EP Services SA - Luxembourg

1. Links

Pascal Ortega — 2012-03-14T16:24:23Z

Taxspecialist : www.taxspecialists.com
ECB : www.ecb.int
CSSF : www.cssf.lu
Luxembourg Chamber of Commerce: www.cc.lu
Profile : www.profil-luxembourg.lu
Luxembourg.lu : www.luxembourg.public.lu/fr
Luxembourg for finance : www.lff.lu
Luxembourg for business : www.luxembourgforbusiness.lu
Ministry of Finance : www.mf.public.lu
Luxembourg e-VAT portal: saturn.etat.lu
Luxembourg financial service industry regulator : www.epsf.lu

1. Contact

Pascal Ortega — 2012-03-14T16:24:02Z

EP Services SA
18-20 rue Michel Rodange,
L-2430 Luxembourg
Tél : 00 352 22 00 26 - info@epservices.com

1. Advantages offered by Luxembourg

Pascal Ortega — 2012-03-14T16:23:47Z

Luxembourg is located at the heart of Europe, and is easy to get to by car, train or plane.
The Grand Duchy of Luxembourg is a constitutional monarchy. Its political and social environment is known for its great stability.
Luxembourg, because of its cosmopolitan population, is multilingual.
Luxembourg has seen its star rise because of its leaders' speed of response. They have always been quick to react and have often been proactive in grasping opportunities arising in the world of business.
Luxembourg's tax and social security policies are favourable to business, while observing EU rules.
Luxembourg is a magnet for those with high skills who want to blossom in a welcoming environment.

2. Advantages offered by EP Services

Pascal Ortega — 2012-03-14T16:23:35Z

EP Services is a company independent of any financial group.
Its shareholders and directors are natural persons of good reputation, university lecturers, and financial experts accredited to the Luxembourg courts.
The staff of EP Services is made up mainly of university graduates.
EP Services provides high value-added services thanks to its huge experience in financial engineering and is respected for its professional approach and its creativity.
Each client is served by a dedicated "financial engineer".
EP Services prides itself on listening carefully to its clients and on its absolute determination to provide service of the quality expected.
Clients are received in prestigious premises.

1. Advantages of PFS domiciliation

Pascal Ortega — 2012-03-14T16:23:35Z

Control and security for clients

A PFS (Professionnel du Secteur Financier) – a regulated financial services industry entity – is recognised by accreditation received from the Ministry of Finance.

Each PFS firm is supervised by the CSSF (Commission de Surveillance du Secteur Financier) – the Luxembourg financial services industry regulator – which supervises all PFS regulated financial services industry entities, including banks.

To qualify for this status, PFS financial services industry entities must implement internal control systems, have an internal auditor and submit annually to an independent audit that reports to the CSSF.

This regulatory system assures clients that the firm meets the requirements of national and international laws, regulations and directives of its profession. It also reinforces the trust that is needed in the world of financial affairs.

Professional confidentiality

Only PFS regulated professionals are protected by article 41 of the Law of 05 April 1993 which regulates professional confidentiality for Finance Industry Professionals, including banks which call it banking secrecy.

Quality clientele

All clients value dealing with service providers that only enter into business relationships with clients that they know well and whose funds have come from honest sources.

No client wants to see the name of their service provider featuring in the media because they have dealt with doubtful clients.

Every client of a PFS regulated finance professional fulfils strict criteria on identifying the ultimate beneficiary and the origin of the funds, this being one of the main obligations that regulated finance professionals must adhere to.

1. Buy your company online

Pascal Ortega — 2012-03-14T16:23:21Z

Choose your company from the list of available companies shown in the list below.

