Doing Business in Luxembourg - RSM International

Doing Business in 

Luxembourg

In a world of different 

cultures, it’s good to 

have advisors who are 

consistent everywhere. 

RSM International is one of the largest networks of 

independent audit and consulting firms in the world. 

RSM International is represented in 90 countries and 

brings together the talents of 32,500 individuals. 

RSM member firms are driven by a common vision 

of providing high quality professional services to 

ambitious and growing organisations.

Foreword 

RSM Henri Grisius & Associés is proud to release its first edition of ‘Doing Business in 

Luxembourg’. The aim of this publication is to provide you with a summary of information 

regarding the formalities of doing business in Luxembourg and should be interpreted 

as a general guide. Specific advice should be obtained from appropriate qualified 

professional sources. RSM in Luxembourg can offer you specific advice as well as access 

to knowledge and understanding of local business customs. 

RSM Henri Grisius & Associés and RSM Audit Luxembourg cannot be held liable for any 

business decision taken on the basis of information in this booklet. An electronic version 

of this publication can be downloaded from our website (www.rsm.lu).

Old town, Luxembourg City 

Previous image - Chateau de Vianden, 

north Luxembourg 

Cover image: The Concert Hall, 

Luxembourg City

Contents 

1 About RSM International 6 

2 About RSM Henri Grisius & Associés and RSM Audit Luxembourg 7 

3 Luxembourg at the heart of Europe 8 

4 Starting a business in Luxembourg 11 

5 Working in Luxembourg 13 

Why Luxembourg? 13 

The Luxembourg labour market 14 

6 Setting up a business in Luxembourg 15 

1. Procedure to set up a company 15 

Step 1: Business Permit 16 

Step 2: Incorporation and Registration 16 

Step 3: Registration with the Social Security Institution 16 

Step 4: registration with the tax authorities 16 

2. Types of corporate entities 17 

3. Different investment vehicles 18 

a. Soparfi holding companies 18 

b. Vehicle for managing family wealth 21 

c. Regulated Investment funds: UCITS 22 

d. The fully regulated funds - UCIs Part II 24 

e. SIFs (Specialised Investment Funds) 26 

f. SICARs 28 

g. Securitisation vehicles 30 

h. Other vehicles 30 

4. Recent developments regarding alternative investment funds: AIFMD 31 

7 Audit requirements 37 

8 Taxation in Luxembourg 38 

Exemption for new businesses 39 

Intellectual property rights 39 

Double taxation agreements (tax treaties) 40 

Filing deadline for tax returns 41 

9 Conclusion 42 

10 Relevant websites and further reading 43

1 About RSM International 

RSM International is a worldwide network of independent accounting and consulting 

firms. RSM International and its member firms are separate and independent legal 

entities. RSM International does not itself provide accounting or consultancy services. 

All such services are provided by affiliate members practicing on their own account. 

RSM International is represented by affiliate independent members in 90 countries and 

brings together the talents of over 32,500 individuals in over 700 offices worldwide. 

The network’s total fee income of USD 3.9bn places it amongst the top six international 

accounting organizations worldwide. Affiliate member firms are driven by a common 

vision of providing high quality professional services, both in their domestic markets and 

in serving the international professional service needs of their client base. 

RSM International is a member of the Forum of Firms. The objective of the Forum of 

Firms is to promote consistent and high quality standards of financial and auditing 

practices worldwide. 

RSM International does not itself provide accounting or consultancy services. All 

such services are provided by member firms practicing on their own account. RSM 

International is the 6th largest network of independent accounting and consulting firms 

worldwide, with over 32,500 individuals in over 700 offices in 90 countries. Member 

firms are driven by a common vision of providing high quality professional services, both 

in their domestic markets and in serving the international professional services needs of 

their client base. 

Amphawa 

6 | DOING BUSINESS IN LUXEMBOURG 

Amphawa floating market, Bangkok

2 About RSM Henri Grisius & Associés 

and RSM Audit Luxembourg 

RSM Henri Grisius & Associés is a Luxembourg based firm specializing in tax services, 

accounting, company administration and financial engineering. We help companies 

and their decision makers to optimize the professional and financial development of 

their organizations. RSM Audit Luxembourg, as independent audit practice, provides 

a wide range of audit-related services. We assist international organisations, financial 

sector professionals, local businesses and private individuals with specialist advice, 

whilst also providing a wide range of ongoing accounting and corporate services to 

their Luxembourg entities. 

