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Create SICAF or SICAV in Luxembourg - Guide for Investors

Create a SICAF or SICAV in Luxembourg

Updated on Wednesday 27th March 2024

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Set Up SICAV SICAF in Luxembourg

 

The SICAV and the SICAF are two types of investment funds that can be formed in Luxembourg. They can take the form of Undertakings for Collective Investment of Transferable Securities (UCITS) or Specialized Investment Funds (SIF). Investment companies can be formed as certain business entities in Luxembourg and the main differences between them will be given by the share capital. Our lawyers in Luxembourg can offer you advice for different types of investments and information about the tax treatment of foreign investments in Luxembourg. 
 
 
 Quick Facts  
 Applicable legislation

 - Undertakings for Collective Investments in Transferable Securities (UCITS) Law,

- Specialized Investment Funds (SIFs) Law,

- Company Act

 Similarities between the SICAF and SICAV

- availability for the creation of various types of investment funds,

- access to tax exemptions,

- possibility to invest in various types of assets

 Differences between the SICAF and SICAV

The SICAF is an investment company with a fixed share capital, the SICAV is an investment company with a variable capital. 

 Legal forms available for the registration of a SICAF

- private limited company,

- public limited company,

- special limited partnership,

- limited partnership,

- partnership limited by shares

 Legal forms available for the registration of a SICAV

- public limited liability company,

- private limited liability company

 Share capital requirements for a SICAF

 The share capital of a SICAF depends on the type of fund established and must be raised within 6 months from the creation of the fund.

 Share capital requirements for a SICAV

 The share capital of a SICAV depends on the type of fund and must be the same as the value of the fund's net assets all the time.

 Registration requirements for SICAFs and SICAVs

 Both types of funds must have:

- a local Luxembourg address,

- a local manager,

- a custodian bank based in Luxembourg

 Authorization requirements for SICAFs and SICAVs

Authorization from the Financial Supervisory Commission in Luxembourg is required for both SICAFs and SICAVs in Luxembourg. 

 Investors addressed by the SICAF/SICAVs Professional and non-professional investors, depending on the law under which it was registered. 
 Types of assets to invest in

 Both types of funds can invest in assets like:

- real estate,

- securities,

- equity, etc.

 Possibility to operate abroad (YES/NO)

 Yes, both types of funds can be operated outside Luxembourg.

 Taxation of SICAFs/SICAVs in Luxembourg

 The SICAF and SICAV are subject to an annual subscription tax.

 How to choose between a SICAV and SICAF

The SICAV is widely used on the European market, the SICAF resembles investment funds operating in the USA, thus being less employed in Europe. 

 SICAF/SICAV registration support (YES/NO)  Yes, our lawyers in Luxembourg can assist with the registration of both SICAFs and SICAVs.
 Possibility for SICAFs to trade on the Stock Exchange (YES/NO) Yes 

 Possibility for SICAVs to trade on the Stock Exchange (YES/NO)

 Yes, SICAV can also list shares on the Stock Exchange.

 Auditor requirements for SICAVs/SICAFs

 Both the SICAV and SICAF in Luxembourg need auditors.

 Possibility to use SICAV to create umbrella funds (YES/NO)  Yes
 Possibility to use SICAF to create umbrella funds (YES/NO)

 Yes, the SICAF can also be used to set up umbrella funds.

 Access to the European passport for investment funds 

 Only SICAVs and SICAFs registered under the UCITS Law can obtain European passports.

 Access to double tax treaties for the SICAV in Luxembourg

 Limited access to double tax treaties is permitted in accordance with Circular L.G.-A No.61.

 Access to double tax agreements for Luxembourg SICAFs

 Circular L.G.-A No. 61 applies to SICAF companies also.

 Access to the EU Parent- Subsidiary Directive for the SICAV (YES/NO)

 Yes

 Access to the EU Parent-Subsidiary Directive for the SICAF (YES/NO) Yes 
 Timeframe to register a SICAV/SICAF company (approx.)

Approx. one month for both types of entities. 

 Share issuance requirements for SICAVs (if any)

 SICAVs can issue shares at any time.

 Share issuance requirements for SICAFs (if any)

 SICAFs can issue a fixed number of shares which can be altered by the shareholder after notifying the Trade Register.

