Watches and wine in a bunker
The first cut of the spade has been made and the Luxembourg Freeport will be operational in September 2014. The Freeport’s benefits to investors and the economy were one of the topics at ALFI’s (Association of the Luxemburg Fund Industry) European alternative investment funds conference.
Luxembourg’s Freeport, a storage facility of 20,000 square meters, will increase the supply of logistics services for high-value goods such as art, fine wines, jewels and other valuable goods. It is located at the Luxembourg airport; deliveries can be taken from both land and air. David Arendt is Managing Director of the Luxembourg Freeport. During a panel at the ALFI conference, he spoke about the tax free environment at the Freeport.
“There is no VAT on the import of valuable goods to the Freeport originating from third countries; storage charges to customers are VAT exempt too. There is no VAT on goods originating from the EU destined for export to third countries and there is no VAT for value added services in the Freeport. There is also no withholding tax on capital gains for non-residents selling goods in the Freeport”. VAT is due, of course, when goods leave the Freeport pursuant to a delivery to a customer based in the European Union.
Miriam Mascherin has set up her own company, Elite Advisers, with her associate Michel Tamisier. They have created a range of open-ended investment funds in Luxembourg which invest in people’s passions such as wine, collectible watches and jewellery. She underlined the significance of a tax-free zone. “For us, it is important to have an efficient process. When you are buying goods, it is important to have a tax-free environment. At the time, it was more complicated for the investors; it created extra charges and a lot of administration”.
Needless to say, taxes are not the only reason for building such a storage facility. Luxembourg wants to position itself as an art cluster for artists, galleries, international fairs, sellers and investors. David Arendt uses the term “one stop shop” to describe this arrangement. “There is a space for expert opinions to be expressed; there are also two scientific laboratories on the premises. We hope that it will also become a trading platform, thanks to the infrastructure and the tax environment that we have”.
While in storage, works of art can be presented in the show rooms. Miriam Mascherin underlines that this is a crucial aspect for her clients. “Our customers are international and one of the key issues for them is to go and visit the Freeport to see the goods. We organise visits at the Geneva Freeport, where our goods are stored, so that investors can see the wines, the watches and the jewellery”.
The construction of the Freeport is also a complete game changer for the Luxembourg fund industry, the second largest in the world after the US in terms of assets under management. David Arendt explained why this is the case. “You will be able to have the laws governing the funds and the laws holding the assets under the same roof”.
Fernand Grulms, the CEO of Luxembourg for Finance, reminded the audience at the ALFI conference that the financial markets have been in trouble for the last few years. Consequently, valuable goods, or non-financial assets, will increase in importance in the portfolios of investors in the years to come, be they private or institutional. Speaking about financial services as such, the Luxembourg Financial Centre was split into five pillars 18 months ago.
“We have wealth management; asset management and investment funds; insurance and reinsurance; corporate finance and finally, structured finance. The idea was to develop the financial centre around these five pillars. The idea behind it is to find horizontal teams that have a direct link to these pillars. I see the Freeport playing that role”.
The security company Brinks, operating in more than 120 countries, is taking full liability of the assets stored in the Freeport. The Freeport only manages the facilities and is in charge of security. Prime logistic companies, to be licensed by customs, will become the long-term tenants of the facility. Indirect customers like banks, investment funds and museums will pay storage and other fees to them. David Arendt, Managing Director of the Luxembourg Freeport, explained how his company differs from traditional storage companies and from other freeports.
“Our airport location is invaluable because precious metals and other valuable goods can be pushed from the airport directly to our storage room with no road transport involved. Secondly, the Freeport will be a work of art in and of itself. We want it to be a place where investors enjoy going. What distinguishes us from the other freeports is the modernity. There is no comparing it to the one in Geneva, which was built right after the Second World War and which is not located at the airport but in the outskirts of Geneva”.
Last but not least, the storage location in Switzerland is at full capacity; in Luxembourg they can start from scratch and there is plenty of space available for new business. CW