A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

FISCAL AND OPERATIONAL ISSUES

Many instruments are available: • Shares;

• Bonds and convertible bonds;

• Preferred rights;

• Profit participation loans and interest free loans; • Convertible preferred equity certificates;

• Options; • Swaps;

• Preferred equity certificates;

• Etc.

VAT aspect

3.1.5

A significant fiscal aspect is the Value-Added Tax (VAT). The choice of jurisdiction for the investment vehicle, the investment advisory company or the GP can have an impact on VAT, as illustrated hereafter: • FSA regulated investment advisers can be VAT exempted in the United Kingdom; • The management companies established in Luxembourg benefit from a 15% VAT rate charged on the services rendered to them, if no exception or exemption applies which, compared to the 21% VAT rate in Belgium, accounts for a 600 basis point gain on invoices’ gross amount. • Management services rendered to funds located in Luxembourg are VAT exempt under certain conditions. In general financial services are exempt from VAT. Private equity houses are concerned about the investments and the profits they can realise on target investments but should also pay a particular attention on each point of the fiscal structuration stated in this chapter if they want to improve the efficiency of their invest- ments proceeds.

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