Luxembourg-S.A.R.L.


Founded in 963, Luxembourg became a grand duchy in 1815 and an independent state under the nominal control of the Netherlands. It lost more than half of its territory to Belgium in 1839, but gained a larger measure of autonomy. Full independence was attained in 1867. Overrun by Germany in both World Wars, it ended its neutrality in 1948 when it entered into the Benelux Customs Union and when it joined NATO the following year. In 1957, Luxembourg became one of the six founding countries of the European Economic Community (later the European Union), and in 1999 it joined the euro currency area.

Service packages

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Service item Express Standard Optimum
Company registration
Legal address per year
Secretarial services for the first year
Fees and duties for the first year
Apostilled bound set of incorporation documents
Compliance fee
Nominee service per year
Bank Account Pre-approval
Price

16 665 USD

21 465 USD

21 965 USD

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Contact method: and / or

Core Services

13 750 EUR

— Incorporation

including incorporation tax, state registry fee, including Compliance fee

Included

— Annual government fees

Stamp Duty and Commercial Registry incorporation fee

10 950 EUR

— Corporate legal services

including registered address and registered agent, NOT including Compliance fee

170 EUR

—Delivery of documents by courier mail

DHL or TNT, at cost of a Courier Service

485 EUR

— Apostilled set of Statutory documents

Optional services

3 960 EUR

Nominee Director

Paid-up “nominee director” set includes the following documents

Nominee Shareholder

Paid-up “nominee shareholder” set includes the following documents

Related services

Tax Certificate

Company’s tax residence certificate for access to double tax treaties network

Certificate of Good Standing

Document issued by a state agency in some countries (Registrar of companies) to confirm a current status of a body corporate. A company with such certificate is proved to be active and operating.

Compliance fee

Compliance fee is payable in the cases of: renewal of a company, liquidation of a company, transfer out of a company, issue of a power of attorney to a new attorney, change of director / shareholder / BO (except the change to a nominee director / shareholder)

250 USD

Basic

simple company structure with only 1 physical person

50 USD

For legal entity in structure under GSL administration

additional compliance fee for legal entity in structure under GSL administration (per 1 entity)

100 USD

For legal entity in structure not under GSL administration

additional compliance fee for legal entity in structure NOT under GSL administration (per 1 entity)

350 USD

For client with high risk Status

Cost of incorporation, including first year servicing 16665
Cost of nominee director services per year, including an apostilled set of documents 4800
Cost of annual service, starting from the second year 13270
Open account in 27420
Incorporation timescale for a turnkey company 2 weeks
Country 26751

General information shortly

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Total area Population Capital Unemployment Corruption perceptions index rank
2.586 sq. km 531.441 (2012) Luxembourg 5.7% (2013) 12 (2012)
Location Western Europe
National currency Euro
Conditional reduction of currency EUR
Against USD 0.73
Climate, average max and min t° Modified continental with mild winters, cool summers; avg. maximum temperature (July) +22°С; avg. minimum temperature (January) +2°С
Time difference from Moscow + 3 hours
Dialing code +352
State language Luxembourgish, German, French
Ethnic groups Luxembourger 63.1%, Portuguese 13.3%, French 4.5%, Italian 4.3%, German 2.3%, etc.
Literacy rate 99%
Credit rating AAA
Government type Constitutional monarchy
Executive branch Head of State (the Grand Duke) and Government
Legislative branch Chamber of Deputies (60 members) and Council of State (advisory body)
Judicial branch Superior Court of Justice (includes the Court of Appeal and the Court of Cassation), Administrative Tribunal, Administrative Court, Constitutional Court
GDP per capita rank 1 (2012)

Corporate info

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Shelf companies permitted Legal system Incorporation timescale for a turnkey company Cyrillic alphabet permitted in company name Local registered office
Yes civil law 2 weeks No Yes
Types of entity Private Limited Company (société à responsabilité limitée, Sarl); Public Company Limited by Shares (société anonyme, SA); General Partnership (société en nom collectif); Limited Partnership (société en commandite simple); Partnership Limited by Shares (société en commandite par actions); Cooperative Society (société coopérative); European Company (société européenne); Branch Office
Incorporation timescale for a new company 5 days
Company suffix SARL or GmbH
Sensitive words Bank, Building Society, Savings, Insurance, Assurance, Reinsurance, Fund Management, Investment Fund
Local registered agent No
Information to be kept at the registered office register of shareholders
Seal required, type of seal not required
Redomiciliation (to, from) permitted permitted