Clients choose us and stay with us because of the high levels of service we offer. 

When you work with us, you deal with senior people who mobilize integrated teams 

on your behalf to meet your company’s needs, both in Luxembourg and abroad. We 

are the Luxembourg members of RSM International. 

The information and opinions expressed herein are of a general nature and are not 

intended as specific business advice. Readers of this material are recommended to 

seek professional advice before making any business decisions. RSM Henri Grisius & 

Associés and RSM Audit Luxembourg are not responsible for any errors or omissions, 

or for the consequences resulting from the use of the present document, which is 

solely for information purposes. 

All intellectual property rights in relation to any material (including text, photographs 

and other images, trademarks and logos) contained in this brochure are either 

owned by or licensed to RSM International, RSM Henri Grisius & Associés or RSM 

Audit Luxembourg who use this material as part of this brochure. You are not allowed 

to remove or change any copyright, trade mark or other intellectual property right 

notices contained in the original material or from any material copied or printed off 

from the brochure. 

DOING BUSINESS IN LUXEMBOURG | 7

3 Luxembourg in the heart of Europe 

Basic facts 

Situated at the heart of Europe, Luxembourg is the smallest member of the European 

Union and the only Grand Duchy in the world. Independent since 1839, it is a 

constitutional monarchy, governed by Prime Minister Jean-Claude Juncker. The head 

of state is Grand Duke Henri. 

As founding member of the European Union, Luxembourg is a member of all the 

principle international organisations. It combines strategic location and openness 

towards the outside world, with political, economic and social stability with a high 

quality of life. 

With its small territory of just 2.586 square km and a population of 509.000 with 

more than 40% foreigners, Luxembourg has established a highly industrialised 

and an increasingly service-based economy. Among those services, the financial 

services sector stands out and stirs the economy. The success of the financial sector 

is grounded in the social and political stability of the Grand Duchy and in a modern 

legal and regulatory framework that is continuously updated by regular consultation 

between the government, the legislator and the private sector. As a result the biggest 

share of Luxembourg GDP comes from the finance sector. 

At the same time, Luxembourg acts as gateway into Europe for new businesses. 

Many of those operating in leading sectors of the economy such as ICT, e-commerce 

and media-businesses have already settled in this particularly business friendly 

climate. Political stability, good communication infrastructure, state-of-the-art and 

ultra-secure connectivity infrastructure, easy access to other European centres and 

skilled multilingual workforce have helped Luxembourg’s increasingly service-based 

economy to maintain its health. 

Luxembourg Economy 

Luxembourg owes its economic expansion to the steel industry which dominated the 

economy of the country from the beginning of the 20th century until the 1970s. Today, 

the country is still an important player in the world steel market, since the capital 

hosts the seat of Arcelor-Mittal, the number one steel producer in the world. Since the 

1950s, international industrial groups such as Goodyear, Guardian Luxguard, Delphi 

Automotive or DuPont de Nemours have set up business in Luxembourg. 

Lake in Rock City, 


National Park of Adrspachĉ ĉ

Service sector 

Today, Luxembourg is an important media and communications centre, hosting 

the seat of RTL Group, the premier audiovisual group in Europe with 45 television 

channels, 31 radio stations in 11 countries, and SES Global, which, with a fleet of more 

than 40 satellites, is the largest satellite operator in the world. Luxembourg has 

transformed itself into one of Europe’s top locations for ICT infrastructures. 

E-commerce 

Luxembourg was also the first country to define a clear legal framework for electronic 

commerce, a fact which led world leaders such as Amazon, Paypal, eBay and Skype 

to centralise their European business in Luxembourg. Luxembourg offers important 

advantages for global ICT/online organisations doing business in Western Europe. 

Luxembourg has a relatively small home market. So ICT companies coming to 

Luxembourg put in place a pan-European strategy, or at least a multi-country strategy. 

Research and Innovation 

Luxembourg understands that ICT companies, more than most other companies, 

strongly depend on innovation. Consequently, it has been investing about 3 to 4% 

of GDP over the last years to create public and private research institutions and 

development initiatives that foster innovation within 5 strategic technology clusters : 

ICT, Biotechnology, Advanced Materials, Environmental Sustainability and Automotive 

Technologies. 

