Asset Protection in Luxembourg

Asset Protection in Luxembourg

Updated on Friday 11th October 2019

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asset protection in luxembourg.jpgLuxembourg 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; however, English is widely spoken. They 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 offer 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 to 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 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 Luxembourg has 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 with 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;
  • since the SPF is set up as a corporate structure, it needs to have a share capital, which can vary between EUR 12,000 and EUR 31,000, depending on the chosen legal entity. 
 

What are the basic taxes and costs associated with the Luxembourg SPF? 

 
One of the costs associated with the registration of a Luxembourg fund that 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 from 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 12,500;
  • 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 30,000. 
 

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 of 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. 

 

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 both 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 4,3 trillion, 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.  
 

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. The 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, you may contact our financial consultants in Luxembourg.