The Association of the Luxembourg Fund Industry has clarified the position of Luxembourg-domiciled funds in response to the so-called ‘LuxLeaks’ investigation, branding it a “targeted campaign” against the country.
Last month the International Consortium of Investigative Journalists leaked the names of over 340 multinational companies involved in the alleged global transfer pricing arrangements via confidential information about Luxembourg tax rulings from 2002 to 2010.
In the early 1990s Luxembourg adopted an EU directive that allowed companies to pay taxes in a European headquarters country other than where their subsidiaries operated.
The country did not fully comply with a request from the European Commission for information in relation to tax ruling practices, only providing a limited sample, so in June the European Commission initiated infringement proceedings by issuing letters of formal notice.
There have been no allegations that the deals were illegal under the law of Luxembourg, but the Commission is examining two cases, where rulings between the tax authorities of Luxemburg and Amazon and Fiat finance may be illegal subsidies, thus violating EU rules on state aid.
Alfi stated that Luxembourg-domiciled investment funds are subject to an annual subscription tax calculated on their assets under management, as opposed to most other countries that do not apply any taxation on a fund level.
It also pointed out that the quasi-totality of Luxembourg investment funds, and more specifically Ucits funds, do not need, nor do they obtain, rulings.
Camille Thommes, director general of Alfi, stated that there is no tax advantage by domiciling an investment fund in Luxembourg.
“Fund managers and international investors select Luxembourg as a domicile because of the track record and unequalled expertise of the investment fund industry in Luxembourg.”
He emphasised that investors in Luxembourg investment funds will be essentially taxed in their home country, according to the local tax rules, on the income derived from their investment.
“In the meantime, everybody knows that tax rulings are legal and commonly used in many jurisdictions. They are not a ‘Luxembourg-specific’ practice, contrary to what the LuxLeaks press seems to suggest.
“It is difficult to get rid of the feeling that LuxLeaks is a targeted campaign against Luxembourg”.
peter.walker@ft.com