The Luxembourg financial centre 

The Luxembourg financial centre is known for its strong culture of investor protection. 

Two supervisory authorities – the Commission de Surveillance du Secteur Financier 

(CSSF) and the Commissariat aux Assurances (CAA) – are in charge of the prudential 

supervision of financial and insurance activities respectively. 

Over 140 banks are established in Luxembourg from 24 different countries. Most are 

subsidiaries and branches of large foreign banks. The activities of the financial centre 

has spread progressively wider, firstly to private banking and asset management and 

later to investment funds. A series of niche activities were added over the course of the 

last twenty years so that the Luxembourg financial centre is today broadly diversified. 


The success of the financial sector is based first on a modern legal and regulatory 

framework. Luxembourg has quickly adopted the European Directives on the 

financial sector and as such has created a favourable environment for banking, 

investment funds, insurance, investment activities and finance, private equity, as well 

as securitisation activities. Since the national market is very limited, the legislator has 

opted to create an environment which supports the setting up of tailor made products 

and services for an international clientele. 

Luxembourg is the European leader in the investment fund industry with assets of 

more than 1.3 trillion under management and ranks second after the United States of 

America on a worldwide basis. It is the leading private banking centre in the Eurozone 

and the largest captive reinsurance centre in Europe. 

The financial sector is under the supervision of the “Commission de Surveillance 

du Secteur Financier” (CSSF) which is responsible for the prudential supervision of 

credit institutions, other professionals of the financial sector (PFSs), undertakings for 

collective investment (UCIs), pension funds, SICARs, securitisation vehicles issuing 

securities to the public on a continuous basis, as well as the supervision of the securities 

market. The CSSF regularly complements the legal framework by issuing circulars. 

Through these circulars, the CSSF clarifies the implementation of legal provisions, 

publishes prudential rules relating to specific activities and gives recommendations 

regarding financial activities. 

In addition to accountants, auditors, legal and tax advisers, numerous other financial 

sector professionals carrying on activities related or supplementary to a financial 

sector activity have developed alongside the financial centre itself : domiciliary 

agents, professionals providing company formation and management services, client 

communication agents, administrative agents, IT system operators, which can all fall 

under the supervision of the CSSF. 

10 | DOING BUSINESS IN LUXEMBOURG

4 Starting a business in Luxembourg 

Why Luxembourg to start a business? 

Luxembourg is small, so foreign trade and investment is highly important. The 

Government understands the need to sustain pro-business policies that make trade 

easier, and Luxembourg is therefore one of the most business-friendly environments 

in Europe. 

Some of the key elements of Luxembourg’s attractiveness are: 

• Economic and political stability: even in the midst of the financial crisis, 

Luxembourg maintains fiscal stability and relative strength in productivity and 

growth as compared to other EU countries. 

• Openness and accessibility of government officials and decision-makers: regular 

networking events are organised by and with the government as well as business 

leaders to informally meet with officials who are actively listening for ways to 

facilitate business success within the parameters established by the EU. 

• Minimal bureaucracy: Luxembourg focuses on “business” not “bureaucracy”. 

Processes are streamlined, eliminating as much unnecessary administration 

as possible. For example: legal entity set-up takes only a few weeks with low 

capital and fees. Tax administration and filing procedures are kept simple and 

straightforward – representing the third most straightforward and uncomplicated 

system in the EU (World Bank IFC “Doing Business” Project 2009). 

• Favourable regulatory programs and legal framework: a business-friendly 

regulatory framework has been established to facilitate cross-border trade, foster 

ICT innovation and protect intellectual property. 

• Connectivity to reach more European consumers: Luxembourg qualifies as 

“e-gateway to Europe” (Luxembourg for Business) and boasts an excellent 

state-of-the-art IT infrastructure following significant public and private sector 

investment in the last years. This is driven partly by the established presence of 

leading media, satellite and financial enterprises and the more recent presence 

of leading e-commerce companies that require fast and ultra-secure fiber-optic 

connectivity to all points within Europe. The result is bigger fiber-optic capacity 

and faster secure connections to more key European customers. 



5 Working in Luxembourg 

Why Luxembourg? 

