PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Leonard Cross, Responsible Partner, Tax; Sylvia Hartwell, Billing Partner, Tax — Calderwood & Harkness LLP
FROM: Robert Jansen, Lead Associate, Tax; Garrett Simmons, Working Associate, Tax — Calderwood & Harkness LLP
DATE: June 16, 2025
RE: Luxembourg Tax Implications of Dissolution of Solara Digital Partners Fund IV-B (Luxembourg) SCSp (RCS B 248193) and Solara Digital Partners Fund V-B (Luxembourg) SCSp (RCS B 271056) — Cross-Border Fund-Platform Reorganization
CLIENT: Solara Digital Infrastructure LP
MATTER/ENGAGEMENT NO.: 20250527-SDILP-PLR
Right-click to update Table of Contents
I. Executive Summary
The purpose of this memorandum is to analyze the Luxembourg tax consequences arising from (a) the contribution of all portfolio assets by Solara Digital Partners Fund IV-B (Luxembourg) SCSp ("Fund IV-B Lux") and Solara Digital Partners Fund V-B (Luxembourg) SCSp ("Fund V-B Lux" and, together with Fund IV-B Lux, the "Luxembourg SCSps") to Solara Consolidated Master Fund LP, a newly formed Delaware limited partnership (the "Consolidated Master Fund" or "Master Fund LP"), in exchange for limited partnership interests therein (Steps 3 and 4 of the broader reorganization), and (b) the subsequent dissolution and liquidation of the two Luxembourg SCSps and the distribution of their respective Master Fund LP interests to existing limited partners (Step 5 of the reorganization). This memorandum has been prepared for internal use by the Calderwood & Harkness tax group and constitutes attorney work product prepared in anticipation of legal advice in connection with the private letter ruling request and the broader cross-border fund-platform reorganization.
Conclusion. Based on the analysis set forth below and in coordination with Luxembourg counsel Veldhuis & Gérard S.à r.l. (Marc Gérard, Managing Partner; 22, boulevard Royal, L-2449 Luxembourg), no material Luxembourg tax liability is expected at the SCSp level upon either the asset contributions (Steps 3 and 4) or the dissolutions (Step 5), subject to the confirmations discussed in Section XIII of this memorandum. This conclusion rests principally on the fiscal transparency of the Luxembourg SCSp under Article 3(2) of the Luxembourg law of July 12, 2013, as amended, which provides that the SCSp is not itself a taxpayer for Luxembourg direct tax purposes, and on the absence of Luxembourg-situs assets in the portfolio.
This memorandum addresses the following key Luxembourg tax categories as they relate to the proposed reorganization steps:
(i) Capital gains tax / income tax — Whether the contribution of portfolio assets by the SCSps to the Consolidated Master Fund LP or the subsequent dissolution of the SCSps gives rise to Luxembourg corporate income tax (impôt sur le revenu des collectivités, "IRC Lux") or municipal business tax (impôt commercial communal, "ICC") at the entity level, or Luxembourg income tax at the partner level;
(ii) Value-added tax (VAT) — Whether the asset contributions or dissolution distributions are subject to Luxembourg VAT under the amended Luxembourg law of February 12, 1979;
(iii) Registration duties (*droits d'enregistrement*) — Whether proportional or fixed registration duties arise from the transfer of portfolio company interests or the dissolution filings;
(iv) Net wealth tax (*impôt sur la fortune*) — Whether the SCSps or the Luxembourg general partner are subject to net wealth tax in connection with the reorganization; and
(v) Withholding tax on distributions to partners — Whether dissolution distributions to limited partners of the SCSps give rise to Luxembourg withholding tax obligations.
This memorandum addresses Luxembourg law issues from a U.S. tax counsel perspective only. Local law conclusions are preliminary and subject to formal written confirmation by Veldhuis & Gérard S.à r.l. as Luxembourg counsel. Calderwood & Harkness's engagement scope, as set forth in the Engagement Scope Memorandum dated May 27, 2025, expressly excludes the rendering of formal opinions on Luxembourg law. The U.S. federal income tax analysis of the reorganization, including the application of Internal Revenue Code ("IRC") §§ 721(a), 731, 704(c), and 1446, is addressed in a separate memorandum being prepared concurrently.
II. Background and Factual Summary
A. The Luxembourg SCSp Entities
The two Luxembourg SCSps at issue were established as parallel fund vehicles within the broader Solara Digital Infrastructure fund platform. Each was organized as a Luxembourg société en commandite spéciale under the Luxembourg law of July 12, 2013, as amended, to accommodate non-U.S. investors and certain European institutional investors seeking treaty access, regulatory considerations, and jurisdictional comfort with a Luxembourg-domiciled vehicle. The following describes each entity in detail.
1. Fund IV-B (Luxembourg) SCSp
Full legal name: Solara Digital Partners Fund IV-B (Luxembourg) SCSp
Entity type: Luxembourg special limited partnership (société en commandite spéciale), established under the Luxembourg law of July 12, 2013, as amended
RCS number: B 248193
Date of formation: March 22, 2019
Registered office: 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg
General partner (*associé commandité*): Solara Luxembourg Management S.à r.l. (RCS B 248194), a Luxembourg société à responsabilité limitée (the "Lux Manager")
Fund size: €1.15 billion (approximately $1.24 billion at the 1.08 EUR/USD exchange rate applied uniformly throughout the reorganization analysis, as established in the Master Reorganization Agreement)
Portfolio composition: Fund IV-B Lux holds a portion of the eleven portfolio companies held by the Fund IV vehicles. Notably, Fund IV-B Lux holds 100% ownership of Crestline Cloud Solutions LLC, a Delaware limited liability company treated as a disregarded entity for U.S. federal income tax purposes. Key valuation metrics for Crestline are as follows:
• Fair market value ("FMV"): €340 million ($367 million)
• Adjusted tax basis: €195 million ($211 million)
• Built-in gain: €145 million ($156 million)
Representative non-U.S. investor: Kestrel Pacific Insurance Group, a Singapore-domiciled regulated insurance company, with committed capital of €200 million in Fund IV-B Lux.
