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How to Incorporate your SPF, the Luxembourg Private Wealth Management Company

by | Feb 7, 2022 | Corporate Structuring

Incorporation a Private Wealth Management Company in Luxembourg

Luxembourg’s Budget Law of 19 December 2020, or the Budget Law of 2021, enacted several changes to the country’s tax regime. Under the Budget Law of 2021, Article 11 or the SPF Law was modified and confirms that a Private Wealth Management Company is not allowed to hold real estate, either directly or indirectly by way of a tax transparent entity or a mutual fund. 

The 2021 Budget Law emphasizes that a Private Wealth Management Company (SPF or “Société de gestion de patrimoine familial) is an attractive asset management vehicle for ultra-high-net-worth individuals in their mission to create, safeguard, and transfer their wealth. This Luxembourg investment vehicle was first introduced towards the end of Luxembourg’s Holding regime in 1929. 

By rule, a Private Wealth Management Company is solely dedicated to the acquisition, holding, management, and disposal of qualified investments that come in various forms. To avoid the abuse of a Private Wealth Management Company by domestic and foreign investors alike, strict monitoring from involved authorities is a must. 

What is a Private Wealth Management Company in Luxembourg?

The SPF or Private Wealth Management Company is a dedicated vehicle for holding and managing financial aspects of a private individual or family, which may include bonds, shares, equities, savings, derivatives, precious metals, futures, warrants, and other financial tools. ‘

By nature, a Private Wealth Management Company  is an unregulated vehicle that does not require any business license to successfully operate. It is specially designed for investors who wish to manage their private wealth. Keeping this in mind, the shares within a Private Wealth Management Company may not be used for public placement, cannot be offered to the public, nor quoted on any stock exchange. 

Luxembourg family wealth management company

Eligible Investors of a Private Wealth Management Company in Luxembourg

  • Individuals solely managing their private wealth
  • Private wealth management outfits serving one or more individuals, such as in the case of family trusts or offices
  • Intermediaries acting on behalf of private investors and private wealth management companies

Private Wealth Management Company Prohibited Activities

A Private Wealth Management Company (unlike the Soparfi) is prohibiting from executing these activities:

Loan Granting Activity

A Private Wealth Management Company  is restricted to render any kind of service, including the granting of interest bearing loans. This also prohibits a Private Wealth Management Company to grant loans to companies in which it holds participation shares. Alternatively, it can issue cash advances or guarantee the liabilities of a company from which it holds participations on an ancillary basis and without any renumeration. 

Holding Intellectual Property 

A Private Wealth Management Company in Luxembourg is not allowed to hold any type of intellectual property directly. 

Holding Real Estate

A Private Wealth Management Company (you may see SPF Vs Soparfi) is not allowed to invest in real estate, although it may acquire holdings in corporations or other non-transparent legal entities that hold real estate. 

A Private Wealth Management Company  in Luxembourg may be set up in various legal forms. Depending on the specific needs of an investor, in terms of capital shares, management control, and share transferability, a Private Wealth Management Company  may be structured in one of the many legal forms:

  • Public liability company (SA)
  • Private limited liability company (SARL)
  • Partnership limited by shares (SCA)
  • Cooperative in the form of a public company 

Luxembourg Private Wealth Management Company Eligible Assets

A Private Wealth Management Company  in Luxembourg is given free reins to invest in any type of financial instruments in Luxembourg and overseas:

Private Wealth Management Company Equity and Liabilities

A Private Wealth Management Company in Luxembourg may issue shares of different classes, nominative, and bearer shares. All shareholders of a Private Wealth Management Company  may be a resident or non-resident. 

  • Private individuals
  • Family offices
  • Investment clubs or groups of individuals managing their own wealth
  • Trusts, foundations, stichting, patrimonial entities, administrative kantor
  • Other wealth management companies

By rule, this excludes corporate shareholders unless they act on behalf of the listed shareholder types. Examples include Soparfis, holding entities, fund, and nominees. 

  • The minimum share capital for a public limited liability company and partnership by limited shares is EUR 31,000, with a minimum of 1/4 paid in during incorporation. 
  • The minimum share capital for a private limited liability is EUR 12,500 that should be fully paid at the time of incorporation. 
  • The minimum share capital may be paid in the equivalent value in another currency. 

In a Private Wealth Management Company, investors may establish the company by contribution either in cash or in kind. There are no capital duties to be made upon incorporation, except for fixed registration payment of EUR 75. It is required to have an external auditor perform valuation for public limited liability companies and partnership by limited shares, but not for private limited liability company. Lastly, capital premium may be used, while contributions does not have to represented by an increase in capital or issuance of shares. 

Luxembourg Private Wealth Management Company Taxation Regime

  • A Private Wealth Management Company  is fully exempt from corporate and municipal business tax. 
  • A Private Wealth Management Company  is assessed with registration tax which is calculated at a rate of 0.25% of its paid-in capital. 
  • A Private Wealth Management Company’s registration tax is not due on profit carried forward.
  • A Private Wealth Management Company ’s registration tax will be due on any debts in excess of eight times its paid-in capital.

The Private Wealth Management Company  structure enjoys a wide range of benefits except for double tax treaties and EU Directives. A Private Wealth Management Company  may be transformed into another legal form over time. 

Damalion excels in providing professional consulting to help private investors in the formation and management of Luxembourg investment vehicles, including Private Wealth Management Company structure. We also assist you for bank account opening. Apart from expert consulting, we utilize our network of connections with seasoned accountants, lawyers, and other professionals to streamline and expedite the company formation process. To learn more about Private Wealth Management Company in Luxembourg or assistance in the incorporation of a Private Wealth Management Company, reach out to a Damalion expert today.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.