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Securitisation

Why Luxembourg

Luxembourg offers better conditions than other European countries, compared to the definition of securitisation in the European legislation, the Luxembourg Securitisation Law provides a rather broad and flexible approach. 

Since the Luxembourg Securitisation Law was adopted in 2004, the Luxembourg securitisation market continues to show a positive trend with nearly 2,300 vehicles created. By the end of March 2021, we had identified more than 1,300 active securitisation vehicles under the Luxembourg Securitisation Law of 22 March 2004. This proves that Luxembourg remains as leader for securitisation transactions in Europe.

While the EU Securitisation Regulation, Capital Requirements Regulation (CRR), and Solvency II Directive require that the securities issued by a securitisation vehicle transfer credit risk and are split into multiple tranches, the Luxembourg Securitisation Law does not contain such restrictions. 

As there is no limitation on the investor basis, investments into a Luxembourg securitisation vehicle are open to all types of investors.

Key topics

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Securitisation in Luxembourg video

The Luxembourg Securitisation Law

The Luxembourg Securitisation Law offers an attractive regulatory framework for setting up workable securitisation structures in Luxembourg at reasonable cost. The key features which make the Luxembourg Securitisation Law attractive in practice are summarised as follows:

  • Enormous flexibility in entity establishment from a cost and structural point of view;

  • Legal certainty;

  • Broad bankruptcy remoteness mechanisms;

  • Qualified service providers in Luxembourg;

  • Tax neutrality.

New Luxembourg Securitisation Law

Such enormous flexibility is also the result of having studied the different securitisation transactions effected on the Luxembourg market since the establishment of the Securitisation Law. In addition to the attractiveness of the Luxembourg Securitisation Law, the Luxembourg market offers some soft factors which should not be underestimated:

  • High degree of expertise of market players (banks, corporate service providers, auditors, etc.);
  • Large range of market players already present in Luxembourg;
  • Liberal tradition in the sense of more flexibility compared to other European countries; and
  • Proximity and accessibility of the regulator (precisely for regulated securitisation vehicles).
atad securitisation

Focus on the current status of the topic

The Luxembourg Securitisation Law of 22 March 2004 historically allowed securitisation companies to achieve tax neutrality as the commitments towards shareholders and creditors were fully tax deductible without any limitations.

However, since the transposition of the Anti-Tax Avoidance Tax Directive 2016/1164 of 12 July 2016 into Luxembourg tax law as from 1 January 2019, securitisation companies can be subject to interest limitation rules that can jeopardize their tax neutrality.

Focus on the challenges/issues inherent to the topic for the clients

When setting up a securitisation structure, the clients and their advisors should look at the different drivers that can influence the choice of the securitisation structure that are mainly the following:

  • the need or not to get treaty access to mitigate any tax leakage in the jurisdictions of the investments;
  • the possibility or not to benefit from one of the exemptions of the interest limitations rules provided by the law that has transposed the Anti-Tax Avoidance Tax Directive 2016/1164 of 12 July 2016 into Luxembourg tax law;
  • the nature of the expected income and gains to be derived by the securitisation vehicle;
  • and last but not least the way the client expects the investors will finance the securitisation vehicle;

How PwC can help

PwC can help clients to choose the most tax efficient securitisation structure among the different alternatives that are offered by the Luxembourg Securitisation Law of 22 March 2014 (i.e. securitisation companies, securitisation companies with fiduciary arrangements or securitisation funds) in order to maintain a tax neutrality at best or at least to mitigate the adverse tax consequences arising from the introduction of the interest limitation rules.

securitisation survey

Following the positive feedback we received about our first survey on the Luxembourg securitisation market in 2020, we have asked your opinion again in 2021 and we are now happy to present the results of this year’s survey.

More information

eu securitisation

Since 1 January 2019, the EU Securitisation Regulation (the “Regulation”), is applicable to EU Securitisation transactions whose securities (or other securitisation positions) are issued on or after that date.

More information

digital transformation

Focus on the current status

We expect digitisation to remain one of the top priorities for the Luxembourg financial centre for the upcoming years. Many banks and other financial services companies have already started their transformation and more will follow suit.

Focus on the challenges

Digital transformation can lead to new opportunities, but new digital challenges need to be tackled. In securitisation, one of the biggest challenges is the complexity of the business.

How PwC can help

Our team can concentrate on what really matters: auditing and looking at the complexity of your business. As a key enabler, technology is at the heart of the PwC audit process. We continually invest in emerging technologies to bring additional value to our clients. Our specialised tools enable us to produce and share meaningful results and new insights.

who we are

Who we are?

Our PwC Luxembourg Securitisation Core Group consists of 16 Partners & Directors leading more than 80 Securitisation experts. Whatever your requirements, our dedicated audit, tax and consulting teams have the necessary experience to guide you through the realms of the Luxembourgish market as well as local and European regulations and will make achieving your goals their number one priority.

Our services

Assurance

Our global presence allows us to provide all audit and audit related services for special purpose entities used for securitisations and structured finance transactions, such as:

  • Statutory and contractual audits
  • Limited Reviews and agreed-upon procedures
  • Audit related services, such as accounting advice and support on capital market transactions

In every case, the PwC audit and audit related service is underpinned by our deep industry knowledge, wide international experience, and global network of skilled professionals.

Tax

  • Review of the existing securitisation structures from a corporate income tax (i.e. impact of the interest limitation rules) and VAT perspective to identify the areas of risk and propose remediation actions.
  • Assisting clients to choose the most tax efficient securitisation structure among the different alternatives that are offered by the Luxembourg Securitisation Law of 22 March 2004.
  • Provide tax compliance services like preparing and filing corporate tax returns for securitisation companies, FATCA and CRS reporting obligations, VAT registrations, preparing and filing VAT returns.

Advisory

  • Review of the existing securitisation structures from an eligibility perspective under the Securitisation Regulation and UCITS Directive

  • Assist Management Companies and AIFMs to implement procedures and processes when the funds they manage invest in securitisation structures

  • Assist on CSSF filings in relation to the amended Article 4 of the Securitisation Regulation

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Contact us

Holger  von Keutz

Holger von Keutz

Partner & Securitisation Leader, PwC Luxembourg

Tel: +352 49 48 48 2383

Xavier Balthazar

Xavier Balthazar

Partner, PwC Luxembourg

Tel: +352 49 48 48 3299

Luc Petit

Luc Petit

Partner, PwC Luxembourg

Tel: +352 49 48 48 3148

Markus Zenz

Markus Zenz

Partner, PwC Luxembourg

Tel: +352 49 48 48 2647

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