Director and secretary

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Minimum number of directors Residency requirements for directors Corporate directors permitted Disclosure to local agent Disclosure to public
1 No Yes Yes Yes
Directors’ meetings/frequency/location No requirements
Company secretary required No
Residency requirements for a secretary No
Qualified secretary required No
Corporate secretary permitted No

Shareholder and beneficiary

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Minimum number of shareholders Residency requirements for shareholders Corporate shareholder permitted Disclosure to local agent Disclosure to public
1 No Yes Yes Yes
Meetings/frequency/location No requirements
Beneficiary info disclosure to No

Shares and share capital

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Minimum authorized share capital Minimum issued share capital Minimum paid share capital Authorized capital payment deadlines Bearer shares permitted
12394.68 12394.68 12395 Upon registration No
Issued capital payment deadlines Upon registration
Standard currency Euro
Standard authorized share capital 12500
Standard par value of shares 100
Shares with no par value permitted No

Taxes

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Min. rate for corporate tax Capital gains tax VAT Withholding tax Exchange control
24,94% Regular rate 17% 15%/0%/0% No
Personal tax 8-42%
Corporate tax (in detail) The overall effective tax rate in Luxembourg City is 24.94%
Capital gains tax. Details Capital gains are generally included in taxable income and taxed at the standard corporate tax rate
VAT. Details The standard VAT rate is 17%. For some goods and services, the tax rate is 14%, 8% and 3%.
Other taxes Social Contributions, Net Assets Tax, Inheritance and Gift Tax, Property Tax
Government fee No
Stamp duty 11.8%

Accounts

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Requirement to file accounts Publicly accessible accounts Audit required Requirement to file Annual Return Publicly accessible Annual Return
Yes Yes No No No
Requirement to prepare accounts Yes
Double tax treaties network 86
OECD member Yes
Offshore/onshore status according to the RF laws No

GENERAL INFORMATION

General info

The Grand Duchy of Luxembourg — is a landlocked country in Western Europe. A member of the European Union since 1951. It is bordered by Belgium to the west and north, Germany to the east, and France to the south.
Luxembourg has a total area of 2,586 sq.km and a population of 531.441 people (2012). The main population are Luxembourgers (63,1%). Among other ethnic groups are Portuguese (13,3%), French (4,5%), Italian (4,3%), German (2,3%), etc.
The capital city is Luxembourg. Official languages are Luxembourgish, French, and German.
Official currency is euro (EUR).
Climate of Luxembourg is modified continental with mild winters, cool summers. Average maximum temperature in July is +22°C; average minimum temperature in January is +2°C.
Time difference with Moscow is +3 hours.
Literacy rate is 99%.
Calling code of Luxembourg is +352.

History

Founded in 963, Luxembourg became a grand duchy in 1815 and an independent state under the nominal control of the Netherlands. It lost more than half of its territory to Belgium in 1839, but gained a larger measure of autonomy. Full independence was attained in 1867. Overrun by Germany in both World Wars, it ended its neutrality in 1948 when it entered into the Benelux Customs Union and when it joined NATO the following year. In 1957, Luxembourg became one of the six founding countries of the European Economic Community (later the European Union), and in 1999 it joined the euro currency area.

Government Type

Government type of Luxembourg is a constitutional monarchy.
The head of state is the Grand Duke. According to the Constitution he exercises executive power, sets the organization rules of government and its members, adopts and declares laws, appoints officials for civil and military posts, commands armed forces, concludes international treaties, etc.
The executive power is exercised by the Cabinet appointed by the Grand Duke and headed by the premier.
The legislative power is vested in the Chamber of Deputies, a unicameral legislature of sixty members, who are directly elected to five-year terms from four constituencies. A second body, the Council of State, composed of twenty-one ordinary citizens appointed by the Grand Duke, advises the Chamber of Deputies in the drafting of legislation.
The judicial system includes Superior Court of Justice, which includes the Court of Appeal and the Court of Cassation. There is also an Administrative Tribunal and an Administrative Court, as well as a Constitutional Court.

Economy

Advantages: One of the richest countries in Europe with the highest level of living conditions. Luxembourg houses a lot of EU organizations. Thanks to profitable conditions and offshore zone in the capital there are about 1000 investment funds and above 200 banks which is more than in any city in the world. 10% of GDP is formed due to iron ore extraction, iron and crude iron production.
Disadvantages: huge external debt. Income from the service for international partners forms 65% of GDP, what makes the country sensitive to the changes in other countries. Sensitive to the recession – the crisis of 2008-2011 was too hard to go through.
The economy is mainly based on the developed service sector, including financial field. Banking plays an important role in Luxembourg’s economy. Special attention is paid to telecommunication manufacturing, audio and video equipment production. Among other production items are chemical products, cars, plastics, textile, glass and porcelain. Almost all energy consumed in Luxembourg is imported, including oil, natural gas and coal.

