth in the documents constituting the SIF thus allowing the
issue and redemption process to meet the funds requirements.

Risk Management
The SIF must implement an adequate risk management system in order to
appropriately detect, measure and manage the risks associated with the
positions taken and their contribution to the overall risk profile of the portfolio.

The SIFs must communicate to the CSSF a concise description of the risk
management systems implemented according to the proportionality principle
in order to appropriately identify, measure, manage and control all the material
risks to which the fund or its compartments are or might be exposed to.
Luxembourg Real Estate Investment Vehicles 2012 | 15

Supervision
The supervisory authority is the CSSF.

Custodian
The custody of the assets of the fund must be entrusted to a depositary.
The depositary must be a credit institution within the meaning of the
amended law of 5 April 1993 concerning the financial sector and must
either have its registered office in Luxembourg or must be established in
Luxembourg as the branch of a credit institution having its registered office
in another Member State of the European Union.

As it is the case for all Luxembourg regulated investment funds, the duties of
the depositary shall be understood in the sense of supervision and not only
safekeeping.This implies that the depositary must know at all times how
the assets of the fund have been invested and where and how these assets
are available. The assets of the fund may be deposited with the depositary
itself or with any professional designated by the fund in agreement with the
depositary.

The depositary is liable to the investors for any loss suffered by them as a
result of its wrongful failure to perform its obligations or its wrongful improper
performance thereof. The liability of the depositary is not affected if it has
entrusted all or some of the assets in its custody to a third party.

Taxation of SIFs
The tax regime for UCIs (including SIFs) is described on page 9
(Taxation of UCIs).
16 | Luxembourg Real Estate Investment Vehicles 2012

Luxembourg The SICAR, a lightly regulated venture capital/private equity vehicle,


was introduced in Luxembourg in 2004.
Risk Capital The purpose of the SICAR law of 15 June 2004 is to facilitate fund raising

Companies and investment in risk-bearing capital. SICARs represent around 12% of


Luxembourg regulated real estate funds.

(SICARs) The SICAR fills the gap between publicly financed vehicles qualifying as UCIs
under the amended law of 17 December 2010 (which are strictly regulated)
and the unregulated standard taxable companies investing in shares or
financing (so called SOPARFIs).

275 SICARs had been set up by May 31st, 2012 demonstrating that the vehicle
meets the needs and requirements of the market.

A typical use of a SICAR structure is shown below:

Well informed
High net worth Other Investors
Investors (corporate
Individuals (management, etc)
or partnership)

SICAR

Investment in
securitised loans

Luxembourg
SOPARFI
Luxembourg Real Estate Investment Vehicles 2012 | 17

Legal and regulatory requirements


A SICAR is a vehicle with the principal object of investing in risk-bearing
assets to the benefit of investors.

Unlike investment funds subject to the law of 17 December 2010, SICARs


are not subject to risk spreading obligations. As a result, a SICAR may invest
all of its funds or acquire the majority of voting power in a single company.
One reason for this flexibility is the limitation on investors discussed under
the heading well-informed investors below. Well-informed investors are
assumed to be aware of the risks of their investments and to accept the
SICARs proposed investment policy from the outset.

Authorisation
A SICAR must be authorised by the CSSF prior to commencing its operations.
The CSSF is the relevant supervisory body for SICARs.

In line with the semi-regulated nature of SICARs, the conditions for


authorisation are less stringent than for Part II funds. There are no restrictions
on the SICARs investment policy. However, the CSSF must approve:

> The SICARs incorporation documents;

> The choice of the Depositary and Auditor

The CSSF requires additionally notification of the identity, function and


responsibility of the directors of the SICAR or of the general partner
depending on the legal form of the SICAR.

Risk-bearing assets
The key qualification for gaining SICAR status is that the capital of a SICAR is
invested in risk capital. Risk capital is defined in Circular 06/241 as follows:

> Investment risk (i.e. the risk of the investment is higher than normal
business risk); and

> Intention to realize the investment (i.e. clear intention to develop and
then realize the investment, for instance by onward sale or by an
initial public offer).

The above definition is broad and the classification of assets in risk capital is
therefore somewhat subjective and will be a key discussion with the regulator
at the initiation of the project.
18 | Luxembourg Real Estate Investment Vehicles 2012

Corporate rules

Legal forms
The law only applies to companies that elect in their bylaws to be governed by
the SICAR law.

A SICAR can be established in any of the following legal forms:

> A public limited liability company (S.A.);

> A private limited liability company (S. r.l.);

> A partnership limited by shares (S.C.A.);

> A cooperative company organized as a public limited liability


company (S.C.o.S.A.);

> Limited partnership (S.C.S.).

The head office and central administration of the SICAR must be located in
Luxembourg.

Umbrella structures
A SICAR can be set up in the form of an umbrella fund with multiple
segregated compartments. Each compartment forms a distinct part of the
SICARs patrimony and the prospectus has to state the investment policy of
each compartment. The rights of investors/creditors are limited to a specific
compartment. It is possible to liquidate a compartment separately without
liquidating the others (only the liquidation of the final compartment triggers
the SICARs liquidation).

Shareholding

Well-informed investors
The shares/units of a SICAR may only be issued/offered to investors with
a high level of expertise (well-informed investors), such as professional
investors and institutional investors. Directors and managers of a SICAR are
deemed to be well-informed investors in the meaning of the SICAR law.

Other investors may be allowed provided they declare in writing that they
adhere to the well-informed investor status and they invest at least
EUR 125,000 or obtain confirmation of their capacity from a
financial institution.
Luxembourg Real Estate Investment Vehicles 2012 | 19

Capital requirements
The minimum subscribed capital of a SICAR is EUR 1 million (share capital and
share premium), which must be reached within 12 months of the company
being authorized by the CSSF. The share capital must be fully subscribed
and each share must be paid up to at least 5%. This facilitates successive
drawing down of subscriptions once satisfactory investments are identified.
No debt-to-equity ratio applies.

There are no legal restrictions on capital repayments, share redemptions,


dividends or interim dividends. The only restrictions are those found in
the SICARs articles of association. A SICAR is not obliged to maintain a
legal reserve.

Reporting
The SICAR is required to prepare a prospectus and an annual report for each
financial year. The annual report must be audited by a Luxembourg approved
statutory auditor (rviseur dentreprise agr). The audited annual report must
be made available to the investors within six months following the end of the
financial period to which it relates.

Risk Management
The risk management function is not regulated.

Supervision
CSSF supervision of compliance by the SICAR and its directors with their
legal and contractual obligations is undertaken on a simplified basis.

Taxation of the SICAR

Income taxation
SICARs are resident companies fully liable to corporate and municipal
business tax at an aggregate tax rate of 28.80% (rate applicable in
Luxembourg city in 2012). Income derived from securities (see below for
definition) held by a SICAR is exempt from Luxembourg income tax. Income
on cash held by the SICAR for the purpose of a future investment is also tax
exempt for a period of 12 months, provided that it can be proved that these
funds have effectively been invested in risk bearing activities. Other income
of a SICAR that is not connected with investments in risk-bearing capital
(e.g. interest earned after 12 months, management fees, etc.) is subject to
normal income tax. Losses and deductions relating to tax exempt income may
not be offset against taxable income.
20 | Luxembourg Real Estate Investment Vehicles 2012

A SICAR established in the form of a limited partnership will be treated as a


tax transparent entity for Luxembourg tax purposes. These SICARs are not
considered to have a commercial activity and consequently are not subject
to municipal business tax even if the unlimited partner or the majority of the
limited partners are share capital companies.

The Luxembourg fiscal consolidation rules do not apply to SICARs.

Definition of a security
The term security is not defined in the SICAR law. However, parliamentary
documents on the law clearly state that the term securities is to be
considered in the larger sense, to include shares, bonds and other debt
instruments, as well as any other negotiable instruments that give right to
acquire any of the above-mentioned securities1.

Withholding tax
The SICAR law provides a full withholding tax exemption on dividends
distributed by a corporate SICAR, irrespective of the residence and tax status
of its shareholders. Interest payments made by SICARs are not subject to
domestic withholding tax (except where required by EU Savings Directive).
Under Luxembourg domestic tax law, the liquidation of a SICAR, regardless of
its legal form, does not trigger any withholding tax at the level of the SICAR.

