Modernisation of the Luxembourg SPF Tax Regime: Key points for families, entrepreneurs and investors

• Corporate tax treatment: SPF remains exempt from corporate income tax, municipal business tax, and net wealth tax.
• Annual subscription tax: 0.25% on a defined base; minimum €1,000 (previously €100, i.e., a 900% increase); maximum €125,000 (unchanged).

This adjustment raises the minimum fiscal contribution without altering the cap applicable to larger structures.

2) Clarified Subscription Tax Base

The subscription tax is assessed on:

• Paid-up share capital;
• Share premiums (always included);
• Debt exceeding eight times equity (equity = paid-up share capital + share premiums).

Only debts in existence on the first day of the financial year (or the date of incorporation for the first financial year) are taken into account for the excess-debt component of the base.

3) Mandatory Use of “SPF” in the Legal Name

Entities using the SPF regime must include “Société de gestion de patrimoine familial” or “SPF” in their registered name to ensure clear identification by third parties and authorities.

4) Strengthened AED Powers and Sanctions

• Administrative fines: up to 50% of the annual subscription tax due, or up to €10,000 when the amount cannot be determined.
• Serious breaches: fines up to €250,000 (e.g., prohibited commercial activity, interference in management of participations, direct real estate holding, ineligible investors).
• Withdrawal of SPF status: possible if a breach is not remedied within six months from notification. Withdrawal may trigger application of the ordinary Luxembourg corporate tax regime (effective combined rate 23.87% in 2025) retroactively for up to four fiscal years.
• Misuse of “SPF” designation after withdrawal: additional fines of €5,000 per month.

5) Suspension of the Statute of Limitation

The general tax limitation period is suspended while the SPF is in breach of its obligations and until a withdrawal decision becomes final, extending exposure to reassessment where non-compliance persists.

6) Digitalisation of Annual Certifications

Annual certifications required under the SPF Law must now be filed electronically, aligning with Luxembourg’s wider shift toward digital compliance.

Key Changes at a Glance

Implications for Families, Entrepreneurs and Investors

• Eligibility and scope: SPFs remain limited to passive financial asset holding; no commercial activity (contrary to SOPARFI: check our SOPARFI guide); no direct real estate; no interference in the management of participations; investors must be eligible (private individuals, certain family wealth entities, and intermediaries acting solely on their behalf).
• Risk management: The higher minimum levy and enhanced sanctions heighten the cost of non-compliance. Persistent breaches can lead to status withdrawal and retroactive taxation for up to four fiscal years.
• Operational discipline: Clear naming, electronic certifications, and attention to the debt-to-equity threshold (8×) are central to ongoing compliance.

How Damalion Assists

Damalion facilitates setup and ongoing compliance for SPFs by coordinating incorporation, advising on capital and financing structures in light of the 8× debt-to-equity threshold, and organising timely electronic certifications with AED-aligned governance. Our team works alongside Luxembourg notaries, lawyers, and auditors to deliver a streamlined, compliant implementation for families, entrepreneurs, and investors.

Frequently Asked Questions (FAQ)

What is the subscription tax applicable to an SPF?

An SPF pays an annual subscription tax of 0.25% on its defined base (paid-up share capital, share premiums, and the portion of debt exceeding eight times equity), with a minimum of €1,000 and a maximum of €125,000.

Can an SPF benefit from Luxembourg’s double tax treaties or EU directives?

No. Due to its exemption from corporate taxation, the SPF does not benefit from Luxembourg’s double tax treaties or the EU Directives typically invoked in cross-border investment structures.

Who may invest in an SPF?

Eligible investors include private individuals managing their own wealth, family wealth management entities acting exclusively for one or more individuals, and intermediaries acting solely on behalf of such eligible investors.

What activities are prohibited for an SPF?

SPFs are restricted to passive holding of financial assets and may not carry on commercial activities, directly hold real estate, or interfere in the management of companies in which they hold participations.

What sanctions apply for non-compliance?

The AED may impose administrative fines of up to 50% of the subscription tax due (or up to €10,000 where the tax cannot be determined). For serious breaches, fines can reach €250,000. If breaches are not cured within six months, the AED may withdraw SPF status, potentially triggering the ordinary corporate tax regime at an effective rate of 23.87% (2025) with retroactive effect for up to four fiscal years.

What happens after SPF status is withdrawn?

The entity must cease using the SPF designation (continued use may lead to €5,000 per month in fines) and becomes subject to ordinary corporate taxation. Exposure to reassessment can extend due to the suspension of the statute of limitation while the breach persists and until the withdrawal decision is final.

Are annual certifications still paper-based?

No. Annual certifications must be filed electronically.

Damalion facilitates setup of SPFs in full alignment with the modernised regime and coordinates ongoing compliance. Please contact your Damalion expert now.