CORPORATE INFORMATION

Legal system

Luxembourg is a civil law jurisdiction. Its legal system is similar to the French Napoleonic Code, except for the commercial and penal divisions, which are similar to their Belgian counterparts. The tax law in principal is based on German tax legislation.

Types of entity

The principal forms of business organization in Luxembourg are:
  • Private Limited Company (société à responsabilité limitée, Sarl);
  • Public Company Limited by Shares (société anonyme, SA);
  • General Partnership (société en nom collectif);
  • Limited Partnership (société en commandite simple);
  • Partnership Limited by Shares (société en commandite par actions);
  • Cooperative Society (société coopérative);
  • European Company (société européenne);
  • Branch Office.

The most common structures are Private Limited Company (société à responsabilité limitée, Sarl) and Public Company Limited by Shares (société anonyme, SA).

REGISTRATION

Company Name

The name of a private limited company must contain the French abbreviation SARL or the German abbreviation GmbH. The name must be different from that of any other company. If it is identical, or if the similarity can lead to error, any interested party may cause it to be changed and may, as the case may be, claim damages. Therefore an enquiry must be made to the Register of Commerce and Companies (Registre du Commerce et des Sociétés) to make sure the proposed name is not used by any other company, and the Register would issue a certificate to confirm the availability of the name. The company name can be in any language using Latin alphabet, but the Register of Commerce and Companies may request a French or German translation if a foreign language is used. Names in Cyrillic alphabet are not allowed. The following elements in the name, their derivatives or foreign language equivalents require consent or a license: Bank, Building Society, Savings, Insurance, Assurance, Reinsurance, Fund Management, Investment Fund, as well as any other names that may suggest association with the banking or insurance business, or government patronage.

Registration

To register a company in Luxembourg it is required:
1) to choose a company name and check it for availability with Trade and Companies Register;
2) to get a business permit (this step is required if the company is to do special types of business requiring license) – is granted within a week upon application receipt;
3) to register a company with the Register:
Required documents:
  • Constitutional documents and articles of association either in French or in German signed before a notary and registered by the notary with the Luxembourg Land Registration and Estates Department within 15 days of signature. The signatories of constitutional documents drawn up as private deeds (i.e. without the involvement of a notary) must, within 3 months of signature, register and file their deeds with the RCS (Trade and Companies Register) for publication purposes.
  • Share capital blocking certificate issued by the bank stating that it undertakes to block the funds until the company is definitively formed.

4) to register with the Joint Social Security Administration within 8 days of entry into service of the 1st employee hired;
5) to register with the tax authorities to obtain VAT number.
Besides, it is possible to buy a shelf company of this type or to incorporate a new one, though it should be noted that due to the costs associated with incorporation and the paid up share capital requirements, shelf companies are not widely available.

Registered office

Luxembourg companies must have a registered office (seat) in Luxembourg. This can be an address provided by a domiciliation agent in Luxembourg. Under the law of 31 May 1999 regulating the domiciliation activity only a member of one of the following regulated professions, established in Luxembourg, may act as a domiciliation agent: credit institution or other professional of the financial sector or insurance sector, lawyer, independent auditor, qualified accountant. The company must keep at the registered office the share register.

Company Seal

There are no statutory requirements for a Luxembourg company to have a seal.

Banking Account

Luxembourg companies may open accounts with banks both within and outside Luxembourg.

Restrictions on the activities

There are a number of restrictions on the activities of Luxembourg companies. They cannot undertake any business in financial sector (as banks, investment firms, financial advisors, brokers etc) or carry out insurance or reinsurance business, unless a special license is obtained.

Renewal

Companies are renewed annually and the renewal normally includes: payment of fees for nominee directors and shareholders (if any), and the registered office.

Redomicile

The redomiciliation of companies is permitted both to and from Luxembourg.

COMPANY STRUCTURE

Managers

Instead of the board of directors, SARL has managers who are appointed by the members for an unlimited or limited period of time. SARL requires the minimum of one manager that can be a natural or legal person and need not be a Luxembourg national or resident. Board meetings of the company may take place both in and outside Luxembourg.
Manager’s details are disclosed to the local agent and appear on public file.

Secretary

Luxembourg companies are not required to appoint a company secretary.

Internal auditor

No statutory auditors are required unless the SARL has more than 25 members.

