Agefi Luxembourg - avril 2025

AGEFI Luxembourg 14 Avril 2025 Economie / Fiscalité S ur invitationdu gouverne- ment du royaume duCam- bodge, S.A.R. leGrand-Duc héritier et leVice-Premierministre, ministre desAffaires étrangères et duCommerce extérieur, ministre de laCoopération et de l’Action humanitaire, Xavier Bettel, ont ef- fectué du 29mars au 2 avril 2025 une visite de travail au royaume du Cambodge. L’objectif de cette visite a été de renforcer les relations bilatérales entre le Grand- Duché de Luxembourg et le royaume du Cambodge et d’explorer de nouvelles op- portunités de collaboration, notamment à travers la coopérationaudéveloppement, mais également dans les domaines poli- tique,ducommerceetdel’investissement. Danscetteoptique,lavisiteacomprisune série d’entrevues bilatérales avec des membresdugouvernementcambodgien, des échanges avecdes représentants de la sociétécivile,desvisitesdupatrimoinecul- turel cambodgien ainsi que des visites de projetsdecoopérationaudéveloppement. Entrevues politiques et échanges avec la société civile S.A.R.leGrand-DuchéritieretleVice-Pre- mier ministre Bettel ont tout d’abord été accueillisparleVice-Premierministre,mi- nistredesAffairesétrangèresetdelaCoo- pération internationale, Prak Sokhonn, pour une entrevue bilatérale suivie d’un déjeuner de travail. Au cours de leur visite, S.A.R. le Grand- Duc héritier et le Vice-Premier ministre Bettelontensuiterencontréleprésidentdu Sénat, Hun Sen, le Premierministre, Hun Manet, le Vice-Premier ministre, Sun Chanthol, le ministre de l’Agriculture, Dith Tina, la ministre du Commerce, ChamNimul,leministreenchargedudé- minage, Ly Thuch, ainsi que le président de la Chambre de commerce, Neak Oknha Kith Meng. S.A.R. le Grand-Duc héritier et le Vice-Premier ministre Bettel ont également pu présenter leurs condo- léances au président du Sénat après la mort de son frère. Les différentes entrevues politiques ont permis de discuter des secteurs d’intérêt mutuel,notammentenmatièredecoopé- ration au développement, ainsi que des derniers développements internationaux et régionaux, tels que les guerres en Ukraine et à Gaza, la situation politique en Asie ou encore les relations de l’UE avecl’ASEAN.Ladélégationluxembour- geoise a également tenu à rencontrer des représentantsdelasociétécivileetdesins- titutionsacadémiquesprésentesauCam- bodge dans l’objectif de mieux comprendrelesdéfisrencontrésparlaso- ciété cambodgienne, et en soulignant par là le rôle fondamental de la société civile dans le développement dupays. Dans ce contexte, S.A.R. le Grand-Duc héritier et le Vice-Premier ministre Bettel ont ren- contré des acteurs actifs dans les do- maines de la gouvernance, de l’inclusion socio-économique, la préservation de la paix, des droits humains et en particulier des droits des femmes. Coopération audéveloppement La visite de travail a notamment été l’oc- casionpourleministreXavierBetteldesi- gner, enprésence de S.A.R. leGrand-Duc héritier, unaccordgénéral de coopération entreleLuxembourgetleCambodge,qui pourra servir comme base pour une coo- pération bilatérale renforcée dans plu- sieurs secteurs. Lors d’une cérémonie de signature enprésence de S.A.R. leGrand- Duchéritier,deLyThuch,ministreetvice- président de la «CambodianMineAction and Victim Assistance Authority», ainsi que de Jo Scheuer, coordinateur résident del’ONUauCambodge,leministreBettel aensuitepuformaliserunecontributionà hauteurde2millionsd’eurosenfaveurdu projet «Clearing for Results» dans le sec- teurdudéminage,cecienpartenariatavec leProgrammededéveloppementdesNa- tions unies (PNUD). « Le Luxembourg attache une attention particulière au déminage. En effet, des millions de mines polluent encore cer- taines régions rurales du Cambodge et continuent - même plusieurs décennies après lafindes conflits - demutilerdes ci- vils, en particulier des agriculteurs et des enfants.Àmoyenetàlongterme,ledémi- nage contribue également au développe- ment socio-économique des pays concernés, puisque cela permet de resti- tuer une terre sans risque aux habitants, d’assurer la sécurité et de favoriser ainsi le développement économique. Nous sommesdoncravisdepouvoircontribuer aux efforts collectifs en faveur d’unCam- bodgesansmines»,adéclaréXavierBettel lors de la signature. Lavisitede travail àPhnomPenha égale- ment permis à S.A.R. le Grand-Duc héri- tieretauministreBetteldevisiterlecentre de réhabilitation «Kien Khleang» où sont traitéesdesvictimesdeminesantiperson- nel, ainsi que l’hôpital pour enfants «Kan- thaBopha»,fondéen1992enréponseaux besoins urgents en soins pédiatriques après des années de conflit. Enfin,ladélégationluxembourgeoiseavi- sité le centre de formationprofessionnelle «Mith Samlanh», qui est soutenu par la Coopérationluxembourgeoiseparlebiais delaFondationJuniclair.Lecentredefor- mation, créé par l’ONG Friends interna- tional, est dédié à