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Global Tax Practice

Taxation of Investment Funds in Australia, Europe and the U.S.

© Allen & Overy LLP 2011

Global Tax Practice | Taxation of Investment Funds in Australia, Europe and the U.S.2

Introduction 3

General Overview of the International Investment Funds Industry from a Tax Perspective 4

Why Allen & Overy LLP? 7

Our Team – Key Contacts 8

Our International Presence 10

Appendices: Comparative Summary Tables 12

Appendix 1: Summary of the Various Types of Investment Vehicles Available for Alternative Investment Funds 12

Appendix 2: Overview of the Domestic Tax Treatment of Investment Funds in Selected Countries 14

Contents

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Introduction

Investment Funds are an important planning tool when it comes to raising and investing capital. This is particularly true since access to cross-border investment products has been simplified and the variety of investment products has increased. These developments go hand in hand with challenging economic circumstances, regulatory requirements and - last but not least - complex tax regulations which require extensive knowledge, comprehensive experience and a global view on investment fund issues.

Against this background, Allen & Overy’s Global Tax practice has published this brochure which is designed to provide an introduction to the basic tax features and issues with respect to international investment fund structures. A comprehensive understanding of the main cross-border tax issues is crucial for investors or promoters setting up investment funds since they will inevitably be faced with increasingly complex tax rules. This brochure also contains summary tables describing the tax treatment applicable to the main investment vehicles (focusing on alternative investment funds) for seven countries which are traditionally seen as attractive jurisdictions for investment funds (Australia, France, Germany, Luxembourg, the Netherlands, the UK and the U.S.).

As every case will have its own features and peculiarities this brochure only provides a general overview and should not be construed as tax or legal advice.

Your usual Allen & Overy contact and our investment funds experts will be happy to support you on any tax-structuring issue associated with investment funds. Contact details may be found in this brochure.

Gottfried BreuningerGlobal Head of Tax

Please note this brochure is for general guidance only and does not constitute definitive advice.



General Overview of the International Investment Funds Industry from a Tax Perspective The United States and Europe are traditionally the leading players in the investment funds industry. In the European Union, France, Germany, Luxembourg, the Netherlands and the United Kingdom are among the most important players in this area. Luxembourg is now the second largest fund centre in the world (after the United States) with over EUR2 trillion assets under management at the end of 20101 . Taking into account non-UCITS, the European market share reached 36.9 percent at the end of March 2011, and that of the United States 42.2 percent. Excluding non-UCITS, the European and the United States share reached 30 percent and 46.9 percent, respectively2 . Australia is fourth in this ranking with a 5.3% market share.

The size of the investment fund industry in each country can arise due to the importance of either domestic funds marketed locally or cross-border activity. The following chart shows the share of some of the leading countries in the European investment funds industry (in terms of net assets under management for UCITS and non UCITS domiciled in each country):

European countries Number of funds (UCITS and non UCITS)

Net assets (mio Euro)

France 11,826 1,494,784

Germany 5,911 1,140,028

Luxembourg 13,057 2,190,896

Netherlands 728 77,197

UK 3,021 792,244

Statistics at the end of March 2011 – source: EFAMA

In terms of the overall size of the asset management industry (rather than at the domiciliation of assets), the top three European countries are traditionally the UK, France and Germany which together accounted for 65% of total assets under management in Europe at the end of 20093 .

1 ALFI2 EFAMA (International statistics – first quarter 2011).3 EFAMA (Asset management in Europe – 4th annual review, May 2011).

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On this basis, Europe is the second largest market for asset management in the world (managing 37% of the EUR 36.5 trillion global assets under management), after the United States4 . Australia (together with Japan) comes in third position.

The success of a country in attracting investment funds depends on various factors, including a favourable regulatory, legal and tax environment. Most of the countries which have an important funds industry provide a diversified legal framework allowing fund promoters to choose from a range of investment vehicles with different features (closed-ended vs. open-ended, corporate form vs. contractual form, etc).

From a tax perspective, the applicable tax treatment will usually depend on the type of legal form chosen (ie corporate or contractual). Although the tax regimes differ from country to country, most detail a specific tax regime for investment funds and their investors which usually aims to establish a broadly level playing field for all domestic funds irrespective of their legal form. Under these specific tax regimes, investment funds may be either fully taxable entities benefiting from a favourable tax regime under certain conditions, or tax-exempt entities. For more information, please refer to Appendix 2, which provides an overview in the form of summary tables of the tax treatment applicable to the main investment vehicles in the seven countries covered in this brochure (Australia, France, Germany, Luxembourg, the Netherlands, the UK and the U.S.). These tables focus on the most commonly used types of investment vehicles for alternative investments (ie real estate, private equity and hedge fund investments). A chart in Appendix 1 also shows the various types of alternative investment vehicles available in each of the selected countries.