Double Tax Treaty Protection and access to EU Parent-Subsidiary Directive


From a Luxembourg perspective, SICARs (except if established in the form
of a limited partnership) benefit from the EU Parent-Subsidiary Directive and
the double tax treaties concluded by Luxembourg as they are fully taxable
corporations. The Luxembourg tax authorities issue on request certificates of
Luxembourg tax residency for SICARs.

Indirect taxes
The only indirect tax due on incorporation of a SICAR is the fixed registration
duty of EUR 75.

A SICAR qualifies as taxable person for VAT purposes. A case-by-case analysis is


required to assess whether this status should result in the registration for VAT.

Management services rendered to a SICAR within the scope of the SICAR


law are, in principle, VAT exempt.

Net wealth tax


SICARs are exempt from the annual 0.5% wealth tax.

Capital gains realized by non-residents


Non-residents are exempt from Luxembourg income tax on capital gains
realized on the disposal of shares of a SICAR.

1 Bill N5201, p22.


Luxembourg Real Estate Investment Vehicles 2012 | 21

Securitization In 2004, Luxembourg introduced an attractive legal, regulatory and tax


framework for Securitization Vehicles (SVs).
Vehicles (SVs) The purpose of the law is to facilitate (i) capital market securitization
transactions, (ii) certain intra-group securitization transactions and (iii)
a combination of these two transaction types.

The below chart summarises a typical securitization transaction:

Final Client
(Obligors)

Goods / Payment over time


Services (cash flow on assets)

Originator
Assets

Cash
SV
Securities

Cash
Investors

In general terms, the law aims to:

> Allow a high degree of flexibility when structuring a securitization


transaction through Luxembourg;

> Ensure a high level of investor protection and legal certainty; and

> Ensure a tax neutral treatment of securitization in Luxembourg.


22 | Luxembourg Real Estate Investment Vehicles 2012

Legal and regulatory requirements


Inspired by Luxembourgs well-known investment funds regime, the law
permits SVs to be established as a corporation or as a fund. The securities
issued by a SV may, under certain conditions, be listed on a stock exchange.

Luxembourg SVs are flexible and can be used in a range of structures of


varying complexity, both in an intra-group and a third party context.

Elective
The SV law does not automatically apply to securitization transactions which
can therefore be structured outside the scope of the law.

As of today, more than 880 SVs have been incorporated, including 28 CSSF
regulated SVs .

Securitization transactions
The SV law defines securitization as the transactions by which an SV acquires
or assumes, directly or through intermediary entities, the risks relating to:

> Holding of assets, whether movable or immovable, tangible or intangible;

> obligations assumed by third parties; or

> all or part of the activities of third parties

and issues securities, whose value or yield depends on such risks.

Securitization Vehicles
A SV is defined as a vehicle through which a securitization transaction is
effected. The SV law only applies to SVs located in Luxembourg. The location
of the SV depends on the place of its head office (corporation) or the head
office of its management company (fund).

Nature of the risks


The risk transferred to the SV in a securitization transaction may relate to
the activities listed in Securitization transactions paragraph as well as risks
relating to obligations or liabilities assumed by third parties or relating to all or
part of the activities of a third party.

The risks may be held by the SV in a number of ways, for example by


purchasing the relevant assets, by guaranteeing the relevant liabilities,
or by entering into any other form of obligation. This allows for securitization
transactions to be executed in one of two typical forms, i.e.:

> As a true sale transaction where the originator sells or contributes a pool
of assets to the SV; or

> As a synthetic transaction where the originator buys credit risk protection
from the SV through a series of credit derivatives.
Luxembourg Real Estate Investment Vehicles 2012 | 23

Legal forms
The law allows the SV to take either the legal form of a company or that of
a fund run by a management company.

The Securitization Company (SC) can take the following forms:

> A public limited liability company (S.A.);

> A private limited liability company (S. r.l.);

> A partnership limited by shares (S.C.A.);

> A cooperative company organized as a public limited liability company


(S.C.o.S.A.).

The securitization fund can be organized in the form of co-ownership or as


fiduciary trust.

Compartment segregation
An SV may comprise different compartments, each corresponding to a
segregated part of its assets and liabilities.

Shareholding

Enhanced investor protection


The SV law provides for a solid bankruptcy remoteness feature. It permits
certain contractual provisions and makes them enforceable to protect the
securitised assets from any insolvency risk relating to the originator or the
SV itself.

Fiduciary representative
To offer investors/creditors an instrument to which they can entrust the
safeguard of their interests, the law provides the possibility (i.e. not
an obligation) to elect a fiduciary representative that is qualified as a
professional of the financial sector under the law of 5 April 1993,
as amended.

Risk Management
The risk management function is not regulated.
24 | Luxembourg Real Estate Investment Vehicles 2012

Supervision
The law specifies that securitization activities in the sense of the law do not
fall within the scope of legislation relating to the insurance sector.

The SV may exist as:

> A non-regulated entity if the SV only carries out (i) private placement or (ii)
public placement but on an irregular basis; or

> A regulated entity if the SV issues securities to the public on a regular


(continuous) basis. In this case, the SV must be authorised by the
CSSF, the supervisory authority of the Luxembourg financial sector.
The procedure for applying for such authorisation is similar to the one
applicable to undertakings for collective investment (UCIs).

Taxation of the Securitization Company (SC)

Income taxation
The following comments are only applicable to SVs incorporated under the
legal form of a securitization company (SC). SCs are resident companies fully
liable to corporate and municipal business tax at an aggregate tax rate of
28.80% (rate applicable in Luxembourg city in 2012). Commitments made to
investors (mainly shareholders) and to other creditors (mainly bondholders),
e.g. preferred dividends and interest, are fully tax deductible. As a result, it is
possible to reduce the companys taxable income to a minimum. By reason of
their specific purpose, SCs are not subject to any thin capitalisation rules.

The law prohibits the SV from being a member of a fiscal consolidation group.

Withholding tax
Shareholders of the SC are treated like bondholders. Distributions and
interest payments made by SCs are not subject to domestic withholding
tax (except where required by EU Savings Directive). Under Luxembourg
domestic tax law, the liquidation of a SC, regardless of its legal form, does not
trigger any withholding tax at the level of the SC.
Luxembourg Real Estate Investment Vehicles 2012 | 25

Double tax treaty protection and access to EU Parent-Subsidiary Directive


From a Luxembourg perspective, SCs benefit from the EU Parent-Subsidiary
Directive and the double tax treaties concluded by Luxembourg as they are
fully taxable corporations. The Luxembourg tax authorities issue certificates of
Luxembourg tax residency for SCs upon request.

Indirect taxes
The only indirect tax due on incorporation of a SC is the fixed registration
duty of EUR 75. SCs are generally not subject to variable registration duties
unless real estate located in Luxembourg, or aircraft or vessels recorded on a
Luxembourg public register are involved.

Luxembourg SCs qualify as taxable persons for VAT purposes. It needs to be


analyzed on a case-bycase basis whether this status should also result in the
registration for VAT purposes.

Management services rendered to SCs within the scope of the securitization


law are in principle VAT exempt.

Net wealth tax


SCs are exempt from net wealth tax.

Capital gains realized by non-resident investors


Capital gains realized by non-resident investors upon sale of bonds or shares
in a SC are in general not subject to Luxembourg tax. However, a potential tax
of 22.05% (rate applicable in 2012) may apply if a non-resident and non-treaty
protected corporate shareholder holds more than 10% of the share capital
of the SC and realizes a capital gain on shares within six months following
their acquisition.

The capital gain on sale of shares in a Luxembourg company may also be


taxable in Luxembourg if the non-resident shareholder has been resident
in Luxembourg during more than 15 years and has become non-resident in
Luxembourg less than 5 years before the disposal operation.
26 | Luxembourg Real Estate Investment Vehicles 2012

SOPARFIs The most common unregulated real estate vehicle set up in Luxembourg
is the SOPARFI which is very often used in combination with the other
Luxembourg investment vehicles.

Legal and regulatory requirements


Under company and tax law SOPARFIs are usual commercial companies
most commonly represented by S.A. or

S. r.l., amongst other forms, and to be distinguished to investment funds


or other specific vehicles such as SIFs, SICARs, etc. SOPARFIs may also
exercise finance or other activities in addition to holding or trading in equity
investments.

