The Reserved Alternative Investment Fund (“RAIF”) is a Luxembourgish fund structure that doesn’t need the Regulator’s approval or supervision. With a time-to-market significantly shorter than similar CSSF-regulated structures, the RAIF always needs to appoint an external authorised Alternative Investment Fund Manager (AIFM).
Being managed by an authorised and fully licensed EU-based AIFM, this fund structure benefits from all the passporting advantages offered by the AIFM Directive, through a regulator-to-regulator notification regime. Therefore, the RAIF’s units/shares and interests can be distributed through a marketing passport across Europe to professional investors.
RAIF main features:
The RAIF is substantially based on the well-known regimes for Specialised Investment Funds (SIFs) and Investment Companies in Risk Capital (SICARs). The main similarities are:
- the various legal forms (corporate and contractual) available,
- the absence of limitation in terms of eligible assets and investment policies (SIF-type regime),
- the possibility to set up an umbrella structure with multiple compartments and share/unit classes, and
- full flexibility in the definition of redemption and distribution features;
The tax regime applicable for SIF-type RAIFs:
- full exemption from corporate income tax, municipal business tax and net wealth tax;
- no withholding tax on distributions;
- subject to an annual subscription tax of 0.01% based on its total net assets of the RAIF.
For RAIFs similar to a SICAR, (i.e. which invest exclusively in securities representing risk capital), the SICAR tax regime applies:
- fully subject to corporate income tax and municipal business tax. An exemption applies to income and gains derived from transferable securities, as well as for income on cash held for the purpose of a future investment (for one year only);
- subject to the minimum net wealth tax;
- not subject to subscription tax;
- no withholding tax on distributions.
Stay tuned: next week we’ll tell you how to set up a Reserved Alternative Investment Fund, step by step!