la réintégration sociale de jeunes marginalisés, notamment des enfants de rue, des toxicomanes ou des travailleuses du sexe. ministère desAffaires étrangères et européennes, de la Défense, de la Coopération et duCommerce extérieur Renforcement des relations entre le Luxembourg et le Cambodge ©MaisonduGrand-Duc S ecuritizationvehicles canbe a powerful vehicle for carrying out third-partydebt invest- ment, but recent structuring op- tions have introduced transfer pricing considerations thatwere previously overlooked.Market par- ticipants shouldbemindful of transfer pricing regulationswhile optimizing their strategies to leve- rage the flexibility of these vehicles. Adhering to the arm’s lengthprin- ciple canhelpmanage associated risks. Proactive collaborationwith tax and transfer pricing experts is crucial for ensuring compliance and achieving financial objectives. Transfer pricing refers to the pricing of transactions, suchas loans andgoods, be- tweenrelatedentities.Itplaysacrucialrole in ensuring that transactions between these entities are conducted at arm’s length, reflectingmarket conditions. Securitization involves pooling various types of financial assets (such as loans, mortgages, or receivables) and convert- ing them into securities that can be sold to investors (usually in the formof notes). The securitization vehicle can be struc- tured in different legal forms (corporate, partnershipand fund) andwithdifferent compartments achieving legal segrega- tion of each asset and corresponding lia- bility. The underlying assets of a securitization vehicle are third-party in- vestments. Inprinciple, securitizationve- hicles should not actively manage their assets, but “active management” is per- mitted for “debt securities, debt financial instruments, or claims,” provided that there is no offer to the public. Usually,Luxembourgsecuritizationvehi- cles are set up as orphan. The term “or- phan” refers to the fact that the vehicle is typically set up in such away that it is not owned or controlled by the originator of the underlying assets. The securitization vehicleisoftencontrolledbyafoundation (suchas aDutch Stichting ), rather than the originator.Thisownershipstructurehelps to isolate the vehicle from the originator’s risks and liabilities, enhancing the bankruptcy remoteness of the vehicle. Some securitization vehicles in Luxem- bourgarenotsetupasorphanentitiesbut asinvestmentvehiclesofacreditfund(for example) that contributes to the funding oftheunderlyingdebtinvestments,either with equity, debt, or a mix of the two. This structuringallows for the sameflex- ibility and risk isolation as an orphan se- curitizationvehiclewhile enablingbetter control over the securitizationvehicle by subscribing to its shares. In the context of anorphan securitizationvehicle, transfer pricing considerations are very limited since there are no intragroup transac- tions. On the liability side, the notes will be issued to third-party investors, andon the asset side, investments are carriedout withunrelatedparties aswell.However, whendiscussingnon-orphan securitiza- tion vehicles, transfer pricing considera- tions are more relevant since the notes will be issued to a related party, and therefore, transferpricing rules shouldbe considered. Specific Tax andTransfer PricingConsiderations The interplay of tax, transfer pricing, and securitization vehicles (non-orphan) pre- sents unique opportunities for market players. When setting up a securitization vehicle, one of the first steps is to under- stand what the best type of funding for the given underlying investment would be.Asmentionedabove,thesecuritization vehicle could be fully equity-funded. In that case, therewill be no transfer pricing considerations. However, in some cases, a fully equity- funded securitization structure may not be perceived as flexible as funding with a mix of debt and equity. In this case, it will be important to ensure that the payables (usuallynotes) issuedby the se- curitization vehicle comply with the arm’s length principle. To do so, the se- curitization vehicle should realize an arm’s lengthremuneration tobe retained and seen as the remuneration for the shareholder who injected equity into the structure. It should be noted that, in line with the qualification of the company as a securitization vehicle, the tax implica- tionsrelatedtothearm’slengthremuner- ation should be very limited. Thearm’slengthremunerationwillhighly depend on the categorization (which is linkedwiththeriskprofile)ofthesecuriti- zationvehicle froma transfer pricingper- spective. A functional analysis should be carriedouttoidentifythefunctions,assets, and risks of the securitization vehicle. In addition, the main driver of the transfer pricing categorization will be the type of functions carriedout by the securitization vehicle. Therefore, if the entity