On 11th May, 2007, Luxembourg enacted a new fiscal regime aimed at private investors and individuals. The Private Family Asset Management Company, or SPF.

Company Form

The SPF regime can be adopted by the following companies:

  • S.à r.l. : Minimum share capital EUR 12.500, minimum of one shareholder and one manager.
  • S.A. : Minimum share capital EUR 31.000 (of which at least ¼ must be paid), minimum of one shareholder, one director and one auditor.
  • S.C.A. : Minimum share capital EUR 31.000 (of which at least ¼ must be paid), minimum of two shareholders, three directors and one auditor.
  • C.O.O.P.S.A. : A Cooperative company which has adopted the form of a Limited company, minimum 3 shareholders and three directors.

Advantages of the SPF

The shares of an SPF can be nominative or bearer, but cannot be listed on the stock exchange.

Restrictions of the SPF

The activity of an SPF is strictly limited to the acquisition, holding, management and realisation of financial assets, such as:

  • Shares, obligations, shares of quotes companies or private companies, securitisation funds, soparfi’s, charitable capital companies, deposit accounts, SICAV’s, Luxembourg or foreign investment funds, structured products, hedge funds, precious metals, options, warrants, indices, currencies and similar financial derivative products.
  • The SPF cannot carry out any commercial deals, hold property of any sort, intellectual property rights nor manage an activity in the trade of financial services.

It can however hold a subsidiary company which does carry out such an activity.

Debt

Depending upon the form of the company, the SPF can issue securities, contract debts with its shareholders or third parties, both resident and non-resident. There is no maximum debt/equity ratio to be respected, however a subscription tax is due on the debt which exceeds 8 times the increased paid-up capital of the capital premiums.

Shareholders

The shareholders of the SPF must be:

  1. Individuals (not corporate), who can be either resident or non-resident
  2. Entities which manage patrimonial assets, either resident or non-resident

Taxation on constitution, capital duty of 0%

  • On the part of the debt or the advance towards the shareholders or the third parties – maximum of 8 times the subscribed share capital;
  • When the contribution in kind is more that 65% of the shares of a company and has its registered office within the European Union;
  • When there is a transfer of registered office from a member state of the European Union towards Luxembourg, as long as a similar duty has been charged at the constitution;
  • When there is a change in the form of a Luxembourg company into an SPF;
  • When there is the incorporation of reserves or deferred results to the capital.

Tax on the results, benefits or dividends received or perceived to be received by the SPF due to its social objective

Total tax exemption from income tax, communal tax, but the SPF is excluded from all tax treaties

 

Withholding at source on the interests paid on the advances and debts of the SPF with individuals

  • If the individual is a Luxembourg resident, either final withholding at source at 10%, or global taxation.
  • If the individual is non-resident in Luxembourg, final withholding tax at source is charged at 15%.

Withholding tax at source

No withholding tax at source is charged on interest paid on advances and debts of the SPF towards the legal entities or other entities.

Wealth tax

100% exempt


Parent/Subsidiary directive and interest royalties directive

Excluded



Anti-abuse measures

The SPF is not able to have more than 5% of its dividends received from non-resident and non-quoted companies (excluding those within the EU), and whose rate of taxation is lower than 11%.

Withholding at source on salaries paid to either employees or directors

Dependent upon a scale with either a reduction or an exemption of withholding tax, dependent upon the specific situation of the beneficiary.


Withholding at source on director’s fees

20%


VAT

No registration is possible


Subscription tax

The taxable basis is equal to: Paid share capital + share premium + debts exceeding 8 times share capital + share premium

 

A rate of 0.25% per annum with a minimum amount of EUR 100 and a maximum amount of EUR 125.000 is payable on a quarterly basis (pro-rata per day)

Tax on realised capital gains

Tax is payable for a Luxembourg residents

Tax is not payable for a non-residents

Tax on the profit on liquidation (boni on liquidation)

Tax is payable for a Luxembourg residents

Tax is not payable for a non-residents

Administrative supervision of the SPF

Only the ‘Administration de l’enregistrement’ is qualified.


Each year, the domiciliation agent must certify the following:

  • That the SPF is held only by qualified investors
  • That the SPF does not receive more than 5% of its dividends from companies which are taxable at a rate lower than 11% (excluding companies in the EU)
  • That the SPF respected its obligations as a paying agent by applying the law ‘relibi’ and the savings directive.