Luxembourg corporations (SOPARFI included) are in principle subject to


income tax at 28.80% in 2012 in the City of Luxembourg (this includes
corporate income tax, municipal business tax at the rate of Luxembourg city
and the contribution to the employment fund) and to net wealth tax of 0.5%
on their fair value of their non exempt net assets as at January 1st of each year.
As from tax year 2011, SOPARFIs may be subject to a minimum corporate
income tax of EUR 1,575 depending on the structure of their balance sheet.

Upon incorporation of a SOPARFI there is a fixed registration duty of EUR 75


to be paid.

Taxation of SOPARFIs
Fully taxable corporations with equity investments may however benefit from
the Luxembourg participation exemption regime2 providing for an exemption
from income, dividend withholding and net wealth tax for qualifying
investments held by qualifying entities. The exemption from income tax is
extensive, covering dividends, capital gains and liquidation proceeds.
In addition, no withholding tax on dividend distributions applies if the
conditions for the participation exemption are fulfilled. Finally the net asset
value of participations qualifying for the participation exemption is exempt
from net wealth tax.

The conditions that must be met to qualify for the exemptions are
summarised below. In some cases, tax treaties may provide for even more
favourable rules. It must be determined on a case-by-case basis whether the
exemptions apply to a particular set of circumstances.

2  Articles 147 and 166 of the Luxembourg


income tax law (LIR) and paragraph 60 of the
valuation law of 16 October 1934 (BewG).
Luxembourg Real Estate Investment Vehicles 2012 | 27

Tax exemption for dividends, capital gains and liquidation proceeds


received - participation exemption

Status of Luxembourg entity


> Fully taxable resident collective entity listed in article 166 LIR
paragraph 103; or

> Fully taxable resident corporation not listed in article 166 LIR
paragraph 104; or

> Luxembourg permanent establishment of either:

- A collective entity that is covered by the Parent-Subsidiary Directive; or

 - A corporation resident in a country with which Luxembourg has signed a


tax treaty; or

- A corporation or a co-operative company that is resident in an EEA


country other than a member state of the European Union5.

Status of subsidiary
> Collective entity listed and covered by the Parent-Subsidiary Directive; or

> Fully taxable resident corporation not listed in article 166 LIR paragraph 10;
or

> Non-resident corporation fully subject to income tax comparable to


the Luxembourg corporate income tax. A minimum income tax rate of
10.5% generally satisfies this requirement as long as the taxable basis
is determined according to rules and criteria similar to those applicable
in Luxembourg. The exemption also applies to participations held in a
qualifying company through tax transparent entities.

Size of participation
The minimum participation that qualifies for the exemption is:

> 10% participation; or

> An acquisition price of at least EUR 1,200,000 to qualify for the dividend
and liquidation proceeds exemption; or

> An acquisition price of at least EUR 6,000,000 to qualify for the capital
gains tax exemption.

3 These are basically entities with a legal form


as listed in the Parent-Subsidiary Directive.
4 These are corporations set up in a non
European Union country.
5 Luxembourg permanent establishment of a
corporation or a co-operative company that is
resident in Liechtenstein, Iceland or Norway.
28 | Luxembourg Real Estate Investment Vehicles 2012

Minimum retention period


The participation must have been held for at least 12 months on the date
the income is allocated or realized for tax purposes. A commitment to hold
the minimum shareholding for an uninterrupted period of at least 12 months
satisfies this condition. The test applies to the participation in general and not
on a share-by-share basis.

Deduction of expenses
Expenses directly related to a participation that qualifies for the exemption
(e.g. interest expenses) are only deductible for the amount exceeding exempt
income arising from the relevant participation in a given year. Decreases in
the acquisition cost of a participation that qualifies for the exemption are
deductible. The exempt amount of a capital gain realized on a qualifying
participation is however reduced by the amount of any expenses related
to the participation, including decreases in the acquisition cost, that have
previously reduced the companys Luxembourg taxable income.

However, decreases in the acquisition cost that result from dividend


distributions are not tax deductible to the extent the dividends are tax exempt.

If a parent company writes off part or all of a loan to its subsidiary, the value
adjustment is treated in the same way as decreases in the acquisition cost
of the participation, i.e. this is taken into account when calculating the exempt
capital gain.

Dividends received - not qualifying for participation exemption


Dividends received by a Luxembourg entity that do not qualify for the
participation exemption are taxed at the full rate of 28.80% in 2012,
being the sum of the corporate income tax, municipal business tax and the
employment fund levy, for companies established in Luxembourg city.
50% of these dividends are exempt from taxation, i.e. they will be subject
to a 14.40% in 2012 effective tax rate, if they are paid by:

> A fully taxable resident corporation; or

> A corporation resident in a country with which Luxembourg has signed


a tax treaty and that is fully subject to income tax comparable to the
Luxembourg corporate income tax; or

> A company that is covered by the Parent-Subsidiary Directive.


Luxembourg Real Estate Investment Vehicles 2012 | 29

Exemption from withholding tax on dividends - participation exemption

Status of recipient
> Collective entity listed and covered by the Parent-Subsidiary Directive; or

> Fully taxable resident corporation not listed in article 166 LIR paragraph 10;
or

> Permanent establishment of one of the above qualifying entities; or

> Collective entity resident in a treaty country and fully subject to income
tax comparable to the Luxembourg corporate income tax as well as a
Luxembourg permanent establishment of such a collective entity; or

> Corporation that is resident in and subject to taxation in Switzerland


without benefiting from an exemption; or

> Corporation or co-operative company resident in a Member State of the


EEA other than an EU Member State and fully subject to income tax
comparable to the Luxembourg corporate income tax; or

> Permanent establishment of a corporation or of a co-operative company


resident in an EEA Member State other than an EU Member State.

Status of subsidiary
> Fully taxable resident collective entity listed in article 166 LIR paragraph 10,
or

> Fully taxable resident corporation not listed in article 166 LIR paragraph 10.

The exemption also applies to a participation in a qualifying company held


through tax transparent entities.

Size of participation
The minimum participation that qualifies for the dividend withholding tax
exemption is:

> 10% participation; or

> An acquisition price of a minimum of EUR 1,200,000.

Minimum retention period


The participation must have been held for at least 12 months on the date that
the dividend is allocated or realized for tax purposes. The test applies to the
participation in general and not on a share-by-share basis.
30 | Luxembourg Real Estate Investment Vehicles 2012

Exemption from withholding tax on dividends - no participation


exemption applies
Where the conditions of the Luxembourg participation exemption are not
met, 15% withholding tax is levied on dividends distributed by a Luxembourg
resident and fully taxable corporation. This rate may be reduced even to 0%
under applicable tax treaties.

No withholding tax on liquidation proceeds


No withholding tax is levied on the remittance of liquidation proceeds,
regardless of the tax status of the liquidated company and the recipient.

Exemption from net wealth tax - participation exemption

Status of parent entity, of subsidiary and size of participation


The conditions to be fulfilled for the exemption of qualifying participations
from net wealth tax are the same as for the exemption from income tax of
dividends received by Luxembourg resident parent companies.

Minimum retention period


> None

Debts relating to the acquisition of exempt participations are not deductible


from the total assets for net wealth tax purposes.

Capital gains taxation for non-residents


If a non-resident shareholder is tax resident in a country that has a double tax
treaty with Luxembourg, the treaty generally allocates the taxation right to
the country of residence of the shareholder.

If a non-resident shareholder is tax resident in a country that has no such


double tax treaty with Luxembourg, capital gains on sale of shares in a
Luxembourg company are taxable in Luxembourg if:

> The non-resident shareholder has held directly or indirectly a stake of


more than 10% of the shares in the Luxembourg company; and

> Has disposed of such shares within a period of 6 months following


the acquisition.

A taxable gain is subject to 22.05% corporate income tax in 2012 if realized by


a non-resident corporate shareholder.
Luxembourg Real Estate Investment Vehicles 2012 | 31

The capital gain on sale of shares in a Luxembourg company may also be


taxable in Luxembourg if the non-resident shareholder has been resident
in Luxembourg during more than 15 years and has become non-resident in
Luxembourg less than 5 years before the disposal operation.

