One of our client has established a Securitization Vehicle in Luxembourg with different compartments under the form of the Société Anonyme (SA). SA is an investment and pooling vehicle in order to make investment in different types of assets.
A Luxembourg securitization vehicle can securitise many types of underlying assets including the risks linked to any type of financial instruments by issuing shares/bonds/certificate which yield and value are linked with the underlying assets. Over the last two decades securitisation has become an alternative to more traditional forms of financing. Luxembourg has emerged as a prime location for securitization vehicles due to an attractive and flexible environment. This is even more true with the enhancement of the Law of February 25, 2022 that allows amongst other to carry out an active management of its pool of assets (mainly interesting for CLOs or CDOs transactions).
The securitization vehicle did not issue securities to the public on a continuous basis; so it is not subject to the supervision of the Luxembourg CSSF.
Such a vehicle is subject to Luxembourg corporate income tax and net wealth tax (with the minimum of EUR 4,815). However, its taxable basis including income from securitized assets is reduced by payments of interest or dividend on preferences shares made to securities holders. As a result, their taxable basis is limited to the very small margin left (some Bps).
There is no withholding tax on interest payments or preference shares distribution.
Securitization vehicle is a VATable person and have the right to recover input VAT depending on the specific situation. Daily management services to securitization vehicle is generally VAT exempt.
