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Company Formation Luxembourg Start-up Luxembourg Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC., LTD./SARL); Partnership Limited by Shares (SCA); Limited Partnership (LP./ SCS); General Partnership (GP./SNC); European Company, (SE); Branch Office; SOPARFI-Financial Holding Company; Trading and Service Company; Private Asset Management Company (SPF); Securitisation Vehicle (SPV); Company for Intellectual Property Rights (IP-Box); SICAV/SICAF Investment Funds; SICAR Investemnt Company; Specialised Investment Funds (SIF); Real Estate Company; E-Commerce Company The Tax and Legal Aspects of the Formation of a Corporate Structure in Luxembourg

Company Formation Luxembourg · Company Formation Luxembourg Legal forms III. Advantages of forming a Limited Liability Company (LLC., Ltd./SARL) 18 Formation of a Partnership Limited

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Page 1: Company Formation Luxembourg · Company Formation Luxembourg Legal forms III. Advantages of forming a Limited Liability Company (LLC., Ltd./SARL) 18 Formation of a Partnership Limited

Company Formation Luxembourg

Start-up

Luxembourg

Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC.,

LTD./SARL); Partnership Limited by Shares (SCA); Limited Partnership (LP./

SCS); General Partnership (GP./SNC); European Company, (SE); Branch Office;

SOPARFI-Financial Holding Company; Trading and Service Company; Private

Asset Management Company (SPF); Securitisation Vehicle (SPV); Company for

Intellectual Property Rights (IP-Box); SICAV/SICAF Investment Funds; SICAR

Investemnt Company; Specialised Investment Funds (SIF); Real Estate Company;

E-Commerce Company

The Tax and Legal Aspects of the Formation of a Corporate Structure

in Luxembourg

Page 2: Company Formation Luxembourg · Company Formation Luxembourg Legal forms III. Advantages of forming a Limited Liability Company (LLC., Ltd./SARL) 18 Formation of a Partnership Limited

2http://[email protected] Telephone: 00 352 250 345 27

Company Formation Luxembourg

This publication is provided for information purposes only and should not be

treated as a substitute for a tax or legal consultation or for the reading of

Luxembourg‘s legislation or public statements.

The reader should not act on the basis of the information contained in this

publication without having obtained individual, expert advice. In particular,

individual advice from tax consultants or lawyers should be sought with regard

to the information on the tax treatment of foreign investments.

International Advokat Trust Management G.E.I.E accept no liability or responsi-

bility for any damage or loss resulting from the reader‘s decision made on the

basis of the information contained in this publication.

Page 3: Company Formation Luxembourg · Company Formation Luxembourg Legal forms III. Advantages of forming a Limited Liability Company (LLC., Ltd./SARL) 18 Formation of a Partnership Limited

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Company Formation LuxembourgLegal forms

Table of ContentsLegal forms

Which legal form of company best suits your project?

Formation of a Public Limited Company (PLC., Corp./SA) in Luxembourg 11

I. Legal Structure of a Public Limited Company (PLC., Corp./SA) 11

1. Concept 11

2. Formation 11

3. Minimum Capital 11

4. Shares and the Transfer of Shares 12

5. Organisation 12

6. Annual Accounts 13

7. Liquidation 13

II. Tax Structure of a Public Limited Company (PLC., Corp./SA) 13

1. Corporate Taxation 13

2. Net Wealth Tax 14

III. Advantages of forming a Public Limited Company (PLC., Corp./SA) 14

Formation of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg 15

I. Legal Structure of a Limited Liability Company (LLC., Ltd./SARL) 15

1. Concept 15

2. Formation 15

3. Minimum Capital 15

4. Share Transfer 16

5. Organisation 16

6. Annual Accounts 16

7. Dissolution 17

II. Tax Structure of a Limited Liability Company (LLC., Ltd./SARL) 17

1. Corporate Taxation 17

2. Net Wealth Tax 17

Page 4: Company Formation Luxembourg · Company Formation Luxembourg Legal forms III. Advantages of forming a Limited Liability Company (LLC., Ltd./SARL) 18 Formation of a Partnership Limited

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Company Formation LuxembourgLegal forms

III. Advantages of forming a Limited Liability Company

(LLC., Ltd./SARL) 18

Formation of a Partnership Limited by Shares (SCA) in Luxembourg 19

I. Legal Structure of a Partnership Limited by Shares (SCA) 19

1. Concept 19

2. Formation 19

3. Minimum Capital 19

4. Company Name 20

5. Organisation 20

II. Tax Structure of a Partnership Limited by Shares (SCA) 20

Formation of a Limited Partnership (LP./SCS); in Luxembourg 21

I. Legal Structure of a Limited partnership (LP./SCS) 21

1. Concept 21

2. Formation 21

3. Minimum Capital 21

4. Company Name 22

II. Tax Structure of a Limited Partnership (LP./SCS) 22

Formation of a General Partnership (GP./SNC) in Luxembourg 23

I. Legal Structure of a General Partnership (GP./Société en

nom collectif, SNC) 23

1. Concept 23

2. Formation 23

3. Minimum Capital 23

4. Company Name 23

II. Tax Structure of a General Partnership (GP./SNC) 24

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Company Formation LuxembourgBusiness forms

Formation of a European Company (SE) in Luxembourg 25

I. Legal Structure of a European Company (SE) 25

1. Concept 25

2. Formation 25

3. Minimum Capital 26

4. Company Name 26

5. Organisation 26

6. Accounting 26

II. Tax Structure of a European Company (SE) 26

Formation of the Branch Office of Foreign Companies in Luxembourg 27

I. LegalStructureofaBranchOfficeinLuxembourg 27

1. Concept 27

2. Formation 27

3. Name 28

4. Representation 28

II. TaxStructureofaBranchOfficeinLuxembourg 28

Business formsWhich tax advantages will your business benefit from?

Formation of a SOPARFI-Financial Holding Company in Luxembourg 30

I. Legal Structure of a SOPARFI in Luxembourg 30

1. Concept 30

2. Formation 30

II. Tax Advantages of a SOPARFI in Luxembourg 31

1. Exemption from Tax of Dividends and Sale and Liquidation

Proceeds from Investments 31

2. Deduction of Investment-related Expenses 32

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Company Formation LuxembourgBusiness forms

3. Exemption from Net Wealth Tax 32

4. Exemption from Withholding Tax 32

5. Double Taxation Agreements (DTA) 33

6. Value-added Tax (VAT) 33

Formation of a Trading and Service Company in Luxembourg 34

I. Trading and Service Company: Concept 34

II. Formation 34

III. Tax Structure of a Trading and Service Company 35

1. Corporation Tax 35

2. Net Wealth Tax 35

3. Value-Added Tax (VAT) 35

IV. Advantages of forming a Trading and Service Company

in Luxembourg 36

Formation of a Private Asset Management Company (SPF) in Luxembourg 37

I. Private Asset Management Company (SPF): Concept 37

II. Legal Structure of a Private Asset Management Company (SPF) 37

1. Legal Form 37

2. Formation 37

3. Activity 38

4. Supervision 39

III. Tax Advantages of a Private Asset Management Company (SPF) 39

1. Taxation 39

2. Tax Exemptions 39

Formation of a Securitisation Vehicle (SPV) in Luxembourg 40

I. Securitisation: Concept 40

II. Legal Structure of a Securitisation Vehicle (SPV) in Luxembourg 40

1. Formation 40

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Company Formation LuxembourgBusiness forms

2. Securitisation Structure 41

3. Asset Classes (Securitisation Objects) 41

4. Supervision 42

III. Tax Structure of a Securitisation Vehicle (SPV) in Luxembourg 42

1. Securitisation Company 42

2. Securitisation Funds 43

Formation of a Company for Intellectual Property Rights (IP-Box) in Luxembourg 44

I. Luxembourg‘s Tax Regime (IP-Box) 44

II. Intellectual Property Rights (IP) in Luxembourg 44

III. IP-Companies in Luxembourg: Tax Optimisation Instrument 45

IV. Further Tax Advantages in Luxembourg 45

1. Tax Exemptions 45

2. Further Advantages 46

Formation of a SICAV/SICAF Investment Fund in Luxembourg 47

I. Legal Structure of a SICAV/SICAF Investment Fund in Luxembourg 47

1. Concept 47

2. Investment Policy 47

3. Investors 48

4. Formation 48

5. Investment and Distribution Policy 48

6. Supervision 49

II. Tax Structure of a SICAV/SICAF Investment Fund in Luxembourg 49

1. Corporate Taxation 49

2. Tax Exemptions 49

Formation of a SICAR Investment Company in Luxembourg 50

I. Legal Structure of a SICAR Investment Company in Luxembourg 50

1. Concept 50

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Company Formation LuxembourgBusiness forms

2. Investment Policy 50

3. Investors 50

4. Formation 51

5. Issuance and Distributions Policy 51

6. Supervision 52

II. Tax Structure of a SICAR Investment Company in Luxembourg 52

1. Corporate Taxation 52

2. Tax Exemptions 53

Formation of Specialised Investment Funds (SIF) in Luxembourg 54

I. Legal Structure of a Specialised Investment Fund (SIF)

in Luxembourg 54

1. Concept 54

2. Investment Policy 54

3. Investor 54

4. Formation 55

5. Issuance and Distributions Policy 56

6. Supervision 56

II. Tax Structure of a Specialised Investment Fund (SIF)

in Luxembourg 57

1. Corporate Taxation 57

2. Tax Exemptions 57

Formation of a Real Estate Company in Luxembourg 58

I. Real Estate Company in Luxembourg: Concept 58

II. Tax Aspects 58

1. The Taxation of Income from the Sale of Real Estate 58

2. The Taxation of Gains on the Sale of Shares 58

3. Two-tier Company Structure 59

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Company Formation LuxembourgBusiness forms

Formation of a E-Commerce Company in Luxembourg 60

I. E-Commerce Luxembourg: Concept 60

II. Tax Aspects of Direct E-Commerce 61

1. The Taxation of Direct E-Commerce Services 61

2. Taxation of Direct E-Commerce Services in Luxembourg 63

Questions on Company Formation in Luxembourg? 64

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Company Formation LuxembourgLegal forms

Legal forms

Which

legal form of company best suits your project?

Public Limited Company (PLC., Corp./SA)

Limited Liability Company (LLC., Ltd./SARL)

Partnership Limited by Shares (SCA)

Limited Partnership (LP./SCS)

General Partnership (GP./SNC)

European Company, (SE)

Branch Office

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Company Formation LuxembourgLegal form: Public Limited Company (PLC., Corp.)

