With the new Circular, Circular L.G.-A. n°61 of 12 February 2015, the Luxembourg Tax Authorities clarify and provide new rules as from February 2015 concerning the issuance of certificates of residence for Luxembourg Undertakings for Collective Investment (UCIs). The new administrative clarifications are expected to have a positive effect on the Luxembourg UCI market, strengthening Luxembourg’s position as a leading UCI platform.
The issuance of certificates of residence is of particular interest for UCIs in order to prove their eligibility for favourable tax treatments.
Certificates of residence are important in claiming benefits under double tax treaties. Therefore, Luxembourg tax resident UCIs may benefit from reduced tax rates or tax exemptions under the double tax treaties entered into by Luxembourg.
In the current tax climate which focuses on increased substance, foreign tax authorities have been asking for certificates of residence in order to determine whether UCIs are effectively Luxembourg tax residents. Additionally, certificates of residence play an important role for UCIs’ withholding tax reclaims in the context of EU case law such as the Fokus/Aberdeen/Santander cases.
Having said that, the new procedures governing the issuance of certificates of residence will markedly improve the tax position of UCIs.
Tax residence of the UCIs
The new Circular covers the question of tax residence for Luxembourg UCIs (covered by the law of 17 December 2010 and the law of 13 February 2007 as modified by the law of 26 December 2012) taking the form of:
- an open-ended (SICAV – Société d’investissement à capital variable) or a closed-ended (SICAF – Société d’investissement à capital fixe) investment company,
- a contractual fund (FCP – fonds commun de placement).
SICAVs/SICAFs and SICAV-SIFs incorporated as capital companies are considered to be Luxembourg tax residents under Luxembourg Income Tax Law (LITL) if they fulfil the legal conditions.
Issuance of certificate of residence
Based on the above, Luxembourg certificates of residence could usually not be issued for FCPs.
FCPs – NEW under the Circular
The Circular provides new opportunities for FCPs when they are treated as individuals or residents in the context of certain double tax treaties, i.e. Luxembourg’s treaties with Germany, Guernsey, the Isle of Man, Jersey, Saudi Arabia, the Seychelles and Tajikistan.
In that case, Luxembourg FCPs are seen as tax residents according to those double tax treaties and Luxembourg tax residence certificates can be issued for their benefit.
SICAVs/SICAFs are considered to be Luxembourg tax residents under the provisions of the LITL, provided that certain conditions are met, and Luxembourg tax residence certificates can be issued on that basis.
If a double tax treaty is applicable to SICAVs/SICAFs, as defined in the Circular (see the list ), then a Luxembourg certificate of residence can be issued based on the relevant double tax treaty. In the Circular, it is interesting to point out that the Luxembourg tax authorities provide some information regarding the different justifications for treaty access.
If treaty benefits are not granted to SICAVs/SICAFs, or when treaty application is uncertain, then the Luxembourg tax authority will not issue certificates based on double tax treaty provisions but based on the provisions of domestic Luxembourg law.
How to obtain a certificate of residence
Requests for Luxembourg tax certificates of residence must be addressed to the Luxembourg tax office Sociétés VI.
FCPs – NEW!
In the context of double tax treaties considering FCPs to be individuals or residents, the request for a certificate of residence must be accompanied by a certificate from the CSSF certifying the FCP’s status and supervision by the CSSF.
If double tax treaty benefits are granted to SICAVs/SICAFs, the request for a certificate of residence must be accompanied by a certificate from the CSSF certifying the SICAV/SICAF’s status and supervision by the CSSF.
As regards requests for certificates of residence under Luxembourg law, the request must include:
- a certificate from the CSSF certifying the SICAV/SICAF’s status and supervision by the CSSF;
- the reasons why the certificate of residence is required with an explicit reference to the related provision in the foreign legislation or in the treaty which, to apply, requires the production of a certificate of residence;
- detailed documentation of the income received by the UCIs for the country concerned and year concerned by the request.