Status within the fund platform: Fund IV-B Lux is a parallel fund to Solara Digital Partners Fund IV LP, a Delaware limited partnership. Fund IV-B Lux was established specifically to accommodate non-U.S. investors and certain European institutional investors who required a Luxembourg-domiciled investment vehicle for regulatory, treaty-access, or internal mandate reasons.
2. Fund V-B (Luxembourg) SCSp
Full legal name: Solara Digital Partners Fund V-B (Luxembourg) SCSp
Entity type: Luxembourg special limited partnership (société en commandite spéciale), established under the Luxembourg law of July 12, 2013, as amended
RCS number: B 271056
Date of formation: September 8, 2021
Registered office: 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg
General partner (*associé commandité*): Solara Luxembourg Management S.à r.l. (RCS B 248194)
Fund size: €1.38 billion (approximately $1.49 billion at 1.08 EUR/USD)
Portfolio composition: Fund V-B Lux holds a portion of twelve portfolio companies held by the Fund V vehicles. The aggregate valuation metrics for all assets held by Fund V-B Lux are as follows:
• Aggregate FMV: €1.29 billion ($1.39 billion)
• Aggregate adjusted tax basis: €1.14 billion ($1.23 billion)
• Aggregate built-in gain: €150 million ($162 million)
Representative non-U.S. investor: Kestrel Pacific Insurance Group, with committed capital of €275 million in Fund V-B Lux.
Status within the fund platform: Fund V-B Lux is a parallel fund to Solara Digital Partners Fund V LP, a Delaware limited partnership, established for the same reasons as Fund IV-B Lux.
Both Luxembourg SCSps are managed by the same general partner (the Lux Manager) and share the same registered office address in Luxembourg. The Lux Manager is the sole general partner of each SCSp and holds a nominal partnership interest in each vehicle, with the overwhelming majority of economic interests held by the limited partners (associés commanditaires).
B. The Proposed Transaction Steps Affecting the Luxembourg SCSps
The broader reorganization encompasses seven steps, of which Steps 3, 4, and 5 directly involve the Luxembourg SCSps. The following summarizes these steps.
Step 3 — Contribution of Fund IV-B Luxembourg Assets (Target: October 15, 2025)
Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets, including the 100% membership interest in Crestline Cloud Solutions LLC and all other equity interests in Fund IV portfolio companies, to Solara Consolidated Master Fund LP, a Delaware limited partnership to be formed on or about September 15, 2025, in exchange for a limited partnership interest in the Master Fund. The aggregate valuation metrics for the assets to be contributed in Step 3 are as follows:
• Aggregate FMV of assets contributed: €1.07 billion ($1.16 billion at 1.08 EUR/USD)
• Aggregate adjusted tax basis: €782 million ($844.6 million)
• Aggregate built-in gain: €288 million ($311 million)
The intended U.S. federal income tax treatment of the Step 3 contribution is as a tax-free contribution under IRC § 721(a), which provides that no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership. The application of § 721(a) to the Step 3 contribution is analyzed in a separate U.S. tax memorandum.
Step 4 — Contribution of Fund V-B Luxembourg Assets (Target: November 1, 2025)
Fund V-B (Luxembourg) SCSp will contribute all of its portfolio assets to Solara Consolidated Master Fund LP in exchange for a limited partnership interest therein. The aggregate valuation metrics for the assets to be contributed in Step 4 correspond to the valuation data for Fund V-B Lux set forth in Section II.A.2 above. The same IRC § 721(a) intended treatment applies to the Step 4 contribution as to Step 3.
The sequencing of Step 3 (October 15, 2025) and Step 4 (November 1, 2025) has been designed to allow approximately two weeks between the asset contributions, providing operational and administrative time for the Master Fund LP to absorb each tranche of contributed assets and for necessary partnership agreement amendments and capital account adjustments to be completed between contributions.
Step 5 — Dissolution and LP Migration (Target Effective Date: December 1, 2025)
Following the completion of Steps 3 and 4, Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp will each dissolve and distribute their respective partnership interests in the Consolidated Master Fund to their existing limited partners. At the time of dissolution, each SCSp's only remaining asset will be its limited partnership interest in the Master Fund LP, all portfolio assets having been contributed in Steps 3 and 4. The dissolution distributions will be effected as follows:
• Non-U.S. limited partners of the Luxembourg SCSps (including Kestrel Pacific Insurance Group, Nordhaven Sovereign Wealth Fund, and other non-U.S. institutional investors) will receive Master Fund LP interests, which will immediately be contributed to or exchanged for interests in Solara International Feeder (Cayman) LP, a newly formed Cayman Islands exempted limited partnership (the "International Feeder"), as part of the LP migration.
• U.S. tax-exempt limited partners of the Luxembourg SCSps (if any) will receive Master Fund LP interests, which will immediately be contributed to or exchanged for interests in Solara Tax-Exempt Feeder (Cayman) LP, a newly formed Cayman Islands exempted limited partnership (the "Tax-Exempt Feeder").
Upon completion of the dissolution distributions, the two Luxembourg SCSps will be struck from the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés — "RCS"). The Lux Manager will manage the dissolution process as general partner and liquidator.
C. Business Rationale for Luxembourg Dissolution
The dissolution of the Luxembourg SCSps is driven by several converging business and regulatory factors that have diminished the benefits of maintaining Luxembourg-domiciled parallel fund vehicles within the Solara fund platform.
