Holding Company In Luxembourg - 10 Leaves

  • 22-02-2021

A GLOBAL CENTRE FOR FINANCIAL SERVICES:

Luxembourg is a global centre for financial services, the second largest fund jurisdiction in the world, after the United States. It is the largest centre for funds in Europe, with over Euro 4.5 trillion in cumulative assets under management in supervised funds alone.

 

What is a holding company?

Wikipedia defines a holding company as “a company that owns other companies' outstanding stock.”

In short, a holding company consolidates investments, be it shares in other companies or property, under a common umbrella, for ease of management and reporting. Such companies do not usually carry out a trade or service – they merely manage existing investments. The management team of the holding company also seeks to make new investments, based on certain pre-determined criteria, to expand their existing portfolios.

Luxembourg provides an excellent corporate structure to facilitate such activities - a SOciéte de PARticipations FInancières (or short: SOPARFI).

Why setup a holding company in Luxembourg?

In 2003, the EU adopted the Parent-Subsidiary Directive on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States.

The Directive was designed to increase tax-efficiencies, especially in the area of profit distributions between groups of companies in the EU by:

  • abolishing withholding taxes on payments of dividends between associated companies of different EU Member States and
  • preventing double taxation of parent companies on the profits of their subsidiaries.

This Directive gives a distinct advantage over offshore jurisdictions such as Cayman Islands, British Virgin Islands or Jersey.

The country is:

  • A founding member of the EU.
  • Politically stable.
  • Financially stable.
  • AAA-rated.

It has:

  • Access to over 500 million EU residents.
  • Reliable investment regulations.
  • Over 82 Double Taxation Avoidance Treaties worldwide.
  • A comprehensive framework of Bilateral Investment Protection Treaties.
  • A responsive and globally recognized financial regulator.

It offers:

  • A multi-lingual jurisdiction with competencies in English, French and German.
  • Attractive legal and tax framework.
  • The lowest VAT Rate in the EU.
  • Non-supervised funds.

Tax benefits:

  • Depending on the need of investors, Luxembourg offers tax exempt, tax neutral or taxable investment vehicles.
  • Some exemptions for VAT payments.

The Luxembourg SOPARFI:

The main purpose of the SOPARFI is to hold and manage shareholdings or ownership in underlying assets. The SOPARFI can be established in various legal forms, depending on the needs of the shareholders, the management, listing requirements or the ease of transferability of the shares of the holding.

The SOPARFI is a fully taxable entity and can therefore benefit from the treaty benefits of the 82+ tax treaties that Luxembourg has signed worldwide. The effective tax rate of the SOPARFI can be reduced via many tax incentives, such as the certain exemption on dividends, capital gains and wealth tax and a withholding tax exemption on dividends paid to qualifying shareholders, no withholding tax on interest payments or on payments following a liquidation. All these exemptions are subject to fulfilling certain holding periods and criteria. Contact us should you need any specific information on this.

The SOPARFI can be set up as:

1.A Public limited company (S.A.)

2.A Private limited liability company (S.à r.l.)

  1. 3. A Partnership limited by shares (S.C.A.)

What assets can a Luxembourg SOPARFI hold and manage?

The SOPARFI can hold any types of securities, including bonds, listed or unlisted shares, stocks, real estate worldwide, cash and commodities, loans, and intangible assets such as Intellectual Property and Patents. Luxembourg SOPARFI can grant loans and receive loans to subsidiaries and group entities, and also provide centralized management services to group entities.

Does the SOPARFI need to have eligible investors?

Shareholders in a SOPARFI can be institutional investors, collective investment schemes, natural persons, companies, trusts or foundations, or other SOPARFIs.

Is the SPOARFI in Luxembourg authorized or supervised by a regulator?

 Luxembourg holding companies are not subject to any supervisory authority unless quoted or commercial activities are carried out.

How do you set up a Luxembourg SOPARFI?

Setting up a SOPARFI is easy, and the following steps are involved:

1. A bank account is opened, and the required mandatory share capital deposited in this account. This ranges from €12,000 to €30,000.

2. Reservation of a name for the SOPARFI, and selection of the corporate structure (S.A.S.à r.l. or S.C.A.)

3. Preparation and review of the Articles of Association.

4. Incorporation by proxy (the physical presence of the shareholder is not required).

5. Capital blocking notice issuance by the bank.

6. Completing the formalities of formation in front of the notary in Luxembourg.

7. Registration of the SOPARFI with the Luxembourg Trade and Companies’ Register.

How can 10 Leaves assist in formation of the SOPARFI in Luxembourg?

Our services include the following:

  1. Structuring the SOPARFI.
  2. Bank account opening.
  3. Provision of the registered address in Luxembourg.
  4. Arranging accounts and audits.
  5. Acting as Resident Director/Manager if required.

Get in touch with us today! For More Information on Holding Company In Luxembourg.

For More Details, Visit our Luxembourg Brochure

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