The investment fund structure should be as tax efficient as possible, with the aim of putting investors in at least as good a position as they would be in if they were to invest in the underlying assets directly. This means that, ideally, no taxation should arise in the country where the fund is established or where its management carries on the investment activities, and that taxation should be imposed at the level of investors only.

Setting up a tax-efficient international investment fund structure requires careful tax planning. There are a variety of ways of achieving this and we have broad experience in many different contexts.

The choice of the type of fund, and the most appropriate fund structures, may of course vary, depending on the type of investors targeted (retail or institutional) and their location, the target investments (and their level of diversification) and the investment policy. For example, alternative investment funds (and in particular venture capital and private equity investments) will often be structured via unregulated vehicles such as limited partnerships, which are generally considered to be well suited to the needs of private equity market players.

4 EFAMA (referring to the Boston Consulting Group report (Global asset management 2010: in search of Stable Growth, July 2010)).



Although tax issues are not the only decisive factors to be considered when determining the most appropriate fund structure, they remain a key element and could jeopardise an investment if not properly taken into account in the structuring process. Briefly, the main tax considerations that must be taken into account in this respect are as follows:

TaxaTion aT invesTor level:

- Taxation (including withholding tax) on fund distributions or redemptions - Taxation at exit, partial exit or upon re-investment for ongoing income or capital gains - Timing of taxation of income/gains

TaxaTion aT invesTmenT fund level:

- Specific fund taxation regimes - Stamp and capital duties on capital contributions and/or transfers - VAT - Corporate tax - Wealth tax - Access to double taxation treaties - Efficient profit repatriation techniques - Offshore ownership constraints/limitations - Tax-efficient management fee structure

TaxaTion in The source counTry:

- Registration duties or transfer taxes on contributions/transfers of certain assets held by the funds (if any)

- Taxation of domestic source income distributed/paid to the fund - Taxation of capital gains realised by the fund on the sale of domestic assets

carried-inTeresT sTrucTuring

- Taxation at source and in the jurisdiction of residence of the beneficiary - Social security considerations

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Why Allen & Overy LLP?We have a global funds tax group comprising representatives from each of the main investment fund jurisdictions and supported by Allen & Overy’s wider network of international offices. We therefore have both a depth of international and local tax knowledge and an understanding of the issues involved in investment funds projects, enabling us to provide a ‘seamless’ and comprehensive service under the leadership of our core team.

Our tax specialists have extensive experience of advising on investment funds’ tax structuring issues, in particular for real estate, infrastructure, private equity and hedge fund investments. Our Global Tax practice enables us to offer a full range of tax services, including advice on both domestic and cross-border situations, such as:

- Direct and indirect tax structuring advice when setting up the investment fund structure and during the life of the investment

- Tax review and drafting of the various legal and/or regulatory documentation - Review and assessment of any substance or beneficial owner issues in the fund structure - Specialised assistance, advice and guidance on isolated transactions as well as on cross-border structuring or re-domiciliation of funds

- Liaison with regulatory bodies and with local tax authorities - Carried-interest structuring

Our global funds tax group closely integrates its work with that of our colleagues dealing with regulatory and other legal implications of establishing funds. This ensures that tax issues can be considered and factored into the structuring process against the wider regulatory and legal background.




8

Our team Key contacts

For further information please do not hesitate to contact one of our investment fund tax experts. The details of the lead partners/counsel from each of our main offices can be found in this section. Our tax experts are supported by legal and regulatory investment fund teams around the world.

Global Tax Practice | Taxation of Investment Funds in Australia, Europe and the U.S.

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Andrew StalsPartnerSydneyTel +612 9373 7857 [email protected]

Dr Asmus MihmPartnerFrankfurt am MainTel +49 69 2648 5796 [email protected]

Jochem KinCounselAmsterdamTel +31 20 674 1178 [email protected]

Mathieu VignonPartnerParisTel +33 1 40 06 53 63 [email protected]

Jean-Luc FischPartnerLuxembourgTel +352 44 44 5 5327 [email protected]

Godfried KinnegimPartnerAmsterdamTel +31 20 674 1120 [email protected]

Dave LewisPartnerNew YorkTel +1 212 756 1147 [email protected]

ausTralia germany

neTherlands

france

luxembourg

u.s.

neTherlands

Klaus HahneCounsel Frankfurt am MainTel +49 69 2648 5474 [email protected]

germany

Ben EatonCounselLondonTel +44 20 3088 3615 [email protected]

uK

Patrick MischoPartnerLuxembourgTel +352 44 44 5 5459 [email protected]

luxembourg



Our international presenceAllen & Overy is an international legal practice with approximately 4,750 staff, including some 480 partners, working in 39 offices worldwide.

Our network combines broad international cover with deep local roots. We combine within one firm a leading local, international and U.S. law practice.

AMERICASNew YorkSão PauloWashington, D.C.