Formation of a Public Limited Company (PLC., Corp./SA) in Luxembourg

I. Legal Structure of a Public Limited Company (PLC., Corp./SA)

1. Concept

The Public Limited Company (PLC., Corp./SA) in Luxembourg is a legal person

whose capital is determined in advance and segmented into shares. The assets

of a Public Limited Company (PLC., Corp./SA) are wholly liable for the company‘s

liabilities. A Public Limited Company (PLC., Corp./SA) in Luxembourg may be

formed for the carrying on of commercial or non-commercial purposes. More-

over, registered shares as well as bearer shares may be issued.

2. Formation

A Public Limited Company (PLC., Corp./SA) in Luxembourg is formed through

the recording of the articles of association by a notary. Its articles of association

will subsequently be published in the Official Bulletin (Mémorial C) and lodged

with Luxembourg‘s Trade and Companies Register. At least one natural or legal

person is required for the said formation. The person may be of any nationality

and is not required to be resident in Luxembourg.

3. Minimum Capital

The minimum capital of a Public Limited Company (PLC., Corp./SA) in Luxem-

bourg is 31,000 EUR. This requires to be contributed in full in the form of a cash

or non-cash contribution. Non-cash contributions are independently valued by

an auditor. When a Public Limited company (PLC., Corp./SA) is formed, at least

25% of the nominal value of every share requires to be paid up. Notwithstan-

ding this, bearer shares will only be issued once the complete capital contribu-

tion is made.

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Company Formation LuxembourgLegal form: Public Limited Company (PLC., Corp.)

4. Shares and the Transfer of Shares

Bearer shares in a Public Limited Company (PLC., Corp./SA) are transferred

through the agreement and transfer of the bearer securities. However, the trans-

fer of registered shares is only effective on a Public Limited Company (PLC.,

Corp./SA) in Luxembourg if either a transfer statement dated and signed by

both the transferor and the transferee is present in the Register of Registered

Shares or if the Public Limited Company (PLC., Corp./SA) has been notified

of the transfer or if the said transfer has been accepted by the Public Limited

Company (PLC., Corp./SA) in the form of a notarial deed.

5. Organisation

5.1. General Meeting

The general meeting of the shareholders is the supreme authority of a Public

Limited Company (PLC., Corp./SA) in Luxembourg. It is authorised to make all

decisions relating to the Public Limited Company (PLC., Corp./SA) including the

appointment of the board of directors. The ordinary general meeting must be

convened annually at the date prescribed in the articles of association. Further-

more, the board of directors as well as the auditor of a Public Limited Company

(PLC., Corp./SA) in Luxembourg can convene an extraordinary general meeting.

The said meeting shall appoint the board of directors of the Public Limited

Company (PLC., Corp./SA).

5.2. Board of Directors

The board of directors is responsible for the management and representation

of a Public Limited Company (PLC., Corp./SA). It must consist of at least one

member (director). However, if a Public Limited Company (PLC., Corp./SA) has

more than one shareholder, the board of directors must consist of at least three

members (directors). The said members (directors) may be natural or legal

persons resident in or outwith Luxembourg. Moreover, it is not required that

the members of the board of directors be shareholders of the Public Limited

Company (PLC., Corp./SA).

5.3. Appointment of an Auditor

A Public Limited Company may appoint one or more commissaire to super-

vise the Public Limited Company (PLC., Corp./SA), who may be shareholders or

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Company Formation LuxembourgLegal form: Public Limited Company (PLC., Corp.)

non-shareholders, if the following upper limits are not exceeded: a balance

sheet total of 6.25 million EUR, net turnover of 6.25 million EUR as well as

having an average number of 50 full-time posts. Where these upper limits are

exceeded, an independent auditor must be appointed to inspect the books.

6. Annual Accounts

The annual accounts of a Public Limited Company in Luxembourg (PLC., Corp./

SA) consist of the balance sheet, the profit and loss account and the notes

thereto. Following their approval, the annual accounts will be lodged with

Luxembourg‘s Trade and Companies Register and published in the Official

Bulletin (Mémorial C).

7. Liquidation

If 75% of the share capital of a Public Limited Company (PLC., Corp./SA) in

Luxembourg has been lost and 25% of the votes cast at the general meeting are

in favour of liquidation, the company shall enter into liquidation.

II. Tax Structure of a Public Limited Company (PLC., Corp./SA)

1. Corporate Taxation

Since January 1st, 2013, all Public Limited Companies (PLC., Corp./SA) in

Luxembourg have been subject to corporate taxation at a rate of 29.22%. This

said rate consists of the following components: corporate income tax at a rate of

21% on income exceeding 15,000 EUR (or a rate of 20% for income not excee-

ding 15,000 EUR); the solidarity surtax at a rate of 7% as well as the municipal

business tax at a rate of 6.75%. All Public Limited Companies (PLC., Corp./SA)

resident in Luxembourg which do not require a trade licence and whose assets,

securities and bank balance together exceed 90% of its balance sheet total are

required to pay only the minimum corporate taxation of 3,210 EUR (3,000 EUR

plus the 7% solidarity surtax).

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Company Formation LuxembourgLegal form: Public Limited Company (PLC., Corp.)

Furthermore, Public Limited Companies (PLC., Corp./SA) in Luxembourg are

liable to withholding tax at a rate of 15% on their dividend distributions. In con-

trast thereto, royalty and interest payments as well as proceeds from liquidation

or partial liquidation are tax-free.

2. Net Wealth Tax

Public Limited Companies (PLC., Corp./SA) in Luxembourg are further subject to

a net wealth tax at a rate of 0.5%. Public Limited Companies (PLC., Corp./SA)

resident in Luxembourg are therefore subject to a net wealth tax on their total

assets (assets in and outwith Luxembourg). However, Public Limited Companies

(PLC., Corp./SA) not resident in Luxembourg are subject to the said tax on their

assets in Luxembourg only.

III. Advantages of forming a Public Limited Company (PLC., Corp./SA)

In Luxembourg, the legal structure of the Public Limited Company (PLC., Corp./

SA) is used by large- as well as small and medium-sized companies, particularly

due to the possibility to issue easily transferable bearer shares. Furthermore,

the Public Limited Company (PLC., Corp./SA) is suitable for numerous Luxem-

bourg business forms. This includes, but is not limited to, the SOPARFI-, the

Financial Holding, the Trading Company, the Private Asset Management Company

and the Securitisation Company (SPV).

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Company Formation LuxembourgLegal form: Limited Liability Company (LLC., LTD./SARL)

Formation of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg

I. Legal Structure of a Limited Liability Company (LLC., Ltd./SARL)

1. Concept

A Limited Liability Company (LLC., Ltd./Société à responsabilité limitée, SARL)

in Luxembourg is a corporation whose assets are wholly liable for the company‘s

liabilities. It may be formed for the carrying on of any type of commercial or

non-commercial purposes.

2. Formation

A Limited Liability Company (LLC., Ltd./SARL) in Luxembourg is formed through

the recording of its articles of association by a notary. Its articles of association

will subsequently be published in the Official Bulletin (Mémorial C) and lodged

with Luxembourg‘s Trade and Companies Register. Moreover, the shareholders

of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg must be regis-

tered in the Trade and Companies Register of which there must be at least two

and no more than 40. The shareholders may be natural or legal persons. It is

also possible to form a single-person Limited Liability Company in Luxembourg

(LLC., Ltd./Société à Responsabilité limitée unipersonelle).

3. Minimum Capital

The minimum capital of a Limited Liability Company (LLC., Ltd./SARL) in

Luxembourg is 12,500 EUR. This requires to be contributed in full in the form of

a cash or non-cash contribution. The company‘s capital is divided into registered

shares. Each share is of the same value and each share will have a minimum

value of 25 EUR.

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Company Formation LuxembourgLegal form: Limited Liability Company (LLC., LTD./SARL)

4. Share Transfer

The shares of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg may

be transferred to non-shareholders only with the consent of the general meeting

at which at least 75% of the company‘s capital must be represented. The said

transfer is required in notarised form. Such consent is not required when the

transfer is to a fellow shareholder.

5. Organisation

5.1. General Meeting

The general meeting is the supreme authority of a Limited Liability Company

(LLC., Ltd./SARL) in Luxembourg. The general meeting consists of all share-

holders of the company and must be convened if the number of shareholders

exceeds 25.

5.2. Managing Director

A Limited Liability Company (LLC., Ltd./SARL) in Luxembourg has one or more

managing directors who are not required to be company shareholders. Further-

more, the managing director(s) can be of any nationality and is not required to

be resident in Luxembourg.

5.3. Supervision

A Limited Liability Company in Luxembourg (LLC., Ltd./SARL) is subject to au-

diting obligations if it has more than 25 shareholders. The supervision is carried

out by one or more commissaire who may be shareholders or non-sharehol-

ders. However, if a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg

exceeds two of the following upper limits, an independent auditor must be

appointed to inspect the books: a balance sheet total of 6.25 million EUR, net

turnover of 6.25 million EUR as well as having an average number of 50 full-

time posts.

6. Annual Accounts

The annual accounts of a Limited Limited Company in Luxembourg (LLC., Ltd./

SA) consist of the balance sheet, the profit and loss account and the notes

thereto. Following their approval, the annual accounts will be lodged with

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Company Formation LuxembourgLegal form: Limited Liability Company (LLC., LTD./SARL)

Luxembourg‘s Trade and Companies Register and published in the Official

Bulletin (Mémorial C).

7. Dissolution

A Limited Liability Company (LLC., Ltd./SARL) in Luxembourg can be dissolved

either through a decision of the general meeting at which 75% of the company

capital must be represented or through a court order.

II. Tax Structure of a Limited Liability Company (LLC., Ltd./SARL)

1. Corporate Taxation

Since January 1st, 2013, all Limited Liability Companies (LLC., Ltd./SARL) in

Luxembourg have been subject to corporate taxation at a rate of 29.22%. This

said rate consists of the following components: corporate income tax at a rate of

21% on income exceeding 15,000 EUR (or a rate of 20% for income not excee-

ding 15,000 EUR), the solidarity surtax at a rate of 7% as well as the municipal

business tax at a rate of 6.75%.

All Limited Liability Companies (LLC., Ltd./SARL) resident in Luxembourg which

do not require a trade licence and whose assets, securities and bank balance

together exceed 90% of its balance sheet total are required to pay only the

minimum corporate taxation of 3,210 EUR (3,000 EUR plus the 7% solidarity

surtax).

