On 2 October 2015, the Luxembourg Tax Administration for registration and estates issued an administrative circular (Circular n° 777) providing needful clarification on the concept of “institutional investor” in the context of collective investment vehicles.
Luxembourg collective investment vehicles setup under the provisions of the Law of 19 December 2010 (UCITS and UCIs) are subject to a standard annual subscription tax of 0.05% on their net assets, payable on a quarterly basis.
The standard rate of 0.05% can be reduced to 0.01% in specific cases including individual compartments of UCIs with multiple compartments as well as individual classes of securities issued within a UCI or within a compartment of a UCI with multiple compartments, provided that the securities of such compartments or classes are reserved to one or more institutional investors.
Furthermore, an exemption from the subscription tax is available in specific cases including UCIs as well as individual compartments of UCIs with multiple compartments,
The conditions for both, the application of the reduced rate and application of the exemption refer to the concept of “institutional investor”, without providing a legal definition of the concept, leaving leeway for a flexible interpretation.
For coherence purposes, the Luxembourg Tax Administration decided to apply the definition used by the Luxembourg Commission de Surveillance du Secteur Financier (CSSF), considering its supervision power over collective investment vehicles.
According to the Circular n° 777 an “institutional investor” is defined as:
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