ASIA PACIFICBangkokBeijingHong KongJakarta*Mumbai***New Delhi***PerthShanghaiSingaporeSydneyTokyo

EUROPEAmsterdamAntwerpAthens**BelfastBratislavaBrusselsBucharest*BudapestDüsseldorf

FrankfurtHamburgLondonLuxembourgMadridMannheimMilanMoscowMunich ParisPragueRomeWarsaw

AFRICACasablanca

MIDDLE EASTAbu DhabiDohaDubaiRiyadh*

* Associated offices** Representative office*** Associated firms

GLOBAL PRESENCE

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“This firm’s network of offices – and superb reputation – stretches across Europe, the Middle East and Asia”Chambers Global (Tax)

A&O tax offices presenceA&O officesRelationship firms



Appendices: Comparative summary tablesappendix 1: Summary of the various types of Investment Vehicles available for Alternative Investment Funds

Country Real estate Private equity Hedge funds Others

Australia Managed investment scheme trust (MIT); Other trust; Company; Partnership; and Limited partnership.

MIT; Other trust; Company; Partnership; Limited partnership; Venture Capital Limited Partnership; Early Stage Venture Capital Limited Partnership; and Australian venture capital fund of funds limited partnership.

MIT; Other trust; Company; Partnership; and Limited partnership.

France SPPICAV (société à préponderance immobilière à capital variable); FPI (fonds de placement immobilier)

SCR (société de capital risque); FCPR (fonds commun de placement à risque)

SICAV (société d’investissement à capital variable); FCP (fonds commun de placement)

Germany Sondervermögen (Fund); Investment-AG; GbR/oHG/KG; Immobilien-Aktiengesellschaft (REIT)

Sondervermögen (Fund); Investment-AG; GbR/oHG/KG

Sondervermögen (Fund); Investment-AG; GbR/oHG/KG

Sondervermögen (Fund) Investment-AG GbR/oHG/KG

Luxembourg FCP (part II); SICAV/SICAF (part II); SIF (specialised investment funds) SICAV-F/FCP; SICAR (venture risk capital company); SOPARFI

FCP (part II); SICAV/SICAF (part II); SIF SICAV-F/FCP; SICAR; SOPARFI

FCP (part II); SICAV/SICAF (part II); SIF SICAV-F/FCP

FCP (part I); SICAV/SICAF (part I)

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Country Real estate Private equity Hedge funds Others

Netherlands Coöperatie (Co-op); Commanditaire Vennootschap (CV); Fonds voor Gemene Rekening (FGR) (whether or not applying the Fiscal Investment Institution regime (FII))

Co-op; CV; FGR Co-op; CV; FGR Co-op; FII; CV; FGR; Entity applying the Exempt Investment Institution regime (EII)

UK Property Authorised Investment Fund (PAIF); Real Estate Investment Trust (REIT); English limited partnership

English limited partnership

AUTs and OEICs Authorised Unit Trust (AUT); Open-Ended Investment Company (OEIC); Investment Trust Companies (ITCs)

U.S. Limited Liability Company (LLC); Partnership; Corporation; Real Estate Investment Trust (REIT); Real Estate Mortgage Investment Conduit (REMIC)

Limited Liability Company (LLC); Partnership; Corporation

Limited Liability Company (LLC); Partnership; Corporation; Regulated Investment Company (RIC)



Tax treatment at vehicle level

Corporate vehicles Contractual/Mutual vehicles

Type of vehicle Australian Company Australian Limited Partnership Australian Managed Investment Scheme Trust (MIT)

Other Australian trust Australian Partnership Australian Venture Capital Limited Partnership, Early Stage Venture Capital Limited Partnership and Australian venture capital fund of funds limited partnership.

Corporate tax Corporate tax rate of 30% Corporate tax rate of 30% No tax at the MIT level if beneficiaries are absolutely entitled to all MIT income at year end.

No tax at the trust level if beneficiaries are absolutely entitled to all trust income at year end.

No taxation at partnership level

No taxation at entity level. Non-Australian resident partners may be entitled to tax exemptions in respect of gains on eligible venture capital investments, although the eligibility criteria are restrictive.

Other taxes N/A N/A N/A N/A N/A N/A

Registration duties (upon incorporation)

A$426 Nominal (depends on the Australian State of formation)

Nil or nominal Nil or nominal Nil Nominal (depends on the Australian State of formation)

Treaty status (DTTs) Access to DTTs Specifically granted access to some DTTs. Should be checked on a case by case basis.

Should be checked on a case by case basis as there may be special rules for trusts.


In principle no access (because the partnership has no separate legal personality)

In principle no access (because there is no separate legal personality)

VAT status (management services)

Management services are subject to GST (Australian equivalent of VAT).






Withholding tax (WHT) on distributions

Dividends are not subject to withholding tax if they are “franked” which effectively means paid out of profits taxed at the company level. Unfranked dividends are subject to withholding tax at 30%. Relief under a tax treaty may however apply to reduce to 15% in most cases.

