European center for Middle Eastern Financial Structures

Finding forwarding-thinking solutions to your investment and wealth management challenges.

Unlocking new investment horizons

As the prominent and largest wealth management center in the EU, Luxembourg has earned its well-recognized reputation of being a European leader for Middle Eastern financial products, including Islamic finance, alternative investments and wealth management. On top of that, Luxembourg is well-known as a top reputable jurisdiction for private banking solutions. With a supportive regulatory framework and a growing industry ecosystem, Luxembourg is well-positioned to attract Middle Eastern investments.

Luxembourg offers a range of dedicated corporate structures that can be established in a Shariah compliant way, amongst other options. This allows families and high net worth individuals to structure and operate their businesses and assets, as well as manage their estate and succession, while achieving tax and operating efficiency.

Opportunities for Middle Eastern finance in Luxembourg

Access to favorable double tax treaty network
Flexibility of the regulators and tax authorities.
Shariah-compliant Investment structures.
Easy access to key locations such as London, Paris and Zurich.
Knowledgeable human capability.
Extensive experience and optimal location for IF solutions.

How can KPMG Luxembourg help?

Forwarding-thinking solutions for your alternative investments and wealth management challenges.

In recent years, KPMG Luxembourg’s Middle East finance team has gained extensive experience and offers support in:

Structuring of Shariah-compliant financial instruments and investment vehicles
Due diligence checks and risk assessments
Transfer pricing assistance
Valuation services
Tax advice and compliance services
Profit distribution assistance
Assistance with accounting reporting and consolidation
Accounting advice and IFRS transition
Tailored audit services
Liquidation assistance
Design and development of private wealth structures or family offices from tax and regulatory perspective and assisting in the implementation phase

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Building trust in ESG disclosures

Structuring Shariah compliant investment vehicles and setting-up high net worth individual or family office structures

In addition to the numerous Shariah-compliant financial instruments on the Luxembourg market, the Luxembourg legal, regulatory and tax framework also provides a variety of Shariah-compliant investment vehicles which can be chosen depending on the desired investment policy and level of regulation.

SPF

SPF is a perfectly fitting corporate structure specifically designed for private wealth management and family office business which is exempt from regulatory supervision and restrictions. It is established for the acquisition, holding, management and realization of financial assets like shares and other securities, bonds, derivatives, commodities and more.

SPF is eligible for an exemption from Luxembourg corporate income tax, municipal business tax and net worth tax. It is subject instead to an annual subscription tax of 0,25% capped at EUR 125,000 and income received by shareholders from SPF is exempt from Luxembourg withholding tax.

SPF allows to manage private wealth like classic common law trusts and foundations. The structure is designed for passive investment and not interfering in the management of the participations held. The legal flexibility allows to establish different shareholders such as private individuals, patrimonial entities and intermediaries.

Specialized Investment Funds (SIFs)

SIF is a lightly regulated investment fund that can be used for any investment strategy allowing to invest in a wide range of assets. However, it is reserved only for well-informed investors fitting certain criteria established by law. SIF is subject to supervision by the Luxembourg financial regulator (CSSF). SIF is exempt from Luxembourg corporate income tax, municipal business tax, net worth tax and withholding tax. It is subject instead to an annual subscription tax of 0.01% of its net assets.

Reserved Alternative Investment Fund (RAIF)

RAIF is another type of lightly regulated investment funds that is easy and quick to set up and which also benefits from similar tax treatment as the SIF. RAIF can be used for any investment strategy allowing to invest in a wide range of assets. Unlike SIF, which is supervised by CSSF, RAIF is subject to simplified control via its Alternative Investment Fund Manager (AIFM). Similar to SIF, RAIF is exempt from Luxembourg taxes but subject instead to an annual subscription tax of 0.01% of its net assets.

SOPARFI

SOPARFI is an unregulated holding company established for the purpose of optimizing international investments and management of the group (usually foreign subsidiaries). SOPARFI can benefit from Luxembourg double tax treaty network and EU Parent-Subsidiary Directive and enjoy potential exemptions on income received from qualified subsidiaries from corporate and net worth taxes perspective. Interests and royalties paid by SOPARFI are exempt from Luxembourg withholding tax. Dividends, if properly structured, can be also exempt from withholding tax.

In addition, SOPARFI can flexibly manage its holdings and perform commercial activity associated herewith.

Partnership structure (SCS or SCSp)

SCS and SCSp are tax-transparent, non-regulated investment vehicles, exempt from Luxembourg corporate income tax, net wealth tax and withholding tax. Any income instead will be deemed to be realized by its partners and allocated to them on a pro-rata basis. There is a municipal business tax aspect possible, but it is easily manageable in private wealth structures. The SCS or SCSp is not a company and can be set up under Limited Partnership Agreement (LPA) which gives contractual freedom to its partners.

Client stories

Whether you're an individual or institutional client looking to optimize your wealth, you can trust KPMG Luxembourg to help you achieve your goals. KPMG brings insight to every critical challenge and opportunity to help you create an optimal investment structure and improve governance by working together.

Maximizing private wealth

Helping a leading telecom company establish an optimal structure and governance

KPMG Luxembourg is proud to have partnered with a leading global telecom company to take their wealth management to the next level. Through our work together with the ultimate beneficial owner in the Middle East, we've achieved success in multiple projects such as the demerger of the group for future succession planning, restructuring to streamline the group structure and improve governance, and even an annual health check for global substance checks and compliance review.

As we move into 2023, we'll continue to offer our support on large restructurings involving top shareholders of the group, while coordination with various foreign KPMG offices on company's local projects. Our expertise, global network and focus on transparency make us a reliable partner and we're excited to see what the future holds for our partnership. With KPMG Luxembourg, Middle Eastern investors can trust us to provide the same level of service and success for their asset management needs in Luxembourg.

Leading the way in asset management

Empowering a Saudi investment service provider with tailor-made asset management solutions

At KPMG Luxembourg, we understand the importance of expert wealth management. That's why one of the world's largest Saudi investment service providers turned to us for help. Our team of asset management experts and business analysts worked closely with the client to create a custom webportal for their custody and securities services, leveraging our technical expertise to design and develop a platform that met their specific needs.

Working together with other KPMG network firms (Saudi Arabia, Portugal), we were able to provide a tailor-made solution that met the client's needs, including four key portal modules: custody, investment accounting, investment performance, and investment compliance. We led the project through four sprints, delivering a final product that fully met the client's requirements. Our successful collaboration with this major Saudi investment service provider is a testament to our ability to provide expert wealth management services. Whether you're an individual or institutional client looking to optimize your wealth, you can trust KPMG Luxembourg to help you achieve your goals.

Ensuring compliance and efficiency

Helping two Saudi banks develop and implement compliance and reporting processes

KPMG Luxembourg was approached by two leading Saudi banks who needed a comprehensive health check for their FATCA and CRS processes and systems. Our team of experts was brought on board to assess any deficiencies and inefficiencies, and to ensure compliance with regulations.

The project began with an on-site review, where our team conducted a thorough analysis of procedures and systems. We provided training and a remediation report to address any identified weaknesses. The project is ongoing and includes additional review of business specifications and assistance in testing current systems, as well as a proposal for further remediation and implementation of FATCA/CRS due diligence and reporting systems. With KPMG's expertise these banks can have peace of mind that their compliance and reporting processes are in top shape.

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