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Micro-Finance Investment Funds and SIFs Exempt from Subscription Tax from 2010


On 9 December 2009 the 2010 budget was passed by the Luxembourg Parliament. The Government did not (as expected) introduce any major corporate tax reforms. The main change, which will apply from 2010, is the extension of the subscription tax exemption to micro-finance investment funds ("MIFs"), including micro-finance specialised investment funds ("SIF").

Subscription tax is a tax payable by investment funds, including SIFs. The tax is due quarterly and is determined by reference to the total net assets of the fund, as established on the last valuation day of each quarter (rather than on an average over a given quarter). An exemption already applies to funds of funds (in order to avoid having the same assets being taxed twice), money market funds and pension pooling vehicles.

MIFs are funds which provide capital to institutions that specialise in micro-loans or micro-credits to persons that earn just barely enough to survive. These micro-loans allow such disadvantaged persons to develop an agricultural or a trading activity, or a micro-undertaking. Given the small number of MIFs currently in place in Luxembourg, there is minimum impact from this new exemption on the overall budget and therefore it is not surprising this exemption has been introduced from the beginning of 2010 despite the current economic climate.

Taxand's Take

The extension of the exemption to MIFs was welcomed by the Luxembourg investment fund industry and follows a recommendation of the Association of the Luxembourg Fund Industry (ALFI).

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