Managing subscription tax obligations

Subscription tax (taxe d’abonnement) is a registration tax levied on the net assets of certain investment vehicles in Luxembourg. This includes:

Undertakings for Collective Investment (UCIs)
Specialized Investment Funds (SIFs)
Reserved Alternative Investment Funds (RAIFs)
Family Wealth Management Companies (SPFs)

A subscription tax return must be submitted on a quarterly basis, and the corresponding tax must be paid by the fund by the 20th of the month following the end of each quarter to the Administration de l’enregistrement, des domaines et de la TVA (“AED”).

Key considerations

While the Subscription tax may appear on the surface to be relatively easy to manage, the reality is that effective compliance requires robust internal controls to:

- Identify taxable and exempted investments in determining the taxable basis;

- Map exempted funds (fund of fund, European Long-Term Investment Fund (“ELTIF”), Exchange Traded Fund (“ETF”), money market funds, compartments reserved to institutional investors, microfinance etc.);

- Ensure institutional share classes are only accessible to eligible institutional investors, especially where reduced tax rates apply;

- Monitor and manage any missing data required to calculate the subscription tax basis (as of the time of filing), and ensure timely resubmission once final figures become available.

- Identify any underpayment of subscription tax that may fall within the scope of Commission de Surveillance du Secteur Financier (“CSSF”) Circular 24/856 and potentially trigger regulatory reporting obligations to the CSSF.

Navigating these complex setups and procedures can be burdensome and challenging, especially when internal teams are already stretched with multiple other tasks. Bringing in expert external assistance can often be an invaluable support.

How we can help

Our team of experienced professionals at KPMG Luxembourg can support investment funds with their subscription tax obligations in a wide range of ways:

Preparation of subscription tax returns.
Assessment of subscription tax compliance, including the identification of any potential non-compliance that may fall under the scope of CSSF Circular 24/856, and support with related regulatory notification requirements to the CSSF.
Review of investment databases to ensure accurate subscription tax codification to calculate the subscription taxable basis, especially for fund of fund structures.
Provision of advice and training on the subscription tax landscape in Luxembourg.
Assistance in navigating tax investigations by providing support during tax audits conducted by the AED, including review of account statements and documentation.
Health checks on subscription tax returns submitted over the past two years to identify and address any risks of non-compliance resulting from incorrect taxable basis or exemptions. This includes analysis of where any non-compliance related to subscription tax may fall in scope of circular 24/856 and trigger notification requirements to the CSSF.
Implementation of internal procedures and controls to ensure accurate calculation and management of subscription tax obligations.