Holding Company in Luxembourg
Establish a Holding Company in Luxembourg
Updated on Monday 20th November 2023 Rate this article
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The holding company, a legal entity created for the purpose of owning shares or other assets, is a very popular business form in Luxembourg as it offers many advantages to its owners. Foreign investors who want to establish holding companies in Luxembourg must follow the same procedures as for setting up other types of companies. Below, our lawyers in Luxembourg explain how to open a holding company in the Grand Duchy.
| Quick Facts | |
|---|---|
| Legal entities used | - private limited liability company, - public limited liability company, - tax exempt holding company (SOPARFI), - limited partnership, - co-operative |
| Incorporation method | Usual registration with the Luxembourg Companies Register |
| Incorporation time | Approx. 3 weeks |
| Types of assets owned by the holding | - shares, - real estate, - intellectual property etc. |
| Requirment for local bank account (Yes/No) | Yes |
| Residency requirements for the founder(s) | No |
| Advantages | - tax exemptions, - easy to register, - good reputation of Luxembourg, - access to double tax treaties |
| Precautions | Special conditions under the EU Parent-Subsidiary Directive |
| Shareholding structure | At least one shareholder |
| Minimum capital | - EUR12,400 for private companies, - EUR31,000 for public companies |
| Taxation | 21% income tax rate for holdings registered as private and public companies |
| Control | Full foreign control of the parent company |
| Registered agent requirements | No local agent is required, however, such services are available |
| Accounting and reporting | Audited financial statements must be filed no later than 6 months from the end of the financial year |
| Number of double taxation treaties | Approx. 80 |
| Applicable legislation | Commercial Companies Law |
| Availability of various types of holding companies (YES/NO) | Yes |
| Types of Luxembourg holding companies | - financial, - operational, - management, - organizational |
| Documents required for registration | - Articles of Association, - details of the shareholders, - details of the director(s), - proof of registered address, - bank statement regarding the issuance of the share capital |
| Local director required (YES/NO) | No, there is no need to appoint a resident director. |
| Management status (natural person/corporate director) | Both natural persons and corporations are accepted. |
| Uses of a holding company | - share ownership, - intellectual property ownership, - acquisition of various assets, - controlling other companies |
| Access to the EU Parent-Subsidiary Regime (YES/NO) | Yes, as Luxembourg is a member of the European Union. |
| Types of shares it can issue | Registered and bearer shares can be issued. |
| Requirement to appoint an auditor (YES/NO) | Yes, a holding company must appoint a statutory auditor. |
| Special authorization requirement (YES/NO) | Yes, in the case of financial holdings, approval from the Financial Supervisory Commission is required. |
| Access to specialized local workforce (YES/NO) | Yes, Luxembourg offers access to financial professionals. |
| Possibility to operate in other countries (YES/NO) | Yes |
| Requirement to travel to open a holding company (YES/NO) | No, there is no need to travel to Luxembourg to create a holding. |
| Holding company registration support (YES/NO) | Yes, our lawyers in Luxembourg offer such a service. |
Our immigration lawyers in Luxembourg can also give you details about the relocation process if you consider moving to this country after opening a holding company. For immigration to Luxembourg with the purpose of obtaining citizenship, you must be at least 18 years old, have resided in Luxembourg for minimum 10 years and speak all three national languages with ease (French, German and Luxembourgish). You can get in touch with our law firm for detailed information on all conditions.
Forms of the Luxembourg holding company
A Luxembourg holding company can be registered under one of the following entities:
- A private limited liability company, shortly known as SARL, which is the most popular business form in Luxembourg;
- A public limited liability company, also known as SA, which is suitable for large businesses;
- A partnership limited by shares, also known as SCA, which can be set up by at least two members;
- A co-operative, shortly known as SC, which falls under the prospect of the Luxembourg Civil Code.
Most of the times, Luxembourg holdings are registered as SARLs or SAs which imply minimum share capital requirements of EUR12,500 in the case of the SARL, respectively EUR31,000 in the case of the SA.
We also invite you to read more about the holding company in the infographic below:
Types of holding companies in Luxembourg
Luxembourg is known as a reputed financial center not only in Europe, but in the entire world. Holding companies are very popular here, which is why they can take various forms depending on their activities.
The following types of holding companies can be created in Luxembourg:
- operative,
- financial,
- management,
- organizational.
