Taxable basis of the Securitisation companies

When incorporated as a company, the securitisation vehicle is totally taxable on all profits resulting from the underlying activity carried out within it.

Therefore all its income (interest, received dividends, profits, gain, appreciation…) is taxable in full and makes up the positive part of the tax base.

All of the expenses related to management of the underlying activity are however deductible from this base. The balance of these two amounts makes up what can be called the tax base prior to allocation; this is the gross profit to be paid to investors.

All payments allocated to investors – holders of securities, shares, bonds or certificates issued by the securitisation vehicle - are deducted from this tax base. Whatever their designation, these payments are actually meant to be interest paid to investors.

On the whole, the securitisation vehicle is taxable on the balance of what it actually keeps for itself according to the usual rules for establishing the tax base for Luxembourg companies (increase of reserves).

It is to be noted that securitisation vehicles cannot claim exemption related to the collection of dividends or capital gains on participations. This is in no way a SOPARFI (SOciété de PARticipation FInancière), although one could be used in tandem with the securitisation vehicle.

Debt ratio

It is useful to indicate that the debt of the securitisation vehicle is not limited or restricted by law. This means that the securitisation vehicle can therefore be financed without having to immobilise a minimum capital and that gearing resulting from interest fees can be used more efficiently.

Withholding tax - deduction at source

  • Interest paid by securitisation vehicles are not subject to any withholding tax.
  • Payments allocated to holders of shares, bonds, securities or certificates issued by the securitisation vehicle are not subject to any withholding tax.
  • Royalties paid by the securitisation vehicle are not subject to any withholding tax.
  • Dividends paid to holders of financing securities of the securitisation vehicle as long as these give entitlement to a proportion of the net income of the securitised asset are not subject to any deductions at source.

Taxable basis of securitisation funds

When securitisation vehicles are incorporated as funds, there is no taxation on profits made by the Fund.

As regards withholding tax and taxation of income generated abroad:

  • either it is incorporated as a co-ownership, and in this case, each investor is taxable on the part of income he owns personally,
  • In our opinion, the income derived from this fiduciary asset must be considered as paid to the management company (as the legal owner). The unit holders only have indebtedness rights in regard to the management company.