The June 15, 2004 Act provides that a “Société d’Investissement en Capital à Risque”, or SICAR for short, is any company whose headquarters and central administration are in Luxembourg and:
- is in the form of a limited partnership company (SCS), a special limited partnership (SCSp), a share partnership company (SCA), a cooperative company (SC) set up in the form of a public limited liability company, a private limited liability company (s.à.r.l.) or a public limited liability company (S.A.) established under the laws of Luxembourg, and
- whose purpose is to invest its funds in securities representative of venture capital for the purpose of having the investors benefit by the results of the management of their assets in consideration for the risk they bear, and
- which reserves its shares for informed investors, and
- whose by-laws provide that it is subjected to the provisions of the above-mentioned law.
Venture capital investment is to be understood as the contribution of funds to entities for the purpose of their launching, development or stock exchange listing.
In terms of direct taxation :
The SICAR has a specific tax system (Section IX of the above-mentioned law) described as follows:
- the income allotted by the SICAR to the investors is not liable to withheld taxation on income from securities, without prejudice however to the taxation of the said income on resident beneficiaries;
- the SICAR set up in the form of a simple partnership company (SCS) should not be considered as a commercial company and as a result is not subjected to commercial taxation; it is fiscally transparent and the partners are as needed, liable to taxation according to the fiscal scheme personally applicable to them;
- is not taxable income of a SICAR set up in the form of a share capital company, the income generated by securities as well as the income generated by the sale, contribution or liquidation of those assets. However losses in value achieved upon the sale of securities as well as losses in value not achieved by entered as a result of the reduction of the value of those assets cannot be deducted from the taxable income of the SICAR. Income and losses in values also include exchange differences on the respective securities;
- is not taxable income of a SICAR the income generated by funds that is waiting to be invested in capital venture; such an exemption does not apply unless it can be proven that the respective funds were effectively invested in venture capital for a period of twelve month at most immediately before their investment in venture capital;
- for a SICAR set up in the form of a simple partnership company (SCS), fiscal transparency implies that the partners are personally liable to wealth taxation for their share of investment in the said SICAR;
- the SICAR is entitled, in theory, to the network of bilateral agreements tending to prevent double taxation in the area of income taxation and wealth taxation entered into by the Grand- Duchy of Luxembourg with third countries.
- the income allotted by the SICAR is not liable to the source taxation withholding on the income from securities, without prejudice however to the taxation of the said income for resident beneficiaries;
- the income allotted to foreign investors due to the sale of their shareholding in a SICAR is not taxable.
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