Out of all of these, the financial holding company is the most popular. If you want to create a holding company in Luxembourg, you can request the help of our law firm.
Requirements for setting up a holding company in Luxembourg
As seen above, the holding company in Luxembourg can take the legal forms imposed by the Company Law. However, these have different requirements. Out of all entities, the private limited liability company is the most employed business form for a holding.
When choosing to open a holding company in Luxembourg, the following requirements must be complied with:
- the company must have a trading name which must be reserved with the Trade Register,
- various documents must be prepared, among which the Articles of Association are essential,
- the company must also have a share capital which must be demonstrated through a bank statement,
- the company must have at least one director, however, specific provisions apply,
- the holding must also have a legal address in Luxembourg prior to incorporation.
All the documents for the creation of a holding company must be filed with the Trade Register. These can be drafted and submitted by our lawyers in Luxembourg.
There is no need to move/ travel here in order to open a holding company, however, we can also answer any questions related to immigration to Luxembourg if you choose to relocate here.
Trading name reservation for a holding company
There are several aspects that need to be considered when it comes to the trading name of a holding company in Luxembourg, apart from the usual requisite of being unique (verifications can be made in this sense). Also, the Luxembourg Company Law specifically requires that the name of a holding does not contain or resemble the name of any of the shareholders.
Registered address requirements for a holding
Just like all domestic businesses, a Luxembourg holding company must have a legal address in the Grand Duchy. This can be an office space or any other address, as long as it can receive official letters, documents and other notifications.
It should be noted that foreign holding companies can also operate in Luxembourg through local offices, but they must also appoint local agents who can provide various services. From this point of view, our law firm can act as a registered agent on behalf of holding companies.
Holding company management in Luxembourg
There are two management structures that can be employed when creating a holding company in Luxembourg. These usually depend on the size of the company.
The company can use one director if the business’ share capital is below 500,000 euros or if it has one shareholder. Large companies can use a management board and a supervisory board that must be stated in their Articles of Association. In this case, the board must be made of minimum three members who can also be shareholders.
All the requirements associated with the appointment of company directors can be explained by our Luxembourg lawyers.
If you are interested in immigration to Luxembourg for the purpose of managing a holding company, we can answer your questions.
Share capital requirements for a holding company in Luxembourg
The minimum amount of money required for the creation of a holding company is EUR30,000, however at least 25% of it must be deposited upon the incorporation of the business with the Companies House.
The uses of a holding company in Luxembourg
Luxembourg holding companies can be used for various purposes, among which the most common are:
- for owning shares in one or more companies;
- for owning intellectual property rights;
- for acquiring an inheritance;
- for e-commerce purposes.
Our law firm in Luxembourg can help investors who want to register a holding company here.
The financial holding company in Luxembourg
One of the most employed types of holding companies in Luxembourg is the financial one. Also known as SOPARFI, which is short from Sociéte de Participations Financières, its main use is related to owning and managing shares in other companies known as subsidiaries.
Taxation of the holding company in Luxembourg
The levies a Luxembourg holding company is subject to are:
- the corporate tax at a rate of 21%,
- the contribution to the unemployment fund - 4%,
- the share transcription tax - 0.5%,
- the share registration duty - 0.6%.
Despite the taxes imposed, the holding company can benefit from Luxembourg’s double tax treaties which will significantly reduce the tax burden.
We invite you to watch our video below about holding companies in Luxembourg:
Why open a holding company in Luxembourg
There are many reasons for which local and foreign investors can choose Luxembourg for the creation of a holding company. Apart from having very well-established regulations which will increase businesspersons’ confidence, the Grand Duchy also offers other advantages, among which:
- tax advantages if the holding company qualifies for the participation exemption regime,
- access to a large network of double taxation agreements,
- easy incorporation and corporate bank account opening procedures compared to other European jurisdictions,
- professional workforce in the financial field which is the country’s most important economic sector.
When adding that Luxembourg is an European Union member state and operating from here in other member countries is quite simple, it becomes even more appealing to create a holding company here.
If you are interested in setting up a holding company in Luxembourg, you can contact our local lawyers for assistance through the registration process. You can also rely on our Luxembourg lawyers if you want to establish other types of companies here.
Our immigration lawyers in Luxembourg can help you if you want to move to the country for business purposes.
