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Luxembourg: Luxembourg tax authorities release circular on tax residence certificates for Luxembourg UCIs

Samantha Schmitz-Merle
Luxembourg Undertakings for Collective Investment (UCIs) may perform different types of investments in many different countries and may as such realise different types of income from different countries. The return on these various investments may be subject to withholding tax in the source country. The double tax treaties (DTTs) concluded by Luxembourg provide, among other provisions, reduced withholding tax rates. The question arises as to whether and if yes, under which conditions, Luxembourg UCIs may benefit from these reduced rates. Obtaining a tax residence certificate (TRC) from the jurisdiction of establishment of the fund is very often one of the requirements. The Luxembourg tax authorities have released a circular, the aim of which is to confirm under which conditions Luxembourg UCIs (SICAVs, SICAFs and FCP) may obtain a TRC. The circular also clarifies the position of the Luxembourg tax authorities and the foreign authorities towards DTT benefits for Luxembourg UCIs. The circular covers SICAVs, SICAFs & FCP, both within the meaning of the Luxembourg 2010 law on Undertakings for Collective Investments and within the meaning of the 2007 Law on Specialised Investment Funds (SIFs).

Tax residence certificate in a DTT context (type 1 and type 2 certificate)

A TRC can be obtained under certain conditions for SICAVs/SICAFs (type 1 tax residence certificate) as well as for FCPs (type 2 tax residence certificate).

The circular indicates which DTTs apply to SICAVs, SICAFs and FCPs and which do not. The circular will be updated on a regular basis by the tax authorities to take into account new DTTs or a change or clarification in the position of the foreign authorities of a respective contracting state.

As far as SICAVs/SICAFs are concerned, the DTT may or may not apply, and this may result from:

  • a clear provision in the DTT;
  • an agreement between the competent authorities of Luxembourg and the other contracting state; or
  • the interpretation of the Luxembourg tax authorities or of the tax authorities of the other contracting state.

The circular clarifies which DTTs now in force apply (or do not apply) based on the above. For the DTTs which apply, the Luxembourg tax authorities will issue a type 1 TRC upon request.

As far as FCPs are concerned, certain recent DTTs include specific provisions for FCPs. For these DTTs only (DTTs with Germany, Saudi Arabia, Guernsey, Isle de Man, Jersey, Seychelles, Tajikistan), the Luxembourg tax authorities will issue a TRC upon request. In all other situations, Luxembourg FCPs will not be able to get a TRC, since they have no legal personality and are considered as tax transparent from a Luxembourg point of view.

The following formal conditions apply to requests for TRCs in a DTT context (type 1 and type 2 tax residence certificates):

  • The request has to be sent to the Luxembourg direct tax authorities (Administration des Contributions Directes, Tax Office 6); and
  • A certificate of the CSSF (Luxembourg Supervisory Authority of the Financial Sector) has to be filed together with the request, according to which the applicant is a SICAV/SICAF/FCP which is subject to the CSSF supervision.

TRC based on Luxembourg internal law (type 3 certificate)

A type 3 TRC can be established upon request each time that the legal seat or the central administration of the UCI is situated in Luxembourg. This type of TRC only applies to SICAVs/SICAFs.

Such certificate can be established in any situation (whether there is a DTT which applies, or there is a DTT but it does not apply, or even if there is no DTT) and could be very useful to obtain a reimbursement of withholding tax based on the famous Aberdeen and Santander case law of the European Court of Justice.

As far as this type of TRC is concerned, the formal requirements are much more burdensome:

  • The request has to be sent to the Luxembourg direct tax authorities (Administration des Contributions Directes, Tax Office 6);
  • A certificate of the CSSF has to be filed together with the request, according to which the applicant is a SICAV/SICAF/FCP which is subject to the CSSF supervision;
  • The request has to be motivated, meaning that it will be necessary to explain why the certificate is needed with an express reference to the applicable DTT or foreign local law provision for the application of which the certificate is needed; and
  • It is necessary to provide a detailed statement of the income in respect of which a TRC is needed. In case the relevant income has not been received yet, the request has to indicate what the investment strategy of the UCI is. In addition, the UCI has to commit to provide a detailed income statement at the latest on June 30 of the year following the accounting year during which the income has been received.

Samantha Schmitz-Merle (samantha.merle@atoz.lu)
Atoz – Taxand Luxembourg
Tel: +352 26 940 235
Website: www.atoz.lu

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