Dividends are not subject to withholding tax if they are “franked” which effectively means paid out of profits taxed at the limited partnership level. Unfranked dividends are subject to withholding tax at 30%. Relief under a tax treaty may however apply to reduce to 15% in most cases.

Normal withholding tax rates for dividends, interest and royalties that flow through a MIT. If certain conditions are met, other MIT Australian sourced income is subject to a final withholding tax rate of either 7.5% or 30%, depending on whether Australia has an Information Exchange Agreement with the relevant country.

Normal withholding tax rates for dividends, interest and royalties that flow through an Other trust. Other Australian sourced income may be subject to an effective non-final withholding. The rate will depend on what sort of entity the beneficiary of the trust is.

Due to the tax transparency of the partnership, investors are in the same position as if they had derived the underlying income directly.

Due to the tax transparency at the entity level, investors are in the same position as if they had derived the underlying income directly.

appendix 2: Overview of the Domestic Tax Treatment of Investment Funds in Selected Countries

Australia

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Type of vehicle Australian Company Australian Limited Partnership Australian Managed Investment Scheme Trust (MIT)

Other Australian trust Australian Partnership Australian Venture Capital Limited Partnership, Early Stage Venture Capital Limited Partnership and Australian venture capital fund of funds limited partnership.

Corporate tax Corporate tax rate of 30% Corporate tax rate of 30% No tax at the MIT level if beneficiaries are absolutely entitled to all MIT income at year end.

No tax at the trust level if beneficiaries are absolutely entitled to all trust income at year end.

No taxation at partnership level

No taxation at entity level. Non-Australian resident partners may be entitled to tax exemptions in respect of gains on eligible venture capital investments, although the eligibility criteria are restrictive.

Other taxes N/A N/A N/A N/A N/A N/A


A$426 Nominal (depends on the Australian State of formation)

Nil or nominal Nil or nominal Nil Nominal (depends on the Australian State of formation)

Treaty status (DTTs) Access to DTTs Specifically granted access to some DTTs. Should be checked on a case by case basis.



In principle no access (because the partnership has no separate legal personality)

In principle no access (because there is no separate legal personality)

VAT status (management services)








Dividends are not subject to withholding tax if they are “franked” which effectively means paid out of profits taxed at the company level. Unfranked dividends are subject to withholding tax at 30%. Relief under a tax treaty may however apply to reduce to 15% in most cases.

Dividends are not subject to withholding tax if they are “franked” which effectively means paid out of profits taxed at the limited partnership level. Unfranked dividends are subject to withholding tax at 30%. Relief under a tax treaty may however apply to reduce to 15% in most cases.

Normal withholding tax rates for dividends, interest and royalties that flow through a MIT. If certain conditions are met, other MIT Australian sourced income is subject to a final withholding tax rate of either 7.5% or 30%, depending on whether Australia has an Information Exchange Agreement with the relevant country.

Normal withholding tax rates for dividends, interest and royalties that flow through an Other trust. Other Australian sourced income may be subject to an effective non-final withholding. The rate will depend on what sort of entity the beneficiary of the trust is.

Due to the tax transparency of the partnership, investors are in the same position as if they had derived the underlying income directly.

Due to the tax transparency at the entity level, investors are in the same position as if they had derived the underlying income directly.

appendix 2: Overview of the Domestic Tax Treatment of Investment Funds in Selected Countries

Australia





Type of vehicle SICAV SPPICAV SCR FCP / FPI / FCPR

Corporate tax No taxation on income and capital gains at the level of the SICAV, provided that the SICAV carries out its legal purpose.

No taxation on income and capital gains at the level of the SPPICAV, provided that it complies with certain requirements (including distribution requirements). SPPICAV’s subsidiaries may also benefit from a tax exemption on income and capital gains derived from their real estate assets purchased or built with a view to renting them (also subject to distribution requirements).

No taxation on income and capital gains at the level of an eligible SCR.

No taxation at the level of the FCP/FPI/FCPR on income or gains derived from its investments (provided, in relation to an FCP, that no individual holds 10% or more of the FCP units).

Other taxes N/A N/A N/A N/A


N/A N/A N/A N/A

Treaty status (DTTs) In principle, no access (because the SICAV is tax exempt).

No access to most DTTs (because the SPPICAV is tax exempt).

In principle, no access (because the SCR is tax exempt).

In principle, no access (because the FCP/FPI/FCPR have no separate legal personality). Investors in such funds may be given treaty access on a look-through approach.

VAT status(management services)

Management services supplied to the SICAV are VAT exempt, unless the management company elects otherwise.

Management services supplied to the SPPICAV are subject to VAT.

Management services supplied to the SCR are subject to VAT.

Management services supplied to the FCP/FCPR are VAT exempt, unless the management company elects otherwise. Management services supplied to the FPI are subject to VAT.


