There are several choices of business structures available to investors in the Grand Duchy of Luxembourg. They include sole proprietorship, partnership (SENC), limited partnership (SECS), Public Limited Company and limited liability company (SARL) or simplified limited liability company (SARL-S).
Limited liability Company (SARL) and Public limited Company (S.A.) are the two most common legal type of entities in Luxembourg. This brochure focuses on the legal aspect of the SARL and SA.

In Luxembourg, a SOPARFI (Société de participations financières) is a special type of company. It is usually structured as a limited company with the main purpose of controlling other legal entities by acquiring a majority of shares with voting rights in those entities.
A SOPARFI does not enjoy any special tax regime and all commercial activity is subject to corporate income tax and VAT. HOWEVER, by limiting its activity to holding investment, a SOPARFI can significantly reduce its tax burden. Investor can benefit, under well detailed conditions, tax exemptions on dividends and capital gains received.
Choosing the most appropriate business form requires a case-by-case analysis. Our consultants at Harris Corporate Solutions will be happy to advise and accompany you through this crucial first step.

The GDL has a classic tax rate for Europe of 29.22% including:

• Corporate Income Tax (CIT) – 18.00%;
• Solidarity surtax imposed upon CIT amount – 7%;
• Municipal business tax – 6.75%;
• Wealth tax – 0.5% of net assets.

As of the 1 January 2013, a minimum CIT of EUR 3,210 (including the 7% surcharge) is applicable.
HOWEVER, Dividends and capital gains from shareholding realised by the SOPARFI may, under certain conditions, benefit from the participation exemption regime namely if:

• The SOPARFI commits to hold at least ten per cent of the shares in a fully taxable company for a minimum period of one year;
• Or if the acquisition price of the shares was higher than EUR 1.2 million for dividends and EUR 6.0 million for capital gains.

Expenses directly linked to the above exemption are not tax deductible up to the amount of the exempt income.

Prior to the incorporation, the availability of the name chosen should be checked with the Luxembourg trade register. Within two or three days, the Luxembourg trade register will issue a certificate of free denomination confirming the availability of the company name.

Prior to the incorporation the Notary would need:

• For Individual director(s) and shareholder(s): legalized copy of passport and address proof.
• For Corporate director(s) and shareholder(s): legalized corporate document of the incorporating company and the legalized copy of passport of individual(s) entitled to represent this company.
• For Ultimate Beneficial Owner(s): A copy of each owner’s passport and address proof. A resume could be requested.

A detailed organization chart explaining the relationship between the Luxembourg company to be incorporated and the ultimate beneficial owner(s) should be provided.

The Incorporation Deed including its articles of association must be submitted to a notary who will ensure that all legal requirements are met. Such deed and articles of association can be drafted in Luxembourgish, French, German or English. If drafted in English, a Luxembourgish, French or German certified translation shall be enclosed. A certificate stating the names of the ultimate beneficial owner(s) of the corporation is also required.
The Incorporation Deed as well as the articles of association must be registered with the Luxembourg capital duty office and then filed with the Luxembourg trade register by the notary within a month of the incorporation before being published in the Luxembourg official gazette.

The paid-up capital is blocked in a Luxembourg bank account opened under the name of the newly formed company in order to confirm good reception of the funds to the notary. It may be possible to open the bank account abroad as long as the chosen bank is able to provide a “blocking” certificate (certificat de blocage) evidencing the transfer and availability of the incorporation funds.
SARL and SA have different capitalization requirements: A SARL has a minimum of €12,500 of which 100 percent must be paid upon incorporation. SA has a minimum capital requirement of €31,000 of which at least 25% must be paid upon incorporation.
The share capital may be expressed in any foreign currency and is divided into a number of shares, with or without a nominal value.

A company must have a registered office in the GDL through the renting of an office or a domiciliation agreement with a fiduciary company.

Certain professions and trading activity are subject to a business license. However SOPARFIS and holding companies are not subject to any business license.
The SOPARFI is not regulated or supervised by the CSSF or any other supervisory authority.

Verification of the accounts must be entrusted to an auditor or a chartered accountant authorised under Luxembourg law to exercise this profession.

Incorporation in Luxembourg is a straightforward and smooth process. It usually takes 10-15 days once all KYC documents and the bank blocking certificate have been provided.

Tax returns: All companies are required to submit an annual tax return by the 31st of May of the following tax year.
Annual Compliance KYC Review: each SOPARFI should conduct an annual KYC review.