Luxembourg offers many opportunities to an internationally mobile workforce: 

• Internationally recognised financial centre 

• Wide range of career opportunities 

• Stepping stone to an international career 

• Multicultural, multilingual environment 

• High quality working environment 

• Broad range of lifelong training programs 

• Attractive salaries 

• Favourable tax system 

• Excellent social security system 

• Political stability with good labour relations 

Around 48,000 people are employed directly, and another 30,000 indirectly, by the 

financial services industry, of which around 23% are of Luxembourg nationality. The 

remaining 77% are composed of foreign residents in Luxembourg and cross-border 

commuters from neighbouring France, Belgium and Germany. As such, Luxembourg 

is characterised by a highly stimulating multinational and cosmopolitan environment. 

The financial centre is steadily recruiting skilled, multilingual staff. 

Working in the Luxembourg financial centre is a challenging experience and, due to 

the presence of numerous multinational companies, can be the starting point for 

an international career. Most of the major international banks have a branch or a 

subsidiary in Luxembourg. 

In terms of professional training and higher education, Luxembourg is well equipped. 

With a view to promoting continuous training, the Luxembourg School of Finance at 

the University of Luxembourg and the Institute for Training in Banking (IFBL-Institut de 

Formation Bancaire Luxembourg) provide specific training in banking and finance. In 

addition to these, a large number of institutions offering training and higher education 

programmes are present in Luxembourg. 


The Luxembourg labour market 

Luxembourg is politically stable, enjoys a low unemployment rate and has a healthy 

economy. As such, it is a very competitive world player. 

The standard of living is extremely high, reflected in an average income of slightly 

above 3,000 euros per month and a minimum gross salary of over 1,800 euros per 

month. In addition, Luxembourg’s income tax rate for individuals is one of the lowest 

in Europe. The progressive income tax system has a maximum marginal tax rate of 

41.36%. 

All residents in Luxembourg benefit from a comprehensive social security system. It 

covers family benefits, unemployment insurance, work accident insurance, health care, 

old age and disability pensions as well as long-term care insurance. Employees and 

the self-employed are automatically enrolled in their respective state social security 

system and, in the majority of cases, benefits extend to family members, such as the 

spouse, children and other dependent family members in the household. 

Luxembourg offers one of the best qualities of life in Europe. Consistently, it places at 

or among the top in the global quality of life ranking : 

• safest city in the world for personal safety, 

• 2nd best place in the world for lifestyle and facilities for expatriates, 

• 4th city in the world for quality of living. 

(Source : Luxembourg for business) 


6 Setting up a business in Luxembourg 

1. Procedure to set up a company 

Step 1: Business Permit 

A business permit is required for commercial activities, the crafts sector, industrial 

activities, as well as for certain liberal professions. 

The permit is granted to the business (a professional operating in his own name or a 

company) if the person responsible for the management or direction of the business 

satisfies the legal conditions of qualification and professional integrity. 

The business permit requires the existence of a real, permanent establishment in 

Luxembourg (ghost firms, letter-box firms and simple domiciliation are not allowed). 

Who is concerned? 

Business permits are granted to enterprises if the person in charge of running the 

business or the business manager satisfies the legal conditions of qualification and 

professional integrity: 

• A professional acting in his own name if the business is operated by a professional 

natural person; 

• The legal representative (manager or director) of the company or its representative 

if the business operates as a company. 

• A business permit is required for any person who wishes to start up a business as 

a self-employed worker or as a company in the following sectors: 

• Trade (trade, catering, transport, …) 

• Crafts (food, fashion, construction, mechanical engineering, audiovisual, 

art, entertainment …) 

• In food service industry 


Certain liberal professions that are mainly intellectual in character also require a 

business permit: 

• Architects 

• Lawyers 

• Doctors, veterinary surgeons 

• Interior designers 

• Construction and independent engineers 

• Accountants 

• Chartered accountants 

• Registered auditors 

• Surveyors 

• Industrial property consultants 

• Self-employed sales agents 

• Economic advisors 

Step 2: Incorporation and Registration 

Founders of sole proprietorships are not subject to the same administrative formalities 

as those founding companies (drawing up articles of incorporation, passing before 

a notary, etc.). Both of them must however register with Luxembourg’s Trade and 

Companies Register. 