The sums distributed by a SICAV are dividends which are subject to a 25% WHT if paid to non-French investors (reduced to 19% for EEA-resident individuals and 15% for EEA non-profit organisations and increased to 50% if paid in a non-cooperative jurisdiction). Relief under a tax treaty may however apply. However a SICAV may create special coupons so that sums distributed to investors keep the same nature and source as the income received by it (with the effect that only distributions out of French dividends are subject to a 25% withholding tax). Also, special rules apply to SICAVs which are fully invested in French debt securities.

The sums distributed by a SPPICAV are dividends which are subject to a 25% WHT if paid to non-French investors (reduced to 19% for EEA-resident individuals and 15% for EEA non-profit organisations and increased to 50% if paid in a non-cooperative jurisdiction).

The sums distributed by a SCR are dividends which are subject to a 25% WHT (19% withholding tax if made out of capital gains) if paid to non-French investors (reduced to 19% for EEA-resident individuals and 15% for EEA non-profit organisations and increased to 50% if paid in a non-cooperative jurisdiction). Relief under a tax treaty may however apply.Sums distributed by a SCR may, under certain circumstances, benefit from a withholding tax exemption.

Due to the tax transparency of the FCP/FPI/FCPR, investors are in the same tax position as if they had received the underlying income directly. Distributions out of French source dividends are subject to a 25% withholding tax (subject to treaty relief)

France

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Type of vehicle SICAV SPPICAV SCR FCP / FPI / FCPR

Corporate tax No taxation on income and capital gains at the level of the SICAV, provided that the SICAV carries out its legal purpose.

No taxation on income and capital gains at the level of the SPPICAV, provided that it complies with certain requirements (including distribution requirements). SPPICAV’s subsidiaries may also benefit from a tax exemption on income and capital gains derived from their real estate assets purchased or built with a view to renting them (also subject to distribution requirements).

No taxation on income and capital gains at the level of an eligible SCR.

No taxation at the level of the FCP/FPI/FCPR on income or gains derived from its investments (provided, in relation to an FCP, that no individual holds 10% or more of the FCP units).

Other taxes N/A N/A N/A N/A


N/A N/A N/A N/A

Treaty status (DTTs) In principle, no access (because the SICAV is tax exempt).

No access to most DTTs (because the SPPICAV is tax exempt).

In principle, no access (because the SCR is tax exempt).

In principle, no access (because the FCP/FPI/FCPR have no separate legal personality). Investors in such funds may be given treaty access on a look-through approach.


Management services supplied to the SICAV are VAT exempt, unless the management company elects otherwise.

Management services supplied to the SPPICAV are subject to VAT.

Management services supplied to the SCR are subject to VAT.

Management services supplied to the FCP/FCPR are VAT exempt, unless the management company elects otherwise. Management services supplied to the FPI are subject to VAT.


The sums distributed by a SICAV are dividends which are subject to a 25% WHT if paid to non-French investors (reduced to 19% for EEA-resident individuals and 15% for EEA non-profit organisations and increased to 50% if paid in a non-cooperative jurisdiction). Relief under a tax treaty may however apply. However a SICAV may create special coupons so that sums distributed to investors keep the same nature and source as the income received by it (with the effect that only distributions out of French dividends are subject to a 25% withholding tax). Also, special rules apply to SICAVs which are fully invested in French debt securities.

The sums distributed by a SPPICAV are dividends which are subject to a 25% WHT if paid to non-French investors (reduced to 19% for EEA-resident individuals and 15% for EEA non-profit organisations and increased to 50% if paid in a non-cooperative jurisdiction).

The sums distributed by a SCR are dividends which are subject to a 25% WHT (19% withholding tax if made out of capital gains) if paid to non-French investors (reduced to 19% for EEA-resident individuals and 15% for EEA non-profit organisations and increased to 50% if paid in a non-cooperative jurisdiction). Relief under a tax treaty may however apply.Sums distributed by a SCR may, under certain circumstances, benefit from a withholding tax exemption.

Due to the tax transparency of the FCP/FPI/FCPR, investors are in the same tax position as if they had received the underlying income directly. Distributions out of French source dividends are subject to a 25% withholding tax (subject to treaty relief)




Corporate vehicles Contractual / Mutual vehicles

Type of vehicle GbR/oHG/KG REIT Investment-AG Sondervermögen (Fund)

Corporate tax Tax-exempt (for corporation income tax purposes)

Tax-exempt (for corporation income tax and trade tax purposes)



Other taxes Trade tax from case to case N/A N/A N/A


N/A N/A N/A N/A

Treaty status (DTTs) No Yes Depends on DTT/generally no application of DTT as vehicle is tax exempt in Germany.

Depends on DTT/generally no application of DTT.


No specific tax exemption applicable No specific tax exemption applicable Portfolio management services are VAT exempt; administrative services are exempt under further conditions.

Portfolio management services are VAT exempt; administrative services are exempt under further conditions.