List of companies available:

AGENCE SK Sàrl
4A, Rue de l'Ouest
L-2273 Luxembourg

Capital : 12.500,00 €
N° de TVA : LU21499055
Autorisation de Commerce
N° RCS : B122.185

CLERVAUX PARTICIPAT IONS S.A.
18, rue Michel Rodange
L-2430 Luxembourg

Capital : 175.000,00 €
N° RCS : B 72.188

SARTAY FINANCE Sàrl
18-20, rue Michel Rodange
L-2430 Luxembourg

Capital: €12,500.00
N° RCS: B116.577

Does one of these companies interest you? Contact us at: info@epservices.com

Europe/Asia tax passport

Pascal Ortega — 2012-03-14T16:23:01Z

Asia has seen the greatest growth for many decades now.

In spite of the profound imbalances from which the world suffers, and which can only be rebalanced with serious disruption, Asia will remain the main area of economic growth in the 21st century.

Many companies already operate and many more want to operate in this region that has such attractive prospects. Many companies have chosen and still choose Hong Kong as the base for expanding their activities in Asia.

Similarly, over the last few years, many Asian companies have acquired or set up businesses in Europe.

Luxembourg has signed a double tax treaty with Hong Kong, which is currently the most favourable in the world.

Luxembourg is therefore the ideal place to set up a SOPARFI mixed holding company to take full advantage of this tax treaty. This is true both for European companies looking for a tax passport to Asia and for Asian companies looking for a tax passport to Europe.

A tax passport valid not only for SMEs but also for European and Asian groups.

Hong Kong, an economic hub and a financial centre

Hong Kong (hereafter HK) based its development on an economic, legal and tax system created by the British, using very cheap immigrant (mainland China, Vietnam and the Philippines) labour, in a deep-water port capable of taking the largest tonnages and in an ideal location as a gateway to a China that was then closed.

Though several of its advantages – deep-water port, gateway to a China that is now open – are running into stiff competition from Shanghai and other coastal cities, HK still has a number of advantages, amongst which are:

A guarantee – which the guarantor finds very convenient – from China that it will retain a capitalist economy in this 'special zone'.
A tried and tested legal system of the type found in the English-speaking world.
A favourable tax regime.
It is multilingual in English, Cantonese and Mandarin.
A leading financial centre in Asia.
Many banks, financial services businesses and legal firms.
A respected economic centre. The ‘Made in Hong Kong' image is still well-known.

All these advantages make HK a place that counts, and will continue to count, for doing business in China and Asia.

Hong Kong is an ideal centre for doing business in Asia

As a result of these advantages, new entrepreneurs who want to do business in Asia are daily setting up HK companies as bases for expansion into Asia.

On top of these advantages, there are two major additional ones:

A HK company pays tax at 16.5% on its taxable income which is limited, on the territoriality principle, to income made in HK only. This situation means that a HK company can fulfil the conditions of article 166 LIR and benefit from the parent-subsidiary directive, with the result that its dividends will be exempt from Luxembourg tax.
A HK company does not need to withhold tax at source from the dividends that it distributes.

The tax treaty signed between Hong Kong and Luxembourg (HK/LUX treaty)
http://www.impotsdirects.public.lu/...

This treaty, based on the OECD model, came into force on 01/01/2008 and was amended on 11/11/2010.

Although the HK/LUX treaty is very comprehensive, only a few very specific points are of interest to companies which are investing at the other end of the world, meaning Asia for European companies and Europe for Asian companies. Dividends

Dividends paid by a Luxembourg subsidiary to its HK parent:

Under the treaty, a Luxembourg company that distributes dividends to its HK resident parent does not need to deduct tax at source if the parent company has a holding of greater than 10%.- La société ‘mère' à HK n'est pas taxée sur ces dividendes (revenus non réalisés à HK)
The HK parent company is not taxed on these dividends (the income does not arise in HK).
The HK parent company distributes these dividends without deduction at source (no deduction at source in the HK tax system).

Dividends paid by a HK subsidiary to its Luxembourg parent:

HK companies are not required to withhold tax at source, so they can distribute dividends to their Luxembourg parent without deducting tax at source.
HK companies that distribute dividends to their Luxembourg parent companies benefit from parent-subsidiary treatment (art. 166 LIR) such that these dividends are exempt from Luxembourg tax in the hands of the parent (SOPARFI).