Furthermore, Limited Liability Companies (LLC., Ltd./SARL) in Luxembourg are

subject to withholding tax at a rate of 15% on their dividend distributions. In

contrast thereto, royalty and interest payments as well as proceeds from liqui-

dation or partial liquidation are tax-free in Luxembourg.

2. Net Wealth Tax

Limited Liability Companies (LLC., Ltd./SARL) in Luxembourg are further subject

to a net wealth tax at a rate of 0.5%. Limited Liability Companies (LLC., Ltd./

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Company Formation LuxembourgLegal form: Limited Liability Company (LLC., LTD./SARL)

SARL) resident in Luxembourg are therefore subject to a net wealth tax on

their total assets (assets in and outwith Luxembourg). However, Limited Liability

Companies (LLC., Ltd./SARL) not resident in Luxembourg are subject to the said

tax on their assets in Luxembourg only.

III. Advantages of forming a Limited Liability Company (LLC., Ltd./SARL)

In Luxembourg, the legal structure of the Limited Liability Company (LLC., Ltd./

SARL) is predominantly suited to medium-sized companies due to its many ad-

vantages including, for example, it suiting all commercial purposes – from the

trading of goods to asset management.

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Company Formation LuxembourgLegal form: SCA

Formation of a Partnership Limited by Shares (SCA) in Luxembourg

I. Legal Structure of a Partnership Limited by Shares (SCA)

1. Concept

The Partnership Limited by Shares (Société en commandite par actions, SCA) is

a corporation which, at the same time, shows the characteristics of a partner-

ship. A Partnership Limited by Shares (SCA) consists of at least one shareholder

subject to unlimited liability (general partner) as well as a natural or legal person

who has contributed to the share capital with a particular contribution (limited

partner). The latter is liable for the Partnership Limited by Share’s (SCA) liabili-

ties only for a sum matching his contribution. Insofar as not otherwise provided,

the provisions on Public Limited Companies (PLC., Corp./SA) in Luxembourg

apply to Partnerships Limited by Shares (SNC) in Luxembourg.

2. Formation

A Partnership Limited by Shares (SNC) in Luxembourg is formed through the

recording of its articles of association (Link Info-Seite) by a notary as well as its

registration in the Trade and Companies Register (Link Info-Seite). At least one

personally liable shareholder (general partner) is required to be mentioned by

name in the said articles of association.

3. Minimum Capital

The provisions on Public Limited Companies (PLC., Corp./SA) in Luxembourg

apply in respect of the minimum capital of the shareholders of a Partnership

Limited by Shares (SCA). According to that, the minimum capital of a Part-

nership Limited by Shares (SCA) in Luxembourg is 31,000 EUR. The Partner-

ship Law provisions, which contain no minimum capital requirements, apply in

respect of the capital contributions of the general partners.

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Company Formation LuxembourgLegal form: SCA

4. Company Name

The company name of a Partnership Limited by Shares (SCA) is permitted only

to contain the name of one or more than one of its personally liable sharehol-

ders (general partners).

5. Organisation

5.1. General Meeting

The general meeting of a Partnership Limited by Shares (SCA) in Luxembourg

has significantly less competences than those of a Public Limited Company (PLC.,

Corp./SA) in Luxembourg. In particular, its resolutions on the amendment of the

articles of association require the consent of the Partnership Limited by Share’s

(SCA) managing director.

5.2. Board of Directors

The board of directors of a Partnership Limited by Shares (SCA) in Luxembourg

is not elected. Instead, it mandatorily consists of those shareholders subject to

unlimited liability (general partners). The said shareholders are responsible for

the management of and representation of the Partnership Limited by Shares

(SCA).

5.3. Commissaire

At least three commissaire are required to carry out the supervision of a Part-

nership Limited by Shares (SCA) in Luxembourg.

II. Tax Structure of a Partnership Limited by Shares (SCA)

In respect of taxation, a distinction is made between the general partners as

well as the Partnership Limited by Shares (SCA) itself together with the limited

partners of a Partnership Limited by Shares (SCA) due to its hybrid structure.

The general partners and their capital contributions are taxed in accordance

with the Partnership Law provisions whilst the Partnership Limited by Shares

(SCA) and its limited partners are treated as a corporation and/or shareholders

for corporate taxation purposes.

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Company Formation LuxembourgLegal form: Limited Partnership

Formation of a Limited Partnership (LP./SCS) in Luxembourg

I. Legal Structure of a Limited partnership (LP./SCS)

1. Concept

A Limited Partnership in Luxembourg (LP./Société en commandite simple) is a

partnership having at least two shareholders, namely a ‘general’ partner who

is subject to unlimited liability and a ‘limited’ partner subject to limited liability.

The general partner is responsible for the management of a Limited Partner-

ship (LP./SCS) in Luxembourg. Moreover, the liability of the said partner for the

liabilities of the Limited Partnership (LP./SCS) is secondary, joint and several

and unlimited.

In contrast thereto, the limited partners are liable for the liabilities of a Limited

Partnership (LP./SCS) only to the extent of that amount that they have contri-

buted (the limited liability sum). Such partners are consequently not permitted

to carry out the management of the business and have restricted controlling

rights.

2. Formation

A Limited Partnership (LP./SCS) is formed through the conclusion of a partner-

ship agreement between at least two persons and will subsequently be registe-

red in the Trade and Companies Register (Link Info-Seite). The registration in

the Trade and Companies Register is accordingly of declaratory effect only.

3. Minimum Capital

There is no minimum capital requirement for a Limited Partnership (LP./SCS) in

Luxembourg.

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Company Formation LuxembourgLegal form: Limited Partnership

4. Company Name

The company name of a Limited Partnership (LP./SCS) in Luxembourg must

contain the surname of at least one of the partners subject to unlimited tax

liability (general partners). The using of the names of other persons, particularly

the names of the limited partners, is not permitted.

II. Tax Structure of a Limited Partnership (LP./SCS)

A Limited Partnership (LP./SCS) in Luxembourg is not subject to taxation as

such. Instead, every shareholder of a Limited Partnership (LP./SCS) is liable to

taxation in Luxembourg on their share of the income and assets of the company

as well as on their private income and assets.

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Company Formation LuxembourgLegal form: General Partnership

Formation of a General Partnership (GP./SNC) in Luxembourg

I. Legal Structure of a General Partnership (GP./Société en nom collectif, SNC)

1. Concept

The General Partnership (GP./Société en nom collectif, SNC) in Luxembourg is

a partnership in which two or more natural and/or legal persons come together

in order to carry on business under a single trading name. The liability of all

shareholders of a General Partnership (GP./SNC) in Luxembourg for its liabilities

is unlimited and joint and several.

2. Formation

A General Partnership (GP./SNC) in Luxembourg is formed through the con-

clusion of a partnership agreement between at least two natural and/or legal

persons. Moreover, a General Partnership (GP./SNC) is required to obtain a

trading licence (Link Info-Seite) from the Ministry of the Middle Classes, Tourism

and Housing as well as registering in the Trade and Companies Register (Link

Info-Seite) in Luxembourg in order to carry on business.

3. Minimum Capital

There is no prescribed minimum capital for the formation of a General Partner-

ship (GP./SNC) in Luxembourg.

4. Company Name

The company name of a General Partnership (LGP./SNC) in Luxembourg is only

permitted to contain the names of its shareholders.

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Company Formation LuxembourgLegal form: General Partnership

II. Tax Structure of a General Partnership (GP./SNC)

A General Partnership (GP./SNC) is not taxed as such. Instead, its shareholders

are subject to the standard taxation in Luxembourg.

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Company Formation LuxembourgLegal form: European Company

Formation of a European Company (SE) in Luxembourg

I. Legal Structure of a European Company (SE)

1. Concept

The legal form of the European Company (Societas Europaea, SE; European

Public Limited Company (PLC.,Corp.)) was introduced in 2001 as part of the EU

Directive 2157/2001 on the Statute for a European Company (SE). The Euro-

pean Company (SE) is a Public Limited Company (PLC., Corp.) having its own

legal personality and whose capital is divided into shares and which has branch

offices in at least two other European Union Member States.

The aim of the introduction of this new legal form was a uniform European

company law. In particular, that businesses active in different Member States of

the European Union or those wanting to become active in other Member States

of the European Union being able to form companies in accordance with exten-

sive uniform legal principles. And therefore not being required to be formed as

subsidiaries in different countries accordance with different laws in each case.

Instead, such businesses, insofar as they are active as a European Company

(SE), subject to

2. Formation

A European Company (SE) is formed independently of domestic law. Only legal

persons are permitted to form a European company. This includes, for example,

already existing companies such as Public Limited Companies (PLC., Corp.),

European Companies (SE) and – under certain restrictions- Limited Liability

Companies (LLC., Ltd.). Furthermore, the registered office as well as the main

place of central management and control of the founding companies must be

located within the European Union (EU) or the European Economic Area (EEA).

The newly formed European Company (SE) will be registered in the Commer-

cial Register of the country in which its registered office is located. A Luxem-

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Company Formation LuxembourgLegal form: European Company

bourg European Company (SE) will, for example, accordingly be registered in

Luxembourg’s Commercial Register. The said registration will subsequently be

published in the Official Journal of the European Union.

3. Minimum Capital

The minimum capital of a European Company (SE) is 120,000 EUR.

4. Company Name

The company name of a European Company (SE) is required to contain the

abbreviation “SE”.

5. Organisation

Due to the different provisions among the Member States on the forms of

company organisation, the Articles of Association of a European Company (SE)

may provide for, in addition to the General Meeting, either a Board of Direc-

tors (monistic system, compare the Public Limited Company (PLC., Corp./SA) in

Luxembourg) or a management and supervisory body (dualistic system, compare

the Public Limited Company (PLC., Corp.) in Germany).

6. Accounting

In respect of the obligation of a European Company (SE) to keep accounts, the

law of the country in which its registered office is located applies.

II. Tax Structure of a European Company (SE)

No special provisions exist on the current taxation of the business activities of

a European Company (SE). Instead, a European Company (SE) is subject to

unlimited tax liability in the country in which its registered office is located. In

respect of permanent establishments in other countries, a European Company

(SE) is required to comply with its tax obligations in force in the respective

countries. The distribution of profits (e.g. dividend payments) to the sharehol-

ders is likewise subject to the particular domestic provisions thereon.

