UCIs investing in environmentally sustainable investments: Reduced subscription tax

The EU Commission has adopted various measures in the field of sustainable finance aiming at taking due account of ESG considerations. Luxembourg is willing to maintain and reinforce its position as a pioneer in this sector.

Against this background, the budget law for 2021 provides for an amendment of Article 174 of the Law of 17 December 2010 on undertakings for collective investment (applicable to UCITS and Part II UCIs¹ ) that will result in reduced subscription tax rates (compared to the usually applicable 0.05% rate) being applicable to the portion of the net assets of a UCI, or a compartment thereof, invested in economic activities that qualify as environmentally sustainable within the meaning of Article 3 of the Taxonomy Regulation²  ("Qualifying Activities").

For a UCI, or a compartment thereof, that invests at least 5% of its nets assets in Qualifying Activities, a reduced tax rate at 0.04% applies to the portion of the net assets invested in Qualifying Activities.

The tax rate is reduced to 0.03% for a UCI investing at least 20% of its net assets in Qualifying Activities, to 0.02% for a UCI investing at least 35% of its net assets in Qualifying Activities and to 0.01% for a UCI investing at least 50% of its net assets in Qualifying Activities. The reduced rate applies only to the portion of the net assets invested in Qualifying Activities.

For UCIs willing to benefit from such reduced rates, the part and percentage of net assets invested in Qualifying Activities on the last day of the UCI's financial year shall be controlled and certified by an approved statutory auditor and published in the annual accounts or in an assurance report.

A statement certified by the approved statutory auditor containing the relevant percentage must be filed with the Luxembourg indirect tax authorities when filing the first subscription tax return following the finalisation of the annual report or the assurance report. This percentage will form the basis for determining the tax rate applicable to the portion of the net assets invested in Qualifying Activities for the 4 quarters following the filing of this statement.

During a transition period ending on 1 January 2022, UCIs willing to benefit from the reduced subscription tax rates (during 2021) must electronically file their quarterly return at the rate of 0.05% together with a corrective statement based on a form that will be made available by the Luxembourg indirect tax authorities.