On 14 July 2016 the Luxembourg parliament voted the awaited new alternative investment fund, the RAIF.
This innovative vehicle is aimed to improve the Luxembourg competitiveness on the international alternative funds industry market.
The main characteristics of the RAIF are its light regulation and extreme flexibility.
Regulation:
The RAIF is an unregulated alternative investment vehicle.
The RAIFs will not be subject to supervision or pre-approval by the Commission de Surveillance du Secteur Financier (CSSF), which will secure a quick time to market. The RAIF must appoint an external authorized AIFM (in Luxembourg or other EU Member State or third Country authorized AIFM ) subject to the full AIFMD requirements (including the supervision by the CSSF or local supervisory Institution). Thus the RAIF is indirectly supervised by the CSSF.
It can be distributed across Europe by way of the AIFMD marketing passport.
The fund central administration and depository bank (AIFMD compliant) must be in Luxembourg and the fund will need to appoint
a Luxembourg auditor. Being not subject to supervision, there will be no periodic reports to the CSSF.
The RAIF could have multi compartments with different investment policies. No limitations in regards to eligible assets and investment strategy. It shall comply with the principle of risk diversification. Should the RAIF invest exclusively in risk capital securities the risk diversification principle will not apply.
The RAIF has no borrowing restrictions.
Eligible investors:
Institutional investors;
Professional investors;
Well informed investors:
- Investment of at least 125,000 Euro; or
- Recommended as a well informed investor by a Credit Institution (Directive 2006/48/EC), Investment Firm (Directive 2004/39/EC) or management company (Directive 2001/107/EC).
Legal forms :
The RAIFs could be establish as:
- FCP (contractual form);
- Partnerships: Société en Commandites Simple (SCS) Société en Commandites Speciale (SCSp);
- Corporate entities: Société Anonyme (SA), Société à responsablité limitée (Sàrl), Société en Commandite parActions (SCA); société cooperative organisée comme une SA (SCOSA)
The RAIF could adopt a variable (SICAV) or fixed (SICAF) capital. It can be closed or open-ended. Minimum capital requirement of Euro 1,250,000 to bereached within 12 months as from the incorporation. Contribution in kind and in cash permissible. Flexible when it comes to subscription and redemption. Existing vehicles could be transformed into RAIFs (ifapplicable, with the approval of the regulator).
Tax:
The RAIF will commonly be exempt from Luxembourg Corporate, Municipal and Wealth taxes, but subject to an annual 0,01% subscription tax.
RAIFs exclusively investing in risk capital securities could opt for a SICARs likewise tax regime. The RAIF would be subject to
Corporate, Municipal and Wealth taxes with the possibility to exempt all incomes and capital gain arising from investments in risk capital securities. In this case the RAIF will be subject to the Net Wealth minimum tax (generally EUR 3,120).
Income deriving from cash awaiting to be invested in risk capital securities are also exempt provided the investment
occurs within 12 months.
The two tax regimes cannot be combined on different compartments of the same fund.
RAIFs established under the SCS or SCSp legal form could also benefit from the full tax transparency status.
No withholding tax on distribution or redemption.
Capital gain realized by foreign investors should not be taxed in Luxembourg.
VAT exemption on AIF management services would also be applicable.
