The Luxembourg Family Wealth Management Company (SPF) is a dedicated investment vehicle for holding and managing an individual, family, or group financial assets, such as bonds, cash, currencies, derivatives, equities, futures, precious metals, options, savings, warrants, and other financial tools. By nature, a Luxembourg Family Wealth Management Company (SPF) is an unregulated entity. This means that a Luxembourg Family Wealth Management Company (SPF) does not require authorization, licensing, and supervision by any regulatory authority.
This specific investment vehicle is crafted private wealth management, hence shares in a Luxembourg Family Wealth Management Company (SPF) cannot be used for public placement. This means that shares cannot be offered in public or entered into a stock exchange.
A Luxembourg Family Wealth Management Company (SPF) is governed by the Law of 11 May 2007 and designed to enable individuals, families, and groups to structure their respective estates in a highly flexible, simple, and tax-efficient manner. It may also be structured for other purposes, making them highly attractive to international investors.
Given the reputation of Luxembourg as a premier hub for legal and financial services, private investors that wish to structure their assets’ holding and financing can expect an excellent experience establishing a Family Wealth Management Company (SPF) in Luxembourg.
What are the main advantages and characteristics of a Luxembourg Family Wealth Management Company (SPF)?
- It has its own character and design. There is a high level of certainty and trust among investors. a Luxembourg Family Wealth Management Company (SPF) is characterized by its targeted approach to risk allocation activities.
- In legal terms, Luxembourg Family Wealth Management Company (SPF) is considered a separate entity with limited liability.
- It enjoys the benefits of a traditional holding company instead of direct capital placement for private individuals.
- Private individuals, groups, and families enjoy greater flexibility in structuring investments.
- A Luxembourg Family Wealth Management Company (SPF) enjoys a simplified and appealing taxation regime.
- Incorporating a Luxembourg Family Wealth Management Company (SPF) is fast and easy as it only requires minimal procedure and initial capital requirements.
Who are eligible investors for a Luxembourg Family Wealth Management Company (SPF)?
- Private individuals managing their private wealth
- Private wealth management organizations acting exclusively for the estate of one or more individuals, who can be resident or non-resident entities, including foundations and trusts. The eligibility requirements for these entities are interpreted in a broader scope, with their sole objective being asset management for one or more physical persons.
- Intermediaries, including fiduciaries that are acting on behalf of private individuals and private wealth management companies.
While its name might imply that this structure is limited to the use of families, a Luxembourg Family Wealth Management Company (SPF) only serves to denominate the access of investors to private individuals; hence no familial ties are not necessary.
A Luxembourg Family Wealth Management Company (SPF) is an ideal starting point for beginner investors, non-professional investors, and investment clubs that wish to test their relationships with potential investment partners. One major selling point of a Luxembourg Family Wealth Management Company (SPF) structure is the greater anonymity, discretion, and privacy that can be achieve when it is structured properly.
What are the different incorporation structures for a Luxembourg Family Wealth Management Company (SPF)?
- Public Limited Liability Company (SA)
- Private Limited Liability Company (SARL)
- Partnership Limited by Shares (SCA)
- Co-operative (SC)
What types of activities can a Luxembourg Family Wealth Management Company (SPF) engage in?
- It is allowed to hold equity stakes as long as it does not disrupt the management of the company in which stakes are held by a special purpose vehicle (SPV).
- A Luxembourg Family Wealth Management Company are restricted from assuming directorship in decision-making authorities.
- As a Luxembourg Family Wealth Management Company (SPF) is under the special tax regime it does not have access to double tax treaties.
Is a Luxembourg Family Wealth Management Company (SPF) under the supervisions from the Commission for the Supervision of the Financial Sector (CSSF)?
- Tax supervision of a Luxembourg Family Wealth Management Company (SPF) will be carried out by the Administration of Registrations and Domains. Auditing is primarily limited to verifying facts and data relevant to the company’s tax status.
- If a Luxembourg Family Wealth Management Company (SPF) violates the provisions on the eligibility of investors, its special tax status will be suspended.
Do investors have limited liability in a Luxembourg Family Wealth Management Company (SPF) structure?
As a separate legal entity, investors enjoy limited liability to their respective contributions. This in turn enhances their position in relation to liability towards third-parties, especially in the case of borrowing activities for estate planning purposes.
Is a Luxembourg Family Wealth Management Company (SPF) a flexible investment vehicle?
One of the unique characteristics of a Luxembourg Family Wealth Management Company (SPF) that sets it apart from other investment tool is that it is only conceived for family asset management, estate planning, matrimonial property management, and similar reasons. Under the Law of 5 August 2005, financial assets allowed in a Luxembourg Family Wealth Management Company (SPF) structure include financial collateral arrangements, debt instruments, structured investments, and cash, to name a few.
It is therefore restricted from the following investment activities:
- Render services, including the approval of interest-bearing loans. However, it may make cash advances or guarantee liabilities of an entity from which it holds participation free of charge.
- Many not be involved in management of entities which it holds a participation, even when it holds management rights and a large percentage of capital is held by the Luxembourg Family Wealth Management Company (SPF). Shareholders of a Luxembourg Family Wealth Management Company (SPF) may engage in the aforementioned activities.
- Restricted to engage in commercial activities, although entities in which a Luxembourg Family Wealth Management Company (SPF) holds participations may engage in commercial activities.
- Direct holding of real estate and intellectual property rights.
- Prohibited from entering life insurance contracts.
Existing laws does not impose any limitations to financing and indebtedness. Luxembourg Family Wealth Management Company (SPF) may be performed through borrowing operations from shareholders, investors, and credit institutions. Contributions in cash or kind are permitted in euros and other currencies.
What provisions are under the Luxembourg Family Wealth Management Company’s (SPF) special tax regime?
- A Luxembourg Family Wealth Management Company (SPF) is a tax neutral entity.
- It is exempt from corporate income tax, municipal business tax, and net wealth tax.
- Annual subscription tax of 0.25% capped to an annual amount of EUR 125,000 is applicable to all Luxembourg Family Wealth Management Companies (SPFs)
- Tax base generated by adding the total paid share capital, share premiums, portion of the debt exceeding eight times the aforementioned sum.
- It does not benefit from provisions under double tax treaties contracted by Luxembourg with other countries and the EU Parent-Subsidiary Directive.
- A Luxembourg Family Wealth Management Company (SPF) will be assessed with foreign withholding taxes in countries where the investments are based.
- Dividends and interest paid by a Luxembourg Family Wealth Management Company (SPF) are not subject to withholding tax, except where the Law 23 December 2005 introduced domestic withholding tax on income on interest payments to resident individuals and entities apply.
- Dividend and interest payments may be taxed for recipients under the prevailing income tax laws for residents, while residents may be taxed in their country of origin.
- Capital gains in share transfer and liquidation surpluses for non-residents are non-taxable in Luxembourg.
- Since it does not engage in commercial activities, a Luxembourg Family Wealth Management Company (SPF) cannot be a taxable person for value added tax purposes.
- In order to meet its corporate responsibilities, a Luxembourg Family Wealth Management Company (SPF) may hire personnel, rent a property, and enter into contracts with various service providers, such as investment and financial consultants and organizations.
As a professional consulting firm, we at Damalion are committed to serve clients using our years of experience and expertise in the financial and investment industry. Our team of consultants will provide you with the necessary guidance that you need to make well-informed investment decisions. If you’re looking to create a Luxembourg Private Wealth Management Company, our Damalion experts will be with you every step of the way. To learn more about Family Wealth Management Company (SPF) incorporation and other investment vehicles such as Soparfi, the Luxembourg holding 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.
