Open a SPF in Luxembourg
Create a SPF in LuxembourgUpdated on Friday 23rd July 2021
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The SPF (“Société de Gestion de Patrimoine Familial”) was created in order to replace the previous “1929 Holding Company” and it’s an entity established in the form of a limited liability company, a joint stock company, a partnership limited by shares which is not involved in any commercial activity, except for the purchase, holding, management and transfer of financial assets.
The private wealth management company was first employed in Luxembourg in 2007 when the legislation in this sense was amended.
Below, our lawyers in Luxembourg explain the requirements for setting up a SPF in the Grand Duchy. You can rely on our legal services if you want to create a SPF in this country.
What is a SPF in Luxembourg?
The Luxembourg SPF Law allows foreign entrepreneurs to register an investment entity which will handle the management of the estate of private individuals. SPFs in Luxembourg can be employed to buy, hold, manage or sell any type of financial assets, but it may not engage in commercial activities. Our team of financial specialists can offer assistance for the registration of a SPF in Luxembourg.
The main characteristics of a Luxembourg SPF
The private wealth management company is one of the business forms which can be used by high net worth individuals interested in organizing their estate. However, the SPF can also be used a business form under the changes brought to the Corporate Law in Luxembourg.
The main features of a SPF in Luxembourg are:
- the SPF has a separate legal personality from its settlors (it can be registered as a limited liability company);
- the SPF can issue several types of shares, among which registered and bearer shares are permitted;
- it has a private character which is an advantage when the company has more than one investor;
- the SPF can also replace the traditional holding company, as it needs not to place the capital directly into the company;
- the SPF is also an excellent tool for those interested in setting up an investment fund in Luxembourg;
- it benefits from an easy and simple business registration procedure and implies a low share capital;
- the SPF cannot sell its shares on the Stock Exchange or place them for public offerings.
Apart from these, the Luxembourg private wealth management company is highly attractive from a taxation point of view.
The private wealth management company can have as shareholders one or more family members, groups of individuals forming family groupings, trusts, private foundations and even investor groups.
Our law firm in Luxembourg can offer more information on the main characteristics and uses of a private wealth management company.
Who can set up a SPF in Luxembourg?
Under the current legislation, only a few categories of investors can open SPFs in Luxembourg. Among these, individuals who want to manage their own estate (in accordance with the company’s characteristics). Private companies can also set up private wealth management companies, however, their activities will focus solely on the administration of the estate of one or more private individuals. Most of the times, such companies will administer the estate of foundations, trusts or associations. Also, there are no restrictions related to the nationality of the individuals entrusting the estate for management.
Intermediaries offering management solutions can also set up SPFs in Luxembourg with the purpose of offering fiduciary services.
The SPF is also a good choice for non-professional investors interested in providing asset management services. The SPF can appoint a Luxembourg-based domiciliation agent to handle the registration procedure.
Our Luxembourg lawyers can offer detailed information on the categories of individuals and companies allowed to create a SPF in the Grand Duchy.
Requirements for opening a SPF in Luxembourg
Every company registered as a SPF in Luxembourg must contain the termination SPF or “Société de Gestion de Patrimoine Familial”.
The main characteristic of a SPF is that it’s not allowed to perform commercial activities. Also, it can keep shares in a company but it may not intervene in its management.
The investors in a Luxembourgish SPF may be individuals acting under the management of their private assets or patrimonial entity acting solely in the interest of the private assets of one or more physical persons or an intermediary acting on behalf the previous type of investors.
An advantage of opening a SPF is the exemption of paying income tax, municipal business tax and the tax on wealth. The SPF is also not subject of the VAT.
Exemption to the above are represented by companies which have received at least 5 percent of the total amount of dividends from holdings in non-resident companies or the companies which are not resident of a member state of the European Union.
The SPF is subject to annual subscription tax rate of 0.25%, from the paid-up capital or the part of the debt that is above eight times the amount of the paid-in share capital. This annual subscription cannot be less than 100 €. The subscription fee is reported (and paid) quarterly.
There is a minimum share capital, which has to be deposit at registration and which depends on the form of business adopted. For example, a joint stock company must have at least 31000 € from which it must deposit at least 25% at registration while the share capital of a limited liability company is 12400 € and must be fully paid-up at registration. Any SPF must also deposit each year 5% of their profits into a legal reserve, until this reserve amount at least 10% of the SPF’s share capital.
Each year, a SPF must deposit at the Trade Register the following: the balance sheet, the list of directors and auditors and a list of shareholders who have not yet fully paid up their shares (with an indication of the open amounts). The SPF must also keep annual account statements. The authority in charge with the SPF supervision is the “Administration de l’Enregistrement”.
Other characteristics of a SPF are that it’s forbidden for the shareholders to be corporate bodies. It may be incorporated with 100% foreign ownership as long as the registered office is in Luxembourg. The annual meetings may be held anywhere in the world.
The video below shows how to establish a SPF in Luxembourg:
What are the basic procedures for the formation of a SPF in Luxembourg?