will carry out active management activities, more functions shouldbe allocated to it andwe wouldexpectthearm’slengthremunera- tion to be slightly higher than the arm’s lengthremunerationinthecaseofnon-ac- tive management. This is because the functions performed by a securitization vehicle with active management should bemore relevant in the context ofmanag- ing the underlying investments. Furthermore,fromataxandtransferpric- ingpointofview,thearticlesofassociation of the securitizationvehicle and the terms and conditions of the payables should be reviewed: - Articles of Association: Typically, there is a stated intention to distribute the divi- dendsgeneratedbytheprofitofthesecu- ritization vehicle as they arise. This is necessary to reflect the business purpose of the securitization vehicle. - Terms and Conditions of the Payable: If the securitizationvehicle carries onactive management, the payable agreement should allow the reinvestment of pro- ceeds generated from the underlying in- vestment.Inaddition,thepayableshould have the correct risk limitation clauses in line with the transfer pricing categoriza- tion of the entity. It is also crucial to reviewhow the securi- tization vehicle is viewed from a foreign tax point of view. In this respect, leaving an arm’s length remuneration (which is a profitmarginforthesecuritizationvehicle) couldbeseenasfosteringthemarketpres- enceandstatusofthesecuritizationvehicle as beneficial owner and not as a simple pass-through entity. The same applies to activemanagement, which allows the se- curitization vehicle to reinvest and make active decisions on its investments. Securitizationvehicles areanefficient tool for carrying out third-party debt invest- ment. Themain reasons for this are: -Thetaximplicationsarelimitedwhenthe vehicle is set up correctly; - There is wide flexibility in terms of un- derlyinginvestmentsandthepossibilityof ring-fencingbetweenvariousinvestments, thanks to the compartments; - Transfer pricing implications are limited but should always be reviewed; -Activemanagement: The ongoing over- sight and strategic decision-making in- volvedinmanagingtheunderlyingassets within a securitization structure can en- hance the substance of the vehicle, partic- ularly towards foreign countries. Nevertheless, activemanagement should be properly documented (for example, in thenotestotheannualaccounts),anditre- quires additional functions to be carried out by the securitization vehicle, which willimpactitsarm’slengthremuneration. Best Practices for Tax andTransfer Pricing Tax Structuring and Transfer Pricing Documentation:When settingupa non- orphan securitization vehicle, the share- holder shouldmaintain comprehensive documentation to support the best way to structure the funding of the underly- ing investment as well as its transfer pricing position. Thisdocumentationshouldincludeanal- ysesof asset types, a reviewof theunder- lying country of investment (to select the most appropriate funding), and a de- tailedtaxandtransferpricingassessment. In addition, all necessary legal docu- ments should be carefully drafted to in- clude specific clauses that reflect the company’s actual activities—suchas ac- tive portfolio management — ensuring alignment with its functional profile and supporting its transfer pricing position. Regular Reviews: In the case of active management, the securitization vehicle, togetherwithitsshareholder,shouldcon- duct regular reviews of their assets. This includes reassessing asset valuations, pricing arrangements, and risk alloca- tions to ensure alignment with market conditions and regulatory requirements. Regular reviews canhelp identifypoten- tial issues before they escalate into more complex challenges. Conclusion Securitizationvehicles are a staple for car- rying out third-party debt investment. However, while transfer pricingwas pre- viously considered not applicable for or- phaned securitization vehicles, theremay be transfer pricing considerations that should be taken into account for securiti- zationownedbyfunds.Marketplayersin- terestedintheflexibilitythatsecuritization vehicles can offer should consider the transferpricingregulationswhileoptimiz- ing their securitization strategies. By adhering to the arm’s lengthprinciple, they can effectivelymanage transfer pric- ingrisksassociatedwithsecuritizationve- hicles.Proactiveengagementwithtaxand transfer pricing experts will be key to en- suring a robust structure, correct compli- ance, and supporting themarket players’ overall financial objectives. ChiaraPALMIERI,SeniorManager, InternationalTaxandTransactionServices(ITTS) NicolasGILLET,Partner, InternationalTaxandTransactionServices(ITTS) VincentREMY,Partner,PrivateDebtLeader EYLuxembourg Tax, Transfer Pricing and Securitization Vehicles: What’s New?

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