Funds and other investors typically hold investments through holding companies, which are very frequently in Luxembourg. Extracting profits from a Luxembourg holding company requires the use of an instrument that gives the Luxco a deduction against its profits and retains the underlying tax treatment for investors. This can be achieved by means of CPECs or convertible loans and the use of these instruments is on the rise. CPECs can trigger the UK’s deeply discounted securities regime, which mean that returns are treated as income unless they are structured to satisfy an exemption.
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Funds and other investors typically hold investments through holding companies, which are very frequently in Luxembourg. Extracting profits from a Luxembourg holding company requires the use of an instrument that gives the Luxco a deduction against its profits and retains the underlying tax treatment for investors. This can be achieved by means of CPECs or convertible loans and the use of these instruments is on the rise. CPECs can trigger the UK’s deeply discounted securities regime, which mean that returns are treated as income unless they are structured to satisfy an exemption.
If you are not a subscriber, subscribe now to read this content.
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