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Company Formation LuxembourgLegal form: Branch Offices of Foreign Companies

Formation of the Branch Offices of Foreign Companies in Luxembourg

I. Legal Structure of a Branch Office in Luxembourg

1. Concept

A Branch Office in Luxembourg is a permanent establishment which is geo-

graphically separated from the main business in a domestic or non-domestic

Trading Company. From a business management point of view, it is a indepen-

dent company carrying on commercial activities in Luxembourg which is fully

authorised to conclude sales contracts. Legally, the Branch Office is seen as part

of the Head Office due to it not having its own legal personality. The liability of

the Branch Office for the liabilities of the Branch Office in Luxembourg is conse-

quently unlimited. If the Head Office is a foreign company, the internal consti-

tution of a Branch Office should be in accordance with the articles of association

of the Head Office of the business and the particular foreign law.

2. Formation

A Branch Office in Luxembourg is formed (Link Info-Seite) through the resolution

of the management of the Head Office and through registration in Luxembourg’s

Trade and Companies Register (link Info-Seite). Therein, the said registration is

of declaratory effect only. It is not required that a Branch Office in Luxembourg

have an articles of association and the articles of association of the principal

place of business shall be published in the Official Bulletin (Mémorial C). Moreo-

ver, the furnishing of the Branch Office with capital can be freely organised. A

Trade Licence is required to be obtained by a Branch Office from Luxembourg’s

Ministry of the Middle Classes, Tourism and Housing for the carrying on of com-

mercial activities.

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Company Formation LuxembourgLegal form: Branch Offices of Foreign Companies

3. Name

The name of a Branch Office in Luxembourg must contain at least a description

of the Head Office as well as the corresponding legal abbreviation in unaltered

form.

4. Representation

A Branch Office in Luxembourg is independently represented by the Branch

Office manager vis-à-vis third parties. Notwithstanding this, the appointment

of a Branch Office manager is not mandatory. An authorised signatory of the

company, registered in Luxembourg”s Trade and Companies Register, can accor-

dingly be appointed to represent the Branch Office.

II. Tax Structure of a Branch Office in Luxembourg

A Branch Office in Luxembourg is liable as a permanent establishment to the stan-

dard tax for profits made there and consequently benefits from Luxembourg’s

preferential taxation. Moreover, the Branch Office may repatriate the said profits

to the country in which its Head Office is located free from tax.

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Company Formation LuxembourgBusines forms

Business forms

Which

tax advantages will your business benefit from?

SOPARFI-Financial Holding Company

Trading and Service Company

Private Asset Management Company (SPF)

Securitisation Vehicle (SPV)

Company for Intellectual Property Rights (IP-Box)

Investment Funds SICAV/SICAF

Investment Company SICAR

Specialised Investment Funds (SIF)

Real Estate Company

E-Commerce

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Company Formation LuxembourgBusiness form: SOPARFI-Financial Holding Company

Formation of a SOPARFI-Financial Holding Company in Luxembourg

I. Legal Structure of a SOPARFI in Luxembourg

1. Concept

A SOPARFI-Financial Holding Company (Société de participations financières) in

Luxembourg is a non-regulated Trading Company in Luxembourg which is fully

liable to tax. It benefits from the “inter-corporate privilege” of the parent subsi-

diary Directive and is able to carry on Holding activities in addition to its finan-

cial activities. A “Holding” describes a parent organisation which can take the

following forms: Operational Holding; Management Holding; Finance Holding

and Organisational Holding.

The purpose of a SOPARFI in Luxembourg is predominantly the acquisition,

management and realisation of investments in companies in or outwith Luxem-

bourg. A SOPARFI is permitted to carry on all types of commercial activities

insofar as they are consistent with the articles of association or Luxembourg’s

statutory provisions.

2. Formation

A SOPARFI in Luxembourg is formed through the recording of its articles of

association by a notary. The articles of association will subsequently be published

in the Official Bulletin (Mémorial C) and lodged with Luxembourg‘s Trade and

Companies Register. A natural or legal person of any nationality, regardless of

where they are resident, is required and authorised for the formation.

A SOPARFI in Luxembourg is formed as a corporation as, for example, a Public

Limited Company (PLC., Corp./SA.), a Limited Liability Company (LLC., Ltd./

SARL) or a Partnership Limited by Shares (SCA). In practice in Luxembourg, the

legal form of the Public Limited Company (PLC., Corp./SA) is the preferred form

for the formation of a SOPARFI. This is particularly so due to it being possible to

issue bearer shares which can be easily transferred.

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Company Formation LuxembourgBusiness form: SOPARFI-Financial Holding Company

It is a mandatory requirement that a SOPARFI in Luxembourg carrying on

commercial activities as its primary or secondary activity obtains prior written

consent (a trade licence, autorisation d établissement) from Luxembourg‘s

Ministry of Small and Medium-Sized Businesses.

II. Tax Advantages of a SOPARFI in Luxembourg

1. Exemption from Tax of Dividends and Sale and Liquidation Proceeds from Investments

Since January 1st, 2013, the rate of corporate taxation on the distribution of

dividends and sale and liquidation proceeds to a SOPARFI in Luxembourg has

been 29.22% (21% or 20% corporation tax, plus the Solidarity Surtax at a rate

of 7% as well as the Municipal Business tax at a rate of 6.75%). All corporations

resident in Luxembourg which do not require a trade licence and whose assets,

securities and bank balance together exceed 90% of its total balance sheet are

required to pay only the minimum corporate taxation of 3,210 EUR (3,000 EUR

plus the 7% Solidarity Surtax).

Notwithstanding this, in the context of the application of the „inter-corporate

privilege“, the dividends and sale and liquidation proceeds distributed to a

SOPARFI in Luxembourg are exempt from tax upon satisfaction of the following

requirements:

1.1. Requirements for the Parent Company

The parent company (SOPARFI) must be either a corporation resident in Luxem-

bourg with unlimited tax liability or the permanent establishment in Luxem-

bourg of an EU Company within the meaning of the parent subsidiary Direc-

tive or must be a corporation resident in a country which has agreed a double

taxation agreement (DTA) with Luxembourg. Furthermore, the parent company

is required to hold at least 10% of the capital of the subsidiary company or to

have acquired the said investment for at least 1.2 million EUR (or 6 million EUR

for sale profits) and at the time of the making available of the dividends, the in-

vestment must have been held for an uninterrupted period of at least 12 months

or a commitment existed to do so.

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Company Formation LuxembourgBusiness form: SOPARFI-Financial Holding Company

1.2. Requirements for the Subsidiary Company

The subsidiary company must either be a corporation which has its registered

office in Luxembourg with unlimited tax liability or a foreign corporation with

unlimited tax liability which is liable to a tax comparable to Luxembourg‘s cor-

poration tax or be an EU-subsidiary company fully liable to corporate taxation

(congruity with Luxembourg‘s rate of corporation tax is not mandatory) within

the meaning of the parent subsidiary Directive.

If these requirements are not met, dividends can be at least 50% tax exempt if

they are distributed by a corporation which is resident in Luxembourg with un-

limited tax liability or a foreign corporation which is liable to corporate taxation

(corresponding with Luxembourg’s rate of corporation tax) and which has its

registered office in a country which has agreed a DTA with Luxembourg or an

EU-Subsidiary Company within the meaning of the parent subsidiary Directive.

2. Deduction of Investment-related Expenses

Investment-related expenses are deductible to the extent they exceed the tax-

free income generated from investment in the respective year. This also applies

to value adjustments as well as losses suffered from the sale of investments.

3. Exemption from Net Wealth Tax

The net wealth tax in Luxembourg applies, in principle, at a rate of 0.5%. Not-

withstanding this and in accordance with the following requirements, the value

of an investment remains exempt from the net wealth tax. For the application of

the parent subsidiary privilege herein, no minimum holding period is prescribed:

The parent company (SOPARFI) in Luxembourg must hold at least 10% of the

capital of the subsidiary company or must have acquired the investment for a

sum amounting to at least 1.2 million EUR and the subsidiary company must

have been a resident or non-resident corporation with unlimited tax liability.

4. Exemption from Withholding Tax

4.1. Withholding Tax on Dividend Distributions

In principle, the dividend distributions of a SOPARFI in Luxembourg are subject

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Company Formation LuxembourgBusiness form: SOPARFI-Financial Holding Company

to withholding tax at a rate of 15%. However, the said tax will not be levied if

the following requirements are satisfied:

Firstly, the company distributing the dividends must be a resident legal person

with unlimited tax liability. The benefiting company must also be a resident cor-

poration with unlimited tax liability or a corporation resident in an EU member

state within the meaning of the parent subsidiary Directive or the resident per-

manent establishment of a parent company with its registered office in a country

which has agreed a DTA with Luxembourg. In addition, the benefiting company

is required to have an investment in the SOPARFI in Luxembourg amounting to

at least 10% of the company‘s share capital or of a purchase price amounting to

at least 1.2 million EUR and which has been held for a period of 12 months or a

commitment existed to do so.

In the case of the dividends of a SOPARFI in Luxembourg being distributed to

companies from countries outwith the EU yet which have agreed a DTA with

Luxembourg, there exists a reduced rate of withholding tax of 5%.

4.2 Withholding Tax on Royalty Payments, Interest and Liquidation

Proceeds

Royalty payments, interest payments as well as the distribution of liquidation

proceeds are also exempt from withholding tax in Luxembourg.

5. Double Taxation Agreements (DTA)

Moreover, a SOPARFI in Luxembourg can benefit from Luxembourg‘s multiple

double taxation agreements (DTA‘s) due to the use of the tax exemptions arising

from the „inter-corporate privilege“ not affecting the general tax liability of a

SOPARFI.

6. Value-added Tax (VAT)

If the business activity of a SOPARFI in Luxembourg is not exclusively limited

to the holding of investments, it will be liable to value-added tax (VAT) and is

consequently required to register for value-added tax (VAT). Luxembourg‘s rate

of value-added tax (VAT) is 15%. A reduced rate applies to certain goods and

services (e.g 3% on e-books).

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Company Formation LuxembourgBusiness form: Trading and Service Comapany

Formation of a Trading and Service Company in Luxembourg

I. Trading and Service Company: Concept

If a company carries on a skilled trade, industrial or other commercial activi-

ties, such company is a Trading and Service Company. In this regard, there is

a distinction made in Luxembourg between Trading Companies, in the strictest

sense, which possess legal personality and Commercial Associations which do

not.

Trading Companies in the strictest sense include Public Limited Companies (PLC.,

Corp./SA); Limited Liability Companies (LLC., Ltd./SARL); Partnerships Limited

by Shares (SCA); Limited Partnerships (LP./SCS); General Partnerships (SNC);

Co-operative Societies (SC) as well as European Companies (SE). In contrast

thereto, Commercial Associations are subdivided into Temporary Commercial

Associations and Commercial Associations by Participation.

