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Luxembourg corporate and investment structures for private equity and real estate investments

Luxembourg corporate and investment structures for private equity and real estate investments. Presentation at the Romania-Luxemburg Business Forum asbl. Agenda. About Experta Luxembourg Activity of our clients relating to Romania

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Luxembourg corporate and investment structures for private equity and real estate investments

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  1. Luxembourg corporate and investment structuresfor private equity and real estate investments Presentation at the Romania-Luxemburg Business Forum asbl.

  2. Agenda • About Experta Luxembourg • Activity of our clients relating to Romania • Private Equity and Real Estate investments through Luxembourg companies • Soparfi, a SPV for cross-border investments • How to choose the right Luxembourg investment vehicle? • Case study on the use of Luxembourg companies as investment vehicle into Romania

  3. About Experta Luxembourg • Fully owned subsidiary of Dexia Banque Internationale à Luxembourg • 70 employees and a share capital of EUR 2,500,000 • Licensed as asset manager, advisor on financial transactions and domiciliation agent by the Luxembourg Banking Supervisory Authority (CSSF) • Member of the Association of the Luxembourg Fund Industry (ALFI), the International Fiscal Association (IFA) and the Luxembourg International Management Services Association (LIMSA)

  4. Private Equity and real estate investments • Private Equity • Emergence of private equity transactions in Europe since the early 80s • Growth of private equity industry enhanced by geopolitical developments in Europe • Real estate investments • Investments in European real estate as mainstream investment alternative attracting both individual and institutional investors • More real estate investment vehicles started in Luxembourg than in other European countries; trend expected to continue in the future • Wealth Management services to HNWIs • Private equity and real estate are the asset classes that HNWIs include in their investment portfolio • In exit situations, potential of high influx of liquid assets for treasury management

  5. Soparfi, a SPV for cross-border investments • Definition • Soparfi is recognised by international investors as a flexible investment vehicle that may be used in various investment schemes due to its wide scope of activities • Scope of activities • hold participations in resident or non-resident companies • perform any type of commercial or industrial activity in relation with the object specified in its articles of incorporation • purchase, sell and exploit patents, grant licenses • acquire shares in real estate companies, or own real estate property itself • Eligible to the participation exemption for dividends, capital gains and net wealth tax under certain conditions • Benefits from the Luxembourg double taxation treaty network and qualifies for the application of EU-Directives

  6. How to choose the right Luxembourg investment vehicle?

  7. Investor Luxembourg company Dividends RomanianCo RomanianCo Real estate Industry Luxembourg companies for investments in RomaniaCase study - Repatriation of profit • Dividends distributed by the Romanian subsidiaries • No withholding tax in Romania provided the Luxembourg company holds at least 15% of the capital of RomanianCo for at least 2 years (domestic law implementing the Parent-Subsidiary Directive) • Dividends received from the Romanian subsidiaries • In principle, taxation at 29.63%, but full exemption provided the conditions of the Luxembourg participation exemption are met: • Minimum shareholding requirement of 10% or acquisition price of EUR 1,200,000 • Minimum holding period of 12 months (or commitment to hold)

  8. Investor Luxembourg company Capital gains RomanianCo RomanianCo Real estate Industry Luxembourg companies for investments in RomaniaCase study - Exit strategies • Treatment of capital gains from the alienation of the Romanian subsidiaries • Based on the Double Taxation Treaty concluded between Luxembourg and Romania, the right to tax capital gains is attributed to the country of the seller, i.e. Luxembourg • Treatment of capital gains at the level of the Luxembourg company • In Luxembourg, in principle, taxation at 29.63%, but full exemption provided the conditions of the Luxembourg participation exemption on capital gains are met: • Minimum shareholding requirement of 10% or acquisition price of EUR 6,000,000 • Minimum holding period of 12 months (or commitment to hold)

  9. Investor Capital gains Luxembourg company RomanianCo RomanianCo Real estate Industry Luxembourg companies for investments in RomaniaCase study - Exit strategies • Liquidation proceeds paid to the shareholder • No withholding tax under article 146 ITL (no condition required)

  10. Disclaimer This presentation has been prepared based on the laws, regulations and administrative and judicial interpretations in force as of today All given information regarding foreign tax systems are indicative No structure should be put in place without prior advice from Experta Luxembourg This presentation should not be understood as a fiscal or legal advice

  11. Contact us Experta Luxembourg 180, rue des Aubépines L-1145 Luxembourg www.experta.lu E-mail:experta@experta.lu Tel: (+352) 26 92 55-1 Fax: (+352) 26 92 55-33 66 Your Experta Advisor: Gabor Kacsoh Member of the Executive Board Head of Business Development Tel: +352 26 92 55 40 95Fax: +352 26 92 55 36 42gabor.kacsoh@experta.lu

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