The advantages of the HK/LUX treaty compared to other treaties signed by HK derives from the fact that tax exemption for dividends depends on having a minimum 10% holding (instead of the usual 25%) with no minimum ownership period (usually an uninterrupted period of 12 months is required).

Interest

In all cases, interest is paid without deduction at source..
It is taxed in the hands of the ultimate beneficiary (companies' tax rate).

Royalties

A 3% deduction at source applies in all cases (instead of 5% in all other treaties signed by HK).

Capital gains

Capital gains, as per the OECD model, are taxable in the hands of and in the country of the structure that realises the capital gain.

If a HK company makes a capital gain on the sale of its Luxembourg subsidiary, the capital gain is taxable in HK. As this is income arising abroad, it does not form part of the tax base.

If a SOPARFI Luxembourg mixed holding company makes a capital gain on the sale of its (greater than 10%) subsidiary in HK, the gain is taxable in Luxembourg. Since the HK company is a qualifying company under article 166 LIR, the capital gain does not form part of the SOPARFI's tax base.

We should note that the treaty does not provide for exclusion for SPFs investment companies, or SIFs, etc.).

Cross-border transfers of head office

Pascal Ortega — 2012-03-14T16:23:01Z

Company mobility is now commonplace, at least within the EU.

Company mobility within the EU, which has so often been confirmed by European case law, must take three different regimes into account – that of the English-speaking countries which is based on the system of incorporation, that of countries who use the control criterion, and finally countries which use the head office criterion.

While "cross-border transfers of a company's head office" may have become commonplace, that does not mean that a "change of a company's nationality" is not a very complex operation, from both the legal and tax angles, which needs to be conducted with the greatest care.

The reasons for which a company might wish to move might be related to its directors moving between countries and/or looking for legal or tax advantages for the company.

Luxembourg law has provided, since the Law of 07/09/1987, for "Société Anonyme" public companies to change nationality provided the shareholders agree unanimously (art 199, Law of 1915). A similar provision has been introduced for SARL private companies (art 26, Law of 21/04/1928). Article 159 of the Law of 1915 provides that Luxembourg law applies to companies formed abroad if the company's central administration is in the Grand Duchy of Luxembourg.

From a legal standpoint, the change of nationality is neither a dissolution nor the formation of a new company, but instead a change of registered office occurring as a result of a change in the Articles of Incorporation. Specifically, an EGM must unanimously resolve to change the company's head office, and have it struck off the register of companies in its country of origin. A notarised deed, executed in Luxembourg, is needed to modify the Articles of Incorporation for Luxembourg law and the notary will take care of registration at the Commercial and Companies Registry and will place a public notice of the deed in the "Mémorial" – the Luxembourg official Gazette.

From the tax standpoint, a company is a taxpayer liable, in the country in which it is established, to tax on its worldwide income. Striking a company off the register of companies does not absolve it from paying all taxes due at the date of the striking off (including unrealised capital gains). For the country that it is leaving, the striking off is equivalent in tax terms to a liquidation.

If the country that it is leaving has a double tax treaty with the Grand Duchy of Luxembourg, the tax is always due in the country in which the company's "central administration" is located.

To become taxable in the Grand Duchy of Luxembourg, in accordance with the tax treaties, not only must the head office be transferred to Luxembourg, but the central administration (substance and business) must also be transferred, failing which it will still be taxable in the country it is leaving.

The arrival of a company formed abroad, by its head office being transferred to the Grand Duchy of Luxembourg, is treated as the formation of a new Luxembourg taxable entity.

The advantages attaching to SOPARFI apply immediately to the transferring company if the Luxembourg notarised deed recording its arrival has amended the company's corporate object appropriately.