II. Formation

How a Trading and Service Company in Luxembourg is formed is determined by

the particular legal form chosen. Irrespective of nationality or residence, any

person may form a Trading and Service Company in Luxembourg.

Furthermore, it is required that all companies in Luxembourg carrying on com-

mercial activities obtain prior written consent (a trade licence, autorisation d‘

établissement) from Luxembourg‘s Ministry of Small and Medium-sized Busi-

nesses. The requirements therefor are, firstly, that the manager of a Trading

and Service Company in Luxembourg possesses certain professional qualifica-

tions and, secondly, that the company has a physical presence in Luxembourg.

Moreover, a Trading and Service Company is required to register the busi-

ness and to apply to the competent tax authority for a value-added tax (VAT)

ID. number in Luxembourg.

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Company Formation LuxembourgBusiness form: Trading and Service Comapany

III. Tax Structure of a Trading and Service Company

The following information on the tax structure exclusively addresses corpora-

tions in Luxembourg due to Trading and Service Companies in Luxembourg

being predominantly formed as Public Limited Companies (PLC., Corp./SA) or as

Limited Liability Companies (LLC., Ltd./SARL):

1. Corporation Tax

Since January 1st, 2013, all corporations in Luxembourg have been subject

to corporate taxation at a rate of 29.22%. This said rate consists of the fol-

lowing components: corporate income tax at a rate of 21% on income excee-

ding 15,000 EUR (or a rate of 20% for income not exceeding 15,000 EUR), the

solidarity surtax at a rate of 7% as well as the municipal business tax at a rate

of 6.75%.

All corporations resident in Luxembourg which do not require a trade licence and

whose assets, securities and bank balance together exceed 90% of its balance

sheet total are required to pay only the minimum corporate taxation of 3,210

EUR (3,000 EUR plus the 7% solidarity surtax).

Furthermore, corporations in Luxembourg are subject to withholding tax at a

rate of 15% on their dividend distributions. In contrast thereto, royalties and

interest payments as well as proceeds from liquidation or partial liquidation are

tax-free in Luxembourg.

2. Net Wealth Tax

Corporations in Luxembourg are further subject to a net wealth tax at a rate

of 0.5%. Corporations resident in Luxembourg are therefore subject to a net

wealth tax on their total assets (assets in and outwith Luxembourg). However,

corporations not resident in Luxembourg are subject to the said tax on their

assets in Luxembourg only.

3. Value-Added Tax (VAT)

Trading and Service Companies in Luxembourg are liable to value-added tax

(VAT) at a rate of 15% on their activities. Notwithstanding this, certain supplies

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Company Formation LuxembourgBusiness form: Trading and Service Comapany

and services are subject to the reduced rate of value-added tax (VAT) in Luxem-

bourg. For example, e-books are subject to a rate of 3%.

IV. Advantages of forming a Trading and Service Company in Luxembourg

There is very little red tape surrounding the formation and management of

a Trading and Service Company in Luxembourg. Moreover, Luxembourg‘s tax

assessment framework in the form of the so-called “tax rulings” is flexibly admi-

nistered. Questions on the scope of tax liability and undertakings relating to the

taxation can be sought from Luxembourg‘s tax authority prior to the tax being

due. In principle, these can be relied upon by both sides. In Luxembourg, such

tax ruling procedures can be completed within weeks.

Luxembourg is a signatory to several double taxation agreements (DTA‘s) which

prevent the double taxation of Trading and Service Companies.

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Company Formation LuxembourgBusiness form: Private Asset Management Company (SPF)

Formation of a Private Asset Management Company (SPF) in Luxembourg

I. Private Asset Management Company (SPF): Concept

The Private Asset Management Company in Luxembourg (Société de gestion de

patrimoine familial, SPF) is not a new business form. Instead, it is a suitable in-

vestment vehicle for the management and planning of family assets, of a system

for matrimonial property and of the succession of natural persons. The Private

Asset Management Company (SPF) has been in existence in Luxembourg since

2007 and is the successor to the abolished Luxembourg Holding 1929.

II. Legal Structure of a Private Asset Management Company (SPF)

1. Legal Form

A Private Asset Management Company (SPF) in Luxembourg is only permitted to

be formed as a corporation (Public Limited Company (PLC., Corp./SA); Limited

Liability Company (LLC., Ltd./SARL); Partnership Limited by Shares (SCA) or

Co-operative in the form of a Public Limited Company (SCOSA)). In practice in

Luxembourg, the SPF is however predominantly formed in the legal forms of

the Public Limited Company (PLC., Corp./SA) and the Limited Liability Company

(LLC., Ltd./SARL).

2. Formation

A Private Asset Management Company (SPF) in Luxembourg is formed through

the recording of its articles of association by a notary. The articles of association

will subsequently be published in the Official Bulletin (Mémorial C) and lodged

with Luxembourg‘s Trade and Companies Register. It is required that the articles

of association expressly regulate that the company is subject to the provisions

of Luxembourg‘s law on Private Asset Management Companies. The minimum

capital of a SPF in Luxembourg is dependent upon which legal form is chosen.

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Company Formation LuxembourgBusiness form: Private Asset Management Company (SPF)

The shareholders of a SPF in Luxembourg, whose number must remain

restricted, must be natural persons who are resident or not resident in Luxem-

bourg who will be active in the management of the private assets. Furthermore,

trustees or patrimonial entities with or without legal personality, such as Trusts

or private Foundations managing the private assets of natural persons, may

be used. In contrast thereto, other corporations are not permitted to hold

the position of shareholder in a Private Asset Management Company (SPF) in

Luxembourg.

3. Activity

3.1. Permitted Activity

The permitted activities of a Private Asset Management Company (SPF) in Luxem-

bourg are as follows: the acquisition, possession, management and realisation

of investments in financial instruments, in the broadest sense, including deri-

vatives; shares; investments; Funds; futures; bonds; options; precious metals

as well as bank accounts. Furthermore, as long as a SPF is not involved in the

management of the individual companies, a SPF in Luxembourg is permitted

to hold majority or 100% company shareholdings. The unlimited taking out of

loans from shareholders or from external third parties as well as the issuing of

securities are also permitted.

3.2. Prohibited Activity

A SPF in Luxembourg is prohibited from carrying on any type of commercial

activity including the provision of management activity or financial services to

third parties or shareholders. Furthermore, the guaranteeing of loans is not per-

mitted even where a SPF has an interest in the respective company. The excep-

tion thereto is where the guaranteeing involves a gratuitous deposit or surety.

A Private Asset Management Company in Luxembourg is likewise not permit-

ted to hold patents or rights, to directly possess real estate, to receive more

than 5% of the complete dividend income of the shareholders which is liable to

taxation of less than 11% as well as the stock market flotation of SPF shares or

their public offering. Notwithstanding this, a SPF can have a financial interest in

structures carrying on the prohibited activities listed.

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Company Formation LuxembourgBusiness form: Private Asset Management Company (SPF)

4. Supervision

A Private Asset Management Company (SPF) in Luxembourg is subject to the

supervision of Luxembourg‘s Indirect Tax Administration (Administration de

l’Enregistrement et des Domaines, AED) and to no further supervision.

III. Tax Advantages of a Private Asset Management Company (SPF)

1. Taxation

In Luxembourg, a SPF is liable to the so-called „subscription tax“ annually at a

rate of 0.25% on its paid-up share capital, the share premium plus on a pro-

portion of its debts exceeding 8 times the paid-up share capital and the share

premium.

2. Tax Exemptions

The income and gains of a Private Asset Management Company (SPF) in Luxem-

bourg are exempt from corporation 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 SPF‘s liquida-

tion proceeds are exempt from taxation. The afore-mentioned tax exemptions

consequently mean that a SPF is not permitted to benefit from Luxembourg‘s

multiple double taxation agreements (DTA‘s).

Moreover, the distributions of a SPF in Luxembourg in the form of dividends to

non-resident investors as well as interest are exempt from withholding tax.

In the absence of commercial transactions, a SPF in Luxembourg is not liable to

value-added tax (VAT) and is consequently not required to register for value-

added tax (VAT).

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Company Formation LuxembourgBusiness form: Securitisation Vehicle (SPV)

Formation of a Securitisation Vehicle (SPV) in Luxembourg

I. Securitisation: Concept

Luxembourg‘s Securitisation Law of March 22nd, 2004, defines the concept of

securitisation as follows: a business transaction in which a Securitisation Struc-

ture or Securitisation Vehicle (Special Purpose Vehicle, SPV) acquires or assumes

direct or indirect risks from receivables, from other assets, assumed from third

parties or from all or some obligations inherent in the business activities of third

parties. The securitisation is wholly performed by such a Securitisation Vehicle

(SPV) or a SPV is involved in such a transaction through the complete or partial

assumption of the securitised risks or through the issuing of securities. A Secu-

ritisation Vehicle (SPV) finances itself from the issuing of securities whose value

or the proceeds from which are dependant upon the assumed risks. A distinc-

tion requires to be made regarding Securitisation Vehicles (SPV) in Luxembourg

between non-regulated Securitisation Companies and Securitisation Funds.

II. Legal Structure of a Securitisation Vehicle (SPV) in Luxembourg

1. Formation

1.1. Securitisation Company

A Securitisation Company in Luxembourg can only be formed as a corporation

and subsequently as a Public Limited Company (PLC., Corp./SA); a Limited Lia-

bility Company (LLC., Ltd./SARL); a Partnership Limited by Shares (SCA) or as

a Co-operative in the form of a Public Limited Company (SCOSA). In practice

in Luxembourg, the Public Limited Company (PLC., Corp./SA) is the preferred

form, particularly if issued securities are to be publicly sold. Such activity is not

possible with a Limited Liability Company (LLC., Ltd./SARL).

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Company Formation LuxembourgBusiness form: Securitisation Vehicle (SPV)

A Securitisation Company in Luxembourg is formed through the recording of its

articles of association by a notary. Its articles of association will subsequently

be published in the Official Bulletin (Mémorial C) and lodged with Luxembourg‘s

Trade and Companies Register. The minimum capital of a Securitisation Company

is dependent upon the legal form chosen.

1.2. Securitisation Funds

In contrast to a Securitisation Company, a Securitisation Fund in Luxembourg

does not have legal personality and is managed by a Management Company re-

sident in Luxembourg which must be a Trading Company. A Securitisation Fund

in Luxembourg is formed in contractual form as jointly owned assets or as trust

assets. However, the Securitisation Fund‘s assets must be separated from those

of the Management Company.

