A recent ruling by Spanish authorities means that Luxembourg-based Ucits funds will not be punitivel...
A recent ruling by Spanish authorities means that Luxembourg-based Ucits funds will not be punitively taxed, as was feared.
The issue has been in doubt for some 18 months since Spain introduced a special high-taxation regime for certain vehicles in jurisdictions it regarded as tax havens.
Had this ruling not come through, the threat of taxation on all capital appreciation from Luxembourg funds would have made it more difficult to market Luxembourg funds into Spain.
Sasha Evers, head of sales, Iberia, for Newton, said: "Funds domiciled in Jersey, Guernsey, the Isle of Man, the Cayman Islands, are all taxed at a detrimental rate."
Despite the question-mark, there have been a lot of fund flows into Luxembourg from Spain, which made it even more important to resolve the situation one way or the other.
But following a request for clarification by Fidelity, the ruling finally came through that Luxembourg was not regarded as a tax haven and would be taxed on the same basis as domestic Spanish funds.
This means that Luxembourg Sicavs qualifying as Ucits will no longer be regarded as being resident in a tax haven territory. There will therefore be no tax on annual appreciation of the fund's shares but only on redemption or sale. This ruling only applies to Ucits funds in Luxembourg and marketed there. Other fund types are not affected. Investments made by corporate investors could, in some cases, be taxed.
A side effect of this decision is that reorganisations of Luxembourg Sicavs can take place under tax-free Spanish rules.
An ambitious objective
'Something completely new'
'Illusion of control'
Reasons to be cheerful
Total investment reaches £9m