Direct real estate investments


Luxembourg companies are also often used for direct real estate investments.
The Luxembourg transfer tax on the acquisition of real estate located in
Luxembourg amounts to 7% or 10% (6% registration duty, 3% surcharge
for real estate situated in Luxembourg City, 1% transcription duty), the
contribution of Luxembourg real estate being either subject to reduced rates,
or being exempt (e.g. in the context of reorganizations). The transfer tax is
payable by the buyer of the Luxembourg real estate property.
32 | Luxembourg Real Estate Investment Vehicles 2012
Luxembourg Real Estate Investment Vehicles 2012 | 33

Appendix
34 | Luxembourg Real Estate Investment Vehicles 2012

Appendix 1 -
Comparison of Real Estate Vehicles

Legal and regulatory requirements


Part II Fund SIF

Applicable legislation Law of 17 December 2010 Law of 13 February 2007, as subsequently


(Fund law). amended (SIF law).

Part II

Eligible assets Unrestricted. Unrestricted.

Prior approval of the investment objective


and strategy by the CSSF.

Risk diversification requirements Risk diversification requirements are detailed Risk diversification requirements are detailed
in CSSF Circular 91/75 and are less stringent in CSSF Circular 07/309 and are less stringent
than the ones in application for Part I funds. than the ones in application for Part I and
Part II funds.
In addition, specific restrictions are contained in:

- CSSF Circular 91/75 for funds investing


in venture capital, futures, options and
real estate.

- CSSF Circular 02/80 for funds adopting an


alternative investment strategy.

Entity type SICAV (SA). SICAV / SICAF (SA, SCA, Srl, SCoSA).
SICAF (SA, SCA, Srl, SCoSA).
FCP.
FCP.
Structures may be open or closed-ended.
Structures may be open or closed-ended.
Luxembourg Real Estate Investment Vehicles 2012 | 35

SICAR Securitization vehicle regulated SOPARFI

Law of 15 June 2004, as subsequently Law of 22 March 2004 Law of 10 August 1915
amended (SICAR law). (Law on Securitization). (commercial law).

Restricted to direct and/or indirect investment Securitization of risks linked to all kinds of Unrestricted.
in securities that represent risk capital. assets, whether movable or immovable,
tangible or intangible as well as risks relating
CSSF Circular 06/241 defines the notion of to obligations or liabilities assumed by
risk capital and the way the CSSF will decide third parties or relating to all or part of the
if the investment objective of the SICAR activities of a third party. Such risks can be
complies with the requirement to invest in taken on by the securitization vehicle through
risk capital. the acquisition of assets, the securing or
guaranteeing of liabilities, or the entering into
Risk capital consists mainly of high risk any kind of obligation.
investments made in view of their launch,
development or listing on stock exchange.
Such investments may take varied forms and
are normally done with a medium-term view.

The SICAR may also marginally enter into


financial derivative instruments on an
exceptional basis.

Temporary investment in other assets is


allowed pending investment in risk capital.

No risk diversification requirements. No risk diversification requirements. No risk diversification requirements.

Corporate entity with fixed or variable share Securitization company SA, SCA, Srl.
capital (SA, SCA, Srl, SCoSA, SCS). (SA, SCA, Srl, SCoSA)
Public offering may only be conducted under
the structure of a SA or SCA.

Securitization fund
(FCP, Fiduciary trust).
36 | Luxembourg Real Estate Investment Vehicles 2012

Legal and regulatory requirements


Part II Fund SIF

Segregated sub-funds Yes. Yes.

Cross sub-funds investment Yes, with restrictions. Yes, with restrictions.

Central administration Central administration established in N/A.


Luxembourg.

Required service providers in Luxembourg Depositary. Depositary.

Rviseur dentreprises agr. Rviseur dentreprises agr.

Management company requirement FCP* FCP


Yes (Chapter 15 or Chapter 16 of the Yes (Chapter 15 or Chapter 16 of the
Fund law). Fund law).

SICAV/SICAF SICAV/SICAF
No. No.

Registration requirements in Luxembourg Head office of SICAV/ SICAF or of the Head office of SICAV/ SICAF or of the
management company of the FCP must be in management company of the FCP must be
Luxembourg. in Luxembourg.

No nationality or residency requirements for No nationality or residency requirements


Directors of funds or management company. for Directors of funds or Chapter 16
management company.

Minimum requirement for one of the two


conducting officiers of the Chapter 15
management company to be located
in Luxembourg.

Minimum capital requirement for EUR 1,250,000 to be reached within EUR 1,250,000 to be reached within
fund/company 6 months of authorization. For umbrella 12 months of authorization.
structures, this capital requirement applies
to the structure as a whole.

Minimum capital requirement for EUR 125,000. EUR 125,000.


management company For Chapter 15 management companies,
additional capital based on the assets
under management is required if in excess
of EUR 250,000,000.

Risk management The risk management function is not regulated. The risk management function is regulated by
Article 42a of the SIF law.

Regulated Asset management Yes. No.


Regulated in the country of domicile
(transitory provision up to 1 July 2012 for
funds created before 1 January 2010).

* Chapter 15 of the Law of December 2010, CSSF Regulation 10-4 and CSSF Circular 11/508
Luxembourg Real Estate Investment Vehicles 2012 | 37

SICAR Securitization vehicle regulated SOPARFI

Yes. Yes. No.

No. No. N/A.

Central administration established in N/A. N/A.


Luxembourg.

Depositary. Depositary. Rviseur dentrprises agr.

Rviseur dentreprises agr. Rviseur dentreprises agr.

No. Securitization fund No.


Yes (Commercial Law).


Securitization company
No.

Head office of the SICAR must be in Head office of securitization company Statutory seat must be in Luxembourg.
Luxembourg. or of the management company of the
securitization fund must be in Luxembourg. No nationality or residency requirements for
No nationality or residency requirements Directors.
for Directors. No nationality or residency requirements
for Directors of securitization company or
management company.

Total of subscribed share capital and share Securitization fund EUR 12,500 for a Srl.
premium of EUR 1,000,000 to be reached No minimum requirement. EUR 31,000 for SA and SCA.
within 12 months of authorization.
Securitization company
SA/SCA: EUR 31.000.
Srl: EUR 12.500.
SCoSA: no minimum requirement.

N/A. Will depend on the legal form chosen. N/A.


The minimum capital will range from
EUR 12,500 for a Srl to EUR 31,000
for a SA.

The risk management function is not regulated. The risk management function is not regulated. N/A.

No. No. N/A.


38 | Luxembourg Real Estate Investment Vehicles 2012

Shareholding
Part II Fund SIF

Eligible investors All types. Well-informed investors.

Listing Possible. Possible.

Capital calls FCP FCP


Capital calls can be made either by way of Capital calls may be made by way of capital
capital commitments or through the issue of commitments or through the issue of partly
partly paid units. The law does not prescribe paid units. The law does not prescribe the
the minimum percentage of payment of minimum percentage to which each unit
the unit. must be paid-up.

SICAV SICAV
Capital calls may only be made by way of Capital calls may be done by way of capital
capital commitments as partly paid shares commitments or through the issue of partly
are not allowed for a SICAV. paid shares. At least 5% of each share must
be paid-up.

SICAF SICAF
For a Srl capital calls may only be made by Capital calls may be done by way of capital
way of capital commitments as partly paid commitments or through the issue of partly
shares are not allowed. If the SICAF is set paid shares. At least 5% of each share must
up as a SA, SCA or SCS, capital calls can be be paid-up.
organized through capital commitment or by
way of the issue of partly paid shares.
At least 25% of each share must be paid-up.

Issue of shares / units FCP FCP


Units must be issued at the NAV price. The unit price will be determined based on
Such price may be increased by expenses the principles laid down in the Management
and commissions. Regulations.

Existing unitholders do not have Existing unitholders do not have


a pre-emption right when new units are a pre-emption right when new units are
issued, unless specifically provided for in issued, unless specifically provided for in
the Management Regulations. the Management Regulations.

SICAV SICAV
The issue of shares does not require an The issue of shares does not require an
amendment of the Articles. amendment of the Articles.

Shares must be issued at the NAV price. The share price will be determined based
Such price may be increased by expenses on the principles laid down in the Articles.
and commissions.
Existing shareholders do not have a pre-
Existing shareholders do not have a pre- emption right when new shares are issued,
emption right when new shares are issued, unless specifically provided for in the Articles.
unless specifically provided for in the Articles.
Luxembourg Real Estate Investment Vehicles 2012 | 39

SICAR Securitization vehicle regulated SOPARFI

Well-informed investors. All types. All types.