Step 3: Registration with the Social Security Institution 

The holder of a business permit must register with the Joint Social Security Centre 

(CCSS) as a self-employed worker. If they are planning to recruit staff, the business 

must also register as an employer. 

Step 4: Registration with the tax authorities 

Registration for Value Added Tax (VAT) has to be submitted to Luxembourg’s Land 

Registration & Estates Department. For income tax queries, the Luxembourg Inland 

Revenue is responsible. 


Deed of 

incorporation 

2. Types of corporate entities 

Depending on their strategy, investors or business owners will have to define the most 

appropriate vehicle for reaching their goals. In this regard, Luxembourg offers a unique 

concentration of product development experts, lawyers, accountants and structuring 

specialists. 

The company acquires its legal status and existence at the date of the signature of the 

incorporation deed and not at the date of the publication of the articles of association 

in the Mémorial, except for the S.E., which acquires legal personality once registered 

with the Luxembourg Register of Companies. 

Luxembourg law distinguishes between seven different types of commercial companies. 

The six most commonly used types of companies are detailed below. 

Minimum 

number of 

partners / 

shareholders / / 

members 

Société 

anonyme 

SA 

Public Limited 

company 

Société à 

responsabilité 

limitée 

SARL 

Private limited 

liability 

company 

Société 

européeene 

SE 

Partnership 

between EU 

companies 

notarised notarised notarised 

or private 

document 

Société en 

commandite 

simple 

SCS 

Limited 

partnership 

notarised 

or private 

document 

Société en 

commandite 

par actions 

SECA 

Partnership 

limited by 

shares 

Société 

coopérative 

Cooperative 

notarised notarised 

or private 

document 

1 1 1 2 2 7 

Minimum capital EUR 31.000 EUR 12.500 EUR 120.000 / EUR 31.000 / 

Liability of 

partners / 

shareholders / 

members 

limited limited limited unlimited or 

limited 

unlimited or 

limited 

according to 

articles 

Tax treatment opaque opaque opaque tax transparent opaque opaque 

Assignability of 

shares 

free regulated free banned for 

general partner/ 

regulated for 

limited partner 

banned for 

general partner/ 

free for limited 

partner 

banned 


3. Different investment vehicles 

Luxembourg offers a wide range of investment vehicles either non regulated (Soparfi - 

SPF) or regulated (UCITS – FIS - SICARs). 

a. Soparfi holding companies 

In Luxembourg, the most common non-regulated private equity vehicle is commonly 

referred to as “Soparfi”. This type of vehicle, which may carry out holding 

and financing activities, benefits from an efficient tax regime: it has access to 

Luxembourg’s extensive double taxation treaty network (which comprises over 60 

countries) and to the EU Parent-Subsidiary Directive. 

A Soparfi is a fully tax resident Luxembourg company limited by shares. As such, 

it benefits from double tax treaties concluded by Luxembourg. A “Soparfi” can 

be incorporated under the form of a public limited company (société anonyme), a 

private limited liability company (société à responsabilité limitée) or a partnership 

limited by shares (société en commandite par actions). 

The aim of a Soparfi consists in general in the taking of financial participations in 

resident or foreign companies and in the management of these participations. It may 

also carry out commercial activities, provided the required authorisations are obtained. 

Soparfi companies are an attractive vehicle in international group structuring and 

financing operations. 

Soparfi companies are subject to tax according to the following rates : 

Taxation of revenues 

Corporate income tax (CIT) 21.00% 

Contribution to the national employment fund : 1.05% 

Municipal business tax (MBT)* 6.75% 

* for Luxembourg city 


28.80%

Companies are subject to an annual tax of 0,5% calculated on the net wealth of 

the company. Participations benefiting from the participation exemption may be 

eliminated from the tax basis of the net wealth tax. The company may reduce net 

wealth tax by the creation of a book reserve. The maximum reduction of net wealth 

tax amounts to one fifth of the book reserve under the condition that this reserve 

remains in the annual accounts during at least five years. The reduction of the net 

wealth tax may not exceed the amount of the corporate income tax due for the year. 

Soparfi companies are subject to a minimum corporate income tax of EUR 1.500 

per year. The contribution to the employment fund has to be added to this amount, 

bringing the amount to EUR 1.575 per year. 