Securitisation

Pascal Ortega — 2012-03-14T16:23:01Z

To explain this complex concept simply, it is best to give an example:

A bank has granted many loans and wants to raise cash to grant new loans. A possibility is to borrow more, if it can, but the new loans granted will be aggregated with the previous ones and will raise its risk level (supervised by the authorities).

Out of prudence, our bank decides to make use of securitisation.

It starts by setting up an SPV* (a company) *SPV = Special Purpose Vehicle

It sells this SPV some of the receivables (loans) that it granted to its clients.

To be able to pay the bank, the SPV invites investors to subscribe capital.

The investors subscribe for the SPV's shares (it is a company).

Using the investors' money, the SPV pays the bank for the receivables (loans) that it has bought.

The benefit for investors: the return on the loans is higher that the interest on deposits.

The benefit for the bank: it receives the cash it needs to keep on lending. In addition, it takes a commission on the sale of the SVP's shares and it receives management commission from the SPV because it still administers the loans that it has sold on behalf of the SPV. All these new additional types of income count as "risk-free" income.

Background

Luxembourg was slow to introduce securitisation into its financial marketplace. It did so in the Law of 22/03/2004.

Securitisation had been carried out in the USA since the 1960s and France introduced its legislation in 1988.

Although Luxembourg may have been a latecomer, it learned from the experience abroad, so Luxembourg's legislation is particularly well thought out and very well-suited to the needs of its financial marketplace.

We should observe as a matter of interest that the technique of securitisation is deeply implicated in the toxic products developed by US banks, based on "sub-prime" loans (low quality real estate loans). It could be said that the problem is not with the technique, it is the way unscrupulous financiers have used it that makes these products toxic.

A short securitisation glossary

Securitisation, although described simply above, is a complex operation. It uses a special vocabulary that you need to know before you can understand the subtleties of this technique.

Assignor : the company (bank or other institution) which assigns the receivables (or other assets) to the open-ended investment company (the securitisation vehicle).
Creditor : the person or company whose debt has been securitised.
Custodian :company (bank or other) responsible for keeping the documentation evidencing the existence of the securitised assets (for example: receivables).
Administrator :company responsible for administration (recovering the principal and interest) of the receivables (or other income if other assets are securitised). This may be the assignor (bank).
Originator : company originating the securitised receivable (often the assigning bank).
Liquidity reserve: amount kept back by the securitisation vehicle to meet payments (commission) when they fall due, but not for covering defaults (non-payment).
SPV : Special Purpose Vehicle or Company (SPC) is the generic name (irrespective of the structure's form) of the vehicle that buys the securitised assets from the assignor and issues the securities bought by the investors.
Senior stock: securities, regardless of form, payment of which takes priority over all other payments. These securities therefore have the lowest risk, and also the lowest return.
Junior stock: securities, regardless of form, payment of which is subordinated to all other payments. These securities have a higher risk.

Illustrative diagram of a securitisation operation

Diagram

Assets that can be securitised

Some of the assets most commonly used for securitisation are:

private mortgage loans (RMBS) Residential Mortgage Backed Securities
commercial mortgage lending (CMBS) Commercial Mortgage Backed Securities
bonds (CBO) Collateralised Bond Obligations
business loans (CLO) Collateralised Loan Obligations
miscellaneous debts (CDO) Collateralised Debt Obligations
commodity options (CCO) Collateralised Commodity Obligations
real estate (REA) Real Estate Assets
business cash flows (WBS) Whole Business Securitisation.

Transferable securities issued by the securitisation vehicle

SPVs can issue various types of transferable security:

shares or units in the SPV
bonds with the following characteristics: floating rate, rate indexed on the return on the securitised assets, subordinated to securitised risk, etc.
hybrid products such as: bonds convertible into other securities issued by the SPV, a "mezzanine" package made up of shares and bonds issued by the SPV, etc.