Operational cost reduction. Solara currently pays approximately $3.8 million annually in duplicative offshore administration, audit, regulatory compliance, and domiciliation fees across all offshore vehicles, including the Luxembourg SCSps. The elimination of the Luxembourg structures, together with the consolidation of the Cayman entities, is expected to contribute materially to the reduction of these ongoing costs. The reorganization as a whole is projected to achieve net annual savings of approximately $2.1 million in recurring administration and compliance costs.
OECD Pillar Two GloBE rules. The forthcoming OECD Pillar Two Global Anti-Base Erosion ("GloBE") rules, effective for Solara's Luxembourg entities commencing with fiscal year 2025, are expected to diminish the tax advantages of maintaining Luxembourg SCSp structures for certain investors. The GloBE rules may subject constituent entities within the Solara group, including the Luxembourg SCSps, to qualified domestic top-up tax or income inclusion rule obligations that did not exist at the time the Luxembourg vehicles were established. This development has been a significant driver of the fund-level governance discussions that led to the reorganization decision. A more detailed analysis of the Pillar Two implications is deferred to a separate workstream.
FATCA and CRS simplification. Consolidation of the fund platform into a Delaware master fund with Cayman feeders simplifies the reporting obligations under both the Foreign Account Tax Compliance Act ("FATCA") and the OECD Common Reporting Standard ("CRS"). The Luxembourg SCSps currently maintain separate FATCA and CRS reporting obligations, which will be eliminated upon dissolution.
LP-requested governance simplification. Several significant limited partners, including Kestrel Pacific Insurance Group, have indicated a preference for a simplified fund structure with fewer parallel vehicles, consolidated reporting, and unified governance. The reorganization responds to these requests.
D. Coordination with Luxembourg Counsel
Veldhuis & Gérard S.à r.l. has been retained as Luxembourg counsel to advise on all local law aspects of the dissolution, including CSSF notification obligations, RCS deregistration procedures, and Luxembourg tax confirmations. The key attorney contact at Veldhuis & Gérard is Marc Gérard, Managing Partner. The firm's offices are located at 22, boulevard Royal, L-2449 Luxembourg.
Calderwood & Harkness's engagement scope, as set forth in the Engagement Scope Memorandum dated May 27, 2025, expressly excludes the rendering of formal opinions on Luxembourg law. This memorandum reflects a preliminary analysis of Luxembourg tax issues prepared for coordination purposes, to be confirmed and supplemented by formal written advice from Veldhuis & Gérard. All conclusions herein regarding Luxembourg law should be regarded as preliminary and subject to formal confirmation by Luxembourg counsel. To the extent that any analysis in this memorandum is inconsistent with the advice ultimately provided by Veldhuis & Gérard, the Luxembourg counsel's advice should be treated as controlling with respect to Luxembourg law matters.
A coordination call with Marc Gérard is scheduled for June 23, 2025, at which time we intend to transmit the open items identified in Section XIII of this memorandum for formal response.
III. Legal Framework — The Luxembourg SCSp Under the Law of July 12, 2013
A. Nature of the SCSp
The société en commandite spéciale ("SCSp") was introduced by the Luxembourg law of July 12, 2013 (the "Law of 2013"), which transposed the EU Alternative Investment Fund Managers Directive ("AIFMD") into Luxembourg law and, at the same time, created the SCSp as a new partnership vehicle available for use by alternative investment funds and other commercial arrangements. The SCSp was modeled in part on the Anglo-Saxon limited partnership and was designed to provide a flexible, contractually governed vehicle attractive to international private equity and venture capital sponsors.
The SCSp possesses several distinctive characteristics that are relevant to the tax analysis:
No legal personality. Unlike the Luxembourg société en commandite simple ("SCS"), which possesses legal personality, the SCSp does not have legal personality under Luxembourg law. It is a contractual arrangement among its partners rather than a separate legal entity. This absence of legal personality is central to its tax treatment, as discussed below.
Contractual flexibility. The SCSp is governed primarily by the terms of its partnership agreement (contrat social), which may be tailored with broad flexibility. The Law of 2013 imposes relatively few mandatory provisions on SCSp partnership agreements, allowing the parties to determine matters such as profit allocation, governance, transfer restrictions, and dissolution procedures.
No minimum capital requirement. The SCSp is not subject to a minimum capital requirement, distinguishing it from Luxembourg corporate vehicles such as the société à responsabilité limitée ("S.à r.l.") and the société anonyme ("S.A.").
Two classes of partners. The SCSp consists of one or more general partners (associés commandités), who bear unlimited liability for the obligations of the partnership, and one or more limited partners (associés commanditaires), whose liability is limited to the amount of their committed capital contributions.
Most importantly for present purposes, the SCSp is not subject to Luxembourg corporate income tax (impôt sur le revenu des collectivités, "IRC Lux") or municipal business tax (impôt commercial communal, "ICC") at the entity level. The SCSp is treated as a fiscally transparent vehicle for Luxembourg direct tax purposes, meaning that income and gains are attributed directly to the partners for tax purposes.
B. Article 3(2) of the Law of July 12, 2013
Article 3(2) of the Law of 2013 provides the statutory basis for the fiscal transparency of the SCSp. Under this provision, the SCSp is treated as a "look-through" vehicle for Luxembourg direct tax purposes, meaning that the SCSp itself is not a taxpayer and does not file Luxembourg corporate income tax or municipal business tax returns. Rather, the income, gains, and losses of the SCSp are attributed to, and taxed in the hands of, the individual partners in accordance with their respective partnership interests and the allocation provisions of the partnership agreement.
The critical consequence of Article 3(2) for the present analysis is as follows: Because the SCSp is not a taxable entity for Luxembourg direct tax purposes, no Luxembourg corporate income tax or capital gains tax is expected to arise at the SCSp level upon either (a) the transfer or contribution of assets by the SCSp (Steps 3 and 4), or (b) the dissolution and liquidation of the SCSp and the distribution of remaining assets to partners (Step 5). The relevant tax analysis in each case occurs at the level of the individual partners rather than at the entity level.
