The SPF tax regime further improved
Background
The Private Wealth Management Company/SPF (société de gestion de patrimoine familial) was created in 2007 (Law of May 11, 2007). The SPF represented at the time an interesting alternative to the phasing out of the so called Holdings 1929/H29 regime which ended in December 2010.
SPFs benefit from a favorable tax regime as they are exempt from the Corporate Income (CIT), Municipal Business (MBT) Net Worth (NWT) Taxes. SPFs are only subject to the subscription tax, amounting to 0,25% on their share capital. Such levy varies between a minimum of EUR 100 and a maximum of EUR 125.000.
As for every rule, there was an exception. SPFs could not benefit from the tax friendly regime if, for any given year, more than 5% of their total incoming dividends stemmed from non-resident/non listed participations that were not subject to a local CIT level equivalent to Luxembourg CIT’s. On February 9, 2010 the European Commission drew the attention of the Luxembourg authorities on the latter exception. The Commission informed the Grand Duchy’s authorities that the aforementioned exception may not be compliant with the European Union and European Economic Area Treaties & Agreements.
As a matter of fact and according to the Commission, said 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 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”. Luxembourg authorities therefore reacted swiftly and submitted the Bill of Law n° 6305 to their Parliament on the 15th of July 2011. The purpose of said Bill was to make the SPF’s tax treatment fully compliant with the Commission’s recommendation.
New perspective
The latter Bill of Law was approved by Luxembourg’s Parliament on February 1st, 2012. As a result, as from the 1st of January 2012, a SPF is allowed to receive incoming dividends from a non resident/non listed participation, without any restrictions whatsoever. This simplifies greatly the duties of administrators/ auditors/ domiciliation agents of SPFs that had, until December 2011, to issue statements to the authorities certifying that no more than 5% of a given SPF’s incoming dividends stemmed from participations taxed at a lower rate than the Luxembourg CIT equivalent. As from now on, certificates to be issued to the authorities only confirm that the investors in a given SPF comply fully with the Law of May 11, 2007.
This legal change represents a great material progress: it will widen the investment scope of SPFs, and increase their effectiveness in better serving the wealth management community and investors alike.
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