 Share issuance price for SICAVs

 The price of shares in a SICAV depends on the net asset value (NAV) of the fund.

 Share issuance price for SICAFs There are no restrictions in the price of the shares in a SICAF company. 

 

The SICAV in Luxembourg

 
A SICAV (Société d’Investissement à Capital Variable) is a type of investment fund organized as an investment company that has a variable share capital. The value of its share capital must match at all time the value of its net assets. Increases and decreases of the capital can be made with no mandatory formalities.
 
The SICAV may be organized as a public limited company. The registered office for any type of investment fund must be located in Luxembourg. Any important documents are to be kept at the registered office and the issuance and redemption of share will also take place in that location. 
 
Investors in Luxembourg can open a SICAV (Société d’Investissement à Capital Variable), which is an investment company with variable capital, that has its own legal personality. The registration of a SICAV is done by opening a limited liability company – more specifically, a public limited company, that will have a share capital equal to its net assets. The SICAV is one of the types of undertakings for collective investments (UCIs) that can be set up in Luxembourg and those interested in other investment vehicles can explore more options when investing in this country. 
The Grand Duchy of Luxembourg is a leading investment fund center in Europe. If you want to open a collective or specialized investment fund here, our team of financial experts can assist with information on the investment legislation and on the procedures involved when opening an investment fund in Luxembourg.  
 

What are the characteristics of the SICAV?

 
The SICAV is subject to the Fund Law in Luxembourg (the 2002 Law and/or the SIF Law of 2007) and also the Luxembourg Commercial Company Law due to its structure, which is set up as a commercial company. This fund can either be managed by a designated fund management company or it can be a self-managed investment company, provided that the individuals running it qualify for this position.
 
Sub-funds may be created after a SICAV is operational, but each one must have a different investment policy. This fund structure does not need any formalities for increasing and decreasing of the company’s capital. The minimum capital requirement for such a fund is EUR 1,250,000 which must be deposited within six months after the fund has received approval for its investment activities in Luxembourg. Provided that the SICAV in Luxembourg is registered under the SIF Law, the company’s capital can be reached in a period of one year.  
 
In the case of a self-managed SICAV in Luxembourg, it is necessary to know that, during the incorporation, the investors will have to deposit a minimum capital of EUR 300,000 (applicable in the case of funds registered under the UCITS Law). If the fund will be registered as an umbrella-fund, the same capital requirement applies.
 

What are the reporting requirements for a Luxembourg SICAV?

 
Funds in Luxembourg will need to observe the generally accepted accounting principles for annual and semi-annual reports. Any SICAV is supervised by the CSSF (Commission du Surveillance du Secteur Financier) and will have to fulfil its reporting requirements to this institution. Also, the CSSF will need to approve the constitutive documents of the fund, its directors, the management regulations and other issues before the fund is created.
 
The fund’s accounts have to be audited by an independent auditor and it is necessary to publish such documents in a period of maximum four months after the end of the financial year, provided that the fund operates under the UCITS regulations. If the fund is registered under the SIF Law, the documents can be published in a period of maximum six months after the end of the financial year. 
 
Investors must also be aware that the fund’s representatives are also required to provide a sale prospectus, which will offer information on the evaluation of the investment strategy that is carried within the fund, as well as the identified risks associated with this matter. This is necessary for all types of SICAVs in Luxembourg, with the exception of those that are registered as closed-ended funds, operating under the UCITS Law.  
 
There is no need to relocate here in order to open these structures, however, our immigration lawyers in Luxembourg can answer your questions if you want to move here.
 

Tax regulations for Luxembourg SICAVs

 
Businessmen who want to open a Luxembourg fund as a SICAV must know that this type of vehicle is liable for the payment of the subscription tax. This tax is imposed at a rate of 0.05% of the fund’s net assets and it is applicable on a yearly basis. In the case of SICAVs formed under the SIF legislation, the subscription tax is imposed at a lower rate, of 0.01%. 
 
Funds in Luxembourg are exempt from the income tax. Furthermore, this type of Luxembourg fund can also benefit from a tax exemption on the net wealth tax and the withholding tax on the distribution of dividends paid to non-resident investors. The SICAV can benefit from certain double tax treaties, although this can be limited, if the other country does not have practical experience with the same financial instrument.
 
