FAMILY WEALTH MANAGEMENT COMPANY (SPF)
1. General provisions
The law of May 11, 2007 relating to the creation of a family wealth management company ("SPF"), amended by the law of February 18, 2012, aims to create a legal framework for the management of private assets. The SPF is designed as an investment company (tool) intended only for natural persons acting within the framework of the management of their private assets.
An SPF is any company which adopts the form of a limited liability company, a public limited company, a limited partnership with shares or a cooperative company organized as a limited company, and who’s exclusive object is the acquisition, holding, management and realization of financial assets to the exclusion of any commercial activity.
The SPF is only allowed to hold a stake in a company on condition that it does not interfere in the management of this company. The SPF is also prohibited from directly acquiring buildings or granting interest-bearing loans, even to the company in which it has a stake. However, the SPF may, on an ancillary basis and purely free of charge, make an advance or guarantee the commitments of the company in which it has a stake.
2. Tax provisions
The SPF is excluded from the benefit of the parent companies and subsidiaries directive.
Dividends allocated by the SPF are not subject to withholding tax at source, without prejudice to the taxation of said income for resident beneficiaries (article 147, number 3 LIR). The 50% gross dividend exemption provided for in Article 115, number 15a LIR is not applicable.
The interest payments by the SPF are subject to the withholding tax at source established under the European directive (RIUE) or the Luxembourg withholding tax (RELIBI), as the case may be. From 1.1.2015, the automatic exchange of information on interest payments becomes mandatory and the RIUE is no longer operated by paying agents established in Luxembourg on behalf of non-resident taxpayers residing outside Luxembourg.
In the case of non-resident taxpayers, income from the sale of a stake in an SPF is not considered as domestic income (article 156, number 8, letter c LIR).
The SPF is added to the list contained in paragraph 178 bis of the general tax law of May 22, 1931 (professional secrecy enforceable against the tax administration).
With the exception of the verification by the Companies tax office of the director fees paid by an SPF using the 510bis model, the authority responsible for exercising the tax control of the SPF is the administration in charge of the registration levies.
3. More details
The Grand Duchy of Luxembourg offers a particularly attractive legal framework to individuals wishing to entrust a dedicated corporate structure with the management of all or part of their private assets.
As soon as certain conditions are met, the family wealth management company (SPF) benefits from a general tax exemption on its income and assets. It is therefore designed as a vehicle for the private management of financial assets, making it possible to reinvest the gains made, reduce tax costs and sustainably plan their personal investment.
What is the purpose of an SPF?
The SPF is a classic Luxembourg capital company but benefits from tax exemption if certain conditions are met.
An SPF can take the form of a public limited company, a limited liability company, a limited partnership with shares or a cooperative company organized as a public limited company. As a result, liability limited to the contributions is guaranteed, providing a certain serenity in the management of a vehicle that has to invest by resorting to borrowing.
An SPF has a single corporate purpose: the acquisition, holding, management and realization of financial assets excluding any commercial activity, any direct ownership of buildings or intellectual property rights.
Intended for private asset management, the SPF is not bound by any type of preconceived asset management: it can therefore be free from any principle of risk distribution imposed on UCIs.
More details about the tax regime of the SPF
The SPF benefits from various tax exemptions on its income and assets.
The SPF is subject to a one time contribution duty of 0.5% on the capital contribution at the time of incorporation and on subsequent capital increases. (There are possibilities to reduce this rate and its exemption - consult us).
The SPF is subject to an annual subscription tax of 0.25% calculated on the basis of the paid-up share capital increased by share premiums and debts exceeding an amount equal to eight times the amount of the aforementioned capital and premiums. The minimum annual amount of this tax is EUR 100. It is capped at 125,000 EUR per year.
The SPF does not benefit from tax treaties against double taxation signed by Luxembourg nor from the Parent-Subsidiaries Directive 90/435 / CE.
What are the tax exemptions from which the SPF benefits :
1) Exemption from its dividend income
The SPF can benefit from an exemption on its dividend income from any company resident in a member state of the European Union, listed or unlisted.
For dividends from companies based outside the European Union, these are also exempt provided they arise from companies subject to an income tax rate higher than or equal to 11% or less than 5% of the total dividends received by the SPF from companies subject to a tax rate of less than 11%. The tax administration therefore checks both the tax base and the tax rate.
2) General exemption for capital gains on securities.
3) Exemption from wealth tax.
Particularities
To benefit from these various exemptions, the SPF must not interfere in the management of the companies in which it invests. She should therefore not hold a mandate as manager or director responsible for day-to-day management. However, there is nothing to prevent the shareholders of the SPF themselves from exercising this type of function in companies in which the SPF has holdings.
A certain number of formalities must be completed quarterly and annually to continue to benefit from this advantageous tax regime.
Situation of the withholding taxes on the income paid by the SPF:
No withholding tax on dividends paid;
No withholding tax on liquidation bonuses distributed;
Withholding tax on interests paid to residents (withholding tax of 10%);
Withholding tax on interests paid to non-residents (depending on jurisdiction, DTT or not);
Withholding tax on directors' fees paid to members of the board of directors (20%).
Withholding tax on salaries paid to employees or directors (0% to 38%).
Upstream, the income received by the SPF is however subject to any withholding taxes provided for by the domestic law of the jurisdiction in which the SPF has priorly invested.