Possible. Possible. Possible for SA and SCA.

Capital calls may be made by way of capital Securitization fund Increase of share capital is organized by way
commitments or through the issue of partly Capital calls can be made either by way of notarial deed.
paid shares. At least 5% of each share must of capital commitments or through the Partly paid shares possible for SA and SCA.
be paid-up. issue of partly paid shares. The law does not
prescribe the minimum percentage to which
each share must be paid-up.

Securitization company
Partly paid shares are not allowed for the
Srl and SCoSA so capital calls must be
organized through capital commitment.
If the company is set up as a SA or SCA,
capital calls can be organized through
capital commitment or by way of the issue
of partly paid shares. At least 25% of each
share must be paid-up.

The issue of new shares requires an Securitization fund The issue of shares requires an amendment
amendment of the Articles unless the SICAR The unit price will be determined based on of the Articles.
is set-up with variable share capital. the principles laid down in the Management The share price will be determined based
Regulations. on the principles laid down in the Articles.
The share price will be determined based on
the principles laid down in the Articles. Existing unitholders do not have When the SOPARFI is organized as a
a pre-emption right when new units are SA or SCA, existing shareholders have a
The issue of new shares will be conducted issued, unless specifically provided for in pre-emption right when new shares are
as provided for in the Articles. The existing the Management Regulations. issued, unless this right was waived by the
shareholders will have a pre-emption right if Shareholders Meeting.
specifically provided for in the Articles. Securitization company
The issue of new shares requires an
amendment of the Articles.

The share price will be determined based


on the principles laid down in the Articles.

When the securitization company is organized


as a SA or SCA, existing shareholders have
a pre-emption right when new shares are
issued, unless this right was waived by the
Shareholders Meeting.
40 | Luxembourg Real Estate Investment Vehicles 2012

Shareholding
Part II Fund SIF

Issue of shares / units (contiued) SICAF SICAF


The issue of shares requires an amendment The issue of shares requires an amendment
of the Articles. of the Articles.

The share price will be determined based The share price will be determined based
on the principles laid down in the Articles. on the principles laid down in the Articles.

When the SICAF is organized as a SA or SCA, When the SICAF is organized as a SA or SCA,
existing shareholders have a pre-emption right existing shareholders have a pre-emption right
when new shares are issued, unless this right when new shares are issued, unless this right
was waived by the Shareholders Meeting. was waived by the Shareholders Meeting.

Distribution of dividends The distribution of dividends must be The distribution of dividends must be
foreseen in the prospectus of the fund. foreseen in the prospectus of the fund.


For SICAV and FCP, distributions (interim or For SICAV and FCP, distributions (interim or
final) can be made irrespective of the realized final) can be made irrespective of the realized
results within the period, to the extent the results within the period, to the extent the
minimum share capital is maintained. minimum share capital is maintained.
(EUR 1,250,000).

For SICAF, final dividend distributions may For SICAF, final dividend distributions may not
not result in a decrease in assets to an result in a decrease in assets to an amount
amount less than one-and-a-half times the less than one-and-a-half times the funds total
funds total liabilities to its creditors. liabilities to its creditors.

Interim dividend distributions may be subject Interim dividend distributions may be subject
to statutory requirements per Article 72-2 of to statutory requirements per Article 72-2 of
the Commercial Law. the Commercial Law.
Luxembourg Real Estate Investment Vehicles 2012 | 41

SICAR Securitization vehicle regulated SOPARFI

The distribution of dividends must be Securitization fund Final dividend distributions may not result
foreseen in the prospectus of the SICAR. There are no restrictions on distributions in a decrease in assets to an amount
(interim or final). less than the suscriped capital plus
non-distributable reserves.

Dividend distributions, interim and final, Securitization company
are not subject to specific regulatory Final dividend distribution may not result in
requirements, except for compliance with a decrease in assets to an amount less than
minimum capital requirements. the subscribed capital plus non-distributable
reserves.

Interim dividend distributions may be subject Interim dividend distributions may be


to statutory requirements per Article 72-2 subject to statutory requirements per
of the Commercial Law. Article 72-2 of the Commercial Law.
42 | Luxembourg Real Estate Investment Vehicles 2012

Reporting requirement
Part II Fund SIF

Prospectus directive as transposed Closed-ended Closed-ended


into the Luxembourg law A prospectus prepared in compliance with A prospectus prepared in compliance with
the requirements of the Prospectus Directive the requirements of the Prospectus Directive
must be prepared when an offer to the must be prepared when an offer to the
public within the meaning of the Prospectus public within the meaning of the Prospectus
Directive is made except if the offer falls Directive is made except if the offer falls
under any exemption of the Prospectus under any exemption of the Prospectus
Directive. In that case, a prospectus must Directive. In that case, a prospectus must
be prepared in accordance with the Fund law. be prepared in accordance with the SIF law.

Open-ended Open-ended
Part II funds may make a public offer on SIF may make a public offer on the basis of
the basis of their prospectus prepared in their prospectus prepared in accordance with
accordance with the requirements of the the requirements of the SIF law.
Fund law.

The prospectus must be updated on an The prospectus must be updated on an


ongoing basis. ongoing basis.

Key Investor Information Document (KIID) Not required. Not required.


(Pre-sale document of 2 pages, written in
plain language, which replaces the simplified
prospectus)

NAV computation frequency NAV must be computed on each day there NAV is computed on the frequency set in
are subscriptions or redemptions with a the Articles or Management Regulations.
minimum of once a month.

Valuation principles Valuation of assets is made on the basis of Assets are to be valued at fair value to be
the realizable value estimated in good faith determined in compliance with the rules
unless provided for differently in the Articles detailed in the Articles or Management
or Management Regulations. Regulations.
Luxembourg Real Estate Investment Vehicles 2012 | 43

SICAR Securitization vehicle regulated SOPARFI

A prospectus prepared in compliance with A prospectus prepared in compliance with N/A.


the requirements of the Prospectus Directive the requirements of the Prospectus
must be prepared when an offer to the Directive must be prepared when an offer
public within the meaning of the Prospectus to the public within the meaning of the
Directive is made except if the offer falls Prospectus Directive is made except if
under any exemption of the Prospectus the offer falls under any exemption of the
Directive. Prospectus Directive.

A SICAR that makes an offer under an There are no specific requirements when
exemption of the prospectus Directive must an offer falls under an exemption of the
prepare a prospectus compliant with the Prospectus Directive.
SICAR law.

The prospectus must be updated each time


new securities are issued.

Not required. Not required. Not required.

Not required. Securitization fund N/A.


Not required.

Securitization company
Not required.

Assets are to be valued at fair value to be Securitization fund Lower of acquisition cost or market value or
determined in compliance with the rules Valuation of assets is made on the basis of at acquisition cost less any durable
detailed in the Articles. the realizable value estimated in good faith impairment considered by the board
unless provided for differently in the Articles of directors.
or Management Regulations.

Securitization company
Valuation of assets is made at the lower
of acquisition cost or market value or
at acquisition cost less any permanent
impairment considered by the Board
of Directors.
44 | Luxembourg Real Estate Investment Vehicles 2012

Reporting requirement
Part II Fund SIF

Financial reports Audited annual report is required within Audited annual report is required within
4 months of the year-end. 6 months of the year-end.

Semi-annual report due within 2 months of No semi-annual report is required.


the 6 month period-end.

If a closed-ended SIF is listed on an EU


regulated market the deadlines may be
shorter. (If listed on LuxSE, the deadline
is 4 months).

Generally accepted accounting principles Irrespective of the methodology used for the Irrespective of the methodology used for the
calculation of the NAV, the reports may be calculation of the NAV, the reports may be
prepared as follows: prepared as follows:

Annual report Annual report


- Lux GAAP, i.e. provisions of the law of 19 - Lux GAAP, i.e. provisions of the law of
December 2002 except for: 19 December 2002 except for:

The content and layout of the annual report. The content and layout of the annual report.
The valuation of assets which is ruled by The valuation of assets which is ruled by
articles 93, 284, 39, 90, 95, 995 of the articles 9, 284, 401 of the SIF law.
Fund law. or
or
- IFRS.
- IFRS.

