Luxembourg’s finance minister Gilles Roth has said the government will look to reduce the subscription tax for active ETFs.
Speaking at the Association of the Luxembourg Fund Industry’s (ALFI) Global Asset Management conference last week, Roth said he hoped the country could harness the growth of the rapidly growing active ETF space by offering favourable tax benefits, Delano reported.
In Luxembourg, mutual funds face a subscription tax at an annual rate of 0.05%, paid quarterly. However, passively managed ETFs – not active – are currently exempt from the subscription tax.
“I also intend to reduce the subscription tax for actively managed ETFs,” Roth said. “Luxembourg should have the right starting conditions in this emerging field.”
The Dutchy has a huge fund management industry, worth roughly €5.1trn at the end of September, but remains some way off in the ETF space, dominated by Ireland.
Ireland is home to over 2,722 ETPs with $1.1trn assets under management, versus 1,364 ETPs across $305bn in Luxembourg, as at the end of October 2023, according to data from ETFbook.
The Double Taxation Treaty with the US – which sees ETFs with US equity exposure are subject to a 15% rather than 30% withholding tax on dividends.
Jean-Marc Goy, ALFI chairperson also called for a 0% taxation for active ETFs, Delano reported.
“We have to ensure that [Luxembourg] is an attractive and competitive jurisdiction of such active ETF products,” he said.
“In our view, we feel that the right way forward would be to provide for 0% taxation under the subscription tax regime for such active ETFs.”