This principle of fiscal transparency is the cornerstone of the conclusion that the reorganization Steps involving the Luxembourg SCSps should not trigger any material Luxembourg income tax or capital gains tax liability at the SCSp level. It is, however, important to note that the fiscal transparency of the SCSp does not necessarily preclude tax obligations from arising at the level of individual partners — particularly Luxembourg-resident partners, if any. The partner-level analysis is addressed in Section IV.B below.
The Luxembourg tax authorities (Administration des contributions directes) have generally confirmed the fiscal transparency treatment of the SCSp in published guidance and in their administrative practice since the enactment of the Law of 2013. We are not aware of any published rulings or administrative circulars that would call into question the fiscal transparency of the SCSp for purposes of the transactions at issue. However, formal confirmation of this position from Veldhuis & Gérard is requested as part of the open items identified in Section XIII.
C. CSSF Regulatory Status
The SCSps may be regulated or unregulated depending on their classification under Luxembourg fund law. If the SCSps or their alternative investment fund manager are registered with the Commission de Surveillance du Secteur Financier ("CSSF"), notification of the planned dissolution may be required, and regulatory waiting periods may apply before the dissolution can be completed.
Based on preliminary information provided by Solara's internal legal team (Priya Narasimhan, General Counsel; Stefan Dalmqvist, Head of Tax), the Luxembourg SCSps are managed by Solara Luxembourg Management S.à r.l. as their general partner, with portfolio management delegated to Solara Digital Infrastructure LP (the U.S. management company). The registration status of the SCSps and the Lux Manager with the CSSF is a matter to be confirmed by Veldhuis & Gérard. To the extent that CSSF notification is required, the timeline for the dissolution must account for any mandatory waiting periods or regulatory approvals, and coordination with the CSSF should commence sufficiently in advance of the December 1, 2025 target effective date for Step 5.
IV. Luxembourg Capital Gains Tax / Income Tax Analysis
A. SCSp-Level Analysis
As discussed in Section III.B above, Article 3(2) of the Law of 2013 provides that the SCSp is fiscally transparent for Luxembourg direct tax purposes. Accordingly, no Luxembourg corporate income tax (IRC Lux) or municipal business tax (ICC) applies at the SCSp level. The SCSp is not a relevant taxpayer, and the tax analysis of any income, gains, or losses arising from the SCSp's activities occurs at the partner level.
Contribution of portfolio assets (Steps 3 and 4). The contribution of all portfolio assets by Fund IV-B Lux and Fund V-B Lux to the Consolidated Master Fund LP in exchange for limited partnership interests therein does not give rise to Luxembourg capital gains tax at the SCSp level. Because the SCSp is not a taxable entity for Luxembourg income tax purposes, the act of transferring assets out of the SCSp does not itself create a Luxembourg taxable event at the entity level. Any tax consequences arising from the transfer — such as the recognition of built-in gains — would be analyzed at the partner level, based on each partner's share of the gains and the tax treatment of such gains under the laws of the partner's country of residence.
It bears emphasis that the aggregate built-in gain in the portfolio assets of the two SCSps is substantial: approximately €288 million ($311 million) for Fund IV-B Lux and approximately €150 million ($162 million) for Fund V-B Lux. While these built-in gains are relevant to the U.S. federal income tax analysis (particularly under IRC §§ 721(a), 704(c), and 1446), they do not give rise to Luxembourg tax liability at the SCSp level, precisely because the SCSp is not the relevant taxpayer.
Dissolution and distribution of Master Fund LP interests (Step 5). The same transparency principle applies to the dissolution. When the SCSps dissolve and distribute their Master Fund LP interests to the limited partners, no Luxembourg corporate income tax or capital gains tax arises at the SCSp level. The dissolution distribution is simply the final act of the transparent vehicle returning assets to its partners, and the tax treatment of such distribution is determined at the partner level.
B. Partner-Level Analysis
Although the SCSp is fiscally transparent, the partners themselves may be subject to Luxembourg income tax on their share of income or gains from the SCSp if they have a sufficient nexus to Luxembourg. The relevant considerations are as follows.
Non-Luxembourg-resident partners. The vast majority of the investor base in both Luxembourg SCSps consists of non-Luxembourg-resident investors, including Kestrel Pacific Insurance Group (a Singapore-domiciled regulated insurance company) and Nordhaven Sovereign Wealth Fund (a sovereign investor of the Kingdom of Nordhaven). Non-Luxembourg-resident partners are generally not subject to Luxembourg income tax on gains from the disposition of interests in a Luxembourg SCSp or from the SCSp's disposition of its underlying assets, provided that (a) the non-resident partner does not have a permanent establishment in Luxembourg to which the partnership interest is attributable, and (b) the gains do not relate to Luxembourg-situs real property.
With respect to condition (b), the portfolio assets being contributed in Steps 3 and 4 consist of equity interests in digital infrastructure and SaaS operating companies (including NovaBright, Crestline Cloud Solutions LLC, Veridian, Thorngate, Helix, and others). Based on information provided by Solara's internal legal and tax teams, none of these portfolio companies hold Luxembourg-situs real property. Accordingly, the Luxembourg real property exception should not apply, and non-resident partners should not be subject to Luxembourg income tax on their share of gains arising from the reorganization.
Luxembourg-resident partners. If any partner of either SCSp were a Luxembourg tax resident, that partner would be subject to Luxembourg income tax (at individual or corporate rates, as applicable) on its share of gains arising from the asset contributions and dissolution distributions. However, based on information received from Solara (Stefan Dalmqvist, Head of Tax, confirmed by email dated June 4, 2025), no limited partners of either Fund IV-B Lux or Fund V-B Lux are Luxembourg tax residents. This is consistent with the original purpose of the Luxembourg SCSps, which were established to accommodate non-U.S. (but not Luxembourg-domiciled) investors.
