Luxembourgis known as a top wealth management center in Europe; the country attracted here numerous investors andhigh net worth individuals interested in protecting their financial assets by employing various types ofmanagement strategiesdesigned forincreasing the wealth of local and foreign entities. The financial experts specialized in wealth management in Luxembourg provide a wide range of services for international clients handling complex businesses in several countries and large amounts of money.
Types of wealth management services
- the administration of wealth of individuals,
- legal representation in registering trusts,
- assistance in registering foundations,
- assisting foreign investors in the procedure of re-domiciliation,
- the administration of various assets, such as real estate, etc.
Legal entities for wealth management in Luxembourg
- SPF (wealth management company, which can be incorporated as a public limited company, private limited company, partnership limited by shares, cooperative),
- SOPARFI (financial holding company)
Minimum capital required
Between EUR 12,000 and EUR 30,000 (based on the selected business form)
Tax advantages for wealth management in Luxembourg
- numerous tax exemptions for both the SPF and the SOPARFI,
- low annual subscription tax, which is capped at EUR 125,000 for the SPF,
- the SOPARFI benefits from the provisions of double tax treaties
Tax exemptions available in Luxembourg
- for SPF: exemption on the corporate tax, the municipal business tax, net wealth tax, the withholding tax charged on dividends paid;
- for SOPARFI: VAT exemption, income tax exemption applied on dividends received and on dividends paid in specific conditions, capital gains exemptions
Types of founders who can register the wealth management structures
- individuals and corporate entities,
- private wealth management entities,
- other intermediaries representing the interests of their clients,
- institutional organizations,
- investment funds, etc.
The main legal entity used for the administration of wealth of individuals
The main types of assets managed by wealth management structures
- a wide range of other financial instruments,
- real estate (the latter is applied only to the SOPARFI)
Law applicable to wealth management legal entities
- for SPF: the SPF Law;
- for SOPARFI: the EU Parent-Subsidiary Directive, Law of 10 August 1915
Authorization required for the registration of wealth management entities (yes/no)
No (It can be necessary for the SOPARFI, depending on the activities it will carry out)
Taxes charged to wealth management entities
- for SPF: the annual subscription tax;
- for SOPARFI: a tax of 24.94% (it includes the corporate income tax, the municipal business tax, the solidarity surcharge), the wealth tax charged at a rate of 0.5%
Incorporating trusts/foundations available in Luxembourg (yes/no)
Reasons to select Luxembourg for wealth management
- a tax transparent cross-border system,
- a clear legal framework for wealth management,
- diversified system for wealth management,
- tailored solutions for various types of high-net worth individuals/companies
Holding company available for wealth management activity (yes/no)
Yes (SOPARFI is a type of holding company)
Immigration assistance available (yes/no)
It is an important connection between the wealth management services and investment funds availablein Luxembourg. Our experts in Luxembourg, specialized in different types of investment funds and wealth management services, can offer advice on how you can administer and invest your money in order to protect and raise your wealth.
Special tax regime for SPF
One of the most common forms of wealth management in Luxembourg isSPF(Société de gestion de patrimoine familial), known as the wealth management company. This type of company benefits from a special tax regime applicable to entities that are incorporated in order to manage the private wealth of individuals and it is registered only for this sole purpose. This type of company is permitted to acquire, hold and manage financial instruments, money and assets.
The following video offers a short presentation on wealth management in Luxembourg:
It is an investment company that manages the wealth of individuals on their behalf and it is incorporated according to the EU rules. TheSPF is not allowed to perform any commercial activities and it is exempted from certain taxes. In order to find out more details about the taxation of a SPF, you may address to our financial specialists in Luxembourg.
What are the main characteristics of a SPF in Luxembourg?
Besides the above mentioned aspects, a SPF in Luxembourg has to comply with the regulations of theLaw of 11th of May 2007 (the SPF Law), the main rule of law which regulates this business structure. Furthermore, it is important to know that the investors are not required to obtain an authorization for opening a Luxembourg SPF and that the legal entity can’t be listed. Other relevant characteristics are the following:
the SPF has to be registered as a capital company, with a share capital that will vary in accordance with the legal entity chosen for registration (it can vary between EUR 12,500 and EUR 31,000);
the shareholders of a SPF can be only natural persons and although the SPF incorporates the term “family wealth”, the investors are not legally required to be related;
the SPF is exempted from a wide category of taxes, including the corporate income tax, municipal business tax and the net worth tax;
it is liable to a subscription tax imposed at a rate of 0.25%, but it is not required to register for value added tax.
Wealth planning in Luxembourg
If you are interested in wealth planning, there are two types of structures that may help you in this respect and protect your assets: SOPARFI (société de participations financières) and the aforementioned SPF (Société de gestion de patrimoine familial). The SOPARFI has the main purpose ofoptimizing the management of agroup of companiesand it can benefit from double tax treaties.
Luxembourg is a state that has signed numerous double tax treaties with other partner countries, while many others are still in negotiation.
A SOPARFI in Luxembourgcan benefit from the provisions of the agreement signed with countries such as Italy, Portugal, Greece, Spain, Romania, United States of America (USA), Tunisia, India, China, South Korea, United Arab Emirates (UAE), etc.
What are the characteristics of a SOPARFI in Luxembourg?
