There are many instances wherein an individual can benefit from organizing a crucial portion of their patrimony in a structure with a unique legal personality. This includes succession planning, asset protection, wealth preservation, and the organization of management powers within a family office, as well as speculative operations and borrowing.
With the law of 11 May 2008, the Luxembourg Parliament created a vehicle formulated to manage private individual and family wealth, the family wealth management company (SPF). It is a simple and highly flexible wealth management structure that adheres to existing EU regulatory requirements.
Family Wealth Management Companies may be established in the following legal forms:
- Public limited liability company (SA)
- Private limited liability company (SARL)
- Partnership limited by shares (SCA)
- Cooperative organized under the form of the public limited company (SCOP)
Taxation for Family Wealth Management companies
- The Family Wealth Managementt (SPF) company is exempt from income tax and net wealth tax.
- There is no withholding tax that applies to interest payments except for interest paid to Luxembourg tax resident individuals and individuals who fall under the European Savings Directive.
- Dividend distributions and liquidation proceeds are not assessed with withholding tax.
- Family Wealth Management cannot benefit from double tax treaties contracted by Luxembourg with other countries or from the European Parent-Subsidiary Directive (90/435/CEE of 23 July 1990)
Family Wealth Management Shareholding Eligibility
The Family Wealth Management structure is limited to the following types of investors:
- Individuals who function within the scope of management of their private wealth.
- Entities that function solely in the interests of private wealth of one or more individuals.
- Intermediaries acting on behalf of investors mentioned above.
Interested investors must confirm in writing to the Domiciliation Agent, or failing that, to the Directors of a Family Wealth Management Company, that it is indeed an eligible investor.
Shareholders of a Family Wealth Management Company (SPF) must be limited to a group of investors. Shares issued by a Family Wealth Management Company (SPF) cannot be listed on any stock exchange nor can be constituted as public offering.
The professional acting on behalf of the Family Wealth Management Company (SPF), such as in the case of a domiciliary agent, authorized auditor, or chartered accountant, must be certified on an annual basis that the Family Wealth Management Company (SPF) complies within the conditions enacted in law.
Capital Distribution Duty
As of 1 January 2009, the 0.5% capital contribution duty was abolished and replaced by a fixed registration fee of EU 75.
A Family Wealth Management Company (SPF) may be financed by debt from bank loans, shareholder loans, and private bond issues within a ratio amounting to eight times its share capital enhanced by share premiums.
The Family Wealth Management Company (SPF) is assessed with an annual subscription tax rate of 0.25% calculated on the subscribed and paid up share capital.
Subscription tax can be no less than EUR 100 and exceed EUR 125,000, applicable to capital only and not to debt except in case the debt is more than eight times of the capital.
Portfolio management of transferrable securities, such as in the case of shares and investment company in variable capital. Participation acquisitions in other companies limited by shares provided that the Family Wealth Management Company (SPF) does not intervene in the management of the latter.
- Commercial and industrial activities
- Purchase or direct ownership of real estate
- Holding intellectual property
- Granting of interest-bearing loans
- Engagement in the management of participations
- Succession planning
- Family wealth management vehicle
As an international consulting firm, Damalion specializes in providing services for individuals and family offices, as well as the incorporation and management of Luxembourg family wealth management companies with bank account opening. Our global service network consists of long-standing relationships with various professionals in the legal field, accountancy, fiscal, and regulatory sectors. Reach out to a Damalion expert today to learn more.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.