Confirmations required. We request that Veldhuis & Gérard formally confirm (a) the absence of Luxembourg-resident partners in either SCSp, and (b) the absence of Luxembourg-situs real estate in the portfolio of either SCSp. These confirmations are included in the open items listed in Section XIII.
C. Luxembourg General Partner (Solara Luxembourg Management S.à r.l.)
Solara Luxembourg Management S.à r.l. (RCS B 248194; the "Lux Manager") is a Luxembourg société à responsabilité limitée serving as the general partner (associé commandité) of both Luxembourg SCSps. As a Luxembourg corporate resident, the Lux Manager is subject to Luxembourg corporate income tax (IRC Lux) at the standard rate of 24.94% (combined rate for Luxembourg City, comprising the 17% IRC Lux rate, the 1.4% solidarity surcharge, and the 6.75% ICC rate) and municipal business tax on its worldwide income.
As the general partner of the SCSps, the Lux Manager's taxable income attributable to the SCSps should be limited to its allocable share of partnership income and gains under the partnership agreements. The Lux Manager typically holds a nominal or minimal partnership interest (often 0.01% or less) in each SCSp, with the overwhelming majority of economic interests held by the limited partners. Accordingly, the Lux Manager's share of any gains arising from the asset contributions (Steps 3 and 4) or the dissolution distributions (Step 5) should be de minimis.
Upon dissolution of the SCSps, the Lux Manager's participation as general partner terminates. Any gain recognized by the Lux Manager on its minimal partnership interest upon termination should be immaterial to the overall Luxembourg tax analysis. The Lux Manager will file final tax returns in respect of the fiscal years in which the dissolutions occur, reporting its nominal share of partnership income or gains.
Post-reorganization disposition of the Lux Manager. Following the dissolution of both SCSps, the question arises whether the Lux Manager should itself be dissolved or maintained for other purposes (such as serving as a corporate shell for future Luxembourg activities or as a contracting party for winding-down obligations). This is primarily a local law and business question to be addressed by Veldhuis & Gérard in coordination with Solara's management. If the Lux Manager is to be dissolved, a separate dissolution procedure applicable to Luxembourg S.à r.l. entities would need to be followed, including a notarial act, shareholders' resolution, appointment of a liquidator, and filing with the RCS. The tax implications of the Lux Manager's dissolution, if pursued, are addressed briefly in Sections VI.D and VII.B below.
V. Luxembourg VAT Analysis
A. General Principles
Luxembourg VAT is governed by the amended Luxembourg law of February 12, 1979, concerning the value-added tax (Loi modifiée du 12 février 1979 concernant la taxe sur la valeur ajoutée), which implements the EU VAT Directive (Council Directive 2006/112/EC) into Luxembourg domestic law. Luxembourg applies a standard VAT rate of 17% (temporarily reduced from 17% to 16% for calendar year 2023, subsequently restored to 17%), with reduced rates applicable to certain categories of goods and services.
Financial services and securities transactions are generally exempt from Luxembourg VAT under Article 44(1)(d) of the Luxembourg VAT law. This exemption encompasses, among other transactions, the negotiation and transfer of shares, partnership interests, debentures, and other securities. The rationale for this exemption derives from the EU VAT Directive's treatment of financial transactions, which are excluded from the VAT base to avoid double taxation and administrative complexity.
Transfers of shares, partnership interests, and equity-like instruments — including membership interests in limited liability companies and limited partnership interests — are generally either outside the scope of Luxembourg VAT entirely (where the transferor is not acting in the capacity of a taxable person or the transaction is not a supply of goods or services within the meaning of the VAT law) or exempt from VAT under the financial services exemption.
B. Application to the Reorganization
Steps 3 and 4 (contribution of portfolio company interests by the SCSps to the Master Fund LP). The assets being contributed by the Luxembourg SCSps to the Consolidated Master Fund LP consist of equity interests in portfolio companies — specifically, corporate shares, limited partnership interests, and limited liability company membership interests in entities organized in the United States (Delaware) and the Cayman Islands. These transfers involve the disposition of financial instruments and equity securities, which should qualify for the VAT exemption applicable to financial transactions under Article 44(1)(d) of the Luxembourg VAT law. Even if the SCSps were regarded as taxable persons for VAT purposes (which is itself uncertain given their fiscal transparency), the nature of the assets being transferred — equity interests in operating companies — falls squarely within the category of transactions exempt from VAT.
Step 5 (distribution of Master Fund LP interests to partners upon dissolution). The dissolution distributions involve the transfer of limited partnership interests in the Consolidated Master Fund LP from the SCSps to their limited partners. This transfer likewise constitutes a disposition of equity-like financial instruments and should be exempt from VAT or outside the scope of VAT for the same reasons as the asset contributions in Steps 3 and 4.
Conclusion. No Luxembourg VAT should be due on either the asset contributions (Steps 3 and 4) or the dissolution distributions (Step 5). The transactions involve transfers of equity interests in portfolio companies and partnership interests, all of which are exempt from or outside the scope of Luxembourg VAT under the financial services exemption.
Confirmation required. We request that Veldhuis & Gérard confirm that none of the portfolio company interests held by the Luxembourg SCSps could be recharacterized as non-financial assets — for example, interests in entities holding Luxembourg-situs real estate — that might attract VAT on a different basis. Based on our preliminary review of the portfolio composition, all portfolio companies are operating companies in the digital infrastructure and SaaS sectors, and none appear to hold Luxembourg real estate. However, formal confirmation from Luxembourg counsel is warranted.
