Having a stable political and economic environment and low taxes for certain types of businesses, Luxembourg
has been a very attractive country for foreign investors
in the last years. The authorities sustain the liberal attitude towards foreign investors
who are encouraged to develop their businesses through the fiscal system especially for those who try to expand their international activities. Luxembourg
is one of the favorite countries for overseas businessmen looking for opening a holding company
, and many multinational companies in the world choose this country for setting up such entity which is known as SOPARFI or Societe de Participations Financieres. Investors can benefit from an exemption regime on dividends and capital gains on shares. In this sense, complete support for registration purposes can be obtained from our company formation specialists in Luxembourg
Conditions for applying the exemption regime
| Quick Facts || |
| Legal entities used ||SARL, SOPARFI |
|With the Luxembourg Trade Register |
|Around 3 weeks |
|Advantages || |
No corporate income tax under certain conditions
|Precautions || |
Subsidiary owned by a Luxembourg or EU resident entity
|Shareholding structure || |
At least 1 shareholder
|Minimum Capital || |
|Taxation || |
24.94% corporate tax rate
A lower rate applies under certain conditions
|Control ||Foreign ownership available |
|Accounting and Reporting ||Financial statements are not publicly displayed, no audits required for less than EUR 3 million bank statement, turnover less than 6 million Euro or if there is a single shareholder |
|Number of double taxation treaties ||82 |
A holding company must accomplish two conditions for being able to benefit from the exemption regime. Firstly, the holding company from Luxembourg must have a participation in the share capital of the subsidiary of 10% or a participation of at least 1.2 million EUR for at least a year. Secondly, the subsidiary must be owned by a Luxembourg resident entity or an EU entity or a capital company which pays, in its country of residence, an income tax that is almost the same as the one paid in Luxembourg. This is not a mandatory condition if the foreign subsidiary is subject to the EU Parent-Subsidiary Directive.
Reasons for opening a holding company in Luxembourg
Many multinational groups from other European countries transferred their financial activities to Luxembourg
because of the stable tax regime and the advantages of holding companies
is a very well-known business center located in the center of Europe and with a qualified labor force which attracts many foreign investors. They choose to buy small companies
and operate on the market with a wide range of activities, giving full credits to holding companies
and being aware of the benefits. Among these, the following are essential when deciding for a holding company in Luxembourg
- • investors have protected assets;
- • there is 100% ownership of these companies;
- • the operations of holding companies in Luxembourg are overseen by a board of managers;
- • the corporate tax is not imposed;
- • such companies can benefit from the double tax treaties signed by Luxembourg with other countries;
- • the skilled workforce in Luxembourg can be part of your holding company.
The interesting part about the companies in Luxembourg is that they aren’t obliged to publicly show the financial statements, but additional details in this sense can be offered by our company incorporation representatives in Luxembourg.
SOPARFI or SPF in Luxembourg
Businessmen who decide to open a holding company in Luxembourg
should know that this type of company (SOPARFI)
is used for doing business
in different fields, such as: industry, commerce, real estate etc. Many foreign international groups choose this form of company – SOPARFI
– for developing their businesses and establish the headquarters in Luxembourg
. The investors may also choose to open a SPF (Special Purpose Vehicle or the Private Wealth Management Company) in order to benefit from the attractive tax regime and protect the personal assets.
How is the management for holding companies in Luxembourg?
The supervisory board and the management board are the two bodies that can conduct the activities of the holding companies in Luxembourg. It is good to know that one of the boards can be in charge of the management and if the shareholders decide on two bodies in charge of the holding company, such information needs to be comprised by the company’s internal documents. As a mandatory condition for establishing a holding company in Luxembourg, foreign investors need to know that the board of managers need to be composed of at least 3 members, even in the case the company has been established by one stockholder. In the case of election, such board of managers is normally appointed at the general meeting of the owners.
Is there an annual fee for holding companies in Luxembourg?
Yes, CHF 6,400 or approximately EUR 5,600 is the annual fee which needs to be paid for a holding company in Luxembourg.
Are there any audit requirements for a holding company in Luxembourg?
Yes, small holding companies in Luxembourg
are required to have a statutory auditor such as legal entities or private persons chosen at the general meeting of the board and owners, while the medium and big companies will need an independent auditor registered with the Institut des Reviseurs d’ Enterprises in Luxembourg. Here are the most important things to consider about the audit and accounting requirements for holding companies in Luxembourg
- The independent auditor is necessary for companies with a net turnover exceeding EUR 6.25 million.
- Audits for holding companies in Luxembourg requires the profit and loss balance, alongside the list of shareholders.
- The annual accounts are normally reviewed at the time the general meeting takes place.
- An independent auditor is necessary for holding companies with more than 50 employees.
If you decide on opening a holding company in Luxembourg
and you are interested in complete accounting services
, we recommend you get in touch with our team of advisors and find out more details in this matter.
How much time does it take for opening a holding company?
The incorporation of a holding company in Luxembourg takes around 7 days due to the lack of harsh formalities and a proper registration process. Feel free to tell us if you want to set up a holding company, in order for us to provide you with the necessary information and guidance.