Shareholders

SARL can be formed by one single shareholder that can be an individual or a company of any nationality or residence. The maximum number of shareholders is 40.
General meetings are to be held annually at the time determined in the articles, if the company has more than 25 shareholders.
Shareholders’ details are disclosed to the local agent and appear on the public file.

Beneficial owner

The identity of the beneficial owner of a Luxembourg company is treated as strictly confidential and must be disclosed as part of the obligatory due diligence to the local agent and local bank where the company opens an account for payment of share capital, as well as to the auditor (if one is appointed), and can only be disclosed by them in the cases stipulated by law and following statutory procedure.

Share capital and shares

The share capital of the private company is normally expressed in EUR, but can also be denominated in any other hard currency. The minimum capital is EUR 12,394.68 which must be fully paid up and subscribed. Usually the authorized share capital is EUR 12,500 divided into shares of CHF 100 each. Bearer shares and shares with no par value are not permitted.

TAXATION

Personal income tax

Tax residents of Luxembourg pay tax on their worldwide income, non-residents on income from sources in Luxembourg.
Income tax rates vary for single individuals, married couples, and single parents.
The tax is levied at progressive rates from 8% to 42%. The income scale is very fractional and has 23 positions. The first EUR 11,265 is exempt; the maximum rate of 42% applies to income over EUR 200,000.
There is also a solidarity tax further charged on the amount of income tax at rates varying from 7% to 9% depending on the level of income. As a result, the total tax rate (including the solidarity tax) ranges from 0% to 45.78%.
There are special tax regimes for working foreigners.
Profits in excess of EUR 500 from the sale of movable property owned for less than 6 months are taxed at the usual progressive rates. Profits from the sale of movable property after 6 months of ownership are tax exempt. The exception is cases of holding a significant participation. A significant participation is that of more than 10% of the capital of a company held (individually or jointly with family members) for 5 years before the sale. In this case, the profit from the sale of the asset is taxed at half of the progressive income tax rate (up to a maximum of 22.89%).
Profits from the sale of the main residence are not taxed. The sale of other properties owned for two years or less is taxed at the usual rates. Reduced rates may apply in the case of longer holding periods.
Some types of interest income are taxed at the rate of 20%. Fifty per cent of dividends from eligible companies are exempt from tax.

Corporate income tax

The corporate income tax rate for companies with profits over EUR 200,000 is 17%.
Reduced rates apply to lower-income companies.
Corporate income tax is also subject to a solidarity surtax at the rate of 7%.
Tax is also levied by municipalities. In Luxembourg City, the municipal tax rate is 6.75%.
The overall effective tax rate in Luxembourg City is thus 24.94%.
Dividends received are exempt from tax subject to a number of conditions, including:
  • Requirements for the company distributing dividends: qualifying EU companies, taxable Luxembourg companies, foreign companies taxed with corporate income tax, as a general rule, at least at 8.5% rate.
  • Holding at least 10% participation or participation with the acquisition price of at least EUR 1.2 million for at least 12 months.
  • Dividends must not be tax deductible at the level of the distributing party.

Profits from the sale of shares may be tax exempt if one holds at least 10% participation or participation with the acquisition price of at least EUR 6 million, for at least 12 months.
As a general rule, the sale by a non-resident company of at least 10% participation in a Luxembourg company within 6 months of the acquisition date is subject to taxation in Luxembourg.

CFC rules

A foreign company is considered a controlled foreign company if:
  • A taxpayer, directly or indirectly, individually or jointly with related parties, holds more than 50% of the capital or voting rights in, or rights to more than 50% of profits of, a foreign company.
  • The foreign company is taxed at the effective rate of less than 50% of the corporate income tax that would be paid in Luxembourg in a similar situation.

The taxpayer must include the CFC’s non-distributed profit in its tax base if such profit arose from arrangements that were aimed at obtaining tax advantages and is generated through the assets, risks and significant people functions performed by the taxpayer.
The profit of a CFC is exempt if it does not exceed EUR 750,000 or 10% of operating costs.

Withholding tax

Portfolio investment dividends are taxed at the rate of 15%.
The rate can be reduced to 0% in the case of significant participation. Thus, tax is not withheld when dividends are paid to a corporate member resident in a DTT (Double Taxation Treaty) country and taxed at a rate of at least 8.5%, who has held at least 10% participation or participation with the acquisition price of at least EUR 1.2 million for at least 12 months.
There is no withholding tax on royalties and interest payments.
The tax may be withheld on certain other income payments.
The tax rates can also be reduced under the relevant DTTs (Double Taxation Treaties) or EU directives.

VAT

The standard VAT rate is 17%.
The rates for certain goods and services are 14%, 8% and 3%.