VI. Luxembourg Registration Duties (*Droits d'Enregistrement*)
A. General Framework
Luxembourg registration duties are governed by the Registration Duties Code (Code des droits d'enregistrement). Registration duties may take the form of either (a) fixed duties (droits fixes), which are nominal amounts (typically €75) payable upon the filing of certain documents with the RCS or the registration of certain acts, or (b) proportional duties (droits proportionnels), which are calculated as a percentage of the value of the assets or transactions involved and may apply at rates of up to 0.5% or higher.
Proportional registration duties are most commonly triggered by transfers of Luxembourg real property or certain business assets located in Luxembourg. Transfers of equity interests in entities that do not hold Luxembourg real property, and transactions involving non-Luxembourg assets, generally do not give rise to proportional registration duties.
Fixed registration duties of €75 apply to the filing of various corporate and partnership documents with the RCS, including formation documents, amendments to partnership agreements, dissolution resolutions, and closure filings.
B. Application to Asset Contributions (Steps 3 and 4)
The assets being contributed by the Luxembourg SCSps to the Consolidated Master Fund LP consist of equity interests in portfolio companies, predominantly non-Luxembourg entities organized in Delaware (corporations, LLCs, and LPs) and the Cayman Islands. No Luxembourg-organized entity is included in the portfolio being transferred.
Specifically, the largest single asset held by Fund IV-B Lux — the 100% membership interest in Crestline Cloud Solutions LLC — is an interest in a Delaware limited liability company. The transfer of this membership interest from Fund IV-B Lux to the Consolidated Master Fund LP involves the disposition of a U.S. asset by a Luxembourg SCSp. Because the underlying asset (the Crestline LLC membership interest) is not Luxembourg-situs property, the transfer should not trigger Luxembourg proportional registration duty. The same analysis applies to all other portfolio company interests being contributed: because the assets are equity interests in non-Luxembourg entities, no proportional registration duty is expected.
Fixed registration duties of €75 may apply to any notarized documents or filings related to amendments of the SCSp partnership agreements that may be required in connection with the asset contributions, if such amendments are made by notarial act or are required to be filed with the RCS. However, because the SCSp partnership agreement is a private contract that does not require notarial form (unlike the articles of association of a Luxembourg S.à r.l. or S.A.), any amendments to the SCSp partnership agreements are unlikely to trigger registration duties unless voluntarily submitted for registration.
C. Application to Dissolution (Step 5)
Upon dissolution of the SCSps, the dissolution documentation must be filed with the RCS. The filing of the dissolution resolution and any related closure documents will be subject to a fixed registration duty of €75 per filing. Assuming that two filings are made per SCSp (one for the dissolution resolution and one for the final closure), the aggregate fixed registration duties for both SCSps would be approximately €300 (i.e., 4 filings × €75 per filing). This amount is nominal and immaterial.
No proportional registration duty should apply to the dissolution distributions because the dissolution involves the distribution of partnership interests in the Consolidated Master Fund LP (a Delaware limited partnership), rather than Luxembourg-situs assets. The Master Fund LP interests are non-Luxembourg assets, and their distribution to the limited partners of the SCSps does not implicate the Luxembourg proportional registration duty regime.
D. Registration Duty on Dissolution of Solara Luxembourg Management S.à r.l.
If the Lux Manager is also to be dissolved following the reorganization (a decision that is pending), a separate dissolution filing with the RCS and a fixed registration duty of €75 would apply. In addition, because the Lux Manager is a Luxembourg S.à r.l. — a corporate entity whose articles of association are adopted by notarial act — the dissolution of the Lux Manager requires a notarial act, which will incur notarial fees and a fixed registration duty. The notarial fees for a dissolution act are typically in the range of €1,500 to €3,000, depending on the complexity of the dissolution and the notary's fee schedule. These amounts are de minimis in the context of the overall reorganization.
Any notarial act required for the dissolution of the S.à r.l. would also need to be published in the Recueil Électronique des Sociétés et Associations ("RESA"), with associated publication fees. These are administrative costs rather than tax obligations, but we note them here for completeness.
VII. Luxembourg Net Wealth Tax
A. Applicability
Luxembourg net wealth tax (impôt sur la fortune) applies to Luxembourg corporate entities — including Luxembourg S.à r.l. entities, S.A. entities, and other opaque corporate forms — but does not apply to fiscally transparent entities such as the SCSp. This distinction follows from the same fiscal transparency principle that exempts the SCSp from Luxembourg corporate income tax and municipal business tax.
Accordingly, the Luxembourg SCSps — Fund IV-B Lux and Fund V-B Lux — are not subject to Luxembourg net wealth tax, either during their operational life or upon dissolution. No net wealth tax liability arises at the SCSp level in connection with any step of the reorganization.
B. Lux Manager Implications
Solara Luxembourg Management S.à r.l. (RCS B 248194) is a Luxembourg corporate entity and is therefore subject to annual Luxembourg net wealth tax on its unitary value (valeur unitaire). The unitary value is generally determined based on the entity's balance sheet assets, adjusted for certain items.
Given the Lux Manager's role as a management and general partner vehicle with presumably minimal assets of its own (apart from its nominal partnership interests in the SCSps), the net wealth tax liability of the Lux Manager should be de minimis. Under the current Luxembourg net wealth tax regime, a minimum net wealth tax applies to Luxembourg entities based on the composition and size of their balance sheet:
• For entities with total balance sheet assets consisting predominantly of financial assets and with a total balance sheet of up to €350 million, the minimum net wealth tax is €4,815.
• For qualifying holding or finance companies with limited financial assets, the minimum net wealth tax may be as low as €535.
Upon dissolution of the Lux Manager (if dissolution is pursued), the Lux Manager will file a final net wealth tax return and pay any remaining net wealth tax liability through the date of dissolution. The final net wealth tax liability is expected to be nominal.
