Luxembourg is one of the most stable and business-friendly jurisdictions in the European Union. It offers a sophisticated legal and tax framework for holding companies, investment funds, SPVs, and family wealth structures. Thanks to investor protection, access to EU markets, and a broad double tax treaty network, Luxembourg is ideal for international tax planning.
Key Tax Advantages in Luxembourg
- 0% withholding tax on EU dividends (Parent-Subsidiary Directive)
- IP box regime: reduced taxation of intellectual property income
- VAT exemptions for fund administration and selected financial services
- No net wealth tax
- Over 80 double tax treaties
- Option to use substance-light holding structures
Most Common Structures in Luxembourg
1. SOPARFI – Luxembourg Holding Company
A standard structure for dividend income, capital gains, and IP licensing.
| Legal Form | SA or SARL |
|---|---|
| Corporate Tax | Approx. 24.94% (possibility of exemptions) |
| Withholding Tax | 0% in EU, otherwise 15% |
| VAT | Not always required |
| Audit | Mandatory for SA and large SARL |
Ideal for EU holdings, licensing structures, and group finance.
2. SPF – Family Wealth Management Company
Designed for private individuals to manage personal assets (non-commercial).
| Income Tax | None |
| VAT | Not applicable |
| Restrictions | No commercial activities |
| Supervision | Not subject to CSSF oversight |
Efficient tool for estate planning, family investment structures.
3. SICAV / SICAF / SIF / SICAR – Investment Funds
Luxembourg is Europe’s leading fund domicile under UCITS and AIFMD.
| Fund Type | Characteristics | Regulation |
|---|---|---|
| SICAV | Open-ended fund (variable capital) | UCITS / AIF |
| SICAF | Closed-ended fund | AIF |
| SIF | Specialized fund for qualified investors | AIFMD-light |
| SICAR | Private equity / risk capital | Simplified rules |
Customizable for hedge, real estate, PE, or multi-strategy portfolios.
4. Securitisation Vehicle (SPV)
Used for risk transfer, asset-backed financing, or repackaging.
| Legal Form | SA, SARL, SCS, or SCA |
| Purpose | Securitisation, loan pooling, financing |
| Tax | Transparent – tax only on residual profit |
| VAT | Exempt on selected services |
Widely used by banks, asset managers, and real estate funds.
Luxembourg Tax Overview (SOPARFI)
| Tax Area | Rate / Notes |
|---|---|
| Corporate Tax | ~24.94% incl. municipal tax |
| Dividend Withholding | 15% (0% EU compliant) |
| Royalties / Interest | Often 0% or reduced under DTTs |
| VAT | 17% standard, exempt for funds |
| Capital Gains | Yes (can be optimized) |
| Net Wealth Tax | None |
Regulatory Compliance & Legal Certainty
- Registration with RCS – Registre de Commerce et des Sociétés
- Annual accounts and audit obligations for SA and large SARL
- DTT network and EU law compliance
- CSSF oversight for financial institutions and investment funds
- Full compliance with CRS, FATCA, AMLD
Luxembourg is not anonymous but offers legal and tax-efficient structuring.
Who should consider Luxembourg?
- International holding companies
- Private equity and real estate funds
- HNW individuals using SPF and investment layers
- Multinational IP licensing structures
- Banks, family offices, and institutional investors
How to set up a company in Luxembourg
- Select structure (SOPARFI, SPF, SICAV, etc.)
- Draft articles and notarise
- Deposit capital with pre-registration bank
- File with RCS and receive incorporation certificate
- (Optional) VAT registration and bank account opening
- Maintain accounting, audit, and filings annually
Typical setup: 5–10 business days. SPF can be faster.
Looking to form a Luxembourg holding company or fund? Contact us for end-to-end setup, structuring, and regulatory support.
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