Luxembourg is an attractive destination for asset protection as it is an important financial hub in Europe and it offers a favorable taxation system and a stable business and political environment. Many foreign investors choose this country that is located strategically in Europe and has French, German and Luxembourgish as the official languages. We invite you to address us if you need legal conselling on the registration of an investment fund.
| Quick Facts | |
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| What is asset protection in Luxembourg? | Asset protection refers to the legal means used by investors and private persons to maintain and increase the value of their assets (financial assets, real estate and other types of income). Asset protection is usually done through certain legal entities that are specifically designed for this purpose. |
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Vehicles for asset protection in Luxembourg |
– the special limited partnership (for estate management/asset protection), – the trust (an entity receives the right to manage the assets of another entity), – life insurance contracts, – the SPF (Société de gestion de patrimoine familial – private wealth management company) – an entity designed for the asset protection of families and other private individuals |
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The characteristics of the SPF |
The SPF is set up for the purpose of protecting the assets of private individuals that are included in the category of private liquid financial assets (shares, bonds, participations in companies, assets held in bank accounts, etc.). |
| Tax advantages for SPF |
The SPF is exempt from paying taxes such as: – the wealth tax, – corporate income tax, – municipal business tax. |
| Company types for SPF |
– partnership limited by shares, – cooperative registered as a public limited company, – public limited company, – private limited company. |
| Capital requirements for the SPF |
EUR 12,500 – EUR 31,000 (It varies based on the selected company type). |
| Financial Sector Supervisory Commission (CSSF) authorization (yes/no) |
No |
| Annual taxes charged to the SPF |
The subscription tax, charged at a rate of 0.25%. |
| Registration fees for the SPF |
EUR 75, charged once, upon incorporation. |
| Types of persons that can set up a SPF |
– private individuals, – patrimonial entities. |
| Why opt for asset protection in Luxembourg? |
– stable legislation, – a reputable country for financial activities, – many investment choices, – favourable tax regime, – largest investment center in Europe, – stable tax laws |
| Tax benefits for individuals/companies |
Exemptions from the payment of the withholding taxes on dividends, interest, and VAT. |
| Activities prohibited for a SPF |
The SPF can't develop commercial activities, be listed on the stock exchange or protect intellectual property rights. |
| Law regulating SPF |
The SPF Law – May 11, 2007 |
| Obligation to set up a registered address in Luxembourg for the SPF (yes/no) | Yes |
However, English is widely spoken. Investors benefit from a wide range of financial services provided by experienced specialists who can offer reliable information about legal methods of tax minimization and asset protection in Luxembourg.
A distinctive category of clients who want to receive financial services in Luxembourg is that of individuals and companies that are interested in asset protection.
Our team of financial experts in Luxembourg offers many solutions for rich families who want to protect their assets, by investing them in order to grow their total possessions on a medium and long term. Our investment strategies are tailored to our clients’ needs, based on the characteristics of their assets.
We offer guidance for banking procedures and we collaborate with a large variety of banks in Luxembourg that assure the secrecy of their operations to a certain point.
The procedure of asset protection in Luxembourg can be done through a certain methods, such as: SPF (Société de gestion de patrimoine familial), special tax regime for intellectual property rights, expatriates and companies or for Luxembourg life insurance contract seen as an investment tool.
SPF in Luxembourg
The SPF (Société de gestion de patrimoine familial) benefits from a special taxation regime and has the main objective of managing the wealth of individuals, being the most common tool for this purpose in Luxembourg.
This type of company is not allowed to perform any type of commercial activities and it can only acquire, hold and manage the assets of individuals. The SPF cannot be used by corporate investors who want to manage their assets.
The most important thing to know is that a SPF is exempt from paying the corporate income tax, wealth tax and municipal business tax, but it has to pay a registration tax on a yearly basis. This tax is calculated on the amount of the paid-up capital and the share premiums. For details about the calculation of this tax and other information, you may address our financial representatives in Luxembourg.
What should an investor know on the SPF in Luxembourg?
The SPF in Luxembourg provides a set of tax advantages, as we presented above. Those who want to open an investment fund in Luxembourg or a structure designed for the protection of personal assets can benefit from other tax advantages, which can be presented by our team.
The SPF in Luxembourg is characterized by the fact that it is addressed to private investors or to entities that are set up with the purpose of managing the private wealth of individuals.
It is necessary to know that, unlike the case of those who want to open a Luxembourg fund, the SPF does not need a prior authorization from the local financial institutions. Still, the structure needs to be registered with the Administration de l’enregistrement et des domaines.
Although the SPF is exempted from the payment of numerous taxes, it does not have access to the double tax treaties that were signed by the representatives of this country, which means that the investors can’t enjoy the tax benefits that derive from such tax agreements.
From an accounting point of view, the structure is required to complete a few procedures, which can be presented by our financial advisors. It is also required to appoint an accountant or an auditor.
Does the SPF need to be registered in Luxembourg under a legal entity?
Yes, the SPF in Luxembourghas to take the form of one of the legal entities prescribed by the commercial legislation in this country. Since the company is not used for commercial activities and its investment operations are done in the name of private individuals, the SPF can’t be listed on the local stock exchange market. With regards to the business structures the SPF can take, the following are available:
- the SPF can be incorporated as a public limited company or as a private limited liability company;
- it can also take the form of a partnership limited by shares;
- the SPF can be registered as a cooperative incorporated as a public limited company in Luxembourg;
- it is legally required to have the company’s office registered in Luxembourg, regardless of the selected company type.
What are the incorporation steps when developing asset management in Luxembourg?