VIII. Luxembourg Withholding Tax on Distributions to Partners
A. SCSp Distributions
Luxembourg imposes a dividend withholding tax at a standard rate of 15% on dividends distributed by Luxembourg corporate entities to their shareholders. However, this withholding tax applies to distributions made by entities that are subject to Luxembourg corporate income tax — specifically, opaque corporate entities such as Luxembourg S.A. entities, S.à r.l. entities, and similar corporate forms.
The SCSp, being a fiscally transparent entity under Article 3(2) of the Law of 2013, does not itself make "distributions" that are subject to Luxembourg dividend withholding tax. The SCSp is not a relevant entity for purposes of the Luxembourg dividend withholding tax regime, which targets distributions by corporate taxpayers. Distributions by the SCSp to its partners are treated as returns of partnership capital or allocations of partnership income, not as dividends subject to withholding.
Accordingly, the distribution of Master Fund LP interests by the SCSps to their limited partners in Step 5 should not trigger any Luxembourg withholding tax obligation. This conclusion applies regardless of the residence of the recipient partners, because the withholding tax regime is inapplicable to distributions by fiscally transparent entities.
It is worth noting that certain jurisdictions impose withholding obligations on partnership distributions under specific circumstances (for example, the U.S. withholding regime under IRC § 1446 for partnerships with effectively connected taxable income). However, no analogous Luxembourg withholding regime applies to SCSp distributions.
B. Coordination with U.S. Tax Analysis
The U.S. federal income tax analysis of withholding obligations under IRC § 1446 (withholding on effectively connected taxable income allocable to foreign partners in a U.S. partnership) is addressed in a separate memorandum prepared concurrently with this analysis. This memorandum addresses only the Luxembourg-side withholding analysis.
We have identified no interaction issues between the Luxembourg withholding tax regime and the U.S. withholding tax regime for the Steps at issue. The absence of Luxembourg withholding on SCSp dissolution distributions means that there is no Luxembourg-side withholding that would need to be credited against U.S. withholding obligations (or vice versa), and no treaty coordination is required on this point.
IX. Specific Portfolio Company Considerations
A. Crestline Cloud Solutions LLC
Crestline Cloud Solutions LLC ("Crestline") is a Delaware limited liability company treated as a disregarded entity for U.S. federal income tax purposes. Crestline is 100% owned by Fund IV-B (Luxembourg) SCSp. The key valuation metrics for Crestline are as follows:
• Fair market value: €340 million ($367 million at 1.08 EUR/USD)
• Adjusted tax basis: €195 million ($211 million)
• Built-in gain: €145 million ($156 million)
Crestline is a digital infrastructure platform company providing cloud-based computing services and managed IT infrastructure to mid-market enterprise clients. Crestline does not hold any Luxembourg-situs real property or maintain any operations, employees, or permanent establishment in Luxembourg.
The transfer of the 100% membership interest in Crestline from Fund IV-B Lux to the Consolidated Master Fund LP in Step 3 involves the transfer of a U.S. asset (a Delaware LLC membership interest) by a Luxembourg SCSp. From a Luxembourg tax perspective, this transfer does not give rise to any Luxembourg tax liability at the SCSp level, for two independent reasons: (a) the SCSp is fiscally transparent under Article 3(2) of the Law of 2013, and therefore is not a taxable entity; and (b) the asset being transferred — a membership interest in a Delaware LLC — is not a Luxembourg-situs asset and does not implicate any Luxembourg transfer tax, registration duty, or real property tax regime.
We request that Veldhuis & Gérard confirm that no Luxembourg tax filing requirements are triggered solely by the transfer of a Delaware LLC membership interest by a Luxembourg SCSp. While we expect the answer to be negative, formal confirmation is prudent given the significant built-in gain in the Crestline position.
B. Other Portfolio Company Interests
All other portfolio company interests held by the Luxembourg SCSps — including interests in NovaBright, Veridian, Thorngate, Helix, and the remaining portfolio companies — are equity interests in non-Luxembourg entities organized in U.S. (predominantly Delaware) and Cayman Islands jurisdictions. Based on information provided by Solara's internal legal and tax teams, none of these portfolio companies hold Luxembourg-situs real property, maintain operations in Luxembourg, or have any other nexus to Luxembourg that could give rise to Luxembourg tax obligations upon transfer.
Accordingly, the transfer of these portfolio company interests from the Luxembourg SCSps to the Consolidated Master Fund LP in Steps 3 and 4, and the subsequent dissolution of the SCSps in Step 5, should not trigger any Luxembourg capital gains tax, income tax, proportional registration duty, or other transfer tax at either the SCSp level or the partner level (with respect to non-Luxembourg-resident partners).
We request confirmation from Veldhuis & Gérard that no Luxembourg-situs real property is held by any portfolio company, directly or indirectly, and that the transfer of the portfolio company interests does not trigger any Luxembourg tax filing requirements at the SCSp level.
X. Luxembourg Dissolution and Deregistration Procedures
A. Dissolution Process for the SCSps
Under the Law of 2013, the dissolution of an SCSp is governed principally by the terms of its partnership agreement (contrat social). The Law of 2013 provides relatively few mandatory rules governing dissolution, allowing the partners broad flexibility to determine the dissolution process through the partnership agreement. The typical dissolution process for a Luxembourg SCSp proceeds as follows:
1. Dissolution resolution. The general partner (the Lux Manager) initiates the dissolution by proposing a dissolution resolution to the partners. The required vote threshold is determined by the partnership agreement; in many cases, a supermajority or unanimous consent of the limited partners is required.
2. Appointment of liquidator. The partnership agreement will typically designate the general partner as the liquidator, or provide for the appointment of an external liquidator. In the present case, we expect the Lux Manager to serve as liquidator for both SCSps.
