SPF (société de gestion de patrimoine familial), is a Luxembourg private wealth management vehicle that allows individuals to structure their estate in a simple, adaptable, unregulated, and tax-efficient manner and for several purposes, thereby appealing to several types of investors.
The SPF is solely designed for investors managing their private wealth, thus the shares of the SPF cannot be used for public placement and cannot be quoted on a stock exchange. The SPF is an unregulated entity and does not mandate any business license.
Legal Framework
The SPF may be set up as either of the following in Luxembourg:
- a private limited company (société à responsabilité limitée – SARL),
- a public limited company (société anonyme – S.A.),
- a partnership limited by shares (société en commandite par actions – S.C.A.) or,
- a cooperative company (société cooperative – S.C.) organised as a S.A.
The requirements respecting incorporation, minimum share capital, representation, annual general meetings, annual accounts, etc., shall apply according to the particularities of the chosen legal form, but with meaningful structuring options in order to offer tailor-made vehicles to investors.
The SPF Eligible activities and Objectives
Objective
The corporate goal of an SPF is restricted to the acquisition, holding, management, and disposal of financial instruments, cash, and other types of assets. The Luxembourg SPF cannot execute any type of commercial activity. The Luxembourg SPF may develop, acquire, manage and sell a portfolio of securities granted by public or private organizations in Luxembourg or overseas. An SPF can borrow from a banking institution or a shareholder.
SPF activities
Authorized activities
The Luxembourg SPF is authorized to hold equity stakes given that it does not impede the management of the company in which such stakes are held by the SPF.
Besides the withholding on interest under the Savings Directive, dividends and interests paid to non-residents will not be prone to any Luxembourg tax. Earnings realized by non-residents due to the sale of shareholding in an SPF or due to the liquidation of an SPF will not be subject to tax in Luxembourg.
Due to its unique tax status, the SPF cannot access benefits permitted under double tax treaties.
Prohibited activities
There are several prohibited activities subject to the SPF, these include, but not exclusively:
- Granting of loans: the SPF is not authorized to render any kind of services, including the granting of interest-bearing loans. But it may make cash advances or guarantee the liabilities of a company in which it holds participation, but only on a secondary basis and without remuneration.
- Holding real estate: the SPF may not invest directly in real estate, but, it may attain holdings in corporations or other non-transparent entities that hold real estate.
- Holding intellectual property: the SPF is not authorized to hold any type of intellectual property directly.
SPF Eligible investors
- Private individuals managing their private wealth,
- Patrimonial entities acting for one or several individuals (trusts, family offices),
- Pure Holdings: this can be a shareholder of an SPF in case the shareholders of this holding are individuals. But such holding must not perform any commercial activity
- Intermediates: these are entities acting on behalf of private individuals. Fiduciaries can be qualified as intermediaries also.
The tax regime for the Luxembourg family wealth management company
Regarded as a specific extension of an individual’s private property and not being involved in commercial activities, an SPF is a tax-neutral company, which is exempt from corporate income tax, municipal business tax, and net wealth tax.
In addition, the following tax statutes apply to an SPF:
- Distribution of dividends to investors is not subject to any withholding tax
- There is no withholding tax on interest payment, unless the EU Savings Directive applies.
- No tax on capital gains and liquidation revenue earned by non-resident investors.
- Subscription tax at a rate of 0.25% computed on the value of paid-up share capital plus share premium applies.
- No access to tax treaties and European directives, and it’s not subject to VAT obligations
From a taxation level of view, the SPF is a very beneficial structure, nevertheless, it must also comply with various tax requirements, as assigned by the Luxembourg authorities.
Being one of the important financial centers in the world, the Grand Duchy of Luxembourg offers an attractive legal framework to investors and entrepreneurs wishing to entrust a dedicated corporate structure with the management of all or part of their assets.
For the formation and management of your Luxembourg corporate structures, let’s go ahead and contact your Damalion expert now, and let us help.
