LUXEMBOURG – A new annual subscription tax rate for Luxembourg domiciled investment funds has been introduced that sees the old tax rate (taxe d’abonnement) reduced from 0.06% to 0.05% to be paid on net assets under management.

The new tax rate was made applicable from January 1 and applies to all investment funds liable for the standard Luxembourg subscription tax rate.

The change was passed by parliament in September 2001.

The reduced tax rates of 0.01% for money market, cash and institutional funds and 0% for fund of funds, remain unchanged.

The Luxembourg investment fund association, ALFI, says it welcomes the tax cut, noting: “As there is a perception that the ‘taxe d’abonnement’ is hurting the industry with regards to performance and other factors, ALFI had called for a progressive reduction in this tax on a basis point by basis point process.”

ALFI has more than 750 member funds and is Luxembourg’s main representative body for the country’s investment community.