Favourable change in the Luxembourg SPF regime ... - Loyens & Loeff

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Favourable change in the
Luxembourg SPF regime
announced
On 11 May 2007 Luxembourg introduced the SPF regime (“Société de gestion
de patrimoine familial”) (SPF Law), which was designed to meet the need for
Luxembourg based private asset management companies after the abolition of
the Holding 1929 regime. A Luxembourg company may adopt the SPF regime if:
(i). its sole object is the acquisition, holding, management and disposal of
financial assets, excluding any commercial activity; (an SPF may not interfere
in the management of its subsidiaries);
(ii). its shares are held by private individuals acting in the context of the
management of their private wealth, private wealth entities (e.g. trusts,
foundations) acting solely for one or more private individuals, or intermediaries
acting on behalf of either of the previous categories; and
(iii). its articles of association state that the company is subject to the SPF Law.
Beneficial Tax Treatment
A company that has adopted the SPF regime is exempt from Luxembourg
municipal business tax, corporate income tax and net wealth tax and is in principle
not a withholding tax agent. An SPF loses the advantage of these tax exemptions
for a particular accounting year if it receives at least 5% of its dividends during
that year from non-resident companies which are not listed on a stock exchange
and are not subject to comparable taxation (Low Tax Dividend Cap). Taxation is
considered comparable if the non-resident company is subject to a tax rate of at
least 10.5%, levied on a tax base determined in accordance with the Luxembourg
corporate income tax standards. Companies covered by article 2 of the EU Parent
Subsidiary Directive are deemed to be subject to comparable taxation. Capital
gains and liquidation proceeds realised by non-resident investors in an SPF are
tax-exempt in Luxembourg.
NEWSFLASH
21 July 2011

NEWSFLASH • 21 July 2011 2
An SPF is only subject to an annual subscription tax of 0.25% levied quarterly on its share capital, plus premium, plus
outstanding debt, insofar as that debt is over eight times the sum of its share capital and share premium. The minimum
amount of the subscription tax per year is EUR 100, and the maximum amount is EUR 125,000. Due to its tax-exempt
status an SPF is excluded from double tax treaty benefits and cannot benefit from the EU Parent Subsidiary Directive.
Abolition of the Low Taxed Dividend Cap
On 15 July 2011 the Luxembourg Government sent the Lower House (“Chambre des Députés”) a draft law which
proposes the abolition of the Low Tax Dividend Cap. The draft law has been prepared as a direct result of a letter sent
by the European Commission to the Luxembourg authorities on 9 February 2010, in which the European Commission
argued that the Low Tax Dividend Cap infringes the freedoms as laid down in the Treaty on the Functioning of the
European Union and the Agreement on the European Economic Area.
If the draft law is approved, the SPF regime will become even more attractive than it currently is, as it will allow an SPF to
receive dividends from entities in low tax jurisdictions, without any limitation and without jeopardising its tax exemptions
for the relevant year.
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NEWSFLASH • 21 July 2011 3
For further information, please contact your regular tax counsel at Loyens & Loeff Luxembourg or:
Pieter Stalman
tel: +352 466 230 403
pieter.stalman@loyensloeff.com
Marie-Aleth Hendessy
tel: +352 466 230 441
marie-aleth.hendessy@@loyensloeff.com
Loyens & Loeff Luxembourg
18-20, rue Edward Steichen
L-2540 Luxembourg
tel: +352 466 230
fax: +352 466 234
www.loyensloeff.lu
Loyens & Loeff Luxembourg comprises more than 110 professionals and offers corporate and tax services on
a fully integrated basis.
The Luxembourg office is affiliated with Loyens & Loeff, which has over 900 professionals in 17 offices in the
Benelux and the main financial centres of the world.
Frank van Kuijk
tel: +44 20 782 630 79
frank.van.kuijk@loyensloeff.com
AMSTERDAM • ARNHEM • BRUSSELS • EINDHOVEN • LUXEMBOURG • ROTTERDAM • ARUBA
CURAÇAO • DUBAI • FRANKFURT • GENEVA • LONDON • NEW YORK • PARIS • SINGAPORE • TOKYO • ZURICH