Double taxation treaties signed by Luxembourg
Being an international financial center and a very much appreciated business hub, Luxembourg had to settle double taxation agreements with partners worldwide. This means that foreign companies established in Luxembourg are protected from paying the taxes on incomes twice. Also, Luxembourg is part of OECD or the Organization for Co-operation and Development which is comprised of 34 state members with which the Gran Duchy established and sustained solid business collaborations for many years. A holding company in Luxembourg comes with a series of advantages, especially regarding the taxation and the ease of doing business. Let our team of consultants tell you more about the registration of such company and about any other type of structure you wish to establish in this country.
The purpose of holding companies in Luxembourg
The single purpose of holding companies in Luxembourg
refers to the management of the stockholdings in other enterprises that have economic activities in this country. When having at least 10% of the shares in the company, you have the right to vote in the firm and you can also provide technical management, if it is the case and if an agreement is approved. Establishing a holding company in Luxembourg
is not a complex process, however, you should talk to a specialist in company formation in Luxembourg
and receive comprehensive support. Our team is ready to help local and foreign entrepreneurs start a business in Luxembourg
by handling the whole process and represent your interests.
Types of holding companies in Luxembourg
SARL (private limited liability company), SA (public limited liability company), SC (co-operative), and SCA (partnership limited by shares), are a few of the legal entities under which a holding company can be registered in Luxembourg. In the case of SARLs, the minimum share capital of EUR 12,500 is needed. Feel free to talk to our consultants and find out more about how to open a holding company in Luxembourg.
Are there any other uses for holding companies in Luxembourg?
Yes, holding companies in Luxembourg can own intellectual property rights and can have e-commerce activities or obtain an inheritance. These are other reasons and purposes that enter the attention of foreign investors wanting to open a holding company in Luxembourg. Please feel free to solicit the assistance and support of our company formation agents in Luxembourg.
5 reasons for starting a holding company in Luxembourg
Setting up a holding company in Luxembourg is quite advantageous for international investors looking for a business in this country. They can pay attention to the following reasons for opening such an entity, helped by one of our company formation specialists in Luxembourg:
1. The tax structure is advantageous – paying fewer taxes is for sure a target for any kind of investor. With a holding company in Luxembourg, there is no need to worry about the corporate income tax on dividends and capital gains from the nominal paid-up capital of a subsidiary in this country.
2. Relying on the local workforce is a plus – The labor force in Luxembourg is multilingual and highly skilled and foreign investors interested in holding companies in this country can think of hiring local staff.
3. The accounting procedures are simplified
– In the case of holding companies in Luxembourg
, the annual financial statements are not publicly disclosed. Independent auditors are needed for companies exceeding a net turnover of around EUR 6.25 million.
4. The support of double tax agreements is important – Luxembourg signed numerous double taxation treaties with countries worldwide (75 states), letting foreign investors benefit from tax-efficient business management and avoid the fiscal evasion.
5. The financial sector in Luxembourg
is one of the most appreciated in the world – the banking sector in Luxembourg hosts numerous financial institutions from all over the world, with branches and subsidiaries. More than that, there is no need to travel to Luxembourg to open a bank account
for your business, as one of our consultants can provide complete support and assistance.
If you believe a holding company in Luxembourg is advantageous for the development of your portfolio among other things, you should get in touch with our team and let us handle the entire registration process.
Making investments in Luxembourg
Luxembourg is a prolific financial center that hosts a wide range of businesses and companies that benefit from a great business environment and support. The great tax structure, the stable economy, the good quality of life, the experienced workforce, and the great infrastructure are among the solid business points of Luxembourg, a country that sustains the foreign investments in a huge percent. The legislation related to foreign investments is quite permissive and lets both domestic and foreign entrepreneurs enjoy the same business rights. Here are some facts and details that describe the economy of Luxembourg:
- • Bermuda is the main investor in Luxembourg, followed by Ireland, UK, and the Netherlands;
- • according to the 2020 World Doing Business report, Luxembourg ranks 72nd out of 190 economies in the world;
- • around USD 164,000 million was the total FDI stock of Luxembourg in 2018;
- • numerous FDIs are directed to the innovative sectors of Luxembourg, like financial services technologies, biomedical and biotechnology.
The advantages of Luxembourg holding companies
Holding companies in Luxembourg are preferred by international investors for many reasons, among which, the exemption from taxation for capital gains and dividends. Smaller withholding tax or the exemption of such tax applies to resident holding companies in Luxembourg if the country of origin signed a double taxation agreement with the Gran Duchy. There is no subscription tax imposed for holding companies in Luxembourg and the possibility of counterbalancing the capital losses on clearance of stockholdings, under certain conditions is available. Just like in the case of other business entities available in Luxembourg, a bank account can be easily opened without having for the foreign investor to travel to this country. Trading in foreign currencies is applicable to all bank accounts, regardless of the chosen financial institution.
The ease of doing business on Luxembourg
is for certain among the reasons to set up a holding company
in this country, whether as a domestic investor or from overseas. In this direction, the available workforce is not only experienced in different domains but also highly educated and multilingual, important features a foreign entrepreneur appreciates.
If you need more information about the advantages of setting up a holding company in Luxembourg
or you need assistance throughout the whole procedure, you can contact
our team of company formation agents in Luxembourg