Asset management companies in Luxembourg must be incorporated following the national procedures available in this country. The rules and procedures can slightly vary from one company type to another, depending on the specific legislation that applies in a particular case.
For asset management companies in Luxembourg that are set up as SPFs, the registration is completed through a notary public, where the investors will sign the articles of association. Once signed, the document must be published in the Official Bulletin.
After that, the document has to be submitted with the Trade and Companies Register in Luxembourg, and following this step, the legal entity will gain legal recognition. The document must state the legal entity chosen by the investors and the capital associated with it, the names of the shareholders, the purpose of the entity, the legislation that regulates the entity and so on.
In this case, the articles of association must specify that the legal entity abides by the law on private asset management companies in Luxembourg. It is also worth knowing that the investors do not have to comply with any residency requirements, as the entity can be set up both by Luxembourg residents and foreigners who do not have their residency here.
What types of investors can set up a Luxembourg SPF?
When it comes to the types of investors that open an investment fund in Luxembourg, the rules vary greatly based on the type of fund selected or the type of activity. For instance, the SICAR in Luxembourg can be set up by investors who are well versed in finance, trading and investments and who can easily estimate the risks associated with their types of investments.
For other categories of funds, such as the RAIF in Luxembourg, there are more options for the investors who can register the fund, as this type of entity is address to the majority of investors. In the case of a SPF, the investors can be high-net worth persons who want to manage their own property.
The investors of a SPF can also be other third parties or the investors of other SPF (registered in this country or registered elsewhere). It must be noted that the SPF can’t have shareholders who are corporate entities.
What are the basic taxes and costs associated with the Luxembourg SPF?
One of the costs associated with the registration of a Luxembourg fundthat operates as a SPF is the share capital. Its value depends, as mentioned earlier, based on the selected legal entity.
It is important to know that upon its registration, the local authorities will require investors to deposit a specific amount of the company’s total share capital. Below, we present the main costs and taxes available for this structure:
- the SPF is imposed with a registration fee of EUR 75, paid once, upon its incorporation;
- this structure is also imposed with the subscription tax, which is imposed at a rate of 0.25%, calculated on the company’s paid-up capital and the share premium;
- however, the value of the subscription tax has to of minimum EUR 100 and maximum EUR 125,000;
- if the SPF is registered as a limited liability company, then it will need a capital of EUR 12,000;
- if the investors select the above mentioned legal entity, they will need to subscribe 100% of the capital upon registration;
- SPFs registered as public limited companies or as limited partnerships by shares will need a capital of EUR 31,000.
Are there any activities that can’t be carried out in a SPF?
If you plan to open a SPF in Luxembourg for the purpose of developing asset management services, you must know that there are certain activities that can’t be developed through this entity. In the list below, you can discover the activities that can’t be carried out while developing asset management in Luxembourg:
- directly owning intellectual property and real estate (there is a possibility to do so, but only as indirect ownership, such as through other entities);
- providing services (with the exception of asset management in Luxembourg);
- developing commercial activities (the SPF is not allowed to engage in commercial activities, but it is allowed to own shares in companies established for commercial purposes);
- conducting life insurance operations.
How long does it take to register the SPF?
The duration of the registration process can vary greatly based on the type of entity investors want to set up. In general, asset management companies in Luxembourg can be incorporated in a period of 2 to 4 weeks, while the registration of a commercial company can be completed in around 5 days, provided that all the documentation has been approved.
The time required to register investment funds in Luxembourg also depends on the fund selected. Therefore, we invite you to find out more details from our team if you want to open a SIF in Luxembourg or other type of fund.
Why should an investor choose asset management services in Luxembourg?
Luxembourg is positioned as one of the main financial hubs at a global level. Asset management services can be provided to high net worth individuals, but this service is also available for corporate investments.
Thus, the service is also open for those who want to open an investment fund in Luxembourg. Currently, the market can be selected for asset management services due to the following relevant data:
- Luxembourg is considered the 2nd most important investment fund center in the world;
- investment funds registered here have assets under management with a value of EUR 5,16 trillion (measured in 2023), as stipulated by the CSSF;
- 98 of the 100 most important asset managers operate funds registered here;
- 90% of the total private investments are carried out through structures domiciled in Luxembourg;
- Luxembourg is the main destination for 19 of 20 most important private equity companies.
We invite you to watch a short video regarding the main vehicles for asset protection in Luxembourg:
Special tax regime in Luxembourg
Certain categories of individuals and companies in Luxembourg can benefit from a special taxation regime. The owners of intellectual property rights are allowed to receive a tax exemption of 80% calculated on the net income obtained from royalties when using the intellectual property rights and the same exemption applies for the revenue they get after selling the intellectual property rights.
Benefits for individuals and companies in Luxembourg
Luxembourg offers very good conditions of asset protection for individuals: low taxes, trustful banks and financial experts, most of the documents are drawn in French, German or English etc., these being language of international usage. The expatriates can benefit from a special tax regime that came into force in 2011 and that offers them the possibility of a tax relief related to relocation costs.
They also can receive tax deductions and save important amounts of money. Companies can also benefit of the favorable tax regime, especially the holdings, such as tax exemption for dividends and capital gains in certain situations; our team can assist with more information on the tax exemptions applicable in this case.
Life insurance contracts in Luxembourg
Life insurance can be used in Luxembourg as an investment tool and the legislation in this country offers a suitable legislation for the investors choosing this type of asset protection. Insurance is a long-term investment that includes financial vehicles, a special tax and legal provisions.
The owners of different types of assets can use this form to put them into different types of investment funds in order to obtain income. For more details about the investments that can be done or if you need assistance on the registration of a SOPARFI in Luxembourg, you may contact our financial consultants.