The maximum rate of corporation tax applicable to Luxembourg companies is 33% but additional municipal taxes can bring the aggregate rate to as much as 39%. There are, however, two types of companies to which special tax regimes apply and which are therefore useful for tax planning purposes:
THE LUXEMBOURG HOLDING COMPANY
A Luxembourg holding company is exempt from all forms of Luxembourg taxation but its activities are restricted to the holding of shares and certain other investments. In particular the company may not advance funds to its shareholders, invest in commodities or futures or carry out any sort of commercial or industrial activity. The company may only hold property in so far as it is necessary for its own use but could, for example, own the shares of a property investment company. This type of company is specifically excluded from the tax treaties signed by Luxembourg except the treaty signed by China.
THE LUXEMBOURG SOCIETÉ DE PARTICIPATION FINANCIERE (SOPARFI)
Luxembourg has recently extended its participation exemption regime and SOPARFI's are now subject to the normal rate of national and municipal Luxembourg tax except that, subject to the fulfilment of certain conditions, dividends and capital gains are not taxed. Such companies are therefore able to take advantage of the EU parent/subsidiary directive 90/435 A SOPARFI is not excluded from the scope of the tax treaties concluded by Luxembourg and this may make this type of company extremely attractive for certain tax planning exercises. Luxembourg has signed tax treaties with most EU countries, Canada, Japan, Korea, Morocco, Norway, Switzerland and the US.
Both of the above types of Luxembourg companies have similar corporate characteristics:
TAXATION |
Profits taxation is dealt with above but the Holding Company pays an annual subscription tax equal to 0.2% of share capital and both types of company pay duty of 1% on the issue of new share capital. The minimum share capital is FLUX1,250,000 and at least 25% of the authorised capital must be paid up. The holding company must have a minimum paid up capital of FLUX1 million. |
SHAREHOLDERS |
A minimum of two shareholders are required. Details of the shareholders appear on the public file. |
DIRECTORS |
A minimum of three directors are required who may be corporate or individual. Details of the directors appear on the public file so anonymity may only be retained by appointing third party professionals to the Board. |
LOCAL REQUIREMENTS |
As a matter of Luxembourg law the company MUST maintain a registered office address with in Luxembourg and must also appoint a Luxembourg based statutory auditor. We would generally provide these services as part of the domiciliary service fee. |
ANNUAL REPORTING |
All Luxembourg companies must file full audited accounts and books of accounts must be maintained at the registered office and updated on a regular basis. |
TIMESCALE |
Incorporation time is approximately 48 hours from receipt of capital and fees. Ready made companies are not generally available. |
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