Luxembourg Overview

Luxembourg

Luxembourg enjoys an excellent international reputation as one of the founder members of the European Union and home to the European Court of Justice (ECJ). It however suffers somewhat from its reputation as an overly bureaucratic country with an unduly complex and esoteric tax system. Luxembourg retains its historic position as the financial services capital of Europe and a centre of excellence for the fund industry despite some recent concerns about the adequacy of its consumer protection provisions. Luxembourg offers bearer shares companies and whilst most countries have outlawed the practice is one of the world’s few remaining countries to continue to permit their use. The future of this practise is uncertain and some question its benefits given the adoption by almost all countries of anti-money laundering (AML) and anti-terrorism (PFOT) procedures prohibiting the use of such companies. Luxembourg, along with some other European countries including Malta, the UK and Cyprus, enjoy a beneficial holding regime making it a popular choice for holding companies. Luxembourg foundations are also widely used for tax planning secondary to their philanthropic use. Luxembourg also offers generous incentives for the registration of Intellectual Property (IP) including an 80% tax exemption.

Luxembourg Intellectual Property (IP) Holding

Intellectual Property (IP) holding structures are often used for tax benefits, for a fuller discussion of how this can be achieved and of the different sorts of IP please see our main article on IP holding. Luxembourg is a popular choice to IP holding and has a regime tailored to tax minimisation for IP acquired or originated since 2008 (and this excludes acquisition from an associated company).

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Luxembourg Private Companies

Private companies are formed by notarial deed. They are referred to as Société à Responsibilité Limitée (or SARLs). Luxembourg private companies pay a high rate of tax in most cases and are generally expensive to form and operate however they benefit from Luxembourg’s reputation as a long-standing EU member state and afford certain benefits such as the favourable holding regime (explained below).

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Luxembourg Public Companies

Public companies are formed by notarial deed. They are referred to as Société Anonymes (or SAs). Luxembourg public companies pay a high rate of tax in most cases and are generally expensive to form and operate however they benefit from Luxembourg’s reputation as a long-standing EU member state and affords certain benefits such as the favourable holding regime (explained below) and is one of the few remaining countries which permits the use of bearer shares.

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Luxembourg Foundation

Luxembourg foundations’ main purpose must be charitable though they are used for tax planning as a secondary purpose and commercial activity is not precluded. For foundations which do not require a charitable purpose the Maltese private foundation is preferable. Luxembourg foundations require a very high level of capitalisation since the initial settlement must be approximately 250,000 EUR (by comparison with Malta where the amount is 1,200 EUR or Panama where the amount is 10,000 USD).

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