Tax treatment of private equity fund structures worldwide

Practical Law UK Articles 4-516-5748 (Approx. 8 pages)

Tax treatment of private equity fund structures worldwide

by Practical Law

Law stated as at 01 Nov 2011 • ExpandAustralia, Belgium, Brazil...Canada (Common Law), China, England, France, Germany, India, Italy, Japan, Luxembourg, Mexico, Norway, Portugal, Romania, Russian Federation, South Africa, Switzerland, UK, USA (National/Federal)

This table provides a high-level summary of the tax treatment applicable to the main private equity vehicles used in 20 major jurisdictions worldwide.

The contents of the table have been derived from Question 7 of the Country Q&A. For the full answers and for information relating to other private equity law matters, refer to the Private Equity Country Q&A tool.

Jurisdiction	What legal structures are commonly used as vehicles?	Are they taxed, tax exempt or fiscally transparent?
Australia	Closed-ended unit trusts.	Fiscally transparent.
	Venture capital limited partnerships (VCLPs).	Fiscally transparent.
	Early stage venture capital limited partnerships (ESVCLPs).	Fiscally transparent.
Belgium	Private privaks.	Fiscally transparent.
Belgium	Other structures.	Taxed.
Brazil	FIPs.	Tax exempt (capital gain).
	Limited partnerships.	Taxed.
	FIMEEs.	Tax exempt (capital gain).
	Holding companies.	Taxed.
	Direct investments.	Taxed.
Canada	Limited partnership.	Fiscally transparent.
PR China	Limited partnership.	Fiscally transparent.
	Trust structure.	Fiscally transparent.
	Venture capital enterprise.	Fiscally transparent, subject to intentional structuring.
	Pilot programmes for offshore investors.	Fiscally transparent, subject to intentional structuring.
France	French regulated fund (FCPRs, FCPIs, FIP).	Tax exempt.
	French SCR.	Tax exempt.
	French corporate vehicle.	Taxed.
Germany	Limited partnership (KG) with a private limited company (GmbH) as its general partner and the investors as limited partners (GmbH & Co KG).	Fiscally transparent.
	GmbHs.	Taxed.
	Public limited companies (AGs).	Taxed.
India	Companies and trusts.	Income earned by a trust that is a SEBI registered domestic VCF and companies set up to raise funds for investment in a venture capital undertaking, is exempt from tax.
India	LLPs.	LLPs are not the preferred form of a PE vehicle since tax is levied on the LLP at the entity level, and the income of the LLP is not taxed in the hands of the individual partners.
Italy	Closed-ended investment fund.	Tax exempt.
Japan	An investment limited partnership (toshijigyo yugensekinin kumiai) (domestic).	Fiscally transparent.
Japan	Cayman limited partnership (offshore).	Fiscally transparent.
Luxembourg	Soparfis.	Taxed.
	SICARs / SIFs – corporations.	Taxed but special tax regime available.
	SICARs / SIFs – partnerships.	Tax transparent.
Mexico	Trusts generally established in non-Mexican jurisdictions.	Depending on the structuring and participants, these may be taxed, tax exempt or fiscally transparent.
Norway	Silent partnership and limited partnership.	Tax transparent.
Norway	Limited liability company.	Taxed.
Portugal	Venture capital funds (Fundos de capital de risco) (FCRs).	Tax exempt.
		Tax exempt.
	Venture capital companies (Sociedades de capital de risco) (SCRs).	Taxed, but tax exempt in relation to certain dividends and capital gains.
Romania	Domestic limited liability companies.	Taxed.
Romania	Joint stock companies.	Taxed.
Russian Federation	Offshore limited liability partnerships formed in a tax-advantageous jurisdiction.	Fiscally transparent for foreign investors.
Russian Federation	SPVs.	Taxed.
South Africa	Limited partnerships.	Fiscally transparent. Partnership income and capital gains are taxed in the partners' hands. Foreign partners are only taxed on South African-sourced income and capital gains on certain land-rich assets.
South Africa	Bewind trusts.	Fiscally transparent and treated as partnerships.
Switzerland	SLLPs.	Fiscally transparent.
	SICAVs.	Fiscally transparent.
	Contractual funds.	Fiscally transparent.
Turkey	Joint stock companies and limited liability companies are used. Capital Markets Board (CMB)-regulated private equity companies (PECs) must take the form of a joint stock company.	Generally, they are taxed. Special rules apply to PECs: They are exempt from corporation tax. The dividend distributions of those companies, whether they are distributed or not, are subject to 0% withholding tax.
United Kingdom (England and Wales)	Domestic and offshore limited partnerships.	Fiscally transparent.
US	Delaware limited partnerships.	Tax transparent.
US	Delaware limited liability company.	Tax transparent in the US but not recognised as tax transparent in some jurisdictions.

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