Luxembourg is a politically and financially stable EU country with an AAA-Rating and is also a globally recognized financial centre. The country is a founding member of the EU, OECD, FATF, and the Eurozone, offering strong political support for the financial services industry, investor-friendly legislation and an attractive legal and tax framework. Its responsive and pragmatic regulatory and tax authorities have made the country a leading financial centre.
Luxembourg is the premier wealth management centre in the Eurozone and the second largest investment fund centre in the world with currently more than EUR 4,7 trillion of assets under management.
Luxembourg is also a forerunner in implementing EU regulations and international standards, always opting for the most investor and business-friendly implementation possible.
Why set up a family wealth management company (SPF)?
Luxembourg is one of the most established and trusted jurisdictions for wealth management and holding vehicles. The SPF is a holding and investment company intended for the management of financial assets and enables individuals to structure their assets in a flexible, simple, and tax-neutral way.
Setting up a SPF in a jurisdiction such as Luxembourg can have multiple advantages over holding a company participation directly or in an offshore jurisdiction:
1. The SPF limits the liability and allows for the flexibility to structure private assets for succession planning and asset protection purposes.
2. The SPF benefits from a preferential tax regime and an exemption from corporate income tax, municipal business tax and net worth tax. It is subject to a subscription tax at a rate of 0.25% of the paid-up share capital (e.g. for the minimum share capital of EUR 12,000 this would amount to EUR 30).
3. Luxembourg offers a well-established attractive legal framework and has a tax system that is fully compliant with EU and OECD standards.
4. Luxembourg has entered into bilateral investment protection treaties (BITs) that can provide investors with an additional tool to protect the underlying assets.
5. Holding an investment through a SPF, provides investors with the option to exit a participation, by selling either the shares or the underlying asset. Luxembourg provides a well-established route for exiting investments in a favorable manner.
6. Luxembourg is a multilingual country. The articles of incorporation and corporate documents are typically prepared in either English, French or German. This can be of use when the investment is in neighbouring jurisdictions, such as Germany, France, Switzerland, Belgium, or Austria.
Which legal form?
A family wealth management company in Luxembourg is called Société de gestion de patrimoine familial (short: SPF).
The corporate purpose of the SPF is the acquisition, holding, management and sale of financial assets, to the exclusion of any commercial activity. The SPF can be established in various legal forms, depending on the needs of the shareholders, the management of the company, and the transferability of the shares.
The SPF is typically established in one of the three following forms:
- Public limited company (S.A.)
- Private limited liability company (S.à r.l.)
- Partnership limited by shares (S.C.A.)
Which assets are eligible?
A SPF has no risk-spreading requirements, but may only invest into the following asset classes anywhere in the world:
- Any type of financial instrument within the meaning of the law of 5 August on financial collateral arrangements (e.g.: shares, stocks, bonds, options, transferable securities)
- Cash, currencies or any other assets kept in a bank account, with a professional of the financial sector or a similar entity.
The SPF may not hold real estate directly, but it may hold a participation in a company holding real estate. The SPF is a passive holding company and is prohibited in engaging in any trading in financial assets, in any services of a financial nature and may not get involved in the active management of a company.
SPF acting within their scope of activity do not require the approval of any supervisory authority.
Which shareholders are eligible?
Shareholders in a SPF are first and foremost private individuals managing their private wealth. These may be single persons or a group of individuals (a family tie is not required). Wealth management companies acting exclusively in the interest of individuals, such as trusts and foundations, may also be shareholders of a SPF.
What are the main steps for the incorporation?
1. Opening of a bank account to deposit the share capital
2. Transfer of the share capital (The minimum share capital for the S.A. and the S.C.A. is: €30,000 and for an S.à r.l. is €12,000)
3. Selecting a name for the SPF
4. Deciding on the corporate form
5. Preparation of articles of incorporation
6. Proxy by the shareholder to incorporate the company (no physical presence required for the incorporation)
7. Blocking notice to be issued by the bank
8. Appointment with the notary in Luxembourg
Following the appointment with the notary, the company is duly incorporated and has legal personality. Following the incorporation, the SPF is registered with the Luxembourg Trade and Companies’ Register.
What service providers does a holding company have to appoint?
A SPF needs to have a registered address in Luxembourg and should operate for substance purposes in such a way that it cannot be considered as a tax resident in jurisdictions where investors or investments are located. The registered address is regularly provided by a domiciliation agent.
A company’s annual accounts must also, in general, be subject to an audit performed by a statutory auditor (Réviseur d’entreprise agrée).
Although it is not a legal requirement to have a Luxembourg resident director/manager, it is advisable for good corporate governance to appoint a local director. These are usually provided for by the domiciliation agent.
How long does it take to set up in Luxembourg?
A SPF is an unregulated holding vehicle without the need for any regulatory approvals, provided it does not engage in any activities that require a commercial license or financial supervision.
Once a bank account is available to deposit the share capital, the SPF can be incorporated. The incorporation can thus be finalized within 2-3 days. Upon incorporation, before a notary, the SPF has legal personality and can enter immediately into legally binding agreements.
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