ELBIS VENTURES S.A.A Luxembourg platform

for IP assets

Luxembourg quick overview Typology of taxes

Direct taxesCorporate income tax : 22,47%Municipal business tax: 6,75% (Luxembourg-City)Wealth tax: 0.5% on net asset value

Indirect taxesContribution 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.

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”)

Luxembourg IP structure - SummaryLuxembourg IP tax regime - 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).

Luxembourg IP tax regime- Conditions for eligible IP

• IP must be created/acquired after 31.12.2007• 3 categories of IP eligible:

– Industrial property:o Trademarkso Patentso Designs and Models

– Artistic and literary propertyo Author’s right (only limited to software)

– Domain names• IP must not be acquired from related party

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

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 treatmento Subject to corporate income tax and municipal business taxo Not subject to net wealth taxo Access to all tax treaties that Luxembourg has concludedo Subject to VAT; potential to recover input VAT (although not in every case)

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

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

Elbis Ventures S.A.

Luxembourg investors

100% shares

Client A Client B Client C Client D

Elbis Ventures S.A.Grant licenses; receive income; pay fees, distribute interest

Compartment A Compartment B Compartment C Compartment DEach compartment holds IP for one client

Clients transfer IP to compartment for debt instruments

License users

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

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

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

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

PRAXIS Luxembourg S.A.55 avenue Pasteur

L-2311 LuxembourgT: +352 27 47 91

F: +352 26 20 01 96E: info@praxisgroup.lu

And for more information, please contact us:

Disclaimer: 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.