Luxembourg’s Société de gestion de patrimoine familial (SPF) offers a distinctive framework for private wealth management, enabling individuals to structure their estates in a flexible and tax-efficient manner. This non-regulated entity is particularly appealing to international clients, including those from Japan and China, seeking effective solutions for wealth preservation and growth.
Understanding the Luxembourg SPF
Established under the Law of 11 May 2007, the SPF serves as a private wealth management company that allows individuals to manage their assets without engaging in commercial activities. Its primary functions include the acquisition, holding, management, and disposal of financial assets. Notably, the SPF benefits from a broad tax exemption regime, being generally exempt from Luxembourg taxation on income and net wealth tax. However, it is subject to a yearly subscription tax of 0.25% based on paid-up capital, share premium, and excessive debts, with a minimum amount of EUR 1,000 and a cap at EUR 125,000.
Attractiveness to Japanese Clients
Japanese investors are often drawn to the SPF’s tax-efficient structure, especially considering Japan‘s progressive income tax system. As of 2025, Japan‘s national income tax rates for individuals range from 5% to 45%, with an additional 2.1% surtax applied to the national income tax. Local inhabitant taxes impose a flat rate of 10%, bringing the top marginal rate to approximately 55.95%.
By utilizing an SPF, Japanese clients can potentially defer or reduce their tax liabilities. The SPF‘s tax-exempt status in Luxembourg allows for the accumulation of wealth without immediate taxation, and dividends distributed by the SPF are not subject to withholding tax. This structure enables investors to manage the timing of income receipts, aligning with their tax planning strategies.
Attractiveness to Chinese Clients
Chinese investors also find the SPF appealing due to its favorable tax treatment and alignment with China‘s individual income tax system. In China, residents are taxed on their worldwide income, while non-residents are taxed only on China-source income. The individual income tax (IIT) law classifies income into nine categories, each with specific tax rates and brackets.
By establishing a Luxemvbourg SPF, Chinese clients can benefit from Luxembourg’s tax exemptions, potentially mitigating the impact of China’s IIT (China Individual Income Tax (IIT)) on their global income. However, it’s crucial to consider China’s global tax scheme, which requires residents to report and pay taxes on overseas income. This was highlighted by recent developments where companies like ByteDance advised their Chinese staff abroad to report income to Chinese tax authorities.
Strategic Considerations
While the SPF offers significant advantages, investors must navigate both Luxembourg’s and their home countries’ tax regulations. Luxembourg’s updated guidance on SPF residence certificates, as released by the Luxembourg Tax Authorities in June 2024, clarifies the conditions under which an SPF is recognized as a Luxembourg resident for tax purposes. This recognition is essential for investors seeking to leverage the SPF’s benefits fully.
Moreover, investors should be mindful of the prohibition against SPFs holding real estate assets directly.
The Luxembourg SPF presents a compelling option for Japanese and Chinese investors aiming to optimize their wealth management strategies. Its tax-efficient structure, flexibility, and alignment with international asset management practices make it an attractive vehicle for those seeking to preserve and grow their wealth across borders. However, careful consideration of both Luxembourg’s regulations and the investors’ home country tax obligations is essential to fully harness the benefits of the SPF.
Damalion supports entrepreneurs, investment groups and families who register their Luxembourg holding company. We provide local resident directors. Please contact your Damalion expert now.
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.
