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Luxembourg

Luxembourg is a land locked country of a little over 2,500 square kilometres bordered by Belgium, Germany and France. It is a member of the European Union and is a stable parliamentary monarchy with a population of just under 400,000. Its income derives mainly from Euro markets and offshore banking.

The languages spoken are French, German and Letzebuergesch. The capital is Luxembourg City which is the home of the European Court of Justice, the Secretariat of the European Parliament, the European Investment Bank, the European Court of Auditors and a section of the European Commission and NATO.

International company legislation is found in the company law of August 1915 as amended and subsequent enactment to 1929. As a result Luxembourg holding companies are not liable to corporate taxes, withholding taxes or inheritance tax on heirs of non-resident shareholders. There are several different types of holding company and these may in turn be formed as private companies (SARL) or public limited companies (SA).

The only tax payable for a Luxembourg holding company is the 1% Capital Registration Duty (Droit d'apport) on incorporation and increases of Share Capital, and the Annual Capital Tax (Taxe d'abonnement) of 0.2% per annum (payable in quarterly instalments). Where dividends of more than 10% of the paid up share capital are paid out in any one year then the taxe d'abonnement for that year will be calculated on ten times the value of the dividend.

Essentially SARL and SA are similar but some differences are illustrated below:

SARL

Minimum capital required is € 12,400.
Registered or bearer shares are permitted in the case of an SA. However, bearer shares are not permitted in the case of an SARL.
A minimum of one shareholder.
No external auditor is required.
No AGM is required if there are less than 25 shareholders.
A minimum of one director.

Minimum capital of € 31,000 is required.
Shares may be registered or bearer.
A minimum of two shareholders.
An independent auditor is required.
An AGM will be necessary and must be held in the municipality in which the company is registered.
A minimum of three directors.

For both types of company:

Corporate entities are allowed as directors.
Accounts must be filed with the authorities.
There is no requirement to disclose the beneficial owners.
A registered office must be maintained in Luxembourg.

Another type of Luxembourg company is a SOPARFI, which is a normal trading company that is able to benefit from Luxembourg's tax treaties. There are no taxes on dividends received from subsidiaries provided that at least 10% has been held for a period of at least one year preceding the close of the current accounting year of the company receiving the dividend. There are no capital gains taxes providing the investment in the subsidiary is at least 25% of the share capital and has been held for at least one year preceding the beginning of the accounting year of the parent company.

Distributions of dividends to parent companies in the EU are not subject to any withholding tax. Distributions to non-EU parent companies are subject to a withholding tax of 25% or the relevant tax treaty amount.