Open a Holding Company in Luxembourg

Luxembourg is one of the favorite countries for overseas businessmen looking to open a holding company, which is known as SOPARFI or Societe de Participations Financieres. Investors can benefit from an exemption regime on dividends and capital gains on shares. Complete support for registration purposes can be obtained from our specialists for starting a company in Luxembourg.

What are the legal entities available for the registration of a holding in Luxembourg?

SARL (private limited liability company), SA (public limited liability company), SC (co-operative), and SCA (partnership limited by shares) are some of the legal entities under which a holding company can be registered in Luxembourg.

What are the steps to open a holding company in Luxembourg?

Here is a presentation of the company registration procedure for a Luxembourg holding:

1. trading name reservation;
2. documents drafting: Articles of Association, identification papers of the shareholders, proof of registered address, proof of share capital deposit;
3. paperwork filing with the Trade Register: the registration takes place as for all other types of businesses;
4. tax registration.

How much time does it take to open a holding company?

The incorporation of a holding company in Luxembourg takes around 7 days due to the lack of harsh formalities and a proper registration process. Feel free to tell us if you want to set up a holding company, in order for us to provide you with the necessary information and assistance.

What is the authorized capital for a holding company in Luxembourg?

The minimum share capital for a holding company in Luxembourg depends on its form: EUR 30,000 for an SA (EUR 12,000, fully paid up, for an SARL). The amount can also be deposited in other currencies, such as USD or GBP. At least 25% of it must be paid upon incorporation.

Are there any special management requirements applicable to this type of company?

The supervisory board and the management board are the two bodies that can coordinate the activities of the holding companies in Luxembourg. The board of managers needs to be composed of at least 3 members, although an SA with a single shareholder may have a sole director. In the case of an election, such a board of managers is normally appointed at the general meeting of the owners.

Here is also an infographic on the holding company:

Are there specific business forms that can be used to create a Luxembourg holding company?

Yes, businessmen who decide to open a holding company in Luxembourg can register it as a:

• SOPARFI;
• SPV;

The SOPARFI is used for doing business in different fields, such as industry, commerce, real estate, etc. Many foreign international groups choose this form of company – SOPARFI – for developing their businesses and establishing the headquarters in Luxembourg.

Investors can also choose to open a SPF (société de gestion de patrimoine familial – Family Wealth Management Company, reserved to private investors) in order to benefit from the attractive tax regime and protect their personal assets.

What are some specific characteristics of Luxembourg holding companies?

The holding company is an excellent tax minimization tool in Luxembourg. Specifically, it can benefit from several tax benefits, among which the participation exemption regime. This is a domestic regime (Article 166 of the Income Tax Law), which also implements the EU Parent-Subsidiary Directive, under which holding companies (parent companies) can benefit from tax exemption provided they hold a significant portion in their subsidiaries.

How does the EU Parent-Subsidiary apply in Luxembourg?

Under the participation regime, a holding company can be exempt from taxation in Luxembourg on the following types of income:

• dividends, if the holding owns at least 10% of the subsidiary’s stock for at least 12 months or if the purchase price of the subsidiary is at least EUR 1.2 million (a full exemption is offered);
• capital gains, if the holding has held at least 10% of the subsidiary for at least 12 months or a participation acquired for at least EUR 6 million (a full exemption applies in this case, too);
• net wealth on qualifying participation.

Also, Luxembourg generally levies no withholding tax on arm's-length interest paid to non-residents.

Please note that to benefit from the Directive, the holding must be a Luxembourg resident company.

What happens if the holding does not fall under the EU Parent-Subsidiary regime?

In the absence of the EU Parent-Subsidiary regime, the holding will pay the standard corporate tax, which is imposed at a rate of 16% (23.87% combined in Luxembourg City). Other levies to be considered by these entities are:

• a fixed registration duty of EUR 75 on incorporation and on contributions to capital;
• proportional duties only on contributions of Luxembourg real estate (3.2%, plus 0.3% in Luxembourg City, when remunerated by shares).

What are the main reasons to open a holding company in Luxembourg?

Many multinational groups from other European countries transferred their financial activities to Luxembourg because of the stable tax regime. Luxembourg is a very well-known business center located in the center of Europe and with a qualified labor force that attracts many foreign investors.

Among the reasons to open a holding company in Luxembourg, the following are essential:

• investors have protected assets;
• there is 100% ownership of these companies;
• the operations of holding companies in Luxembourg are overseen by a board of managers;
• qualifying dividends and capital gains are exempt from corporate tax;
• such companies can benefit from the double tax treaties signed by Luxembourg with other countries;
• the skilled workforce in Luxembourg can be part of your holding company.

The interesting part about the companies in Luxembourg is that they must file their annual accounts with the Trade and Companies Register, where they are public. Also, there is no subscription tax imposed for holding companies in Luxembourg, and the possibility of counterbalancing the capital losses on clearance of stockholdings, under certain conditions, is available.

Are there any disadvantages associated with holding companies?

Two of the main disadvantages of Luxembourg holdings are related to the complexity in terms of reporting requirements and the compliance related to its taxation. This happens because of the intricate relations between the holding and its subsidiaries, especially when owning enterprises in other countries.

Another disadvantage may also be related to the limited operational activities that such companies can undertake, as their main role is to oversee and administer subsidiaries.

If you need more information about the conditions of setting up a holding company in Luxembourg or you need assistance throughout the whole procedure, you can contact our team of company formation agents in Luxembourg.