No minimum capital is prescribed for a Securitisation Fund in Luxembourg. The

managing Management Company must satisfy the minimum capital require-

ment prescribed for its legal form.

1.3. Separate Compartments

The assets of a Securitisation Vehicle (SPV) in Luxembourg may be separated

into a single or several compartments if so permitted by the articles of associ-

ation of a Securitisation Company in Luxembourg or the contractual provisions

of a Securitisation Fund.

2. Securitisation Structure

The permitted Securitisation Structures are the „True Sale“ transaction and the

„Synthetic“ transaction. In a „True Sale“ transaction, the securitisation takes

place through the transfer of the legal ownership of the assets. In a „Synthetic“

transaction, the securitisation takes place through the transfer of the credit risks

of the assets.

3. Asset Classes (Securitisation Objects)

There exist no restrictions on which assets may be securitised. Securitisation

transactions may consequently pertain to moveable and immoveable assets

including but not limited to, for example, diamonds; intellectual property; recei-

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Company Formation LuxembourgBusiness form: Securitisation Vehicle (SPV)

vables as well as all activities having a real value or which are expected to gene-

rate proceeds in the future. The securitised assets will finally be represented by

registered or bearer shares including, for example, shares, certificates and bonds.

4. Supervision

If a Securitisation Vehicle (SPV) in Luxembourg issues securities to the public,

it requires the consent of and is subject to the supervision of Luxembourg‘s

Financial Market Authority (CSSF). Moreover, a Securitisation Vehicle (SPV) in

Luxembourg must entrust its current assets, including its securities, to a bank

in Luxembourg on a fiduciary basis.

III. Tax Structure of a Securitisation Vehicle (SPV) in Luxembourg

1. Securitisation Company

1.1. Corporate Taxation

All Securitisation Companies in Luxembourg are subject to corporate taxation at

a rate of 29.22%. This said rate consists of the following components: corporate

income tax at a rate of 21% on income exceeding 15,000 EUR (or a rate of 20%

for income not exceeding 15,000 EUR); the Solidarity Surtax at a rate of 7%

as well as the Municipal Business tax at a rate of 6.75%. Therein, the rate of

corporation tax may be reduced through the obligations arising from the inves-

tors‘ remuneration such as interest or dividends. All Securitisation Companies

resident in Luxembourg which do not require a trade licence and whose assets,

securities and bank balance together exceed 90% of its balance sheet total are

required to pay only the minimum corporate taxation of 3,210 EUR (3,000 EUR

plus the 7% Solidarity Surtax). Due to a Securitisation Company in Luxem-

bourg having unlimited tax liability, it can benefit from Luxembourg‘s network

of double taxation agreements.

1.2. Tax Exemptions

A Securitisation Company in Luxembourg is neither liable to the net wealth tax

nor to withholding tax on distributions to its investors.

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Company Formation LuxembourgBusiness form: Securitisation Vehicle (SPV)

2. Securitisation Funds

Due to a Securitisation Fund in Luxembourg lacking its own legal personality, it is

the shareholders and their income which is liable to tax and not the Fund itself.

A Securitisation Fund in Luxembourg is neither liable to income tax nor to the

so-called „subscription tax“ („Tax d’ Abonnement“). As also applies in the case of

a Securitisation Company in Luxembourg, a Securitisation Fund in Luxembourg

is not liable to withholding tax on distributions to its investors.

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Company Formation LuxembourgBusiness form: Company for Intellectual Property Rights (IP-Box)

Formation of a Company for Intellectual Property Rights (IP-Box) in Luxembourg

I. Luxembourg‘s Tax Regime (IP-Box)

The so-called IP-Box (Intellectual Property Box) is a special tax regime in which

income from intellectual property rights is subject to preferential taxation. In

Luxembourg, such a tax regime takes the form of tax relief for income from

intellectual property rights. In Luxembourg, net income and capital gains from

the use, licensing and sale of intellectual property rights are accordingly only

subject to corporate taxation at a rate of 20%. This results in 80% of the said

income being exempt from tax. The effective tax burden of the said income

subject to preferential taxation is therefore 5.84%.

The following criteria must be satisfied for Luxembourg‘s tax relief to apply:

Firstly, the intellectual property rights must have been acquired or deve-

loped after December 31st, 2007. Secondly, the intellectual property rights and

the development costs already spent must have achieved a favourable trade

balance. Furthermore, proof is required when intellectual property rights are

acquired that they were acquired for reasons unrelated to taxation. The transfer

of intellectual property rights between parent and subsidiary companies with a

shareholding exceeding 10% and by subsidiary companies with common share-

holders is not permitted.

II. Intellectual Property Rights (IP) in Luxembourg

In accordance with Luxembourg‘s tax relief, the following constitute intellec-

tual property rights (IP): patents; copyright; software; trademarks; industrial

designs and utility models; models; domain names; brands for services and

goods such as production and marketing know-how.

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Company Formation LuxembourgBusiness form: Company for Intellectual Property Rights (IP-Box)

III. IP-Companies in Luxembourg: Tax Optimisation Instrument

The value of a Company for Intellectual Property Rights (IP) can increase through

having a tax efficient structure. Foreign IP-Companies are therefore used and

their intellectual property rights transferred to be managed and exploited. The

resulting gains are subsequently subject to preferential taxation at the resi-

dence of the company to which the said rights are transferred. By so doing, it

can be ensured that income from the use and exploitation of one‘s own or third-

party intellectual property rights is taxed efficiently.

Accordingly, if intellectual property rights are transferred to an IP-Company

formed in Luxembourg, gains made from the intellectual property rights can be

preferentially taxed in accordance with Luxembourg‘s tax relief. To do so, it is

required that the IP-Company has a business address in Luxembourg and that

at least one of its directors be resident in Luxembourg.

In respect of the use of such IP-Companies in practice in Luxembourg, the struc-

ture of the IP-SOPARFI-Holding Company, which belongs to a group of compa-

nies, is chosen. The IP-SOPARFI-Holding Company is within the scope of appli-

cation of the parent subsidiary Directive and which, among other advantages,

can profit from dividend distributions being tax-free. An IP-SOPARFI-Holding

Company in Luxembourg is formed in the legal form of a corporation and thus as

a Public Limited Company (PLC., Corp./SA); a Limited Liability Company (LLC.,

Ltd./SARL); a Partnership Limited by Shares or as a Cooperative in the form of

a Public Limited Company (SCOSA). The particular formation requirements will

be determined by the legal form the said company takes.

IV. Further Tax Advantages in Luxembourg

1. Tax Exemptions

In Luxembourg, intellectual property rights are not subject to the net wealth

tax. Similarly, gains made from liquidation, royalties payments or interest pay-

ments are exempt from taxation.

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Company Formation LuxembourgBusiness form: Company for Intellectual Property Rights (IP-Box)

2. Further Advantages

Luxembourg‘s tax assessment framework in the form of the so-called “tax

rulings” is flexibly administered. Questions on the scope of tax liability and

undertakings relating to the taxation can be sought from Luxembourg‘s tax

authority prior to the tax being due. In principle, these can be relied upon by

both sides. In Luxembourg, such tax ruling procedures can be completed within

weeks.

Luxembourg is a signatory to several double taxation agreements (DTA‘s) which

prevent the double taxation of Trading and Service Companies.

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Company Formation LuxembourgBusiness form: Formation of a SICAV/SICAF Fund

Formation of a SICAV/SICAF Fund in Luxembourg

I. Legal Structure of a SICAV/SICAF Investment Fund in Luxembourg

1. Concept

The SICAV and SICAF are investment fund structures in Luxembourg which may

be formed as UCITS (Collective Investment of Transferable Securities) Funds or

as Specialised Investment Funds (SIF). Their purpose is the investment of the

share capital in securities or in other liquid financial investments in accordance

with the principle of diversification to allow the shareholders to receive the ear-

nings generated from the management of their assets. The SICAV and SICAF In-

vestment Funds are only permitted to manage the assets in their own portfolios.

A SICAV (Société d’Investissement à Capital Variable) in Luxembourg is an in-

vestment fund in the form of an Investment Company whose share capital is

variable and the value of which at any time matches the value of the net assets

of all the sub-funds, constituted as shares without a statement of their nominal

value. In contrast thereto, a SICAF Investment Fund (Société d’Investissement

à Capital Fixe) in Luxembourg exists in the form of an Investment Company

whose share capital is fixed.

Due to both of the afore-mentioned Investment Funds not having their own

legal personality, they are either self-managed or externally managed Invest-

ment Companies.

2. Investment Policy

Due to it being possible to mix both both the SICAV and SICAF Investment

Funds with other investment assets, they may be formed as, among others,

Security-; Real Estate-; Money market- as well as Holding-Funds.

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Company Formation LuxembourgBusiness form: Formation of a SICAV/SICAF Fund

3. Investors

If a SICAV and SICAF in Luxembourg are formed as UCITS funds, no restrictions

apply as to who may be an investor. Only in respect of Specialised Investment

Funds (SIF) is a „qualified investor“ required.

4. Formation

A SICAV in Luxembourg is formed as a Public Limited Company (PLC., Corp./

SA), whereas a SICAF can be formed as any type of corporation in Luxembourg

(e.g. Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC.,

Ltd./SARL); Partnership Limited by Shares (SCA)). A SICAV and SICAF in Lux-

embourg can be formed as umbrella funds with several sub-funds, each of which

being independent of the others.

The registered office and main place of control and management of a SICAV and

SICAF under the articles of association must be located in Luxembourg.

Furthermore, the assets of a SICAV and SICAF must be transferred to a cus-

todian (depositary bank) to ensure that the income or profits are used in ac-

cordance with its articles of association. The custodian is liable to both Invest-

ment Funds in Luxembourg as well as the shareholders only for loss arising from

the culpable non-performance or defective performance of its duties.

The subscribed capital of a SICAV/SICAF Investment Fund, amounting to at

least 1.25 million EUR, requires to be reached within a period of 6 months fol-

lowing the obtaining of consent from Luxembourg‘s Financial Market Authority

(CSSF) if it is an UCITS Fund and within a period of 12 months in the case of a

Specialised Investment Fund (SIF) respectively. The minimum share capital is

dependent upon which legal form is chosen.

5. Investment and Distribution Policy

A SICAV and SICAF in Luxembourg can issue, and cancel, at any time new

shares not exceeding its net asset value and may regulate the distribution of

dividends or other repayments to its investors by way of formal conditions in its

article of associations. Both Investment Funds in Luxembourg are not subject to

a duty to create legal reserves.