The main forms that a SPF can take are the limited liability company (based on a share capital of 12,400 EUR and not more than 40 investors) or the joint stock companies (with at least two founders and an initial capital of 31,000 EUR). The main difference between the usual SA or SARL and the SPF is that the last ones cannot be engaged in commercial activities and the securities issued cannot be transferred to the public or registered on a stock exchange market. The name must be unique, written with Latin characters and must end with SPF. The first step in SPF incorporation is checking the uniqueness of the name in the Trade Register.
After that, the minimum share capital has to be deposit and the receipt for it must be received.
Along with this receipt the investor must prepare the notarized articles of association and deposit it at the “Registre de Commerce et des Sociétés”. The publication of the Articles of Association in the Official Gazette of Luxembourg must be made. The documents may be in any language, but it has to be accompanied by a French or German translation.
Which are the legal entities under which a SPF can operate in Luxembourg?
The legislation on SPF in Luxembourg allows local and foreign investors to choose from a wide range of legal entities. However, in practice, most of the SPFs are registered under a public limited company. Also, another business form usually employed in this case is the limited liability company. Investors may choose from the following:
- public limited company (SA) – incorporated by signing the articles of association in front of a public local notary;
- private limited liability company (Sàrl) – it is registered by lodging the company’s articles of association with the Luxembourg’s Trade and Companies Register;
- partnership limited by shares (SCA); - it is incorporated by at least two shareholders, in which one has unlimited liability and the other has limited liability;
- limited partnership (SCS) – it will require two partners and the legal entity is established by drafting a partnership agreement;
- cooperative company organized as public limited company (SCoSA).
Restrictions imposed on SPFs in Luxembourg
Even if the SPF offers many benefits, it is also subject to several restrictions, according to the law. One of the most important restrictions refers to the fact that a Luxembourg private wealth management company cannot undertake any commercial activity. The other restrictions applied to SPFs are:
- the SPF cannot offer any services to thrid parties, no matter if they are natural persons or companies;
- the SPF cannot get involved in the management of the businesses in which it participates;
- it cannot hold any real estate or intellectual property rights in Luxembourg;
- it cannot conclude life insurance contract (only private individuals in the SPF can).
There aren’t many restrictions imposed on private wealth management company, however, you can obtain detailed information about them directly from our attorneys in Luxembourg.
What are the main taxes applicable to a SPF?
From a taxation point of view, the Luxembourg SPF is exempt from paying the corporate, the municipal business tax and the net wealth taxes. The SPF will only be subject to an annual subscription tax of 0,25% calculated on a specific tax base. The annual subscription will be paid on a quarterly basis, its minimum value being established at EUR 100 per year. Still, the subscription tax can’t have a value higher than EUR 125,000.
However, due to the fact that the SPF is exempted of numerous taxes, the company can’t benefit from the stipulations of the treaties for the avoidance of double taxation signed by the local authorities. The SPF is not required to register for value added tax and, at the same time, non-resident investors are not required to pay a tax on capital gains.
What are the tax exemptions that are applicable to a Luxembourg SPF?
Besides the above mentioned tax requirements and exemptions, those who want to open an investment fund in Luxembourg through a SPF will benefit from other tax benefits. For example, in a SPF, the investors will not be imposed with the withholding tax on interest payments or the withholding tax on dividend payments addressed to non-resident investors.
Furthermore, the SPF does not apply a tax on capital profits that can be obtained through the sale of the SPF’s shares, nor does it tax the liquidation revenues of the vehicle. These regulations are applicable only in the case of non-resident investors.
Other aspects related to the creation of SPFs in Luxembourg
From a taxation point of view, the SPF is a very advantageous structure, however, it must also comply with several tax requirements, as imposed by the Luxembourg authorities. Among these, the SPF is subject to a registration fee of less than 100 euros upon incorporation. Other fees are also applied if the private wealth management company amends its Articles of Association.
Other aspects which need to be considered when opening a SPF in Luxembourg is that is not subject to any oversight requirements imposed by the CSSF or the Companies Register. If the owner of the SPF is a foreign entity or citizen, the domiciliation agent will be in charge with filing an annual report on its activities with the authorities in Luxembourg. The SPF benefits from enhanced protection when it comes to bank-confidentiality rules.
How long does it take to incorporate a SPF in Luxembourg?
The procedure of SPF registration in Luxembourg usually doesn’t take longer than a week if all the documents are elaborated correctly.
What are the tax advantages of the Luxembourg SPF?
Opening an investment fund in Luxembourg or an investment company is recommended due to the fact the country stands out as one of the most reliable jurisdictions for investment purposes. The rise of Luxembourg as a top financial center is also related to the tax advantages offered to any businessman, which also applies to the SPF structure. The SPF benefits from the following tax advantages:
- a low registration tax (of EUR 75), required only once, when the SPF structure is registered with the local authorities;
- a subscription tax applicable at the rate of 0.25% of the SPF’s deposited capital (paid on a yearly basis), with the mention that the yearly tax is limited to a value of maximum EUR 125,000;
- exemption from paying the value added tax, the corporate income tax, the excise tax and the assets tax;
- the SPF is also exempted from paying the withholding tax on interest and dividends paid to non-residents;
- the sale of shares is exempted from the taxation of capital profits (applicable to non-resident investors).
For more details about other investment funds in Luxembourg, you may contact our lawyers in Luxembourg.