Semi-annual report Semi-annual report


Lux GAAP, i.e. provisions of the law of 19 Not required
December 2002 except for:

The content and layout of the annual report.


The valuation of assets which is ruled by
articles 93, 284, 39, 90, 95, 995 of the
Fund law.
or

- IFRS.

Consolidated accounts Consolidated accounts


IFRS is mandatory if the company is listed in IFRS is mandatory if the company is listed in
accordance with the EU regulation 1606/2002. accordance with the EU regulation 1606/2002.

Other reports Long-form report to be issued by the auditor None.


with the annual report in accordance with
CSSF Circular 02/81.

Consolidation No exemption granted. The law contains an exemption to prepare


consolidated accounts for the SIF and
its subsidiaries owned for investment purposes.
Luxembourg Real Estate Investment Vehicles 2012 | 45

SICAR Securitization vehicle regulated SOPARFI

Audited annual report is required within Securitization fund Annual report is required at year-end.
6 months of the year-end. Same requirements as for the Fund law. It must be available 15 days before the
Annual General meeting of shareholders and
No semi-annual report is required. Securitization company filed with the Registar within 7 months of the
Audited annual report is required at year- year-end. Staturoy audit requirements vary
end. It must be available 15 days before the depending on legal form (see appendix 2).
Annual General meeting of shareholders and
filed with the Registrar within 7 months of
the year-end.

No semi-annual report is required. No semi-annual report is required.

If the entity has securities listed on If the entity has securities listed on If the entity has securities listed on an
an EU regulated market the deadlines an EU regulated market the deadlines EU regulated market the deadlines may
may be shorter. may be shorter. be shorter.

Irrespective of the methodology used for the Irrespective of the methodology used for the
calculation of the NAV, the reports may be calculation of the NAV, the reports may be
prepared as follows: prepared as follows:

Annual report Annual report Annual report


-L
 ux GAAP only, i.e. provisions of the law of - Securitization fund - Lux GAAP only, i.e. provisions of the law of
19 December 2002 except for the valuation Lux GAAP only, i.e. provisions of the law of 19 December 2002 except for:
of assets which is ruled by article 53 of the 19 December 2002 except for: or
SICAR law. - IFRS.
or The content and layout of the annual report.
The valuation of assets which is ruled by
- IFRS. articles 93, 284, 39, 90, 95, 995 of the
Fund law.
or

- IFRS.

Semi-annual report - Securitization company Semi-annual report


Not required Lux GAAP, i.e. provisions of the law of 19 Not required.
December 2002.
or

- IFRS.

Semi-annual report
Not required

Consolidated accounts Consolidated accounts Consolidated accounts


IFRS is mandatory if the company is listed in IFRS is mandatory if the company is listed in IFRS is mandatory if the company is listed in
accordance with the EU regulation 1606/2002. accordance with the EU regulation 1606/2002. accordance with the EU regulation 1606/2002.

None. None. None.

The law contains an exemption for the SICAR No exemption granted. Exemption possible.
to prepare consolidated accounts.
46 | Luxembourg Real Estate Investment Vehicles 2012

Approval and supervision


Part II Fund SIF

Promoter requirement Yes. No.

Supervision by CSSF Yes. Yes.

Regular reporting to CSSF Yes. Yes.


Monthly with due date the 10th of the Monthly with due date the 10th of the next
next month. month based on the latest available NAV
(when NAV is not calculated monthly).
Annually with due date four months after
year-end. Annually with due date six months after
year-end.
Details on reporting contained in CSSF
Circular 97/136 as modified by CSSF Details on reporting contained in CSSF
Circular 08/348. Circular 07/310 as modified by CSSF
Circular 08/348.

Approval process Creation of a fund is subject to prior approval Creation of a SIF is subject to prior approval
by the CSSF of: of the CSSF.

Articles, or Management Regulations, Articles, or Management Regulations,


prospectus and main agreements with and Prospectus.
service providers. Directors of the fund or managers of the
Directors of the fund or managers of the management company.
management company. Choice of Depositary and Auditor.
Choice of Depositary and Auditor. Confirmation of honorability and expertise
Promoters experience and financial of the persons that will conduct portfolio
soundness. management.
Confirmation of supervision by regulatory
authority of Promoter and Asset Manager.
Luxembourg Real Estate Investment Vehicles 2012 | 47

SICAR Securitization vehicle regulated SOPARFI

No. No. N/A.

Yes. Yes. No.

Yes. Yes. N/A.


Twice a year, as at June 30 and (only applicable for regulated vehicles that
December 31 with due date 45 calendar issue securities to the public on a continuous
days subsequent to the reference date basis for others no requirements).
of the report.
When issued:
Details on reporting contained in CSSF
circular 08/376. Final documents relating to each issue.
Financial statements prepared for investors
and rating agencies.
Annual audited report.

Half-yearly:

Details on the issuing activities and


situation as at half-year.
Financial situation including assets and
liabilities.

At year-end:

Balance sheet and profit and loss account.

Creation of a SICAR is not subject to prior Creation of a securitization vehicle is subject N/A.
approval of the CSSF. to prior approval by the CSSF of:

An authorization file must be submitted to Articles or Management Regulations and


the CSSF within the month following the main agreements with service providers.
creation of the SICAR. The authorization will Directors of the company or managers
be granted subject to: of the management company.
Choice of Depositary and Auditor.
Approval of the Articles or Management
Regulations. Notification is required of:
Approval of the choice of Depositary
and Auditor. Investors that may have a significant
Notification of the Directors of the SICAR or influence on the business conduct.
managers of the management company. Initiation of the securitization scheme.
48 | Luxembourg Real Estate Investment Vehicles 2012

Taxation
Part II Fund SIF

Income tax Tax exempt. Tax exempt.

Withholding tax on interest dividends Not subject to withholding tax except Not subject to withholding tax except in the
and capital gains in the cases forseen by EU savings directive. cases by the EU savings directive.

Subscription tax 0.05% of NAV, except: Annually 0.01% of NAV.


0.01% of NAV for money market funds,
cash funds and institutional funds. Tax exemption possible for certain money
Exemption for special institutional money market and pension funds or SIFs investing
market funds, pension funds , exchange in other funds already subject
traded funds, micro-finance funds and to subscription tax.
funds investing in other funds already
subject to the subsciption tax.

Net wealth tax Tax exempt. Tax exempt.

Capital duty No proportional capital duty. No proportional capital duty.

Value Added tax (VAT) Tax exemption on management services. Tax exemption on management services.

Double Taxation Treaties (DTT) FCP FCP


No access to DTT signed by Luxembourg; No access to DTT signed by Luxembourg;
exception Ireland. exception Ireland.

SICAV/SICAF SICAV/SICAF
Limited to some DTTs. Limited to some DTTs.

Applicability of DTTs is determined by a Applicability of DTTs is determined by a


decision taken by the Luxembourg fiscal decision taken by the Luxembourg fiscal
authorities, but without practical experience on authorities, but without practical experience
the exact classification that may be adopted by on the exact classification that may be
the other countries. adopted by the other countries.
Luxembourg Real Estate Investment Vehicles 2012 | 49

SICAR Securitization vehicle regulated SOPARFI

Tax exemption for income derived from Securitization company Luxembourg corporations are subject to a
transferable securities. Fully taxable at a rate of 28.80% in 2012 28,80% tax rate (in 2012):
(Municipal Business Tax + Corporate Income
Tax exemption for one year for income Tax - Luxembourg city 2012). A reduction 22,05% of corporate income tax (in 2012).
on cash held for the purpose of a future of the taxable income to close to EUR 0 is 6 ,75% of municipal business tax
investment. possible (engagements made to investors (Luxembourg city 2012).
and other creditors are fully tax deductible).
The remaining income is subject to the
ordinary income tax of 28.80% in 2012 Securitization fund The participation exemption regime provides
(Municipal Business Tax + Corporate Income Tax exempt. for exemption of income from qualifiying
Tax - Luxembourg city 2012). equity investments.

Not subject to withholding tax except Not subject to withholding tax except A withholding tax of 15% is levied on
in the cases forseen by EU savings directive. in the cases forseen by EU savings directive. dividend payments, unless tax treaties
provide for lower rates or the Luxembourg
participation exemption regime applies to
reduce withholding tax to 0%.
Normal interest and liquidation proceeds are
not subject to withholding tax except in the
cases forseen by the EU Savings Directive.
Liquidation proceeds are not subject to
withholding tax.

