Sustainable Finance Insights Series - 9 | Reduced subscription tax for UCIs investing in sustainable activities

With effect from 1^st January 2021, the Law of 19 December 2020 (the “2021 Budget Law”) (please see our  BSP October Newsflash), introduced a reduced subscription tax (taxe d’abonnement) that will apply to Undertakings for Collective Investment (“UCIs”) investing in sustainable activities as defined by the Taxonomy (Regulation (EU) 2020/852) (please see our  BSP Newsflash on the Taxonomy Regulation).

In principle, according to article 174 (1) of the Law of 17 December 2010 on UCIs, UCIs are subject to an annual subscription tax at the rate of 0.05 % on their net assets.

The new reduced subscription tax applies if the proportion of the net assets of a UCI or of an individual sub-fund of an umbrella UCI invested in sustainable activities represents:

• At least 5% of the total net assets of this entity or of an individual sub-fund of an umbrella UCI → the subscription rate is 0.04% on their net assets.
• At least 20% of the total net assets of this entity or of an individual sub-fund of an umbrella UCI → the subscription rate is 0.03% on their net assets.
• At least 35% of the total net assets of this entity or of an individual sub-fund of an umbrella UCI → the subscription rate is 0.02% on their net assets.
• At least 50% of the total net assets of this entity or of an individual sub-fund of an umbrella UCI → the subscription rate is 0.01% on their net assets.

The relevant proportion of the net assets invested in sustainable activities is verified by an auditor and must be included in the annual report. The auditors issue an attestation which is forwarded to the Administration de l’enregistrement, des domaines, et de la TVA (the “AED”) to serve as a basis for determining the applicable tax rate.

The 2021 Budget Law foresees a transitory period ending 1^st January 2022. During this period, declarants interested in benefiting from the reduced rates will have to submit electronically their quarterly declaration at the rate of 0.05% as well as an amending declaration via a form which will be made available by the AED.

However, as the reduced subscription tax is tied to the EU classification of what classifies as sustainable investment (the Taxonomy Regulation), and that the delegated acts for the technical screening criteria with respect to climate-related objectives are delayed, funds cannot claim the lower rate for the moment.