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Private Asset Management Company (SPF) In Luxembourg
Concept The SPF was created by Luxembourg law issued on 11th May 2007 to allow the registration of an investment corporate vehicle dedicated to the management of the estate of private individuals.
Purpose of an SPF is: purchasing, holding, managing, and selling of any kind of financial assets, albeit excluding commercial activities.
The SPF is designed as an investment-company targeted to individuals in so far as acting under the management of their private assets.
The term "family property" shall be heard exclusively in the sense of "private assets of individuals", and does not imply or require any family relationship between shareholders of a SPF.
The minimum capital of a SPF is based on the legal form chosen, that must mandatory be in the form of a corporation.
The SPF is a wealth-management corporate-vehicle simple, flexible and consistent with the EU regulatory requirements. It can be used for instance, both for management of assets for a club of investors, or to acquire shares of a company by its own directors or employees.
Legal Structure Of Private Asset Management Company (SPF) In Luxembourg
A Private Asset Management Company (SPF) in Luxembourg is only permitted to be formed as a corporation (Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC., Ltd./SARL); Partnership Limited by Shares (SCA) or Co-operative in the form of a Public Limited Company (SCOSA)). In practice in Luxembourg, the SPF is however predominantly formed (Link Info-Seite) in the legal forms of the Public Limited Company (PLC., Corp./SA) and the Limited Liability Company (LLC., Ltd./SARL).
A Private Asset Management Company (SPF) in Luxembourg is formed through the recording of its articles of association by a notary. The articles of association will subsequently be published in the Official Bulletin (Mémorial C) and lodged with Luxembourg's Trade and Companies Register. It is required that the articles of association expressly regulate that the company is subject to the provisions of Luxembourg's law on Private Asset Management Companies. The minimum capital of a SPF in Luxembourg is dependent upon which legal form is chosen.
The shareholders of a SPF in Luxembourg, whose number must remain restricted, must be natural persons who are resident or not resident in Luxembourg who will be active in the management of the private assets. Furthermore, trustees or patrimonial entities with or without legal personality, such as Trusts or private Foundations managing the private assets of natural persons, may be used. In contrast thereto, other corporations are not permitted to hold the position of shareholder in a Private Asset Management Company (SPF) in Luxembourg.
Investment Policy And
The activities of the SPF are strictly limited to management of the private wealth.
The SPF cannot:
Carry out any commercial activities
Hold directly real estate
Lend money or grant a caution unless in restrictive conditions being on ancillary basis and for free
The SPF can:
Hold an important participation but may not interfere in its management
Invest in the broadest scope of financial assets (gold, currencies, securities such as bonds, swap, etc.)
The scope of eligible investors is defined in article 2 of the law. The shares of the SPF are strictly reserved to:
Individuals acting in the scope of the management of their private wealth;
Estate Corporation acting exclusively in the interest of private individuals;
An intermediary acting on behalf of the two above mentioned eligible investors;
The second category refers to trust, foundation or “stichting administratie kantoor”. The comments on the initial draft project mention that shares can also be owned by a group of individuals forming a restricted club of investors. The shares of the SPF may further not be quoted on a stock market.
It is required that the company name of a Private Asset Management Company (SPF) contains the abbreviation “SPF”.
Upon incorporation, The SA, SCA must have a minimum capital of EUR 31,000 where 7,250 need to be fully paid up The SARL must have a minimum capital of EUR 12,500 where 100% must be fully paid up SPFs are obliged to create a legal reserve which is equal to 5% of the profit until the legal reserve reaches 10% of the share capital.
A Private Asset Management Company (SPF) in Luxembourg is subject to the supervision of Luxembourg‘s Indirect Tax Administration (Administration de l’Enregistrement et des Domaines, AED) and to no further supervision. The domiciliation agent is required to submit a report annually on the SPF‘s operation in Luxembourg within the given legal framework.
Advantages of forming a Private Asset Management Company (SPF) in Luxembourg
Taxation In Luxembourg
In Luxembourg, a SPF is liable to the so-called “subscription tax” (taxe d’abonnement) annually at a rate of 0.25% on its paid-up share capital, the share premium plus on a proportion of its debts exceeding 8 times the paid up share capital and the share premium. However, the maximum payment of subscription tax is restricted to 125,000 EUR.
In general, the income and profits of a Private Asset Management Company (SPF) in Luxembourg are exempt from corporation tax, municipal business tax as well as from the net wealth tax. Luxembourg‘s lawmakers have justified the afore-mentioned subjective tax exemptions on the ground that the SPF does not carry on any commercial activities and is accordingly to be considered as an instrument for the management of the private assets of natural persons.
The afore-mentioned tax exemptions consequently mean, however, that Luxembourg‘s multiple double taxation agreements (DTA‘s) do not apply to the SPF in Luxembourg.
Further Tax Exemptions
In Luxembourg, interest payments are exempt from withholding tax. Moreover, the distributions of a SPF in Luxembourg in the form of dividends to non-resident investors is exempt from withholding tax. This affects gains generated by a SPF in Luxembourg from its available capital and which are later distributed to non-resident shareholders.
Furthermore, gains from the transfer or sale of shares in a SPF in Luxembourg by a non-resident shareholder as well as the liquidation proceeds of a SPF are exempt from taxation.
A SPF in Luxembourg is not liable to value-added tax (VAT) due to it not carrying on commercial transactions.
The Private Asset Management Company (SPF) in Luxembourg is an attractive vehicle for managing the private assets of wealthy natural persons. This is particularly so due to its special tax status as well as its wide spectrum of application.
A SPF in Luxembourg does not require an official licence prior to commencing its activities.
Moreover, the shareholders of a SPF benefit from the liability of it as a legal person as well as from its ability to issue bearer and registered shares.
Content supplied by TBA & Associates