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Company Formation LuxembourgBusiness form: Formation of a SICAV/SICAF Fund

6. Supervision

A SICAV and SICAF in Luxembourg are subject to the permanent supervision

of Luxembourg‘s Financial Market Authority (CSSF). Both Investment Funds,

as well as the investment managers and advisers of the said funds, require a

licence prior to commencing business.

In addition, a SICAV and SICAF must produce annual accounts and half-yearly

accounts which must be audited by an independent auditor. The accounts are

subsequently required to be published no later than 4 months (and no later than

6 months in the case of a Specialised Investment Fund (SIF) in Luxembourg)

after the conclusion of the year. Moreover, Investment Funds in Luxembourg are

required to prepare, with the exception of those Investment Funds in the form

of a closed UCITS Fund, a sale prospectus which must contain, among others,

the founding documents in order to provide investors with the opportunity of

carrying out an informed evaluation of the investment and the associated risks.

II. Tax Structure of a SICAV/SICAF Investment Fund in Luxembourg

1. Corporate Taxation

The SICAV and SICAF Investment Funds in Luxembourg are neither liable to income

tax nor corporate taxation. They are liable to the so-called „subscription tax“ at an

annual rate of 0.05% on their net worth or at a rate of 0.01% if the Investment

Funds are formed as a Specialised Investment Fund (SIF) in Luxembourg.

2. Tax Exemptions

A SICAV and SICAF in Luxembourg are exempt from the net wealth tax and with-

holding tax on the distribution of dividends to non-resident investors.

Moreover, Fund management services provided by a Management Company in

Luxembourg are not subject to value-added tax (VAT). Notwithstanding this,

other services may be still subject to value-added tax (VAT) in Luxembourg at

a rate of 15%.

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Company Formation LuxembourgBusiness form: SICAR Investment Company

Formation of a SICAR Investment Company in Luxembourg

I. Legal Structure of a SICAR Investment Company in Luxembourg

1. Concept

A SICAR Investment Company (Société d’investissement en capital à risqué) in

Luxembourg is an instrument for venture capital investments which is regulated

by the SICAR law and which has legal personality separate from its investors.

A SICAR Investment Company in Luxembourg is designed for the investment

of its resources in high-risk assets in order to distribute the result generated

therefrom to qualified investors. The said result offsets the risk borne.

2. Investment Policy

The Luxembourg investment vehicle SICAR is permitted to invest in venture

capital (private equity) only. This means that funding is directly or indirectly

contributed to a company for assistance during its early stage, for its develop-

ment or its flotation on the stock market. Investments in real estate are only

permitted under certain conditions.

A SICAR Investment Company in Luxembourg is not under a duty to comply

with the principle of diversification in choosing its investments. It is therefore

possible for it to invest in one or several companies active in a particularly

crowded segment of the market.

3. Investors

The Luxembourg SICAR investment vehicle is exclusively reserved for “quali-

fied investors”, namely professional investors as well as institutional investors.

Moreover, natural persons, who invest at least 125,000 EUR, are required to

submit written proof of their well-informed investment status (e.g. in the form

of a letter from their bank).

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Company Formation LuxembourgBusiness form: SICAR Investment Company

4. Formation

A SICAR in Luxembourg is formed either as a corporation or as a partnership

(Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC.,

Ltd./SARL); Partnership Limited by Shares (SCA); Co-operative in the legal form

of a Public Limited Company (SCOSA) and Limited Partnership (SCS). It is not

permitted to be organised in the form of a contractual Investment Fund (fonds

commun de placement, FCP). A SICAR in Luxembourg may however take the

structure of a Holding Fund constituted by several sub-funds, each of which

being independent of the others.

The registered office and main place of central management and control of a

SICAR, under its articles of association, must be located in Luxembourg. More-

over, the assets of a SICAR are to be transferred to an independent custodian

(financial institute) resident in Luxembourg. This ensures that the subscription

price of shares in the company will be received on time, that transactions invol-

ving equivalent assets are transferred or paid and that the proceeds are used in

accordance with its founding documents.

Furthermore, the company management and custodian of a SICAR in Luxem-

bourg require to be sufficiently qualified and to provide proof of their correspon-

ding experience in the area of venture capital investments. Notwithstanding this,

they must not necessarily have a “Sponsor/Promoter”.

Beginning from the date when a SICAR in Luxembourg was approved by

Luxembourg‘s Financial Market Authority (CSSF), a SICAR must reach its

subscribed share capital of at least 1 million EUR within 12 months. However,

the minimum share capital is dependent on the particular business form chosen.

If a SICAR in Luxembourg is formed as a corporation, the shares issued required

to be fully subscribed and at least 5% of every share requires to be paid up

through a cash or non-cash contribution.

5. Issuance and Distributions Policy

The provisions contained in the articles of association are wholly authoritative

with regard to the issuance of new shares due to the SICAR law containing no

specific provisions thereon. This is also the case for the regulation of the formal

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Company Formation LuxembourgBusiness form: SICAR Investment Company

criteria for the distribution of dividends or other repayments to the investors.

Furthermore, a SICAR in Luxembourg is not required to create reserves.

6. Supervision

A SICAR in Luxembourg is subject to the permanent supervision of Luxembourg‘s

Financial Market Authority (CSSF). A SICAR requires a licence prior to commen-

cing business. A SICAR may be quoted on Luxembourg‘s stock market directly

after obtaining approval from the CSSF. Moreover, its annual accounts must

be audited by an independent auditor and must be published no later than

6 months after the close of the year.

Moreover, a SICAR in Luxembourg is required to prepare a sale prospectus

which must contain, among others, the founding documents in order to provide

investors with the opportunity of carrying out an informed evaluation of the

investment and the associated risks.

II. Tax Structure of a SICAR Investment Company in Luxembourg

1. Corporate Taxation

In principle, a SICAR corporation in Luxembourg is subject to corporate taxation

at a rate of 29.22%. This said rate consists of the following components: cor-

porate income tax at a rate of 21% on income exceeding 15,000 EUR (or a rate

of 20% for income not exceeding 15,000 EUR); the solidarity surtax at a rate of

7% as well as the municipal business tax at a rate of 6.75%. In contrast thereto,

income from securities as well as from the sale, contribution or liquidation of its

securities is exempt from income tax.

If a SICAR in Luxembourg is formed as a Limited Partnership, it is the persons

carrying on business as partners and not the partnership itself that is liable to

tax. The SICAR consequently remains exempt from corporate income and the

municipal business tax. In contrast thereto, its investors remain liable to tax in

the country in which they are resident.

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Company Formation LuxembourgBusiness form: SICAR Investment Company

2. Tax Exemptions

A SICAR in Luxembourg is neither liable to the net wealth tax nor to 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” (Tax 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).

Due to a SICAR in Luxembourg in the form of a corporation being fully liable to

tax, it is able to benefit from Luxembourg‘s double taxation agreements (DTA‘s).

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Company Formation LuxembourgBusiness form: Specialised Investment Funds (SIF)

Formation of Specialised Investment Funds (SIF) in Luxembourg

I. Legal Structure of a Specialised Investment Fund (SIF) in Luxembourg

1. Concept

A Specialised Investment Fund (SIF) in Luxembourg is a type of investment

fund which is regulated and which is not intended for the general public. In cont-

rast to UCITS Funds (Collective Investment of Transferable Securities) which fall

within the scope of application of the EU Directive and which invest in securities

such as shares and bonds, the Specialised Investment Fund (SIF) offers greater

flexibility.

2. Investment Policy

A Specialised Investment Fund (SIF) in Luxembourg is permitted to deal with all

types of assets including traditional and alternative investment strategies. This

includes, for example, securities or money market Funds; real estate; private

investment capital; infrastructure; private equity and hedge Funds.

A Specialised Investment Fund (SIF) in Luxembourg must comply with the diver-

sification principle when choosing its investments in order to protect the inves-

tors and is subsequently not permitted to invest more than 30% of its assets in

securities of the same type and from the same issuer.

3. Investor

The Luxembourg investment vehicle which is the Specialised Investment Fund

(SIF) is reserved for “qualified investors”, namely professional investors and

institutional investors as well as all those investors investing at least 125,000 EUR.

The latter are required to submit written proof of their well-informed investment

status (e.g. in the form of a letter from the bank).

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Company Formation LuxembourgBusiness form: Specialised Investment Funds (SIF)

4. Formation

A Specialised Investment Fund (SIF) is formed either in contractual form and

consequently as an Investment Fund represented by a Managing Company

(fonds commun de placement, FCP) or in the form of a company, namely as

an Investment Company whose capital is variable (SICAV) or fixed (SICAR). If

a SIF is formed as a company, it may be formed as a Public Limited Company

(PLC., Corp./SA); a Limited Liability Company (LLC., Ltd./SARL); a Partnership

Limited by Shares (SCA) or as Co-operative in the form of a Public Limited

Company (SCOSA). A SIF in Luxembourg may take the structure of a Holding

Fund constituted by several sub-funds, each of which are independent of the

others.

The registered office and main place of central management and control of a

Specialised Investment Fund (SIF) under its articles of association must be

located in Luxembourg. If a Specialised Investment Fund (SIF) is formed as

an Investment Fund FCP in Luxembourg, it will be managed by a Management

Company in Luxembourg. Moreover, the assets of a Specialised Investment Fund

(SIF) are to be transferred to an independent custodian (financial institute) re-

sident in Luxembourg. This ensures that the subscription price of shares in the

company will be received on time, that transactions involving equivalent assets

are transferred or paid and that its proceeds are used in accordance with the

founding documents.

Furthermore, the management of a Specialised Investment Fund (SIF) in Luxem-

bourg or the Management Company (in the case of an Investment Fund FCP)

and the custodian require to be sufficiently qualified and to provide proof of

their corresponding professional experience. Notwithstanding this, a Specialised

Investment Fund (SIF) must not necessarily have a “Sponsor/Promoter”.

Beginning from the date when a Specialised Investment Fund (SIF) in Luxem-

bourg was approved by Luxembourg‘s Financial Market Authority (CSSF), the

net assets of a SIF must amount to at least 1.25 million EUR within 12 months.

Furthermore, a minimum share capital is required for the formation of a Specia-

lised Investment Fund (SIF) and is dependent upon the business form chosen.