Dividends received from a qualified participation are tax exempt if the Soparfi holds or 

undertakes to hold the said participation during an uninterrupted period of at least 12 

months, and if, during that period, the participation rate never passes below 10% of the 

share capital of the participation, or the acquisition cost below EUR 1.200.000. 

Expenses related to tax exempt dividends (for example interest on a loan used to finance 

the purchase of the participation) are only tax exempt if they exceed the exempt dividend 

income for a given year. 

Capital gains realized on the sale of a qualified participation are tax exempt if, at the 

day of sale, the seller holds or undertakes to hold the said participation during an 

uninterrupted period of at least 12 months and if, during that period, the participation 

rate never passes below 10% of the share capital of the participation, or the acquisition 

cost below € 6.000.000. 

The exempt amount of the capital gains is reduced by the sum of the expenses related 

to the participation which has been tax deductible over the year of disposal and over the 

previous years. 

Qualified participations are fully taxable resident companies limited by shares, non 

resident companies limited by shares subject to a tax that corresponds to the Luxembourg 

corporate income tax, and companies of an EU member state mentioned in the appendix 

to article 2 of the EEC Directive 90/435 of 23rd July 1990. 

Dividends may also be exempt under the provisions of some double tax treaties. 

Bangkok city skyline 


Dividends paid by a fully taxable Luxembourg company limited by shares are subject to 

a withholding tax of 15%. The withholding tax may be reduced by double tax treaties. 

Dividends paid to: 

• a parent company resident in an EU member state mentioned in the appendix to 

article 2 of the EEC Directive 90/435 of 23rd July 1990; 

• a non-resident capital company subject to a tax that corresponds to the Luxembourg 

corporate income tax and resident in a country with which Luxembourg has 

concluded a double tax treaty ; 

are exempt from withholding tax provided that the parent company holds or undertakes 

to hold, during a period of at least 12 months, a participation in the Luxembourg 

company of at least 10% of the share capital or of an acquisition cost amounting to at 

least € 1.2 million. 

Liquidation proceeds are not subject to withholding tax. 

Luxembourg does not levy any withholding tax on interest payments (except interest 

paid to private persons, who are within the European Savings Directive and if the 

latter is applicable to the interest payment). 

In addition, Luxembourg has also abolished in 2004 the withholding tax on royalty 

payments. 


Traditional Thai boats, Railay Beach, Krabi

. Vehicle for managing family wealth – Société de gestion de Patrimoine Familial (SPF) 

SPF companies are governed by a law of 2007. The SPF legislation replaces the 

1929 holding company legislation, which has been abolished. SPF companies may be 

incorporated under the form of a public limited company (société anonyme), a private 

limited liability company (société à responsabilité limitée), a partnership limited by 

shares (société en commandite par actions) or a cooperative organised under the form 

of a public limited company. 

The SPF is exempt from income tax and net wealth tax. No withholding tax applies to 

interest payments except for interest paid to Luxembourg tax resident individuals 

and individuals who fall within the scope of the European Savings Directive. Dividend 

distributions and liquidation proceeds are not subject to any withholding tax. 

The SPF cannot benefit from most double tax treaties signed by Luxembourg nor from 

the European parent-subsidiary directive (90/435/CEE dated 23 July 1990). 

The SPF is subject to an annual subscription tax (taxe d’abonnement) of 0.25%, calculated 

on the subscribed and paid-up share capital (increased by any share premiums). The 

subscription tax cannot exceed EUR 25,000 and applies to capital only and not to debt. 

The SPF is restricted to the following eligible investors, who have to confirm their 

eligibility status in writing: 

• Individuals acting within the scope of the management of their private wealth 

• Entities acting solely in the interests of the private wealth of one or more individuals; 

• Intermediaries acting on behalf of the above investors. 

The SPF is mostly used to manage a portfolio of transferable securities (e.g. shares, 

bonds, investment funds). The SPF may also acquire participations in other companies 

limited by shares provided that the SPF does not intervene in the management of the 

latter. 

The SPF is an instrument for succession planning and for family wealth management. 

For more information, please refer to the publications available on www.rsm.lu. 


c. Regulated Investment funds: UCITS 

The majority of funds domiciled in Luxembourg are created as UCITS (“Undertakings for 

Collective Investment in Transferable Securities”). The first European Directive on UCITS, 

i.e. European Directive 85/611/EEC dated 20 December 1985, set up a single regulatory 

regime across the European Union for open-ended funds investing in transferable 

securities such as shares and bonds, with a view to defining high levels of investor 

protection. This Directive regulates the organisation, management and oversight of 

such funds, and imposes rules concerning diversification, liquidity and use of leverage. 