It is necessary to know that the SICAVs can benefit from the double tax treaties signed by Luxembourg based on the Circular Letter L.G. - A no. 61, signed on 12th of February 2015. Our team of financial consultants can advise on the tax treaties that are available for Luxembourg SICAVs
 
No VAT applies for SICAVs in Luxembourg and our team of financial representatives may offer more information. The tax exemption on the VAT is applicable in the case of fund management services offered by a management company registered in Luxembourg; it is necessary to know that the provision of other types of services will be imposed with a VAT applicable at a rate of 15%.
 
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The purpose of a Luxembourg SICAV

 
Foreign businessmen who want to open a SICAV in Luxembourg should know that this type of vehicle is registered for the purpose of investing the fund’s share capital in liquid financial instruments, securities included; more importantly, this type of fund allows the mixture of various type of financial assets and thus, the SICAV can be incorporated for the purpose of investing in real estate, but it may also be formed as a securities fund or as a money market fund.  
 

Who is eligible for opening a SICAV in Luxembourg? 

 
When opening an investment fund in Luxembourg, the investors have to analyze the eligibility requirements, which can vary on the type of fund selected for registration. In the case of Luxembourg SICAV, the fund can be incorporated by any type of investor, as long as it is formed under the UCITS regulations
 
 

Using a Luxembourg SICAV for investment purposes

 
A SICAV often has an umbrella structure, which means it is separated into multiple sub-funds with different investment strategies and management attributes. The level of risk is determined by the investment strategy of each type of sub-fund. Among the most significant ones are:
 
  • equity funds that often have a high risk profile and pursue profitability over a longer period of time;
  • average returns are the primary goal of this kind of investing, and bond funds are more secure;
  • it can be used in diversified funds to combine bonds and stocks and to maximize capital gains;
  • it can also be used for money market funds that have lower returns due to their minimal risk and short duration.
 
Professional investors from abroad and Luxembourg who want to enter the financial market use the SICAV, even though it also can be registered as any other legal company. To do this, a person must confirm that they fulfill the requirements for the type of fund that needs to be established.

Any investor may use the SICAV as long as they abide by the UCITS rules.
 
Our law firm in Luxembourg can assist with the registration of a SICAV company with the purpose of setting up an investment fund.
 

Other relevant aspects on SICAVs in Luxembourg 

 
Those interested in opening an investment fund in Luxembourg that will be set up as a SICAV should also take into consideration other aspects that are necessary for the proper functioning of this type of vehicle on the local market. For example, it will be necessary to respect the following: 
 
  • the SICAV’s registered office has to be in Luxembourg, as well as its place of management and control;
  • it is also necessary to appoint a custodian, which is generally represented by a banking institution resident in Luxembourg;
  • the fund may issue shares at any time, with the mention that they may not exceed the value of the fund’s net assets;
  • if the SICAV is registered under the UCITS regulations, any type of investors may set up this fund; however, under the regulations available for SIFs, the SICAV is available only for qualified investors

 

What are the obligations of the custodian bank in Luxembourg? 

 
As mentioned above, the assets of the SICAV in Luxembourg have to transferred to a custodian bank, which has the purpose of ensuring that the income of the fund is used as stipulated in the company’s articles of association. Provided that the assets of the fund are not properly managed, the custodian bank will become liable to both the investment fund and its shareholders. 


Requirements for the issuance of shares

 
In a SICAV, the issuance of shares does not need any particular amendment in the fund’s constitutive documents. The price of a share will be established taking into account the net asset value (NAV) and the number of shares outstanding. Our team of financial specialists can offer more information concerning the manner in which the price of a share is established in a SICAV
 

Stipulations concerning the distribution of dividends

 
Regardless if the SICAV in Luxembourg is registered under the SIF or the UCITS legislation, the distribution of dividends follows the same regulations. Thus, it is necessary to know that the manner in which the distribution of dividends is concluded has to be prescribed in the fund’s prospectus. It is also necessary to know that the distributions can be allocated to the fund’s shareholders regardless of the financial result of the fund in a given period of time.
 
