INCORPORATION

LUXEMBOURG PUBLIC LIMITED COMPANY (PLC., CORP./SA); LIMITED LIABILITY COMPANY (LLC., LTD.,/SARL); SOPARFI; SPV; SICAV; SICAF; SICAR; SPF; SIF; TRADING COMPANY; IP-BOX; REAL ESTATE COMPANY; E-COMMERCE COMPANY

See also: LCG Luxembourg special website

Company formation in Luxembourg, the Public Limited Company (PLC., Corp./SA): legal and tax aspects

Company type: Public Limited Company (PLC., Corp./SA)
Name: Any name not already entered in the trade register. Required endings: "AG" or "SA"
Capital: Minimum of 31 000 €, 25% of which must be paid up.
Shares: Bearer shares or registered shares. Prerequisite for bearer shares: capital must be paid up in full.
Share register: Mandatory
Registered agent requirement: No
Registered headquarters: Yes
Entry in the public register: Commercial register, Registre de Commerce et des Sociétés
Shareholders: Minimum of 2, can be natural persons or legal entities.
Directors: Minimum of 3, can be natural persons or legal entities.
Secretary (Commissary): Yes
Incorporation period: 1 week
Disclosure of beneficial owner: No
Disclosure of shareholders: Registration in non-public register.
Disclosure of directors: Directors data must be published in the commercial register. It is possible to appoint nominee directors.
Trading restrictions: Yes, in the case of banking or insurance activities.
Taxation: Rate of corporate taxation 29,22 %
Double taxation agreements: Yes
Accounting: Yes
Tax returns: Yes
Annual accounts: Yes, through the commissaire (internal auditor)
Formation costs: €3,390 (minimum capital €31,000)
Annual running costs: €1,600 (minimum)

Company formation in Luxembourg, the Limited Liability Company (LLC., Ltd./SARL): legal and tax aspects

Company type: Limited Liability Company (LLC., Ltd./SARL)
Name: Any name not already entered in the trade register. Required endings: "GmbH" or "SARL"
Capital: Minimum of 12 500 €, must be paid up in total.
Shares: No shares, but stakes.
Shares index: Names of partners are entered into the commercial register.
Registered agent requirement: No
Registered headquarters: Yes
Entry in the public register: Commercial register, Registre de Commerce et des Sociétés
Shareholders: Minimum of 1 shareholder
Directors: Minimum of 1 director
Secretary (Commissary): No
Incorporation period: 1 week
Disclosure of beneficial owner: No
Disclosure of shareholders: Names of partners must always be entered in the commercial register. Anonymity can be retained through nominees.
Disclosure of directors: Directors data must be published in the commercial register. It is possible to appoint nominee directors.
Trading restrictions: Yes, in the case of banking or insurance activities.
Double taxation agreements: Yes
Financial statements: Yes, but they are not published. Financial statements must be submitted to the commercial register.
Tax returns: Yes
Accounting: Yes
Annual reports: Yes
Formation costs: €2,900 (minimum capital €12,500)
Annual running costs: €1,600 (minimum)

Company formation in Luxembourg, the SOPARFI-Financial Holding Company: tax aspects

Taxation 1. The profits of the SOPARFI-Financial Holding Companies which are generated from commercial activity are liable to ordinary taxation.
2. As long as SOPARFIs carry on Holding functions, dividends and sale and liquidation proceeds that are distributed to it shall be exempt or partially exempt from taxation. Moreover, the dividend distributions of a SOPARFI in Luxembourg are exempt from withholding tax. The tax advantages are a result of the national, Luxembourg provisions, existing double taxation agreements (DTA's) and the European parent subsidiary Directive.
Double taxation agreements Yes

Company formation in Luxembourg, the Securitisation Vehicle (SPV): tax aspects

Taxation 1. The profits of Securitisation Companies are liable to corporate taxation at a rate of 29.22%. It is exempt from net wealth tax and withholding tax.
2. Due to Securitisation Funds in Luxembourg lacking legal personality, it is the shareholders and their income which is liable to ordinary taxation and not the Fund itself. A Securitisation Fund in Luxembourg is accordingly neither liable to corporate income tax nor to the so-called „subscription tax“ („taxe d’abonnement“) nor to withholding tax.
Double taxation agreements Yes, in the case of Securitisation Companies.
No, in the case of Securitisation Funds.

