With the enactment of the amended Collective Investment Schemes Act and Ordinance on March 1, 2024, the Limited Qualified Investor Fund (L-QIF) is now officially launched in Switzerland. As it does not require FINMA approval, it is an attractive, cost-efficient alternative to the Luxembourg RAIF, for example. The new scheme is restricted to qualified investors and must be managed by a regulated fund manager. However, like other collective investment schemes, it is also subject to the Swiss withholding tax, which makes it a less attractive option for international investors.

Background

The Swiss fund market has been dominated for many years by foreign funds, particularly from Luxembourg. The Swiss legislator has recognised this problem. With the introduction of the Limited Qualified Investor Fund (L-QIF), the parliament aims to strengthen Switzerland's competitiveness as a fund and asset management centre by increasing the number of collective investment schemes.

The amendment to the Collective Investment Schemes Act (CISA), together with the amended Investment Schemes Ordinance, entered into force on March 1, 2024. The L-QIF is now officially launched in Switzerland.

What is a Limited Qualified Investor Fund?

The Limited Qualified Investor Fund (L-QIF) is a collective investment scheme open exclusively to qualified investors. The L-QIF is not a legal form itself, but can be established as a contractual investment fund, investment company with variable capital (SICAVs), or a limited partnership for collective investment (LP or KmGK). An L-QIF can be structured as an open-end or closed-end fund. Although the L-QIF itself does not require authorisation from the Swiss Financial Market Authority (FINMA), it must be managed by an institution supervised by FINMA. The term "management" is a generic term for the activities mentioned in the law, such as administration, management, and investment decisions. Furthermore, there is an obligation to report to the Federal Department of Finance the establishment or dissolution of the fund and data from statistical surveys on business activities.

By eliminating the FINMA authorisation and approval process for L-QIFs, collective investment schemes for qualified investors can now be launched much more quickly and cost effectively than before, which represents a significant improvement on the status quo, especially for collective investment schemes with a focus on alternative investments (private equity, venture capital, infrastructure, private debt). In many respects, the newly introduced L-QIF is similar to the Luxembourg Reserved Alternative Investment Fund (RAIF) regime.

Swiss Tax Aspects

From a tax perspective there is no special treatment for the L-QIF compared to other collective investment schemes, which is both positive and negative. The L-QIF is governed by circular no. 24 of the Swiss Federal Tax Administration and therefore enjoys favourable treatment in terms of stamp duty and VAT. Insofar as the fund does not hold direct real estate, it is also treated transparently for income tax. However, distributions and reinvested net income are subject to 35% withholding tax. This is currently a major obstacle to the use of the L-QIF for some groups of investors and foreign investors. As all funds are treated in the same way as other funds, tax reporting for individuals holding the units in their private assets must also be prepared by the L-QIF.

Our View

The L-QIF is a simple, cost-effective instrument for qualified investors which can be compared with the Luxembourg RAIF. However, due to the Swiss withholding tax obligation, the L-QIF may be less suitable for international investment structures.

Please reach out to our Deloitte tax and legal experts to discuss the advantages and disadvantages of this newly launched collective investment scheme in more detail.

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