Luxembourg is located in Northern Europe. Its official name is “The Grand Duchy of Luxembourg”. It is ranked as one of the world’s wealthiest countries. In addition, Luxembourg is well known for its wine consumption. Famous for its lax taxation and secret bank accounts, Luxembourg is also well known for its UNESCO Heritage designated historic buildings perched on top of majestic mountains and on the edge of cliffs. In addition, stunning medieval castles are sprinkled along its mountainous terrains with fairy tale like settings. Its Moselle wine country is world famous along with spectacular trails along its beautiful micro-gorges of Müllerthal.
Luxembourg Holding Companies are different from corporations with fewer formalities. The Luxembourg Trade and Companies Register govern holding companies. Anybody, regardless of where they live in the world or their nationality, may register a holding company in Luxembourg.
A Luxembourg holding company receives a few benefits including:
• Some Tax Exemptions: A Luxembourg Holding company is exempt from capital gains taxes, net worth taxes, and withholding taxes in most cases. However, they are subject to income taxes.
• Easy Registration: Incorporation of a Luxembourg holding company is relatively efficient and easy.
• One Shareholder: The holding company can be incorporated by one or more investors, who may be resident or non-resident, individuals or legal entities.
• Privacy: A Luxembourg Holding Company offers privacy and confidentiality to both shareholders and directors.
Holding Company Name
Luxembourg holding companies must select a unique name that is not similar to any already existing companies. The company name must also end with the initials “AG” or “SA” to designate the particular type of company that it is. Also, the company name cannot be similar to a company shareholder’s name.
Office Address and Local Agent
Luxembourg holding companies must have a local office and local registered agent in order to receive process server requests and official notices. The company is allowed to have a main address anywhere in the world.
A Luxembourg holding company must have at least one shareholder.
Directors and Officers
A Luxembourg holding company’s management can be conducted in one of two ways:
The company may use a single body, or two bodies (the management board and the supervisory board). If a company decides to use two bodies for management, it must state this in the company statues.
(i) If the company has a single member and one management body, then it can be managed by a single director.
(ii) If the company has two bodies, a single director can still be used as long as the company’s share capital is less than 500,000 Euro.
A Board of Directors is required, however, if the company has more than one shareholder. The Board of Directors must be made up of at least three members, and these members can also be shareholders. The directors are elected by the shareholders at the annual general meeting if the company has a single board or by the supervisory board if the company has two boards. The shareholders can dismiss the Board of Directors at any time.
The minimum share capital for a Luxembourg holding company is EUR 30,000 or the equivalent in another non-euro currency. The minimum paid must be 25% of the total share capital value.
Luxembourg holding companies must pay a Corporate Income Tax rate (also known as a CIT), which is 21%. Furthermore, companies must pay 4% into the government’s unemployment fund. This means that the total CIT usually costs companies 21.84%. Also, the CIT tax is applied to worldwide income.
Luxembourg holding companies do not have to pay capital gains taxes.
Share contributions are charged a 0.6% registration duty and a 0.5% transcription tax.
Other company contributions are charged a 6% registration duty and a 1% transcription tax (4% for Luxembourg City).
The required annual renewal fee for a holding company in Luxembourg is 6.400 CHF.
If a holding company pursues a trade in a commercial manner or the statutes of the company provide for this, then the company will be entered into public record. Otherwise companies will not be entered into the public record.
There is no public disclosure of shareholders.
Accounting and Audit Requirements
Auditing requirements depend on the size of the Luxembourg holding company. If the company is small, it must have a statutory auditor. Medium to large companies must have an independent auditor.
For the small company, a statutory auditor can be one or more private persons or legal entities, and the auditor(s) may or may not be shareholders. Furthermore, these auditors are elected at the general meeting, and may be dismissed at any time. The independent auditor is required to be a member of the Institut des Réviseurs d’Entreprises in Luxembourg.
For the medium to large company, an independent auditor is legally required if the company meets two of the following three criteria:
- The net turnover: exceeds EUR 6.25 million
- The total balance sheet: exceeds EUR 3.125 million
- The average number of employees: exceeds 50
Luxembourg holding companies are required to file taxes annually. Alongside this information, they must also prepare the following:
- A profit and loss balance sheet
- An audit report
- A list of company directors and auditors
- A list of shareholders (denoting those that have not paid their shares in full and what they owe).
- A notice must be published in the Memorial that these documents have been filed with the trade register.
Annual General Meeting
Luxembourg holding companies are required to hold an annual general meeting to review annual accounts. The meeting must occur within six months after the end of the financial year.
Time Required for Incorporation
The estimated time required for incorporation in Luxembourg is one week.
Shelf companies are available in Luxembourg to purchase for faster registration.
A Luxembourg holding company receives a few benefits including: some tax exemptions, easy registration with only one shareholder required, and privacy with shareholders not named in any public records.