Company formation in Luxembourg, the SICAV/SICAF Investment Funds: tax aspects

Taxation The SICAV and SICAF Investment Funds are neither liable to corporate income tax nor to corporate taxation. They are merely liable to the so-called „subscription tax“ (taxe d’abonnement) at a rate of 0.05% annually on its net assets. The SICAV and SICAF are exempt from net wealth tax on the distribution of dividends to non-resident investors. Moreover, Fund management services provided by a Management Company in Luxembourg are not liable to value-added tax (VAT).
Double taxation agreements No

Company formation in Luxembourg, the SICAR Investment Company: tax aspects

Taxation In general, the SICAR Investment Company is, as a corporation, liable to corporate taxation at a rate of 29.22%. If a SICAR is formed as a Limited Partnership (LP.), it is the persons carrying on business as partners and not the partnership itself which is liable to tax.
The SICAR is exempt from the net wealth tax and withholding tax on the distribution of dividends to investors as well as investment income from the disposal of such investments. It is likewise exempt from the so-called “subscription tax” (taxe d’abonnement). In addition, withholding tax does not require to be paid by non-resident investors on interest paid by a SICAR as well as on liquidation proceeds. Moreover, management services provided to a SICAR by a Management Company in Luxembourg remain exempt from value-added tax (VAT).
Double taxation agreements Yes

Company formation in Luxembourg, the Private Asset Management Company (SPF): tax aspects

Taxation The Private Asset Management Company (SPF) is liable to the so-called „subscription tax“ (taxe d’abonnement) annually at a rate of 0.25% on its paid-up share capital, the share premium plus on a proportion of its debts exceeding 8 times the paid-up share capital and the share premium. Its income and profits are exempt from corporate income tax, municipal business tax as well as from the net wealth tax. Furthermore, gains from the transfer or sale of shares in a SPF in Luxembourg by a non-resident shareholder as well as a the liquidation proceeds of a SPF are exempt from taxation. Moreover, the distributions of a SPF in Luxembourg in the form of dividends to non-resident investors is exempt from withholding tax. A SPF in Luxembourg is not liable to value-added tax (VAT) due to it not carrying on commercial transactions and is consequently not required to be VAT registered.
Double taxation agreements No

Company Formation in Luxembourg, the Specialised Investment Funds (SIF): tax aspects

Taxation A Specialised Investment Fund (SIF) is exempt from corporate taxation and corporate income tax. Instead, it is liable to the so-called “subscription tax” (taxe d’abonnement) at a rate of 0.01% annually on its net assets. Notwithstanding this, a range of investments are exempt therefrom. A SIF is not liable to the net wealth tax nor to withholding tax on the distribution of dividends to non-resident investors. Furthermore, management services provided to a SIF by a Management Company in Luxembourg remain exempt from value-added tax (VAT).
Double taxation agreements No

Company formation in Luxembourg, Trading and Service Company: tax aspects

Taxation In Luxembourg, Trading and Service Companies are predominantly formed in the legal forms of the Public Limited Company (PLC., Corp./SA) or the Limited Liability Company (LLC., Ltd./SARL) and are thus liable to corporate taxation and net wealth tax. On the ground of their activities, Trading and Service Companies are liable to value-added tax (VAT) at a rate not exceeding 15% (3% on e-books).

Company formation in Luxembourg, the Company for Intellectual Property Rights (IP- Box): tax aspects

Taxation The income and sale profits of Companies for Intellectual Property Rights (IP-Box) in Luxembourg made from the use, licensing and sale of intellectual property rights (IP) are taxed at a rate of only 20% (IP-Box). As a result, the effective tax burden on the income subject to preferential taxation is 5.84%. Companies for Intellectual Property Rights (IP-Box) in Luxembourg are exempt from the net wealth tax as well as from withholding tax on liquidation profits and on royalty payments or interest.