Social security contributions

For employees, there are compulsory social contributions withheld by employers:
  • Sick leave fund – 3.05%.
  • Pension fund – 8%.

Net wealth tax

Luxembourg corporate taxpayers pay net wealth tax (NWT).
The tax is payable at the rate of 0.5% on net assets of up to EUR 500 million and at the rate of 0.05% on net assets of over EUR 500 million.
When determining the tax base, assets are accounted for at market value, with special rules applying to real estate.
Shareholdings the dividends from which are tax exempt are not generally subject to NWT.
There is a minimum NWT set in euros, and its size varies depending on the value of the company's assets.
There are certain opportunities for reducing NWT.

Registration duty

The sale of real estate located in Luxembourg is subject to a registration duty payable at the rate of 7% (surtax on the registration duty at a rate of 3% – in Luxembourg City).
In addition, registration duties are levied at various rates on the contribution of Luxembourg real estate to the capital of a company, as well as in relation to certain other contracts.

Inheritance and gift tax

There is inheritance tax.
The rates vary depending on the degree of relationship and other factors.
There are gift taxes, and gifts are required to be evidenced by a notarial deed.

Property tax

Property taxes are levied at the level of municipalities, the tax liability depends on the value, category, and location of the property.

Exchange control

No exchange control.

ACCOUNTS

Accounting records

A Luxembourg company must keep regular accounting records in accordance with Luxembourg commercial law and prepare annual accounts. The annual accounts may be represented in any currency and include a balance sheet, a profit and loss account and notes to the accounts. But, in practice, the amount of documents to be prepared and filed varies depending on the size of the company. A company may not exceed two of the three following thresholds:
Indicators small medium-sized
Balance sheet sum (mln EUR) up to EUR 3,125,000 up to EUR 12,500,000
Annual net turnover (mln EUR) up to EUR 6,250,000 up to EUR 25,000,000
Average number of employees up to 50 up to 150

Thus, small companies are only required to prepare and file a simplified balance sheet. Medium-sized companies may publish abridged balance sheet, and notes to the accounts need to include information on turnover and may group several items together under gross profit. The company which owns subsidiaries may be required to present consolidated accounts in application of the law of 11 July 1988 adopting the Seventh European Directive on consolidated accounts as domestic law. SA may have its accounts audited by an internal auditor (commissaire aux comptes) if it meets small company criteria. Sarl only needs to have the accounts audited by the internal auditor if it has more than 25 shareholders, but will also need an external professional auditor if it exceeds small company criteria. The annual accounts are subject to approval by the shareholder(s) at an annual general meeting. The annual accounts duly approved must within one month of such approval be lodged with the Register of Commerce and Companies together with annual reports and auditor’s report. They are then published in the Memorial, the publication is made by means of a reference to the lodgement of such documents at the Register of Commerce and Companies.

Annual Return

Generally speaking, Annual Return is a short review on the current state of the company, which is prepared by the company secretary annually. As a rule it includes the following information:
  • Incorporation information (registration date, registered address);
  • Information about directors and their resignation;
  • Information about secretaries and their resignation;
  • Information about registered capital, nominal value of shares and amount of issued shares;
  • Information about shareholders and share transfer.

In Luxembourg companies are not obliged to prepare or file Annual Return.

Tax returns

The tax year is generally the same as the financial year. Corporate income tax returns must be filed by 31 May of the year following the reporting year. Upon receipt of the tax return, the tax authorities issue a tax assessment – calculation of tax to be paid.
Advance payments of corporate income tax are made quarterly. The final payment must be made by the end of the month following the month of receipt of the tax assessment.

SPECIAL PURPOSE VEHICLES

SOPARFI (Sociétés de participation financière) - Financial Holding Company

A Société de Participations Financières (SOPARFI) is a holding financial company and is rather a status than a corporate form. In fact, SOPARFI can adopt various corporate forms: public company limited by shares (Société Anonyme, “SA”), private limited company (Société à Responsabilité Limitée, “SARL”), partnership limited by shares (Société en Commandite par Actions, “SCA”) and European company (Société Européenne, “SE”), but, in practice, it is generally incorporated in the form of a SA due to its operating flexibility.

The activities of SOPARFI are not limited to holding and management of shares only. Upon authorisation from the Ministry of Middle Classes it can also carry out any commercial activity that is directly or indirectly connected with the management of its holdings. If the SOPARFI undertakes a commercial activity it is subject to the normal rate of corporate income tax and municipal business tax. Corporate income tax rate is 20% for income below EUR 15,000, and 21% for income above EUR 15,000. Municipal business tax depends on the municipality where SOPARFI is located. For example, in the city of Luxembourg it is 6.75%. However, if SOPARFI carries on holding activity only, it can take advantage of Luxembourg double tax treaties network and EU directives.

