SGG Flash News: Changes on the SPF tax regime
Background
The Private Wealth Management Company (SPF) was created by the Law of May 11, 2007 as an alternative to the phase out of the Holdings 1929 (H29).
SPFs profit from a favorable tax regime since they are exempt from the Corporate Income Tax (CIT), the Municipal Business Tax (MBT) as well as the Net Worth Tax (NWT). They remain, nevertheless, subject to the subscription tax of 0,25% on the share capital varying between a minimum of EUR 100 and a maximum of EUR 125.000.
However, a SPF was excluded from the tax exemption regime if, for a given year, more than 5% of the total dividends received derived from a non resident and non listed participation that is not subject to a local corporate income tax similar to the Luxembourg CIT.
By a letter of February 9, 2010 to the Luxembourg authorities, the European Commission drew their attention to the fact that the aforementioned provision set out by the Law of May 11, 2007 may not be compliant with the Treaty on the Functioning of the European Union and the Agreement on the European Economic Area. As a matter of fact and according to the Commission, the Luxembourg law “seems to apply different tax treatments to similar situations; which could deter the Luxembourg SPFs from investing in non resident corporations that are similar to the Luxembourg companies”. Whereas a “SPF may be entitled to invest freely in all Luxembourg entities whether they are tax exempt or not, listed or non-listed and keep on profiting from their tax exempt status”.
Therefore, the Bill of Law n° 6305 was submitted to the Parliament on July 15, 2011 in order make the SPFs fulfill the European requirements.
New perspective
The Bill of Law was approved by the Parliament on February 1, 2012.
As a result, as from January 1, 2012, a SPF is allowed to receive dividends from a non resident and non listed participation without restrictions. Accordingly, the certifying duties become simplified as the certificates to be issued must, from now on, only confirm that the investors in a SPF comply with the conditions of the Law.
This change is, without a doubt, a progress that, while enlarging the investment scope of the SPF, increase their efficiency in the service dedicated to wealth management.
For further information please contact:
Alex Pham, Manager Tax
+352 466 111 3725, Alex.Pham@sgg.lu
Betty Prudhomme, Senior Vice President
+352 466 111 3855, Betty.Prudhomme@sgg.lu