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Company Formation LuxembourgBusiness form: Specialised Investment Funds (SIF)

5. Issuance and Distributions Policy

The provisions contained in the articles of association are wholly authoritative

with regard to the issuance of new shares due to the SIF law containing no

specific provisions thereon. This is also the case for the regulation of the formal

criteria for the distribution of dividends or other repayments to the investors.

Furthermore, a Specialised Investment Fund (SIF) in Luxembourg is not requi-

red to create reserves.

Provisions regarding the method of valuation of the assets of a Specialised

Investment Fund (SIF) in Luxembourg should be regulated in the founding

document. This is despite a SIF in Luxembourg having a degree of freedom in

the regulation thereof.

6. Supervision

A Specialised Investment Fund (SIF) is subject to the permanent supervision

of Luxembourg‘s Financial Market Authority (CSSF). A Specialised Investment

Fund (SIF) requires a licence prior to commencing business. Notwithstanding

this, a SIF may commence activity before such time if its application for the

said licence was submitted within 1 month following its formation. A SIF can

be quoted on Luxembourg‘s stock market directly following obtaining the said

licence from Luxembourg‘s CSSF. Moreover, its annual accounts require to be

audited by an independent auditor and must be published no later than 6 months

after the close of the year.

Moreover, a Specialised Investment Fund (SIF) in Luxembourg is required to

prepare a sale prospectus which must contain, among others, the founding

documents in order to provide investors with the opportunity of carrying out an

informed evaluation of the investment and the associated risks.

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Company Formation LuxembourgBusiness form: Specialised Investment Funds (SIF)

II. Tax Structure of a Specialised Investment Fund (SIF) in Luxembourg

1. Corporate Taxation

A Specialised Investment Fund (SIF) is neither subject to income tax nor cor-

porate taxation. A SIF is liable to „subscription tax“ annually at a rate of 0.01%

on its net worth. Notwithstanding this, several investments are not liable to the

said tax.

2. Tax Exemptions

A SIF in Luxembourg is exempt from the net wealth tax as well as from with-

holding tax on the distribution of dividends to non-resident investors. Moreover,

value-added tax (VAT) is not payable by a Management Company in Luxem-

bourg for Fund management services. Notwithstanding this, other services may

remain liable to value-added tax in Luxembourg at a rate of 15%.

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Company Formation LuxembourgBusiness form: Real Estate Company

Formation of a Real Estate Company in Luxembourg

I. Real Estate Company in Luxembourg: Concept

A Real Estate Company in Luxembourg is a business carrying on or the purpose

of which under its articles of association is exclusively or predominantly the

acquisition, management, use of and sale of real estate. A Real Estate Company

in Luxembourg can be formed in the form of a corporation (as a Public Limited

Company (PLC., Corp./SA); Limited Liability Company (LLC., Ltd./SARL); Part-

nership Limited by Shares (SCA) or Co-operative in the form of a Public Limited

Company (SCOSA)). The particular formation requirements will be determined

by the legal form the said company takes.

II. Tax Aspects

1. The Taxation of Income from the Sale of Real Estate

In principle, gains made from the sale of real estate are taxed in accordance

with the situs principle, namely where the real estate is situated.

2. The Taxation of Gains on the Sale of Shares

In principle, gains made on the sale of shares of a Real Estate Company, which

owns the real estate, are taxed in the country in which the seller is resident. If

the Real Estate Company is a Luxembourg corporation, the gains on the sale of

the shares shall be taxed in Luxembourg.

However, some of the new double taxation agreements (DTA‘s) which Luxem-

bourg has agreed with many countries extend the situs principle to cover the

sale of shares to Real Estate Companies whose assets, directly or indirectly,

consist of at least 50% real estate. In such cases, the gains on the sale of the

shares are taxed at the location of the Real Estate Company rather than where

the seller is resident. Consequently, such Real Estate Companies in Luxembourg

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Company Formation LuxembourgBusiness form: Real Estate Company

are unable to make use of Luxembourg‘s preferential tax regime if the real

estate is located outwith Luxembourg.

3. Two-tier Company Structure

However, the provisions permit exceptions to that effect meaning the exten-

ded situs principle does not apply to parent companies which are resident and

the management of which is located abroad. In respect of a two-tier structure,

gains from the sale of the shares of a Real Estate Company continue to be taxed

where the seller is resident. Accordingly, if real estate owned by a resident Real

Estate Company is to be held by a foreign corporation and shares in the resident

Real Estate Company are to be sold, the tax liability remains with the foreign

corporation. In this regard, the following procedure has developed in practice in

Luxembourg:

Firstly, a Luxembourg corporation is formed in the form of a SOPARFI-Financial

Holding Company. The said Holding Company is particularly attractive due to

its tax status whereby it benefits from the „inter-corporate privilege“ under the

parent subsidiary Directive and is exempt, in accordance with certain requi-

rements, from corporate taxation and withholding tax. The SOPARFI-Financial

Holding Company is formed in the legal form of a Public Limited Company (PLC.,

Corp./SA) in Luxembourg which is preferred herein due to the ability to issue

bearer shares which are easily transferable. The Luxembourg SOPARFI-Financial

Holding Company forms or acquires shares in the capital of an EU Real Estate

Company which are subsequently sold. The resulting gains are subject to taxa-

tion in Luxembourg. Within this framework, dividends and the sale proceeds and

liquidation proceeds resulting from investments remain exempt from tax. The

SOPARFI-Financial Holding Company in Luxembourg will finally be liquidated

and the liquidation proceeds subsequently distributed free from withholding tax.

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Company Formation LuxembourgBusiness form: E-Commerce Company

Formation of an E-Commerce Company in Luxembourg

I. E-Commerce Luxembourg: Concept

E-Commerce is the electronic trading of goods and services on the internet and

is divided into indirect and direct E-Commerce. In the case of indirect E-Com-

merce, the contract is concluded on the internet whilst the performance of the

contract takes place outwith the internet. With regard to value-added tax (VAT),

this transaction is treated in the same way as a conventional commercial trans-

action. In contrast, in the case of direct E-Commerce transactions, the entire

legal transaction and the subsequent exchange of goods and services take place

on the internet. In light of this special feature, the remainder of this text will

exclusively focus on direct E-Commerce:

E-Commerce includes the following services:

» The provision of websites, web hosting and the maintenance of program-

mes and equipment;

» The provision of software and the updating thereof;

» The provision of texts and information for, but not limited to, e-books and

other electronic publications as well as online advertisements;

» The provision of databases such as those required for search engines;

» The provision of music, films and games used for gambling and lotteries as

well as for programmes and events from the worlds of politics; culture;

sport; science and entertainment;

» The provision of long-distance learning;

» Online auctions, insofar as this is not already dealt with by web hosting

services, through automated databases where the customer is required to

input data and where no or minimal human intervention is necessary;

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Company Formation LuxembourgBusiness form: E-Commerce Company

» Internet service packages which include more than mere access to the in-

ternet, instead including -but not limited to- news; the weather forecast;

travel information; gaming forums; web hosting and access to chatlines.

In Luxembourg, E-Commerce Companies are specifically designed for such direct

E-Commerce services. E-Commerce Companies may be formed as corporations

or as partnerships in Luxembourg. The particular formation requirements will be

determined by the legal form the said company takes.

II. Tax Aspects of Direct E-Commerce

In accordance with the European Directive on E-Commerce, direct E-Commerce

services are subject to a special EU value-added tax (VAT) regime. The said

Directive will remain in force until January 1st, 2015:

1. The Taxation of Direct E-Commerce Services

For the purposes of value-added tax (VAT), every supplier of E-Commerce direct

services will be treated as a business person and is accordingly required to pay

value-added tax (VAT) on the services he provides. The place of performance is

decisive therefor and is to be measured against the following criteria:

» The residence of the performing business person

» The status and residence of the purchaser

1.1. Business persons outwith the EU

(1) Services to Customers in the same EU Member State

Where an EU business person provides E-Commerce services to a private person

in the same EU member state or to a commercial customer in the same EU

member state, value-added tax (VAT) requires to be paid by the EU business

person providing the services.

(2) Services to Customers in another EU Member State

Where an EU business person provides E-Commerce Services to a commercial

customer in another EU member state, value-added tax (VAT) requires to be

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Company Formation LuxembourgBusiness form: E-Commerce Company

paid in the member state in which the commercial customer is resident. In

cases such as this, the so-called “reverse charge” procedure, a special regula-

tion which uniformly applies to all EU member states, will operate. Thereafter,

the commercial 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 and to pay the tax to the competent tax office. 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 EU member state, tax requires to be paid in the member

state in which the performing business person is resident. Notwithstanding

this, from January 1st, 2015, where an EU business person has provided direct

E-Commerce services to private persons, value-added tax (VAT) will required to

be paid in the customer‘s member state.

(3) Services to Customers outwith the EU

Where direct E-Commerce services are provided by EU business persons to

customers outwith the EU, no EU value-added tax (VAT) is paid. In such cases,

tax is levied in the jurisdiction of the customer.

1.2. Business Persons Resident outwith the EU

(1) Commercial EU Customers

Where a business person resident outwith the EU provides direct E-Commerce

services to a commercial EU customer, value-added tax (VAT) will be paid on

the said services in the jurisdiction of the 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) within the reverse charge procedure.

(2) EU Private Person

Likewise, where a business person resident outwith the EU provides direct

E-Commerce services to a private person in the EU, value-added tax (VAT) will

be paid in the EU. However, in this case the said business person must be re-

gistered in the EU, in a member state of his choice, for value-added tax (VAT)

purposes and must bill such customers at the standard rate of value-added tax

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Company Formation LuxembourgBusiness form: E-Commerce Company

(VAT) in force in the EU member state in which the customers are resident. The

said business person is thereafter required to pay value-added tax (VAT) to the

tax authority in the member state in which he is registered every three months

and to simultaneously provide an electronic statement detailing the transactions

during that period. In accordance with the said statement, the taxes will there-

after be forwarded to the relevant member state of the customers.

2. Taxation of Direct E-Commerce Services in Luxembourg

Luxembourg is an attractive location for direct E-Commerce due to its favou-

rable and, with respect to certain services, reduced rates of value-added tax

(VAT). The provision of goods and services is subject to value-added tax (VAT)

at a rate not exceeding 15% in Luxembourg. In Luxembourg, a reduced rate of

value-added tax (VAT) of 3% applies to the supply of e-books to end-customers.

The said reduced rate is in force until January 1st, 2015.

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Company Formation Luxembourg

Questions on Company Formation in Luxembourg?

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of charge.

Our lawyers and tax experts stand ready to advise you personally and free of

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formation process.

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