Luxembourg opportunities

Luxembourg holding company advantages

The taxation system is among the benefits of a holding company and among the reasons why foreign investors decide for such type of company. The following advantages of a holding company in Luxembourg can help investors decide easily for this form of business in the Grand Duchy:

  • a SOPARFI is subject to a reduced withholding tax or income tax exemption on residents;
  • there is no withholding tax on interest payments made in Luxembourg;
  • such a company can be managed by a single director which can also be the shareholder;
  • EUR 30,000 is the minimum share capital for a holding company and foreigners can use any currency they want;
  • holding companies in Luxembourg do not need to pay capital gains taxes;
  • if the company is not subject to commercial activities, information about the owners will be private.

Some benefits why incorporate in Luxembourg:

  • Internationally recognized financial center
  • Strategic location in Europe with a high standard of living
  • The availability of a qualified multilingual workforce speaking English, French and German
  • Political and social stability
  • Favorable tax treaty agreements with 57 countries
  • Very competitive company taxation at 28.59% which is made up of a corporate tax of 21.00% plus an unemployment surcharge of 0.84% and a municipal business tax of 6.75% (for Luxembourg City).
  • Companies are also subject to a wealth tax of 0.5% of net assets with certain exemptions.
  • No withholding taxes on dividends, paid to EU or double tax treaty resident companies otherwise 15%.
  • No withholding tax on interest and royalties.
  • Lowest VAT rate in Europe at 15%.
  • Very competitive personal tax rates up to a maximum of 38.95%.
  • Very low social security rates of 12% for employees and 13% for employers

A holding company can have one of the following legal forms to operate in Luxembourg:

  • Public Limited Company – SA
  • Private Limited Company – SARL
  • Partnership Limited by Shares – SCA
  • Co – operative – SC
  • A public company incorporated in conformity with the article 2 of the European Council regulation from 2001 – SE

Regardless of the types of companies in Luxembourg, all share capital contributions can be paid in cash or kind and the shares may be issued as registered or bearer shares under certain conditions.

A public company may utilize a board of directors or a management board and a supervisory board as forms of management. There are no legal requirements relating to the nationality or residence of the directors.

This type of company requires that an annual balance sheet, a profit and loss account and notes to the accounts must be prepared and submitted for the shareholders’ approval within six months after the financial year-end.

Benefits of a holding company in Luxembourg

  • Received pidends and capital gains on disposal of shareholding are exempt from taxation under certain conditions;
  • Limited or no withholding tax on pidends paid to a company resident of a country that has a double tax treaty with Luxembourg, under certain conditions;
  • No withholding tax on pidends paid between the Luxembourg company and other EU resident companies, under certain conditions;
  • No withholding tax on the liquidation process of a holding company;
  • Possibility of offsetting financial charges such as capital losses on disposal of shareholdings, acquisition of shareholdings in respect of taxable activities and, under certain conditions, foreign tax credits against profits made from other activities subject of taxation;
  • Flexible thin capitalization rules and possibility of VAT registration;
  • No requirements on paying any subscription tax.