Question 1

How does Luxembourg's participation exemption work?

Accepted Answer

Luxembourg's participation exemption eliminates corporate tax on dividends and capital gains from qualifying subsidiaries. The conditions are: the parent must hold at least 10% of the subsidiary's capital (or the acquisition cost must be at least €1.2 million), the holding must be maintained for an uninterrupted period of at least 12 months, and the subsidiary must be subject to a tax comparable to Luxembourg's CIT (generally at least 8.5% effective rate) or be an EU-resident company covered by the Parent-Subsidiary Directive. When conditions are met, qualifying dividends and capital gains are fully exempt from Luxembourg corporate income tax and municipal business tax.

Question 2

What is a Luxembourg SPV and when should I use one?

Accepted Answer

A Special Purpose Vehicle (SPV) is a Luxembourg entity — typically a Sàrl or SA — created for a specific transaction or asset-holding purpose. SPVs are commonly used in private equity (to hold portfolio company investments), real estate (to hold property assets across jurisdictions), and structured finance (securitisation vehicles). Luxembourg SPVs benefit from the participation exemption, extensive treaty access, and a well-established legal framework for pledge-over-shares and subordination agreements. Use an SPV when you need a clean, ring-fenced entity for a specific investment or asset class.

Question 3

What are the substance requirements for a Luxembourg company?

Accepted Answer

Luxembourg does not have a single statutory "substance" test, but in practice, tax authorities expect: at least one director resident in Luxembourg (or a professional director), a physical office with a real address, local bank accounts, board meetings held in Luxembourg with documented minutes, and staff or service providers performing the entity's core activities locally. The ATAD general anti-abuse rule and transfer pricing regulations reinforce these expectations. Structures lacking substance risk having their tax benefits denied by Luxembourg or challenged by the tax authorities of other jurisdictions.

Question 4

How does the Luxembourg IP box regime work?

Accepted Answer

Luxembourg's IP box (Article 50ter of the Income Tax Law) provides an 80% exemption on qualifying net IP income, resulting in an effective tax rate of approximately 5.2% (based on the combined 24.94% rate). Qualifying IP includes patents, copyrighted software, utility models, and certain other IP rights — trademarks and domain names are excluded. The regime follows the OECD modified nexus approach, meaning the benefit is proportional to the R&D expenditure undertaken by the taxpayer itself (or outsourced to unrelated parties). It is well-suited for tech companies with genuine R&D activity in Luxembourg.

Question 5

Is Luxembourg suitable for fund structures?

Accepted Answer

Luxembourg is the premier EU jurisdiction for investment funds. It hosts the largest fund industry in Europe and the second largest globally after the US. Key fund vehicles include the UCITS (for retail funds), the RAIF (Reserved Alternative Investment Fund — no CSSF approval needed, managed by an authorised AIFM), the SIF (Specialised Investment Fund), and the SICAR (for venture capital and private equity). The Sàrl, SA, and SCA (limited partnership) are all commonly used as legal forms for these vehicles. Luxembourg's CSSF is a well-regarded regulator, and the country's fund servicing ecosystem (administrators, depositaries, legal counsel) is unmatched in Europe.

Luxembourg

概览

可用的企业结构

Private Limited Liability Company (Sàrl)

费用概览

税务概览

银行开户实况

签证与移民

常见错误

常见问题

获取设立概览 — Luxembourg