3. Liquidation period. Following the dissolution resolution, the SCSps enter a period of liquidation during which remaining assets are distributed to the partners and remaining liabilities are settled. Since the SCSps will have contributed all portfolio assets to the Master Fund LP in Steps 3 and 4, the only remaining asset at the time of dissolution should be each SCSp's limited partnership interest in the Master Fund LP, which is distributed to the limited partners in Step 5. Remaining liabilities — including accrued administration fees, audit fees, legal fees, and any outstanding tax obligations — must be settled before or concurrently with the final dissolution.
4. Final accounts and discharge. The liquidator prepares final liquidation accounts, which are approved by the partners. The partners discharge the liquidator from liability.
5. Filing with the RCS. The dissolution resolution, the appointment of the liquidator, and the final closure of the liquidation are filed with the RCS, triggering fixed registration duties of €75 per filing.
6. Deregistration. Upon completion of the liquidation and filing of the closure documents, the SCSps are struck from the RCS.
B. RCS Deregistration
The specific filings required for RCS deregistration include:
• Filing of the dissolution resolution with the RCS, together with identification of the liquidator
• Publication of the dissolution in the Recueil Électronique des Sociétés et Associations ("RESA")
• Filing of the final dissolution and closure documents upon completion of the liquidation, confirming that all assets have been distributed and all liabilities have been settled
• A fixed registration duty of €75 applies to each filing
The Lux Manager, acting as liquidator, will be responsible for preparing and submitting all required RCS filings. Veldhuis & Gérard will supervise the filings and ensure compliance with all procedural requirements.
C. CSSF Notification
If the Luxembourg SCSps are registered with the CSSF as alternative investment funds, or if their alternative investment fund manager (whether the Lux Manager or a delegated entity) is registered with the CSSF, notification of the planned dissolution is required under applicable CSSF regulations. The CSSF may impose mandatory waiting periods between notification and the effective date of dissolution, during which the CSSF may request additional information or impose conditions.
Veldhuis & Gérard will advise on the specific CSSF notification requirements applicable to the SCSps, including the content and timing of the notification, any mandatory waiting periods, and the coordination of the CSSF process with the December 1, 2025 target effective date for Step 5. It is critical that the CSSF notification process commence well in advance of the target dissolution date to avoid delays in the overall reorganization timeline.
D. Dissolution of Solara Luxembourg Management S.à r.l.
The question of whether the Lux Manager should be dissolved concurrently with or following the dissolution of the SCSps is a separate matter that involves both local law and business considerations. As a Luxembourg S.à r.l., the Lux Manager's dissolution follows a distinct procedure from the SCSp dissolution:
• Shareholders' resolution. The shareholders of the Lux Manager (which we understand to be one or more Solara group entities) must adopt a dissolution resolution. For a Luxembourg S.à r.l., this resolution must be passed before a Luxembourg notary (notaire).
• Notarial act. The dissolution of a Luxembourg S.à r.l. requires a notarial act, unlike the dissolution of an SCSp (which is a contractual vehicle and does not require notarial form). The notarial act will incur notarial fees (typically €1,500 to €3,000) and a fixed registration duty.
• Appointment of liquidator. A liquidator must be appointed to wind up the affairs of the S.à r.l., distribute any remaining assets to shareholders, and settle any remaining liabilities.
• Publication and RCS filing. The dissolution and appointment of the liquidator must be published in RESA and filed with the RCS.
• Final accounts and closure. Upon completion of the liquidation, the liquidator prepares final accounts, which are approved by the shareholders. The closure is filed with the RCS, and the Lux Manager is struck from the register.
The decision on whether to dissolve the Lux Manager will be made in consultation with Solara (Priya Narasimhan, General Counsel; Stefan Dalmqvist, Head of Tax) and Veldhuis & Gérard, taking into account any continuing obligations of the Lux Manager (such as pending tax filings, contractual obligations, or potential future utility as a Luxembourg corporate shell).
XI. OECD Pillar Two / GloBE Interaction
The forthcoming OECD Pillar Two Global Anti-Base Erosion ("GloBE") rules represent a fundamental shift in the international tax landscape for multinational enterprise groups, including private equity fund platforms such as Solara. The GloBE rules, as implemented in Luxembourg by the law of December 22, 2023 (transposing the EU Minimum Tax Directive, Council Directive (EU) 2022/2523), establish a global minimum effective tax rate of 15% for constituent entities of in-scope multinational groups with consolidated revenues exceeding €750 million.
The Luxembourg SCSps, while fiscally transparent for Luxembourg direct tax purposes, may constitute "constituent entities" of the Solara group for purposes of the GloBE rules, depending on the group's consolidated revenue thresholds and the consolidation methodology applied. If the SCSps are in scope of the GloBE rules, the Solara group could be subject to qualified domestic top-up tax ("QDTT") or income inclusion rule ("IIR") obligations in respect of the SCSps' activities, potentially eliminating the tax efficiencies historically associated with the Luxembourg SCSp structures for certain investors.
The GloBE rules are effective for Solara's Luxembourg entities commencing with fiscal year 2025. The dissolution of the Luxembourg SCSps before the FY 2025 reporting obligations fully crystallize — targeting a dissolution effective date of December 1, 2025 — would simplify compliance with the GloBE rules and eliminate potential top-up tax exposure that might otherwise arise in respect of the Luxembourg vehicles. This consideration is a significant driver of the reorganization timeline and reinforces the business rationale for completing the dissolution before the end of FY 2025.
A detailed Pillar Two analysis, including the determination of whether the SCSps are in scope, the calculation of the effective tax rate for the Luxembourg jurisdiction, and the potential application of safe harbors, is deferred to a separate workstream. This memorandum notes the Pillar Two interaction for completeness and to contextualize the urgency of the dissolution timeline.