N/A WHT on (mandatory) dividend distributions

(from 2012:) WHT deduction from income distributions and deemed distribution income by German custodian banks safekeeping the fund shares or by German depositary bank.No WHT deduction for foreign shareholders which are not tax liable with the respective income components in Germany.Deviant regulations for specialised investment funds.

(from 2012:) WHT deduction from income distributions and deemed distribution income by German custodian banks safekeeping the fund units or by German depositary bank.No WHT deduction for foreign shareholders which are not tax liable with the respective income components in Germany.Deviant regulations for specialised investment funds.

Germany

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Corporate vehicles Contractual / Mutual vehicles

Type of vehicle GbR/oHG/KG REIT Investment-AG Sondervermögen (Fund)

Corporate tax Tax-exempt (for corporation income tax purposes)




Other taxes Trade tax from case to case N/A N/A N/A


N/A N/A N/A N/A

Treaty status (DTTs) No Yes Depends on DTT/generally no application of DTT as vehicle is tax exempt in Germany.

Depends on DTT/generally no application of DTT.


No specific tax exemption applicable No specific tax exemption applicable Portfolio management services are VAT exempt; administrative services are exempt under further conditions.

Portfolio management services are VAT exempt; administrative services are exempt under further conditions.


N/A WHT on (mandatory) dividend distributions

(from 2012:) WHT deduction from income distributions and deemed distribution income by German custodian banks safekeeping the fund shares or by German depositary bank.No WHT deduction for foreign shareholders which are not tax liable with the respective income components in Germany.Deviant regulations for specialised investment funds.

(from 2012:) WHT deduction from income distributions and deemed distribution income by German custodian banks safekeeping the fund units or by German depositary bank.No WHT deduction for foreign shareholders which are not tax liable with the respective income components in Germany.Deviant regulations for specialised investment funds.





Type of vehicle SICAV/SICAF (part I and II)SIF SICAV

SICAR (corporate form) SOPARFI (unregulated company) FCP (part I and II)SIF FCP

Corporate tax N/A Taxable at the ordinary corporate income tax rate of 28.8% (for 2011 for Luxembourg City), but income and capital gains derived from investments in securities are tax exempt.

Taxable at the ordinary corporate income tax rate of 28.8% (for 2011 for Luxembourg City), but exemption available for dividends and capital gains on qualifying shareholdings based on the participation exemption regime.

N/A

Other taxes Annual subscription tax at a general rate of 0.05% of the net asset value of the fund (reduced subscription tax of 0.01% for SIF SICAV). Full exemptions also available in certain cases.

Subject to wealth tax (annually) at a 0.5% rate but exemptions are available for qualifying shareholdings based on the participation exemption regime.

Annual subscription tax at a general rate of 0.05% of the net asset value of the fund (reduced subscription tax of 0.01% for SIF FCP). Full exemptions also available in certain cases.


EUR75 fixed fee. EUR75 fixed fee. EUR75 fixed fee. No (but a EUR75 fixed fee may be borne by the management company upon its incorporation).

Treaty status (DTTs) Access to certain DTTs. Must be checked on a case-by-case basis.

Yes Yes No immediate access to DTTs due to the tax transparency of the FCP.


Management services supplied to the vehicle may be VAT exempt.


The company is a VAT taxable person for activities other than pure shareholding activities

Management services supplied to the management company of the FCP (on its behalf) may be VAT exempt.


No WHT (except for certain interest payments, under the European Savings Directive (EUSD) in certain cases).

No WHT (except for certain interest payments, under the EUSD in certain cases).

15% WHT on dividend distributions but (i) exemption available for dividends paid to qualifying corporate shareholders based on the participation exemption regime or (ii) reduced rates available based on DTTs.


Luxembourg

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Type of vehicle SICAV/SICAF (part I and II)SIF SICAV

SICAR (corporate form) SOPARFI (unregulated company) FCP (part I and II)SIF FCP

Corporate tax N/A Taxable at the ordinary corporate income tax rate of 28.8% (for 2011 for Luxembourg City), but income and capital gains derived from investments in securities are tax exempt.

Taxable at the ordinary corporate income tax rate of 28.8% (for 2011 for Luxembourg City), but exemption available for dividends and capital gains on qualifying shareholdings based on the participation exemption regime.

N/A

Other taxes Annual subscription tax at a general rate of 0.05% of the net asset value of the fund (reduced subscription tax of 0.01% for SIF SICAV). Full exemptions also available in certain cases.

Subject to wealth tax (annually) at a 0.5% rate but exemptions are available for qualifying shareholdings based on the participation exemption regime.

Annual subscription tax at a general rate of 0.05% of the net asset value of the fund (reduced subscription tax of 0.01% for SIF FCP). Full exemptions also available in certain cases.


EUR75 fixed fee. EUR75 fixed fee. EUR75 fixed fee. No (but a EUR75 fixed fee may be borne by the management company upon its incorporation).

Treaty status (DTTs) Access to certain DTTs. Must be checked on a case-by-case basis.