No subscription tax. Securitization company No subsciption tax.


No subscription tax.

Securitization fund
Tax exemption.

Tax exempt. Tax exempt. 0,5% of the fair value of non exempt net
assets as at each January 1st.
The participation exemption regime provides for
an exemption of qualifying equity investments.

No proportional capital duty. No proportional capital duty. No proportional capital duty.

Tax exemption on management services. Tax exemption on management services. VAT statues depends on activities.

SICAR in the form of a corporate entity Securitization company Luxembourgs tax treaties generally apply
(all types except the SCS) should benefit from Yes (all types except the SCS). Luxembourg SOPARFIs.
the Luxembourg double tax treaty network.

Securitization fund Substance requirements under Luxembourg
No access to DTT. law and the law of the contracting state
need to be considered.
50 | Luxembourg Real Estate Investment Vehicles 2012

Appendix 2 -
The most popular forms of legal entities

SOCIT ANONYME (S.A.) SOCIT RESPONSABILIT LIMIT (S. r.l.)


Public limited liability company Private limited liability company

Formation The company is incorporated through a notarial The company is incorporated through a notarial
deed. The articles of incorporation are filed with deed. The articles of incorporation are filed with
the commercial registrar and published the commercial registrar and published
(in extenso) in the Official Gazette (Mmorial C). (in extenso) in the Official Gazette (Mmorial C).

Share capital Minimum share capital: EUR 31,000, 1/4 of Minimum share capital: EUR 12,500 fully paid
which must be paid up at incorporation. Bearer up at incorporation.
and registered shares are permissible. Capital is divided in registered shares.

Liability Shareholders liability is limited to capital Shareholders liability is limited to capital


subscribed. subscribed.

Shareholders At least one investor, who may be a From one to forty investors, who may
natural person or legal entity, resident be a natural person or legal entity, resident
or non-resident. or non-resident.

Shareholders meeting An ordinary shareholders meeting must be An annual statutory shareholders meeting
held annually. The date and time should be is required only if there are more than
specified in the articles of incorporation. 25 shareholders. Otherwise each shareholder
may give his vote in writing.

Board The shareholder(s) appoint the board, which The shareholders appoint one or more
manages the company. The board may transfer managers, who need not be shareholders.
responsibility for daily management to one or There are no requirements on the nationality or
more persons who do not need to be members domicile of managers.
of the board. The company may have only
one director if it is held by a sole shareholder.
Otherwise, the board must have at least three
members, who need neither be shareholders nor
natural persons.

Where a corporate entity is appointed as a


board member, this entity shall appoint a
permanent representative who bears the
same responsibilities as if he acted as board
member in his own name. There are no statutory
requirements on the nationality or domicile of the
board members. The shareholders may also opt
for a two tier system. In this case, a supervisory
board will be in charge of the permanent control
and supervision of the management board. The
management board has the same powers as the
board of directors in the one tier system.
Luxembourg Real Estate Investment Vehicles 2012 | 51

SOCIT EN COMMANDITE PAR ACTION S (S.C.A.) SOCIT EN NOM COLLECTIF (S.N.C.) SOCIT EN COMMANDITE SIMPLE (S.C.S.)
Partnership limited by shares General partnership Limited partnership

The company is incorporated through a notarial The company may be incorporated through a The company may be incorporated through a
deed. The articles of incorporation are filed with notarial deed or through private agreement. The notarial deed or through private agreement. The
the commercial registrar and published latter procedure requires civil law requirements latter procedure implies civil law requirements to
(in extenso) in the Official Gazette (Mmorial C). to be observed, e.g. the same number of copies be observed, e.g. the same number of copies as
as number of parties must be signed. The articles number of parties must be signed. The articles
of incorporation shall be published (by extract) in of incorporation shall be published (by extract) in
the Official Gazette (Mmorial C). the Official Gazette (Mmorial C).

Minimum share capital: EUR 31,000, 1/4 of The share capital is defined in the bylaws. The share capital is defined in the bylaws.
which must be paid up at incorporation. Bearer No minimum or maximum share capital No minimum or maximum share capital
and registered shares may be held by limited is required. The capital is divided into is required. The capital is divided in
partners. General partners may only hold registered shares. registered shares.
registered shares.

General partners have joint and several, unlimited Shareholders liability is unlimited. General partners have joint and several,
liability. Limited partners have liability limited to The shareholder is personally, jointly, severally unlimited liability. Limited partners have liability
the amount of the contribution, and indefinitely liable. limited to the amount of the contribution,
as long as they do not intrude in the as long as they do not intrude in the
management of the company. management of the company.

At least two investors, who may be a natural At least two investors, who may be a At least two investors, who may be
person or legal entity, resident or non-resident. natural person or legal entity, resident a natural person or legal entity, resident
or non-resident. or non-resident.

An ordinary shareholders meeting must be held The ordinary partners meeting should be The ordinary partners meeting should be
annually. The date should be specified in the specified in the companys bylaws. specified in the companys bylaws.
articles of incorporation.

There must be at least one manager who must At least one manager is required. If the At least one manager who must be one of the
be one of the general partners. There are no companys bylaws do not provide otherwise, general partners. If the companys bylaws do
requirements on the nationality or domicile all the partners are deemed to be managers. not provide otherwise, all the general partners
of managers. There are no requirements on the nationality or are deemed to be managers. There are no
domicile of the managers. requirements on the nationality or domicile of
the managers.
52 | Luxembourg Real Estate Investment Vehicles 2012

Appendix 2 -
The most popular forms of legal entities

SOCIT ANONYME (S.A.) SOCIT RESPONSABILIT LIMIT (S. r.l.)


Public limited liability company Private limited liability company

Annual accounts The annual accounts comprise the balance The annual accounts comprise the balance
sheet, the profit and loss account and the sheet, the profit and loss account and the notes
notes to the accounts. The annual accounts to the accounts. The annual accounts shall be
shall be approved by the shareholders approved by the shareholders within 6 months
meeting within 6 months after the closing of after the closing of the financial year and filed
the financial year and filed with the commercial with the commercial registrar within one month
registrar within one month after the after the shareholders approval.
shareholders approval. Notice of the filing is Notice of the filing is published in the Official
published in the Official Gazette (Mmorial C). Gazette (Mmorial C).

Monitoring and audit of Small companies need to have their accounts Companies with more than 25 shareholders
annual accounts monitored by a commissaire (no professional are required to have their accounts monitored
qualification required). Large companies are by one or more commissaires (no professional
required to have their accounts audited by qualification required). Large companies are
an independent qualified auditor (rviseur required to have their accounts audited by
dentreprises agr). an independent qualified auditor (rviseur
dentreprises agr).
A report by a rviseur dentreprises is required,
with exceptions.

Listed companies must have their annual/ Listed companies must have their annual/
consolidated accounts audited by an consolidated accounts audited by an
independent qualified auditor (rviseur independent qualified auditor (rviseur
dentreprises agr). dentreprises agr).

Idem for S. r.l.s.


Idem for S.C.A.
Idem for S.N.C., S.C.S.

Contributions other A report by a rviseur dentreprises agr is No external auditors report is required.
than cash required, with exceptions.
Luxembourg Real Estate Investment Vehicles 2012 | 53

SOCIT EN COMMANDITE PAR ACTION S (S.C.A.) SOCIT EN NOM COLLECTIF (S.N.C.) SOCIT EN COMMANDITE SIMPLE (S.C.S.)
Partnership limited by shares General partnership Limited partnership

The annual accounts comprise the balance The annual accounts comprise the balance The annual accounts comprise the balance
sheet, the profit and loss account and the sheet, the profit and loss account and the sheet, the profit and loss account and the notes
notes to the accounts. The annual accounts notes to the accounts. The annual accounts to the accounts. The annual accounts shall be
shall be approved by the shareholders shall be approved by the partners within approved by the partners within 6 months after
meeting within 6 months after the closing 6 months after the closing of the financial year the closing of the financial year and filed with
of the financial year and filed with the and filed with the commercial registrar within the commercial registrar within one month after
commercial registrar within one month after one month after the partners approval. the partners approval.
the shareholders approval. Notice of filing is
published in the Official Gazette (Mmorial C).