Company formation in Luxembourg, the Real Estate Company: tax aspects

Taxation
  • 1. In principle, the income made from the sale of real estate is taxed in accordance with the situs principle. Such income is accordingly liable to tax in the country in which the real estate is located.
  • 2. In contrast, profits from the sale of shares in a Real Estate Company which owns the real estate are liable to taxation in the country in which the seller resides.
  • 3. However, some of the new double taxation agreements (DTA's) which Luxembourg has entered into with many countries extend the application of the situs principle to include Real Estate Companies whose assets, directly or indirectly, consist of at least 50% real estate. Profits from the sale of shares in such a Real Estate Company, which have hitherto been liable to tax in the country of the seller in accordance with the general provisions, are now liable to tax at the place where the real estate is located. Exception: the extended situs principle does not, however, apply to parent companies which have their registered office and the management located abroad. In the case of a two-tier corporate structure, profits made on the sale of shares within the context of the sale of Real Estate Company shares remain liable to taxation in the place where the seller is resident. With regard thereto, the following procedure has developed in practice in Luxembourg:
The formation of a Luxembourg corporation in the form of a SOPARFI-Financial Holding Company which acquires shares in an EU Real Estate Company and subsequently sells the said shares. The profit which results therefrom is taxed in Luxembourg. Within this procedure, the dividends, the profits from sale and liquidation are accordingly exempt from corporate taxation. Finally, the Luxembourg SOPARFI-Financial Holding Company is liquidated and the liquidation proceeds are distributed free from withholding tax.

Company formation in Luxembourg, the E-Commerce Company: tax aspects

Taxation Direct E-Commerce Services are subject to a special EU value-added tax (VAT) regime which will remain in force until January 1st, 2015:
1. Business persons domiciled within the EU
  • In the case where an EU business person provides direct E-Commerce services to a private person or to a commercial customer in the same EU member state, the place of taxation continues to be where the services provider is domiciled.
  • Where an EU business person provides direct E-Commerce services to a commercial customer in another EU member state, value-added tax (VAT) requires to be paid in the member state in which the commercial customer is resident. The value-added tax (VAT) therefore requires to be paid by the customer. In cases such as this, the so-called “reverse charge” procedure will operate. This means that the commercial EU customer -as the recipient of the services- is to calculate the value-added tax (VAT) liability in accordance with the tax rates in force in his country, within the framework of the reversal of the tax liability, and thereafter to pay the tax to the competent tax authority in the country in which he is resident. In so doing, the said commercial customer has the right to deduct input tax for the same amount.
  • Where an EU business person provides direct E-Commerce services to a private person in another member state, the place of taxation will continue to be where the services provider is resident.
  • In contrast, where direct E-Commerce services are provided by an EU business person to customers outwith the EU, the place of taxation is where the customer is resident. Accordingly, such services are not liable to value-added tax (VAT) in the EU.
2. Business persons domiciled outwith the EU
  • Where a business person domiciled outwith the EU provides direct E-Commerce services to commercial customers within the EU, the place of taxation will be within the EU and will be collected from the commercial EU customer through the reverse charge procedure. The non-EU business person is not required to be registered in the EU for value-added tax (VAT) purposes due to the commercial customer himself paying the value-added tax (VAT) through the reverse charge procedure.
  • Where a business person domiciled outwith the EU provides direct E-Commerce services to a private person within the EU, value-added tax (VAT) is collected within the EU. However, the said business person must be registered in the EU for value-added tax (VAT) purposes in a member state of his choice in such cases. Thereafter, he must bill such non-commercial customers in the EU at the standard rate of value-added tax (VAT) in force in the EU member state in which the customers are resident.
In Luxembourg, the rate of value-added tax (VAT) applies at a rate not exceeding 15%. A reduced rate of value-added tax (VAT) applies to the supply of e-books.

Luxembourg: General Information

Area: 2 586 sq km
Capital: Luxembourg
GDP per capita: 56 600 Euro
Unemployment Rate: 4,6%
Population: 450 000
Language: French, German, Luxembourgish
Currency: Euro
Rate of Inflation: 2,3%
Political Risks: None
Communications: Good
Residence Permit: No restrictions for EU nationals; non-EU nationals subject to approval.
Legal System: French law (Code Napoléon), Belgian law, in principle German tax law.
Exchange Control: No
Patent Law: Yes
Tax Information Exchange Agreement: No
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