SOPARFI enjoys the following tax benefits:
1. Exemption from corporate tax and municipal business tax of dividends paid by subsidiaries, if the following conditions are met:
- shareholding is at least 10% (or acquisition price of EUR 1,200,000)
- holding period is at least 12 months
- subsidiary is a fully taxable Luxembourg company, or EU company, or non-EU company subject to corporate income tax of at least 10.5%

2. Exemption from or reduced rate of withholding tax on dividends.
Dividends distributed by SOPARFI to its shareholders are in principle subject to a withholding tax of 15%. This rate can be reduced under the double tax treaties signed with the respective countries of residence of the shareholders. However, dividends may benefit from a full exemption if the following conditions are met:
- shareholding is at least 10% (or acquisition price of EUR 1,200,000)
- holding period is at least 12 months
- beneficiary company is a fully taxable Luxembourg company / EU / EEA or Swiss company, or a company resident in a country with which Luxembourg has a double tax treaty and which is subject to a tax of at least 10.5%
Besides, there is no withholding tax on interest paid by the SOPARFI to its shareholders (except in case the SOPARFI offers its securities to the public), nor on liquidation proceeds distributed to the shareholders further to the liquidation of the SOPARFI.

3. Exemption of transfer capital gains, if the following conditions are met:
- shareholding is at least 10% (or acquisition price of EUR 6,000,000)
- holding period is at least 12 months
- subsidiary is a fully taxable Luxembourg company, or EU company, or non-EU company subject to corporate income tax of at least 10.5%

SIF (Specialized Investment Fund)

On 13 February 2007, the Luxembourg Parliament adopted a law on Specialized Investment Funds (SIF). The new law replaces the law of 19 July 1991 on Undertakings for Collective Investments dedicated to institutional investors. The innovations of the law include: extended definition of eligible investors, flexible valuation rules, unlimited range of eligible assets, simplified approval process, no limitations on promoter or manager, light reporting requirements and attractive tax regime.

There are three categories of eligible investors (i.e. investors authorised to invest in the SIF): institutional investors; professional investors; and well-informed investors who have adhered in writing to the status of well-informed investors and who have either a minimum investment of EUR 125,000 in the SIF or a positive assessment from a credit institution or another financial sector professional certifying their aptitude to appraise the contemplated investment and the risks attaching thereto. This last category gives sophisticated individual investors (including high net worth individuals) access to the SIF.

The submission to the SIF regime must be opted for by inserting a mention to that effect in the constitutive documents or offering documents. However, existing 1991 UCIs are automatically governed by the SIF Law without any formalities.

The SIF can be incorporated in a contractual form (as a Fonds Commun de Placement, or FCP) or a corporate form: as a Variable Capital Investment Company (Société d’Investissement à Capital Variable (SICAV)) or as a Fixed Capital Investment Company (Société d’Investissement à Capital Fixe (SICAF)). Should the SIF be incorporated as a SICAV/SICAF, it could be incorporated as a Public Limited Company (société anonyme), a Limited Liability Company (société à responsabilité limitée), a partnership limited by shares (société en commandite par actions) or a cooperative organized under the form of a Public Limited Company (société coopérative organisée sous la forme d’une société anonyme). The SIF must be capitalized with at least EUR 1,250,000. This minimum capital must be reached within 12 months from the date of the authorization from the Luxembourg supervisory authorities of the financial sector (so-called CSSF). Although the SIF has to value its assets at fair value, the bylaws or management regulations can determine how this value will be computed. Therefore, other valuation criteria like those set by professional associations (EVCA, RICS etc.) may be used.

The SIF may invest in all types of assets including equity, debt, real estate, financial derivatives, hedge and private equity investments. The SIF is required by the law to comply with the principle of risk diversification. However, the concept of risk diversification being not detailed in the law, the CSSF issued a circular providing guideline as to the minimum level of risk diversification that must be ensured by the SIF. Under the circular, the SIF cannot invest more than 30% of its assets in a same investment line. This restriction is however waived for investments in collective investment schemes that are subject to risk diversification requirements that are equivalent to those applicable to the SIF.

