Specific Tax Efficient Vehicles
Luxembourg provides a number of tax efficient vehicles for holding investments and/or organizing financing activities.
There are both taxable (SoParFi) and non-taxable regimes, with respect to income and capital gains taxation.
Société de Gestion de Patrimoine Familial
The Private Wealth Management Company
The SPF, introduced by the law of April 26, 2007, takes one of the existing forms of a S.A., S.à r.l., S.C.A. or S.C. organized as a S.A., and is governed by the same rules, but benefits from a special tax regime, subject to restrictions mainly on its activities and on who may be its shareholders.
The SPF’s activities are restricted to acquiring, holding, managing and disposing of “financial assets”. All commercial activities, the granting of interest bearing loans and the provision of any kind of remunerated services are forbidden and the SPF may not have a role in the management of companies in which it holds shares.
The SPF’s shareholders must be individuals, private wealth vehicles or intermediaries acting on behalf of individuals or private wealth vehicles.
The major advantage of the SPF is that these companies are exempt from income tax, net worth tax and withholding tax on dividends distributed, and are only subject to the following:
Registration duty at the fixed rate of EUR 75 (capital duty no longer applies).
Annual subscription tax (taxe d’abonnement”) at an annual rate of 0.25% levied on the amount of paid-up capital increased by the amount of share premium and the amount of debts exceeding eight times the paid-up capital and share premium. The subscription tax is capped to a maximum annual amount of EUR 125,000 (minimum of EUR 100).
The SPF is not entitled to benefit from double tax treaties signed by Luxembourg or EU directives.
SIF – The Specialised Investment Fund
Fonds d’Investissement Spécialisé (FIS)
Luxembourg SIF is a tax-exempt lightly regulated investment fund reserved for “informed investors”.
The SIF can either be set up as a contractual fund (fonds commun de placement, otherwise known as an FCP), or as a variable capital or fixed capital company (SICAV or SICAF).
A SICAV may have the legal form of a S.A., SARL., S.C.A. or S.C. organized as a S.A.
A SICAF may take those forms as well as the S.N.C. or Société civile forms.
It is however more lightly regulated, for example in terms of reporting requirements and restrictions on its investments and leverage than UCITS and Part II UCIs. It must apply risk diversification and can be divided into sub-funds. The SIF must have net assets of at least EUR 1,250,000.
A major advantage of the SIF is that it is exempt from income tax, net worth tax and dividend withholding tax on dividends distributed, and is only subject to the following:
Registration duty at the fixed rate of EUR 75 (capital duty no longer applies). Contribution of movable property (e.g. shares, receivables, cash) to a Luxembourg company for a consideration other than shares should be subject to proportional registration duties.
Annual subscription tax of 0.01% of net asset value (payable on a quarterly basis)
A SIF may be in the scope of the Luxembourg law implementing the EU Savings Directive, but only if it is a FCP, and this will then depend on its investment policy.
A SIF is eligible for benefits under certain tax treaties signed by Luxembourg but excluded from others.
One limitation on the use of SIFs is that they do not qualify under the EU Parent Subsidiary Directive as normally taxable companies.
Dividends distributed by the SPF are not subject to withholding tax.
There is no withholding tax on interest paid by the SPF except where the EU Savings Directive or Luxembourg domestic withholding tax apply.
SOPARFI – Sociétés de Participations Financières
Taxable holding companies
The SOPARFI, which is fully taxable like any other entity, takes advantage of tax legislation available to all companies (principally double tax treaties and benefits under the EU Parent Subsidiary Directive) and does not have any restrictions on the scope of its activities.
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