Foreigners interested in wealth management in Luxembourg can protect their financial assets through a SOPARFI, as we presented above. A SOPARFI in Luxembourg represents a type of holding company that is allowed to invest in numerous types of economic sectors and which may also be employed for providing management services for high net worth individuals.
It is important to know that the SOPARFI is considered to have the status of a trading company, but it is bounded by the legislation on commercial companies available in Luxembourg. In order toopen a SOPARFI, it is necessary to select a specific business form and this type of company may incorporated in this country as a public limited company, a limited liability company or as a partnership limited by shares.
When opening this type of structure in Luxembourg, investors should know that they can invest in a wide range of assets, such as: stocks, bonds, shares, material assets, real estate properties, commodities, cash, currencies, loans and others. It is also necessary to find out that the Luxembourg SOPARFI can be incorporated by a wide range of entities. Its investors can be represented by natural persons, trusts, foundations,investment funds, holding structures or companies.
The minimum share capital necessary toincorporate a SOPARFI depends on the type of legal entity that was selected by the investors. Thus, when registering it under a public limited company, it can be formed with a capital of EUR 31,000, while in the case of a limited liability company, the minimum share capital required is EUR 12,500 (in the latter case, it is necessary to deposit the entire capital in a single installment).
What are the main tax considerations for a Luxembourg SOPARFI?
The manner in which a SOPARFI is taxed in Luxembourg depends on several factors. For example, it can vary based on where its headquarters is situated and whether the company has the status of a parent company or a subsidiary. In the case of a SOPARFI that is considered a parent company incorporated in Luxembourg, theSOPARFI can benefit from an exemption on the payment of the corporate tax. This can be applicable to the company’s profits obtained from dividends or sales and our team of financial representatives can provide more information concerning this aspect.
The SOPARFI can obtain an exemption on the payment of the withholding tax and the net wealth tax, in specific conditions. For example, those who want to open an investment fund in Luxembourg or an investment company must know that the net wealth tax is generally imposed at a rate of 0.05% on the value of taxable assets of a given entity.
The SOPARFI in Luxembourg can be exempted from the payment of this tax if the company registered in this country owns at least 10% of the capital of its subsidiary or in the situation in which the value of an investment is of at least EUR 1.2 million. Investors who want to provide services related to wealth management in Luxembourg through a SOPARFI structure should know that the company can become liable to the payment of the value added tax (VAT).
What are the main types of wealth management services in Luxembourg?
Providing services related to wealth management in Luxembourg can represent a complex matter, as this financial industry is composed of several pillars. Our team of financial consultants can provide in-depth advice on the types of wealth management services that can be provided to natural persons, but some of the most common are the following:
services created to properly administer the wealth and possessions of natural persons (assets they own in Luxembourg or elsewhere);
assistance in incorporating trusts and foundations, vehicles that can also be used for administering and investing the financial assets of high net worth individuals;
assistance in transferring a foreigner’s tax residence in Luxembourg and providing full representation in any matter concerning the re-domiciliation in this country (obtaining the necessary residency documents, finding a suitable real estate property, assistance in relocating the person’s close family members and other similar matters);
providing economic advice and understanding the client’s financial objectives;
administration of assets with a high value, such as real estate,investment funds, private equity, art works and others.
Luxembourg is a trustful location for wealth management as it is in the top 10 largest financial markets in the world and it offers a stable business environment, international financial specialists, a high skilled workforce and favorable taxation regime. It is also well-known for its social and political stability, having a strategic position at the core of Europe.
Why is wealth management important in Luxembourg?
Luxembourg is a popular business destination in Europe which offers various opportunities to business owners who choose to open a company there. When investing in another country, foreign investors need to make the best choices for the future of their company.
A wealth manager can provide the needed assistance and will help you make important decisions about investments and allocating business funds. Wealth managers can provide complete management services for finances and assets.
Irrespective of the type of company you own in Luxembourg, a wealth manager can offer you the appropriate financial products and services.
For more details on the wealth management services in this country, you may contact our financial specialists in Luxembourg. Our consultants can offer a wide range of services and they may also assist you on how to open an investment fund in Luxembourg and to register for taxation purposes.
Foreign investors can have other options for investing in Luxembourg. They can set up a SIF in Luxembourg, which is used for investing in specific assets, such as real estate, private equity, etc.
This type of fund must be supervised by the main financial regulator of the country, the CSSF, and its activities must be conducted through the services of a management company.
Another option foreign and local investors have is to register a SICAR in Luxembourg, an investment structure designed to businessmen who qualify as well-informed investors.
This category of businessmen must provide a written document through which they testify they comply with this status (they can be institutional investors or professional investors and other businessmen that can be included in this category).
A newer investment entity that is available for investors is the RAIF in Luxembourg, which is also addressed to well-informed businessmen. This structure is regulated under the Luxembourg Law of 23 July 2016 (RAIF Law), this being the basic legislation.
Besides this law, investors must follow the rules and the regulations of the Alternative Investment Fund Manager (AIFM) Directive.
The financial experts working at StartLuxembourgFund.com can assist investors in registering any of the investments funds that are available under the local legislation and can also represent high net worth individuals (local citizens and foreign nationals) in protecting their assets.
Vlad Cuc , Director of