Yes Yes No immediate access to DTTs due to the tax transparency of the FCP.




The company is a VAT taxable person for activities other than pure shareholding activities

Management services supplied to the management company of the FCP (on its behalf) may be VAT exempt.


No WHT (except for certain interest payments, under the European Savings Directive (EUSD) in certain cases).


15% WHT on dividend distributions but (i) exemption available for dividends paid to qualifying corporate shareholders based on the participation exemption regime or (ii) reduced rates available based on DTTs.






Type of vehicle FII (tax regime). An FII takes the legal form of an NV, BV or FGR or some comparable foreign entities.

EII (tax regime). An Ell takes the form of an NV, an FGR or some comparable foreign legal forms.

Co-op (legal form) Closed FGR (legal form) Closed CV (legal form)

Corporate tax Subject to Dutch corporate income tax (CIT) at a rate of 0% (under certain conditions).

Exempt from CIT if certain requirements are met.

A Co-op is subject to Dutch corporate income tax at statutory rates (mainstream rate 25%), but exemption available for dividends and capital gains on qualifying shareholdings based on the participation exemption regime.

N/A (due to the tax transparency of the closed FGR).

N/A (due to the tax transparency of the closed CV.

Other taxes N/A N/A N/A N/A N/A


An annual Chamber of Commerce fee of EUR121 until 2012. Abolished as per 2013.





Treaty status (DTTs) In principle, access to DTTs. But this must be checked on a case-by-case basis.

In principle, no access to DTTs (as the VBI is, in general, not considered a resident of the Netherlands for tax purposes). This may however change under a new Netherlands tax treaty policy and must thus be checked on a case-by-case basis.

Yes No access. No access.


Asset management services are VAT exempt. Regular management is VAT taxable.






15% dividend WHT. Reduced rates available under DTTs.

Dividends exempt from WHT. Distributions by a Co-op are not subject to Dutch dividend witholding tax. Under proposed legislation (expected to enter into force 1 January 2012) distributions made by a Co-op no longer are exempt in all circumstances. Distributions should remain exempt from Dutch dividend withholding tax if certain conditions are met. Typically, these conditions should, amongst others, be met by private equity investors and active sovereign wealth funds.

N/A N/A

Netherlands

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Type of vehicle FII (tax regime). An FII takes the legal form of an NV, BV or FGR or some comparable foreign entities.

EII (tax regime). An Ell takes the form of an NV, an FGR or some comparable foreign legal forms.

Co-op (legal form) Closed FGR (legal form) Closed CV (legal form)

Corporate tax Subject to Dutch corporate income tax (CIT) at a rate of 0% (under certain conditions).

Exempt from CIT if certain requirements are met.

A Co-op is subject to Dutch corporate income tax at statutory rates (mainstream rate 25%), but exemption available for dividends and capital gains on qualifying shareholdings based on the participation exemption regime.

N/A (due to the tax transparency of the closed FGR).

N/A (due to the tax transparency of the closed CV.

Other taxes N/A N/A N/A N/A N/A







Treaty status (DTTs) In principle, access to DTTs. But this must be checked on a case-by-case basis.

In principle, no access to DTTs (as the VBI is, in general, not considered a resident of the Netherlands for tax purposes). This may however change under a new Netherlands tax treaty policy and must thus be checked on a case-by-case basis.

Yes No access. No access.








15% dividend WHT. Reduced rates available under DTTs.

Dividends exempt from WHT. Distributions by a Co-op are not subject to Dutch dividend witholding tax. Under proposed legislation (expected to enter into force 1 January 2012) distributions made by a Co-op no longer are exempt in all circumstances. Distributions should remain exempt from Dutch dividend withholding tax if certain conditions are met. Typically, these conditions should, amongst others, be met by private equity investors and active sovereign wealth funds.

N/A N/A





Type of vehicle OEIC/PAIF ITC REIT AUT English Limited Partnership

Corporate tax Capital gains exempt.Income taxable or exempt depending on category of income and status of fund; distributions out of certain income categories may be deductible.

Capital gains exempt.Income taxable or exempt depending on category of income.

Capital gains from real estate investment exempt. Other capital gains taxable.Income from real estate investment exempt. Other categories of income taxable or exempt in accordance with normal rules.

Capital gains exempt.Income taxable or exempt depending on category of income and status of fund; distributions out of certain income categories may be deductible.

N/A due to the tax transparency of the vehicle.

Other taxes Possible charge to stamp duty reserve tax on certain transfers or surrenders of shares

N/A N/A Possible charge to stamp duty reserve tax on certain transfers or surrenders of units

N/A


N/A N/A N/A N/A N/A

Treaty status (DTTs) Subject to being regarded by foreign tax authority as resident in the UK.

Yes, in principle Yes, in principle No. Trustee may be entitled to treaty benefits, but normally excluded by beneficial ownership requirement.

No


Management services supplied to the vehicle are VAT exempt.