The SIF is a regulated vehicle subject to the permanent supervision of the CSSF. However, the activities of the SIF can start without a prior approval from the CSSF provided the request for the authorization is filed within the month following the set up of the SIF. It must be noted that although the CSSF does not carry out an in-depth review of all materials, the CSSF has to approve the bylaws/management rules, the directors/managers (must be experienced and reputable) and the choice of the depositary bank of the SIF. The SIF must entrust the custody of the assets to a depositary bank resident in Luxembourg. The annual accounts of the SIF must be audited by a Luxembourg independent auditor. No promoter is required for the set up of the SIF. The SIF must establish an offering document (sales prospectus) and an annual report. The annual report must be presented to the investors at the latest 6 months following the end of the financial year and must include a balance sheet or a statement of assets and liabilities, a profit and loss account, significant information on the financial year as well as additional information for the assessment. Under a CSSF circular, the SIF must also publish a monthly report. In practice, however, if the SIF does not calculate a Net Asset Value each month, the report can be based on the previous available report. The SIF is free form the obligation to consolidate the companies that are held in the portfolio for investment purposes. Besides, there is no requirement to publish the Net Asset Value.

The SIF is exempt from taxes on incomes and gains and from withholding taxes on distributions. The only taxes for which the SIF will be liable are: annual subscription tax of 0.01% on its Net Asset Value (however exemptions from the subscription tax may apply depending on the underlying investments) and fixed capital duty of EUR 75 levied upon incorporation.

SICAR (Société d’Investissement en Capital à Risque) - Investment Company in Risk Capital

Société d’Investissement en Capital à Risque (SICAR), which means ‘an Investment Company in Risk Capital’, was introduced by the law 15 June 2004 and is a regulated vehicle mainly intended for investments in venture capital and private equity in general.

There are three categories of eligible investors (i.e. investors authorized to invest in the SICAR): institutional investors; professional investors; and well-informed investors who have adhered in writing to the status of well-informed investors and who (i) have minimum investment of EUR 125,000 in the SICAR; or (ii) participate in the management of the SICAR; or (iii) have positive assessment from a credit institution or another professional of the financial sector certifying their aptitude to appraise the contemplated investment and the risks attaching thereto.

The submission to the SICAR regime must be opted for by inserting a mention to that effect in the constitutive documents.

The SICAR must be incorporated in one of the following legal forms: public limited liability company (société anonyme), private limited liability company (société à responsabilité limitée), partnership limited by shares (société en commandite par actions), co-operative company in the form of an public limited liability company (société coopérative organisée sous la forme d’une société anonyme) or limited partnership (société en commandite simple). Besides, it must be noted that the SICAR may be set up as an umbrella vehicle with multiple compartments with strict segregation of assets and liabilities between compartments. The SICAR must be capitalized with at least EUR 1,000,000 which can be the subscribed capital increased by the share premiums. Subscription must be made 12 months following the authorisation of the SICAR by the Luxembourg supervisory authorities of the financial sector (so-called CSSF). Unlike regular companies, the SICAR may opt for variable share capital allowing variation in share capital without need to respect any formalities. The SICAR has to value its assets at fair value in accordance with the methodologies set out in its articles of incorporation. Generally, valuation principles established by specialized professional bodies are used. Computation of a periodic NAV may be required by investors if necessary.

The SICAR must invest in assets representing “risk capital” with the aim of rewarding investors in proportion for the risk they bear. The concept of “risk capital” being defined in a broad manner by the Law as the direct or indirect contribution of assets to entities in view of their launch, their development or their listing on a stock exchange, the CSSF issued a circular in order to provide with guidelines as to the eligible assets. In principle, all types of assets (e.g. securities, debt instruments, hybrid instruments, real estate…) should be eligible provided the investment is risky and made with intent to develop or create value. It must be noted that unlike investment funds, the SICAR is not required to diversify its risks. It can invest in only one target.

The SICAR must be authorized by the CSSF prior to starting its operations. Once authorized, the SICAR is subject to the permanent supervision of the CSSF. However, it has to be mentioned that the SICAR benefits from a “light” regulatory regime, resulting from the fact that the SICAR is dedicated to well-informed investors who are deemed to be able to value the risks involved in their investments. Besides, it must be noted that although the CSSF does not carry out an in-depth review of all materials, the CSSF has to approve the offering document, bylaws/management rules, the directors/managers (must be experienced and reputable) and the choice of the depositary bank of the SICAR. The SICAR must entrust the custody of the assets to a depositary bank resident in Luxembourg. The annual accounts of the SICAR must be audited by a Luxembourg independent auditor. The SICAR must establish an offering document (sales prospectus) and an annual report. The annual report must be presented to the investors at the latest 6 months following the end of the financial year. The annual report must include a balance sheet or a statement of assets and liabilities, a profit and loss account, significant information on the financial year as well as additional information for the assessment.

