The Société d’investissement en capital à risqué, popularly known as SICAR is one of the legal forms available for venture capital investments in Luxembourg. This entity is liable to the SICAR law and will have a legal personality different from that of its investors. A SICAR investment company is formed for its resources investment in high-risk assets in order to distribute the result generated therefrom to qualified investors.

A SICAR can be incorporated under quite a number of different legal structures in Luxembourg. It can either be incorporated as a partnership or as a corporation. As a partnership, it can take the form of either a (Public Limited Company (PLC., Corp./SA); Partnership Limited by Shares (SCA) or a Limited Liability Company (LLC., Ltd./SARL). In the case of a corporative, it can either be a Public Limited Company (SCOSA) and Limited Partnership (SCS). It is important to note that a SICAR cannot be incorporated in the form of a contractual Investment Fund (fonds commun de placement, FCP). However, it’s permitted for a SICAR to be incorporated as a Holding Fund constituted by several sub-funds, each of which being independent on the others. The main management and control of a SICAR as well as its registered office should be located in Luxembourg, this is a mandate. Furthermore, the assets of a SICAR should be transferred to an independent custodian, a financial institute residing in Luxembourg. This is done to make sure that the subscription price of shares in the company are received in due time; transactions which involve equivalent assets are transferred or paid, and the proceeds will be used in compliance with the founding documents. In Luxembourg, it’s requisite that the custodian and management of a SICAR is conducted by well-qualified and industry experienced staff. It’s not mandatory for a SICAR to have a “Sponsor/Promoter.” Dating from incorporation and approval by the Luxembourgian Financial Market Authority (CSSF), a SICAR is expected to reach its subscribed minimum share capital of 1 million EUR within 1 year. The minimum share capital might vary depending upon the business form chosen. In the case of a SICAR that is incorporated as a corporation, it’s requisite that the issued shares are fully subscribed and at least 5% of all the shares are paid up, the payment can be in the form of cash or other accepted non-cash contributions.

According to law, a Luxembourgian SICAR corporation is liable to the corporate tax rate of 29.22%. However, profits received from securities as well as from the sale, contribution or liquidation of its securities will be exempted from paying income tax. A SICAR that is incorporated as a Limited Partnership, while the partners are not the partnership itself (that is, not accountable to taxation) will be exempted from municipal and corporate business tax. Nonetheless, its investors will still be accountable to tax in their residential countries.

SICAR companies in Luxembourg are exempted from the following taxes:

  • Net wealth tax
  • Withholding taxes on the distribution of dividends to investors
  • “subscription tax” (Tax d’Abonnement)

Furthermore, non-resident investors are exempted from paying withholding tax on the interest paid by the SICAR and on liquidation proceeds. The same applies for management services provided to a SICAR by a Management Company in Luxembourg, they are exempted from paying value-added tax (VAT).

Last but not least, it’s also worth mentioning that a SICAR can benefit from the privileges of double taxation agreements. For more insights on how to set up a SICAR in Luxembourg, reach out to LUXSTART. Our team of accountants, lawyers, and consultants stay au courant with the latest business trends and regulations in Luxembourg. Thus, you can be confident that you will always get relevant information which guides you to do everything the right way and in your favor.

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