Management services are VATable, but the REIT is normally internally managed so that VAT does not arise.


Management services supplied to the vehicle are VAT taxable.


WHT may apply WHT may apply. WHT may apply. WHT may apply. N/A

UK

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Type of vehicle OEIC/PAIF ITC REIT AUT English Limited Partnership

Corporate tax Capital gains exempt.Income taxable or exempt depending on category of income and status of fund; distributions out of certain income categories may be deductible.

Capital gains exempt.Income taxable or exempt depending on category of income.

Capital gains from real estate investment exempt. Other capital gains taxable.Income from real estate investment exempt. Other categories of income taxable or exempt in accordance with normal rules.

Capital gains exempt.Income taxable or exempt depending on category of income and status of fund; distributions out of certain income categories may be deductible.

N/A due to the tax transparency of the vehicle.

Other taxes Possible charge to stamp duty reserve tax on certain transfers or surrenders of shares

N/A N/A Possible charge to stamp duty reserve tax on certain transfers or surrenders of units

N/A


N/A N/A N/A N/A N/A

Treaty status (DTTs) Subject to being regarded by foreign tax authority as resident in the UK.

Yes, in principle Yes, in principle No. Trustee may be entitled to treaty benefits, but normally excluded by beneficial ownership requirement.

No




Management services are VATable, but the REIT is normally internally managed so that VAT does not arise.


Management services supplied to the vehicle are VAT taxable.


WHT may apply WHT may apply. WHT may apply. WHT may apply. N/A



U.S.


Corporate vehiclesContractual/Mutual

vehicles

Type of vehicle Corporation REMIC RIC REIT Partnership or LLC

Corporate tax Income and gains generally are taxable at regular corporate rates (35%). Preferential rates for capital gains do not apply to corporations.

Generally exempt from tax at the entity level, provided the entity meets requirements with respect to investments (generally mortgages and mortgage-backed securities).

Income and gains are generally taxable at regular corporate rates (35%), subject to reduction by the amount of dividends paid, provided the entity meets requirements with respect to assets (generally cash and securities), diversification and distribution (90% of “investment company taxable income” must be distributed to shareholders).

Income and gains are generally taxable at regular corporate rates (35%), subject to reduction by the amount of dividends paid, provided the entity meets requirements with respect to assets (generally real property and mortgages on real property), diversification and distribution (90% of “real estate investment trust taxable income” must be distributed to shareholders).

No tax at the entity level. Income, gains, losses and deductions flow through to partners, and character is determined at the partnership level.

Other taxes State and local income and other taxes, as applicable

State and local income and other taxes, as applicable





Formation fees vary according to state law requirements.





Treaty status (DTTs) Yes, but generally subject to Limitation on Benefits clause.

Yes, but generally subject to Limitation on Benefits clause.





N/A N/A N/A N/A N/A

Withholding tax on distributions

30% withholding tax (or lower applicable treaty rate) applies to dividends paid to non-U.S. persons.


30% withholding tax (or lower applicable treaty rate) applies to dividends paid to non-U.S. persons. Additional tax may apply to the extent distributions are attributable to the disposition of a U.S. real property interest.


Entity may be required to withhold at a 30% (or lower applicable treaty) rate on certain payments to non-U.S. partners. Additional tax may apply to the extent distributions are attributable to the disposition of a U.S. real property interest.

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Corporate vehiclesContractual/Mutual

vehicles

Type of vehicle Corporation REMIC RIC REIT Partnership or LLC

Corporate tax Income and gains generally are taxable at regular corporate rates (35%). Preferential rates for capital gains do not apply to corporations.

Generally exempt from tax at the entity level, provided the entity meets requirements with respect to investments (generally mortgages and mortgage-backed securities).

Income and gains are generally taxable at regular corporate rates (35%), subject to reduction by the amount of dividends paid, provided the entity meets requirements with respect to assets (generally cash and securities), diversification and distribution (90% of “investment company taxable income” must be distributed to shareholders).

Income and gains are generally taxable at regular corporate rates (35%), subject to reduction by the amount of dividends paid, provided the entity meets requirements with respect to assets (generally real property and mortgages on real property), diversification and distribution (90% of “real estate investment trust taxable income” must be distributed to shareholders).

No tax at the entity level. Income, gains, losses and deductions flow through to partners, and character is determined at the partnership level.

Other taxes State and local income and other taxes, as applicable











Treaty status (DTTs) Yes, but generally subject to Limitation on Benefits clause.






N/A N/A N/A N/A N/A

Withholding tax on distributions





Entity may be required to withhold at a 30% (or lower applicable treaty) rate on certain payments to non-U.S. partners. Additional tax may apply to the extent distributions are attributable to the disposition of a U.S. real property interest.


© Allen & Overy LLP 2011 I CS1109_CDD 159 ADD 591 v3_29.11.11

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a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an

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This is a document published in October 2011, which has not been updated since.

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