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One of the most important and attractive Luxembourg vehicles is the SPF (“Société de Gestion de Patrimoine Familial”)  or family management company.

What is an SPF in Luxembourg? 

The SPF (Société de Gestion de Patrimoine Familial) was established to replace the 1929 Luxembourg Holding regime, which had been regarded as not being in line with European Community Treaty state aid measures. 

The family SPF depicts a suitably private asset management tool for ultra and high-net-worth individuals in their quest to build, protect and transfer their wealth. 

The Family Wealth Management company (Société de Gestion de Patrimoine Familial) has a single corporate purpose: the acquisition, holding, management, and realization of financial assets excluding any commercial activity, any explicit ownership of buildings, or intellectual property rights. 

Eligible investors 

According to the SPF Law, eligible investors are: either 

  1. private individuals managing their wealth; or 
  2. private wealth management entities acting solely for the estate of one or more individuals, which may be resident and non-resident entities; or 
  3. intermediaries acting on behalf of the individuals listed under (1) and (2) above. 

Companies or commercial businesses should not be considered eligible investors. 

Also, the SPF is an excellent vehicle for both investment clubs and/or beginner and non-professional investors who want to test the functioning of their relationships with potential co-investors. 

The investment policy of an SPF 

The SPF itself signifies a passive investment vehicle developed for family asset and succession planning, matrimonial property management, and similar purposes. Its permitted activities are thus limited to the acquisition, holding, and sale of financial assets, cash, and other assets kept in an account with experienced financial service providers. 

Restricted activities 

Due to its particular status: 

  • the SPF is not permitted to render services, including the granting of interest-bearing loans 
  • the SPF may not be involved in the administration of the entities in which it holds participation, even if the percentage of capital held by the SPF would form a majority and provide it with certain management rights. 
  • any type of commercial activity is restricted  
  • the direct holding of real estate or intellectual property is not allowed 
  • the SPF may not enter into any life insurance contracts. 

The law does not exact any direct limitation to financing and indebtedness, and the SPF financing may be executed through borrowing operations, whether from credit institutions, its shareholders, or other investors. Also, an SPF is permitted to hold equity stakes provided that it does not interfere in the management of the company in which such stakes are held by the SPF. 

Simplified taxation of the SPF 

According to the SPF Law, SPFs are in principle exempt from corporate income tax, municipal business tax, and net wealth tax. 

An annual subscription tax of 0,25%, limited to a yearly amount of EUR 125,000, applies to all SPFs. The tax base is calculated as a sum of the paid share capital and share premiums, and the part of the debt that surpasses eight times the aforementioned sum. 

As an effect of its fiscal neutrality, an SPF does not benefit from the conditions of Luxembourg’s bilateral double tax treaty network or the European Union Parent-Subsidiary Directive. Hence, an SPF may be subject to foreign withholding taxes in the country where its investments are situated. 

Dividends paid by an SPF are not subject to withholding tax.

Given the lack of any commercial activity, an SPF should not be a taxable person for Luxembourg value-added tax purposes. 

The management of the SPF for tax purposes is carried out by the indirect tax authorities who may inform the direct tax authorities in case the SPF no longer fulfills the requirements to benefit from the SPF regime. 

Under the current legislation, only a few classifications of investors can open SPFs in Luxembourg, and our team of experts at Damalion can offer assistance in the registration of an SPF in Luxembourg. Contact your Damalion expert now to register your SPF in Luxembourg.