The taxation of the SICAR depends on the legal form. From the five corporate forms available, four are taxable entities (SA, SARL, SCA and SCoSA) and one is tax transparent (SCS).
The SICAR that takes the form of an SA, SARL, SCA or SCoSA is, as a general rule, fully subject to corporate income and municipal business tax at the aggregate rate of 28.59%. However, in practice the SICAR avoids substantial taxation in Luxembourg as it is allowed to exempt from its taxable base all income and gains deriving from: (i) Transferable securities. This income classification is very large and covers not only shares and titles in equity participations (and the resulting dividends, interest, royalties and capital gains) but also debt instruments; and (ii) Temporary cash deposits held for less than 12 months in view of investments in risk capital. This exemption covers funds that have been called by the SICAR, paid up by the investor, but not yet invested.
As a result, the SICAR is only taxable on ancillary income. Besides, it must be noted that the SICAR is exempt from net wealth tax and withholding taxes on dividends, interest and liquidation proceeds. The Luxembourg tax authorities do not require from the SICAR to respect a debt-to-equity ratio (no thin capitalisation rules).
The SICAR that takes the form of the SCS is deemed transparent (i.e. look-through) for Luxembourg tax purposes. Income generated by the SICAR is therefore deemed having been directly earned by the partners in proportion to their respective participation in the limited partnership. Consequently, they will be taxed according to the rules applicable in their country of residence.

International law relations

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Party to the Hague Convention (Apostille) Legal system Double tax treaties network OECD member Offshore/onshore status according to the RF laws
Yes civil law 86 Yes No

Public authorities and legal acts

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List of laws and regulations
Act name Scope of law
Law of 10 August 1915 on Commercial Companies commercial companies
Law of 4 December 1967 on income tax (consolidated text as of 2011) income tax
Grand-Ducal Decree of 24 December 1990 (implementing the EU Parent-Subsidiary Directive and thus introducing the so-called “participation exemption”, which law gave rise to SOPARFI) participation exemption
Law of 12 February 1979 on VAT (consolidated text as of 2011) VAT
Grand-Ducal Regulation of 28 December 1990 (listing procedures and requirements) listing procedures and requirements
Law of 6 December 1991 (insurance sector) insurance
Law of 5th April 1993 (banking secrecy) banking secrecy
Law of 31 May 1999 regulating the domiciliation activity domiciliation activity
CSSF Circular 02/80 of 5 December 2002 governing undertakings for collective investment pursuing alternative investment strategies (hedge funds) hedge funds
Law of 27 July 2003 trust and its recognition
Law of 15 June 2004 on Société d’Investissement en Capital à Risque (SICAR) SICAR
Law of 13 February 2007 on Specialized Investment Funds Specialized Investment Funds
Law of 11 May 2007 on SPF (Societe de gestion du Patrimoine Familiale) SPF
Law of 17 December 2010 on Undertakings for Collective Investment collective investment
Tax treaties entered Albania, Andorra, Armenia, Austria, Azerbaijan, Bahrain, Barbados, Belgium, Brazil, Brunei Darussalam, Bulgaria, Canada, China, Chinese Taipei, Croatia, Czech Republic, Cyprus, Denmark, Estonia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Guernsey, Hong Kong, China, Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Korea (Republic of), Kuwait, Lao People's Democratic Republic, Latvia, Liechtenstein, Lithuania, Malaysia, Mauritius, Mexico, Moldova (Republic of, Monaco, Mongolia, Morocco, Netherlands, Norway, Panama, Poland, Portugal, Qatar, Romania, Russian Federation, San Marino, Saudi Arabia, Senegal, Seychelles, Sierra Leone, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Viet nam
List of state regulatory authorities
Luxembourg Government http://www.gouvernement.lu/
Luxembourg Chamber of Commerce http://www.cc.lu/
Register of Commerce and Companies https://www.rcsl.lu/mjrcs/jsp/IndexActionNotSecured.action?time=1385444240392
Luxembourg Official Gazette (Memorial) http://www.legilux.public.lu/
Central Bank of Luxembourg http://www.bcl.lu/fr/index.php
Luxembourg Administration of Direct Contributions http://www.impotsdirects.public.lu/
Luxembourg Administration of Indirect Taxes http://www.aed.public.lu/index.php
Luxembourg Administration of Customs & Excise http://www.do.etat.lu/
Luxembourg Bar Council http://www.barreau.lu/
Association of the Luxembourg Fund Industry (ALFI) http://www.alfi.lu/
Luxembourg Bankers’ Association (ABBL) http://www.abbl.lu/
Luxembourg International Management Services Association (LIMSA/www.limsa.lu/
Luxembourg National Tourist Office http://www.visitluxembourg.com/en

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