Investment funds that fulfill the requirements of the UCITS Directive can be freely 

marketed, under the European passport, throughout the European Union. 

Although UCITS were initially intended only to be marketed across the European Union, 

the UCITS brand is now recognized as the only truly globally distributed investment fund 

product. As a result, an increasing number of asset managers are establishing UCITS 

funds with a clearly defined global distribution strategy. 

Luxembourg has successfully positioned itself as the global leader for cross-border 

distribution of investment funds, with the result that today Luxembourg’s market 

share in cross-border fund distributions amounts to 74.6% on a worldwide basis. The 

first promoters of Luxembourg domiciled funds come from the United States (23%), 

Germany (17%), Switzerland (15%) and the United Kingdom (13%). 

UCITS IV, and more precisely Directive 2009/65/EC, provided the latest amendments to 

the UCITS legislation, which had to be implemented into national law by 1 July 2011. For 

funds created before that date, the simplified prospectus will have to be replaced by the 

Key Investor Information Document at the latest by July 2012. Luxembourg transposed 

the UCITS IV Directive into national law by the Law of 17 December 2010 (“The Law 

of 17 December 2010” or “The Investment Funds Act”) relating to undertakings for 

collective investment. 

Legal form 

A UCITS may take the legal form of a common fund (FCP – fonds commun de placement) 

or may be incorporated as an investment company (SICAV – Société d’investissement à 

capital variable or SICAF – Société d’investissement à capital fixe). The FCP has no legal 

personality and thus must be managed by a management company. The SICAV/SICAF 

can either appoint a management company or designate itself as “self-managed”. 


City of Telč, in central south 

Czech Republic, is a UNESCO 

World Heritage siteĉ 

These different entities may be set up as a single fund or as an umbrella fund 

consisting of multiple compartments, each with a different investment policy. The 

fund and compartments respectively may have an unlimited number of share classes, 

depending on the needs of the investors to whom the fund is distributed. 

All three entities must be open-ended. 

Capital requirements 

The net assets of an FCP may not be less than EUR 1,250,000. This minimum must be 

reached within a period of six months following its authorisation. 

The minimum capital of a self-managed SICAV/SICAF may not be less than EUR 

300,000 at the date of authorisation. The capital of any SICAV/SICAF must reach 

EUR 1,250,000 within a period of six months following its authorisation. 

Authorisation and supervision 

A UCITS fund must be authorized by the CSSF before it can start its activities. UCITS 

funds also require the backing of a strong fund promoter (generally a bank). 

Custodian bank 

For all UCITS funds, the depositary bank must be a Luxembourg based bank. The 

depositary bank needs to be authorized by the competent governmental authorities 

in the context of its establishment but the CSSF requires confirmation that such 

bank is properly equipped to fulfill its duties under the Investment Funds Act. The 

depositary bank has, in the case of an FCP, certain specified functions in order to 

ensure the protection of the unit holders of the scheme. 

Central administration and auditor 

The central administration has to be located in Luxembourg and a Luxembourg 

auditor (“Réviseur d’entreprises agréé”) must be appointed to exercise the 

supervision functions provided by the Investment Funds Act. 


Taxation 

There is no Luxembourg tax payable on income received and capital gains realized 

by a UCITS fund. Schemes of the corporate type have to pay a capital duty which 

has been fixed as a lump sum of EUR 75. UCITS are subject in Luxembourg to an 

annual subscription tax (“taxe d’abonnement”) amounting to 0.05% p.a. of the net 

assets, such tax to be levied quarterly on the basis of the net assets at the end of 

each calendar quarter. A reduced rate of 0.01% p.a. of net assets is applicable to 

subfunds restricted to institutional investors. If investments are made by a collective 

investment scheme in other Luxembourg UCITS no subscription tax will be payable. 

There is no withholding tax on distributions paid by Luxembourg UCITS to investors 

(except if the EU Savings Directive or the Luxembourg final withholding tax on 

interest paid to Luxembourg resident individuals apply). 

