Societe de Patrimoine Familiale or SPF
By law dated 11 May 2007, the Luxembourg government introduced the “Societe de Patrimoine Familiale or SPF” to replace the 1929 Holding Company regime which was terminated on 1 January 2007 after it was found by the European Commission to be in violation of state aid rules for providing “unjustified tax advantages” to providers of certain financial services who set up holding structures in Luxembourg.

The SPF tax regime has been implemented to answer the needs of individuals wanting to manage their private wealth and assets through a dedicated capitalization vehicle. 

Tax features
Companies which have elected for the SPF regime are exempted from corporate income tax, municipal business tax and net wealth tax. 

On the other hand, the SPF is subject to a subscription tax (“taxe d’abonnement”) at an annual rate of 0.25% with a minimum amount of €100, and a maximum amount of €125,000. The subscription tax is levied on the amount of the paid-up capital increased by the amount of share premium and the amount of debts exceeding eight times the paid-up capital and share premium.

Distributions, whether in the form of dividends or interest payments or other, paid by an SPF are not subject to withholding tax, unless such distributions fall within the scope of savings withholding taxes. Non-residents will not be subject to capital gains taxation in Luxembourg upon the sale of all or part of their interest in an SPF.

An SPF is not considered to be a VAT entrepreneur. As such, it can not obtain a Luxembourg VAT registration and a VAT number. Luxembourg excludes the SPF from the application of its tax treaties. Accordingly, no regular residency certificates are issued by the tax authorities for an SPF. Note that in cases where treaty protection is sought for, regular companies may be interposed as so-called blocker entities.

Amendment of 1 February 2012 abolishing the low tax dividend condition
Following an opinion letter from the European Commission, the Luxembourg Parliament approved Bill n°6305 (“Amendment Law”) aiming at abolishing the low tax dividend condition on 1 February 2012. Prior to that, the SPF regime provided that the favourable tax status would be lost any year during which the SPF received at least 5% of its dividend income from participations in unlisted and non-resident companies that were not subject to a tax similar to the Luxembourg CIT. In order to comply with this condition, the SPF had to provide annually a certificate issued either by its domiciliation company or by an auditor or by a chartered accountant that the 5% limit for dividends derived from non-resident and unlisted companies not subject to a tax similar to Luxembourg CIT is fulfilled.

Consequently, 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.

Legal form of an SPF
An SPF has to adopt the form of a public or private limited liability company (société anonyme or société à responsabilité limitée), a limited partnership having a capital divided into shares (société en commandite par actions) or a cooperative company organised in the form of a public limited company (société coopérative organisée sous forme d’une société anonyme). The articles of association of an SPF have to state explicitly that the company is subject to the provisions of the law regulating the SPF, and after the indication of the legal form of the entity, “SPF” is to be mentioned.

The shares of a SPF can either be nominative or bearer (not for a société à responsabilité limitée). The shares in an SPF may not be listed on a stock exchange. 

Activities of an SPF
The activities of an SPF are limited to the acquisition, holding, administration and sale of:

  • Financial assets as defined in the law of August 5, 2005 on financial collateral arrangements (securities in the broadest sense, including options, derivatives and structured financial products);
  • Cash (including foreign currencies), and
  • Other assets (e.g. precious metals) held in an account with a professional financial service provider. 

An SPF is not allowed to perform commercial activities, such as trading in financial instruments, or providing financial services. Moreover, an SPF can not directly hold real estate. Nevertheless, real estate held directly for its own use or indirectly, through its participations, is allowed.

Although an SPF is allowed to hold shares in other companies (even majority shareholdings), it should limit its involvement in its shareholdings to the exercise of shareholder rights (voting rights, right to receive dividends). An SPF may not be actively involved in the management of the participations or render services of whatever nature. An SPF is not allowed to grant interest bearing loans, not even to participations (to a limited extent it may grant interest free advances to participations).

Investors in an SPF
The investors eligible to invest in an SPF can be subdivided into three groups:

  • (A confined group of) Private investors acting in the context of their private wealth management;
  • Private wealth entities (i.e. trust, foundation, a Dutch “stichting”, etc.) acting solely for one or several individuals;
  • Intermediaries acting on behalf of either one stated above (e.g. Institutional investors acting with a fiduciary contract).

The SPF is subject to the control of the Administration for Registrations and State Property. Each year, the domiciliation agent, the auditor or a chartered accountant has to certify that:

  • The SPF has fulfilled its obligations as paying agent under the EC Savings Directive; and
  • The conditions pertaining to the nature of the investors are fulfilled; and 
  • The SPF did not receive at least 5% of its dividends from non-qualifying participations (see paragraph on taxation of an SPF).

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