Securitisation in Luxembourg (Law of 22 March 2004)

a) Definition and comments

"Securitisation is an operation by which a securitisation body, in the form of a company or a fund (managed by an investment company) acquires or accepts, directly or through the intermediary of another body, the risk arising on receivables, and other assets or on commitments accepted by third parties or inherent in all or part of the activities carried out by the third parties, through issuing transferable securities, the value of or return on which depends on these risks".
As stated, since the Luxembourg Law of 22/03/2004 is based on experience learned abroad, it allows a very wide range of assets to be securitised: movable or immovable property, tangible assets, intangibles or those simply linked to or inherent in third-party commitments. The law contains no restrictions on the nature of the securitisable rights, risks or assets. The law even allows securitisation of business activities providing they have certain and reasonable intrinsic value or that they generate future income streams.

b) Securitisation vehicles

The law provides for two types of securitisation vehicle:

Luxembourg limited companies (SA, SARL, SCA, SCopSA) having as their corporate object the acquisition of securitisable assets and the issue of securities representing those assets.
A securitisation fund (managed by an investment company) without separate legal personality (assets owned in common).

Each of these two vehicles can be formed as a single unit or with many compartments. The risks are restricted to compartments individually, and a single compartment can be liquidated without any impact on the other compartments.

Depending on its form, its requirements and the structure of its equity and liabilities, each SPV can issue transferable securities, as stated above, which can be individually registered or held on share accounts, and are freely tradable and transferable. The securities can be listed, subject to CSSF approval.

c) Formation permit

The formation of a securitisation vehicle requires CSSF approval if the vehicle is to "continuously" issue transferable securities intended for the general public. This is to protect savers.

d) Tax treatment of securitisation operations

The tax treatment differs depending on the particular form of the securitisation vehicle.

Securitisation funds have the same beneficial tax treatment as FCPs (Fund Communs de Placement) – mutual funds – except for the registration tax, which is not payable by securitisation funds. Distributions made by funds are not subject to any deduction at source, and are not taxable in Luxembourg for non-residents.
Securitisation companies are not subject to wealth tax. They are taxed at the normal companies' rate. All this income, without exception, is taxable at the standard rate. The company can, however, deduct from its taxable income all its expenses including all distribution commitments that it makes to its investors. These distributions, irrespective of how they are described, are treated as interest paid to the investors, and are therefore deductible from the tax base. As a result, securitisation companies will only be taxed on the income that they do not distribute, or which they do not commit to distribute, to their investors. There is no deduction at source in Luxembourg on income paid to non-resident investors.
Since securitisation companies are taxable at the standard rate, they have the benefit of tax treaties, of the parent-subsidiary Directive and of the interest and royalties Directive.

Securitisation companies are not eligible for SOPARFI (art 166 LIR) treatment and they are exempt from VAT.

e) Borrowings ratio

Securitisation vehicles have no restriction on the borrowing ratio, which enables them to finance themselves without having to raise large amounts of equity.

Professional confidentiality

Pascal Ortega — 2012-03-14T16:23:01Z

Professional confidentiality in a few words

In Luxembourg's regulated financial services industry (PSF), professional confidentiality is governed by article 41 of the Law of 05 April 1993.

When a bank claims professional confidentiality, it is called 'bank secrecy' but the legal provisions governing professional confidentiality are the same for all financial services industry professionals.

The Grand Duchy of Luxembourg has a long tradition of upholding and safeguarding privacy. There is no danger of any change in the situation; it is an integral part of the country's culture.

Confidentiality is still a national value, even though globalisation may oblige all countries to step up their joint efforts against crime and laundering the proceeds of crime.

The Grand Duchy of Luxembourg unflaggingly participates in this effort, while maintaining a firm position on safeguarding privacy.

Confidentiality is therefore still absolute for everyone conducting financial transactions in the Grand Duchy of Luxembourg with clean money, and in compliance with the laws and regulations.

The Law of 05/04/1993 http://www.legilux.public.lu/rgl/19...