 

The SICAF in Luxembourg

 
A SICAF (Société d’Investissement à Capital Fixe) is a type of investment fund in Luxembourg that has a fixed capital. It can be organized almost in every available business form in Luxembourg, among which:
 
- public limited company (S.A.),
- limited partnership (S.C.A.),
- limited liability company (S.a.r.l.).
 
Unlike in the case of a SICAV, the share capital of a SICAF can only be increased by the company’s shareholders and any changes to the capital must be notified and published. 
 
The subscribed share capital of a SICAV or SICAF in Luxembourg must reach 1.25 million euros within six months after the company begins its activities. The timeframe for reaching the necessary capital is 12 months for Specialized Investment Funds (SIF)
 
The minimum share capital of the investment fund depends of the type of company chosen. Our lawyers in Luxembourg can provide more information about the minimum share capital according to the type of company.
 
The video below presents the main features of SICAFs and SICAVs in Luxembourg:
 
 

 

How to register a SICAV/SICAF in Luxembourg

 
The following conditions must be fulfilled in order to establish a SICAV or SICAF in Luxembourg:
 
  • it must be incorporated in compliance with the Company Law,
  •  it also required a legal address and administration in the Grand Duchy;
  • it must designate a custodian bank with its headquarters in Luxembourg.

 

The main difference between the SICAV and SICAF reside in the business types employed to create one or the other. While the stock corporation can be used for both entities, the Luxembourg SICAF can also take the form of a partnership. This can be limited or general one.
 
The appointment of a custodian to guarantee the integrity of Luxembourg's fund income and its usage for the purposes specified in the Articles of Association is one of the primary prerequisites for creating a SICAV. The custodian will also guarantee that the interests of the shareholders are safeguarded.
 
Both the SICAF and the SICAV needs to meet certain share capital criteria, with a minimum of EUR 1.25 million. In the case of UCITS funds, the money must be deposited immediately, but no later than 6 months after receiving the license from the CSSF. For SIF funds, the money needs to be drafted no later than 12 months after the CSSF acknowledges it. However, a SICAV in Luxembourg may issue shares whenever it pleases, provided that the shares' value exceeds the net asset value of the fund. This legal form may only be utilized by qualified investors when registered as a UCITS.
 
If you have difficulties in choosing between a SICAF and SICAV, you can enquire with our Luxembourg law firm.
 

Main differences between SICAFs and SICAVs in Luxembourg

 

The differences between Luxembourg SICAFs and SICAVs usually consist in:
 
  • the share issue price which depends on the net asset value of fund in the case of the SICAV, and which is not subject to any restrictions in the case of a SICAF;
  • the distribution of dividends which is not subject to restrictions in the case of SICAVs and is limited in accordance with the Company Law in the case of SICAFs.

 

 

Other requirements for SICAVs and SICAFs in Luxembourg

 
These types of business entities are subject to the Commercial Law in Luxembourg and Company Law. They are supervised by the Financial Market Authority (CSSF) in Luxembourg. In both cases, a license is required in order for these funds to begin their activities. 
 
According to law, SICAVs and SICAFs are exempt from corporate taxation. They are also exempt from the withholding tax on dividends. They are liable to the subscription tax, an annual tax rate of 0.05% of their net assets (0.01% if they are formed as SIFs). Investment funds in Luxembourg must prepare annual accounts and must appoint a Luxembourg auditor. Other advantages of these funds are that the persons or companies who administer them or perform consulting services do not need to have Luxembourg nationality. Howevver, those who want to immigrate to Luxembourg can rely on our lawyers in this sense.
 

The Luxembourg investment fund sector in numbers

 

Luxembourg is well-known for its financial industry which very developed. In term of the investment funds sector, the most recent numbers indicate that:
 
  • the total value of this industry was EUR 5285.01 billion at the end of 2023;
  • the net asset of UCIs funds held by SICAV companies was EUR 3.617 billion at the end of 2023.
 
Investors can open SICAVs or SICAFs even if they are not interested in immigration to Luxembourg. Our immigration lawyers in Luxembourg can answer your questions if you wish to relocate here.
 
Our local representatives in other countries, such as UAE, China, USA, Bulgaria and Cyprus, can help you with your legal issues. For more information about investment opportunities in Luxembourg and other details about investment funds, please contact our team or lawyers in Luxembourg. We can provide more information about the investment policy.