1.ELBIS VENTURES S.A. A Luxembourg platform for IP assets
2. Luxembourg quick overview Typology of taxes Direct taxes Corporate income tax : Municipal business tax: Wealth tax:22,47% 6,75% (Luxembourg-City) 0.5% on net asset valueIndirect taxes Contribution tax: fixed amount (negligible) Value Added Tax: 15% (lowest rate in the EU)Some Luxembourg entities are subject to the above taxes whereas others are legally exempt. 3. Luxembourg quick overview Tax typology of companies Taxable entities: Commercial company Holding company (SOPARFI) Venture Capital Fund (SICAR) Securitization company (SV) Exempt entities: Family wealth management company (SPF) Specialized Investment Fund (SIF) 4. Luxembourg IP tax regime - summaryLuxembourg IP structure - Summary 80% of all income derived from IP is exempt from corporate income tax and municipal business tax applies to royalties and gains on sale; applies to a large list of IP items; effective tax rate maximum 5.84%, possibly lower; tax efficient exit routes (i.e. no tax charge on exit). 5. Luxembourg IP tax regimeConditions for eligible IP IP must be created/acquired after 31.12.2007 3 categories of IP eligible: Industrial property: o Trademarks o Patents o Designs and Models Artistic and literary property o Authors right (only limited to software) Domain names IP must not be acquired from related party 6. Luxembourg IP tax regime Other features Double tax treaties with 65+ countries, all with reduction on w/tax rate on royalties Amortization of IP can be a deductible expense reducing effective tax rate further Straightforward valuation of IP (based on historical cost) is allowed for small companies Luxembourg IP SPV will require business license given to Luxembourg residents only 7. Luxembourg the Securitisation Vehicle Created by law of 2004 Can be regulated or unregulated depending on frequency of issuance of securities About 900 entities currently set up under law, overwhelmingly unregulated Allows for the creation of compartments which enable the strict segregation of the rights of creditors and investors Tax treatment o Subject to corporate income tax and municipal business tax o Not subject to net wealth taxo Access to all tax treaties that Luxembourg has concluded o Subject to VAT; potential to recover input VAT (although not in every case) 8. Elbis Ventures Proposition (I) Is owned by 2 Luxembourg investors Is set up as a securitisation vehicle and will have multiple compartments that are completely segregated from each other Each compartment will acquire - as a true third party - IP from original holder in exchange for hybrid debt instruments Will exploit IP and receive (royalty) income from licensees as a true third party 9. Elbis Ventures Proposition (II) Will pay Luxembourg income tax & fees and costs; then distribute remaining income as interest on debt instruments Will pay all fees and costs out of income from IP, with possible exception of legal fees related to IP Will have put / call option with original holder in respect of IP Will exit through sale of IP to third party (any capital gain will qualify for the Luxembourg IP tax regime) or exercise of put option 10. Elbis Ventures S.A. Client AClient BLuxembourg investorsClient CClient D100% sharesClients transfer IP to compartment for debt instrumentsElbis Ventures S.A. Compartment ACompartment BCompartment CEach compartment holds IP for one clientLicense usersCompartment DGrant licenses; receive income; pay fees, distribute interest 11. Elbis Ventures Debt instruments Each compartment will in exchange for acquisition IP issue instruments that are considered debt for Luxembourg purposes Instruments could be considered as equity in the hands of the holder, in particular US holders Long duration; subordinated to other creditors; redeemable at option of Elbis, not of holder Interest will in principle track income, but flexibility offered No Luxembourg w/tax on interest payments 12. Elbis Ventures Costs Our aim is to keep total Luxembourg costs, excluding taxes, to a maximum of 3.25 % of royalty income, with economy of scale Praxis will as administrative and domiciliary agent take a fee of 2% of royalty income with a minimum and a maximum The Luxembourg investors will take a fee of 0.5% of royalty income with a minimum and no maximum In principle no Luxembourg costs for clients at entry and exit Legal costs related to IP (e.g. IP challenge) to be discussed 13. Elbis Ventures Advantages for clients Tackles many anti-avoidance issues No need for Luxembourg business license Shared costs make solution cheaper Straightforward set-up and exit 14. Elbis Ventures Comfort for clients Annual accounts will be audited Luxembourg tax ruling for treatment of IP income and interest on debt instruments Board of Directors consists of the Luxembourg investors and 1 Praxis individual Praxis Luxembourg S.A., which will act as administrative agent, is a regulated service provider in Luxembourg 15. And for more information, please contact us: PRAXIS Luxembourg S.A. 55 avenue Pasteur L-2311 Luxembourg T: +352 27 47 91 F: +352 26 20 01 96 E: email@example.comDisclaimer: Praxis Luxembourg S.A. does not advise on any tax requirements or issues consequently the information in this presentation should not be used in any transaction without the prior guidance and advice of a professional Tax Advisor.