Small companies need to have their accounts Large companies are required to have their Large companies are required to have their
monitored by at least three commissaires accounts audited by an independent qualified accounts audited by an independent qualified
(no professional qualification required). Large auditor (rviseur dentreprises agr). auditor (rviseur dentreprises agr).
companies are required to have their accounts
audited by an independent qualified auditor
(rviseur dentreprises agr).

Listed companies must have their annual/


consolidated accounts audited by an
independent qualified auditor (rviseur
dentreprises agr).

A report by a rviseur dentreprises agr is N/A. N/A.


required, with exceptions.
54 | Luxembourg Real Estate Investment Vehicles 2012

Appendix 3 -
Glossary of terms
Articles Articles of incorporation of a Company / Fund.

Closed-ended fund A fund which is not open to redemptions.

Commercial Law The Law dated 10 August 1915 on commercial companies, as amended.

CSSF Commission de Surveillance du Secteur Financier, the Luxembourg financial


supervisory authority.

FCP Fonds Commun de Placement, an unincorporated co-ownership of assets


managed by a management company.

IFRS International Financial Reporting Standards.

Lux GAAP Luxembourg Generally Accepted Accounting Principles.

KIID Key Investor Information Document.

NAV Net Asset Value.

Offer to the public Offer to the public within the meaning of the Prospectus Directive:
a communication that is addressed in any form or by any means to
individuals and containing sufficient information on the conditions of the
offer and on the shares offered, so that the investor is in a position to decide
on the purchase or subscription of those shares. This definition also applies
to the placement of shares by financial intermediaries.

Open-ended fund A fund that is open to redemptions.

Part II fund A fund that complies with Part II of the law of 17 December 2010.

Prospectus Directive Directive 2003/71/EC (amending Directive 2001/34/EC) on the prospectus


to be published when securities are offered to the public or admitted to
trading, as transposed into Luxembourg law.

Well-informed investor A well-informed investor must be either :

An institutional investor


Undertakings and organizations that manage an important amount
of funds and assets. This concept covers inter alia credit institutions
and other financial sector professionals, insurance and re-insurance
undertakings, welfare institutions and pension funds, industrial and
financial groups and structures put in place by these entities to manage
an important amount of funds and assets.
Luxembourg Real Estate Investment Vehicles 2012 | 55

Or a professional investor


Any professional investor within the meaning of Annex II to the Directive
2004/39/EC on markets in financial instruments.

Or an investor who has adhered in writing to the status of well-informed


investor and complies with one of the following conditions:

- he invests at least EUR 125,000 in the fund /company,

-h
 is expertise is confirmed by a banking institution as defined in Directive
2006/48/EC, by an investment firm as defined in Directive 2004/39/EC
or by a management company as defined in Directive 2009/65/EC.

SA Socit Anonyme (public limited company).

Srl Socit Responsabilit Limite (private limited company).

SC Securitization Company.

SCA Socit en Commandite par Actions (partnership limited by shares).

SCoSA Socit Cooprative organise comme une Socit Anonyme


(cooperative company organized as a public limited company).

SCS Socit en Commandite Simple (limited partnership).

SICAF Socit dInvestissement Capital Fixe (investment company with fixed capital).

SICAR Socit dInvestissement en Capital Risque (investment company in


risk capital).

SICAV Socit dInvestissement Capital Variable (investment company with


variable capital).

SIF Specialised investment fund, compliant with the law of 13 February 2007,
a is amended.

SNC Socit en Nom collectif.

SOPARFI Socit de participation financire.

SV Securisation Vehicle, under the law of March 2004.

UCI Undertakings for Collective Investments.


56 | Luxembourg Real Estate Investment Vehicles 2012

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70,700 people in 31,000 people in
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1,000+ Professionals
Nr. 1 in banking
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net assets audited
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100+ experts dedicated to Real Estate
Audit Tax Advisory
Luxembourg Real Estate Investment Vehicles 2012 | 57

Tailored & Awarded Solutions

Unique Experiences

Audit Investor Risk & Compliance

Tax Investment Adviser Valuation

Accounting & Corporate Services Accountant Restructuring

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Business Process Management Property Manager Transaction Support

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58 | Luxembourg Real Estate Investment Vehicles 2012

Audit Services Tax Services

Core Services Tax Planning


> Financial statement audit > Advice on tax efficient structures for international real
estate and infrastructure funds
> Contractual audit
> Multi jurisdictional project management
> Attestation services
> Drafting of cash flow models

> VAT advisory services


Specific Services
> Withholding tax optimization
> Audit of IT systems and controls
> Due diligence
> Risk management and assessment

> Advice on internal control structures and processes

> Advice on reporting and controls Tax Compliance


> Preparation or review of corporate tax and VAT returns
> Review of prospectus and management regulations
> Preparation or review of withholding tax returns
> Review of performance fee computations
> Preparation or review of tax accruals computations
> Contribution in kind/in specie transactions

> Interim dividend reporting

> Assistance with selection of accounting principles and Special Tax Topics
net asset value methodology > Transfer pricing

> IFRS and Luxembourg GAAP training > ECJ case law application

> INREV NAV compliance checks > Islamic finance

> EPRA NAV compliance checks > EU savings directive

> International executive services

> Restructuring

> Tax risk reviews


Luxembourg Real Estate Investment Vehicles 2012 | 59

Accounting &
Advisory Services Corporate Services

Growth, Transaction and Restructuring Accounting Services


> Valuation services > Bookkeeping and creation of a full accounting file
in compliance with Luxembourg law
> Feasibility studies and economic assessments
> Financial reporting
> Advice on project financing and refinancing
> Preparation of budgets and cash plans
> Assistance in creation of business plans
> Preparation of annual accounts
> Mergers & acquisitions
> Compilation of consolidated financial statements
> Due diligence
under Lux GAAP and IFRS
> Liquidation services
> Coordinating the relations with the auditor
> Litigation support
> Guidance and assistance in establishing a company
> Independent business reviews accounting organization
> Financial and operational restructuring > Assessment of existing accounting systems

> Advisory support on specific accounting topics

Governance, Risk and Compliance > Providing qualified staff for bookkeeping purposes
> Risk and Compliance > Training
> IT security and access management

> Business process controls and Governance


Corporate Services
> Compliance with regulatory requirements and assis- > Incorporation
tance with application files
> Domiciliation

> Provision of office space


Performance & Technology > Assistance for the provision of independent
> IT systems strategy manager/director mandates
> IT value and IT cost application > Assistance for the provision of a part-time employee
> Business process management > Corporate secretarial services
> HR advisory
60 | Luxembourg Real Estate Investment Vehicles 2012
Your contacts:

Pierre Kreemer Eric Wilhelm Stephen Nye


Head of Real Estate & Infrastructure Accounting Leader, Audit Partner,
T: +352 22 51 51 5502 Real Estate & Infrastructure Real Estate & Infrastructure
E: pierre.kreemer@kpmg.lu T: +352 22 51 51 6263 T: +352 22 51 51 6315
E: eric.wilhelm@kpmg.lu E: stephen.nye@kpmg.lu
Yves Courtois
Head of Corporate Finance Frauke Oddone
T: +352 22 51 51 7503 Audit Partner,
E: yves.courtois@kpmg.lu Real Estate & Infrastructure
T: +352 22 51 51 6640
E: fraukecarola.oddone@kpmg.lu
Sandrine Degreve
Tax Director, Antoine Badot
Real Estate & Infrastructure Tax Director,
T: +352 22 51 51 5560 Real Estate & Infrastructure
E: sandrine.degreve@kpmg.lu T: +352 22 51 51 5558
E: antoine.badot@kpmg.lu
Emmanuelle Ramponi
Audit Director, Geoffroy Gailly
Real Estate & Infrastructure Advisory Director,
T: +352 22 51 51 6302 Real Estate & Infrastructure
E: emmanuelle.ramponi@kpmg.lu T: +352 22 51 51 7250
E: geoffroy.gailly@kpmg.lu
Alison Macleod
Audit Leader,
Real Estate & Infrastructure
T: +352 22 51 516873
E: alison.macleod@kpmg.lu

The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such
information without appropriate professional advice after a thorough examination of the particular situation.

2012 KPMG Luxembourg S. r.l., a Luxembourg private limited company, is a subsidiary of KPMG Europe LLP and a member of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity.
All rights reserved. Printed in Luxembourg.

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