Non residents are not subject to capital gains tax on the sale of their holdings in 

corporate UCITS. 

d. The fully regulated funds - UCIs Part II 

Fund promoters wishing to set up a fully regulated investment vehicle under the 

Luxembourg fund legislation can also do so by submitting their fund to Part II of the 

Law of 17 December 2010 governing UCIs which do not qualify as UCITS (hereafter 

“UCIs”. Such regulated UCIs are nevertheless subject to authorisation and ongoing 

supervision by the CSSF and a promoter must be presented to the CSSF for each 

project. Depending on their individual needs, promoters have the choice between 

more strongly regulated investment vehicles (UCITS and Part II UCIs) and more 

lightly regulated ones (SIFs, cf. below). 

Conditions 

A collective investment scheme can qualify as UCI under Part II if: 

• 1) It is closed end, 

• 2) It raises capital without promoting the sale of its shares or units to the public 

within the E.U., 

• 3) It reserves in its constitutional documents the sale of its units or shares to 

the public in non-EU countries, 

• 4) or it pursues investment policies for which the investment restrictions of 

UCITS funds are inappropriate (which would typically be the case for private 

equity vehicles). 


Legal form 

UCIs can be created in contractual or in corporate form. Under both legal forms 

umbrella funds offering segregated sub-funds can be created. Contractual form 

is that of the “fonds commun de placement” or “FCP”, being an unincorporated 

co-ownership of assets managed by a management company in accordance with 

management regulations established by such management company and signed by 

the custodian. Investment management functions can be delegated to professionals 

authorised by the CSSF (which may be located abroad). In the corporate form, UCIs 

are usually created as SICAVs or SICAFs. The SICAV (société d’investissement à 

capital variable - investment company with variable capital) can only be incorporated 

as a public limited company (SA) while the SICAF (société d’investissement à capital 

fixe - investment company with fixed capital) can be incorporated as a public limited 

company (SA), as a partnership limited by shares (SCA) or as a private limited 

company (Sàrl). 


UCIs must be authorized by the CSSF before they can start their activities. UCIs 

funds also require the backing of a strong fund promoter (generally a bank). 

Custodian bank 

For all UCIs, the depositary bank must be a Luxembourg based bank. The depositary 

bank needs to be authorised by the competent governmental authorities in the 

context of its establishment but the CSSF requires confirmation that such bank is 

properly equipped to fulfill its duties under the Investment Funds Act. The depositary 

bank has, in the case of an FCP, certain specified functions in order to ensure the 

protection of the unit holders of the scheme. 

Central administration and auditor 

The central administration has to be located in Luxembourg and a Luxembourg 

auditor (“Réviseur d’entreprises agréé”) must be appointed to exercise the 

supervision functions provided by the Investment Funds Act. 


Taxation 

There is no Luxembourg tax payable on income received and capital gains realized by 

UCIs. Schemes of the corporate type have to pay a capital duty which has been fixed 

as a lump sum of EUR 75. UCIs are subject in Luxembourg to an annual subscription 

tax (“taxe d’abonnement”) amounting to 0.05% p.a. of the net assets, such tax to be 

levied quarterly on the basis of the net assets at the end of each calendar quarter. 

A reduced rate of 0.01% p.a. of net assets is applicable to subfunds restricted to 

institutional investors. If investments are made by a collective investment scheme in 

other Luxembourg UCIs no subscription tax will be payable. There is no withholding 

tax on distributions paid by Luxembourg UCIs to investors (except if the EU Savings 

Directive or the Luxembourg final withholding tax on interest paid to Luxembourg 

resident individuals apply). 


corporate UCIs. 

e. SIFs (Specialised Investment Funds) 

Luxembourg Parliament has voted on 13 February 2007 the law on Specialised 

Investment Funds (SIF). The introduction of the SIF has successfully paved the path 

for a new generation of investment funds for an international, qualified investor 

base. The SIF is a flexible non-UCITS vehicle that is subject to lighter supervision by 

Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF). 

Only well-informed investors are allowed to invest in SIFs. The definition of a wellinformed 

investor is the one comprised in the SICAR Act i.e. institutional investors, 

professional investors as defined in Directive 2004/39/EC of the European Parliament 

and the Council of April 21, 2004 in financial instruments and other investors who 

adhere in writing to the status of well-informed investor and (ii) who invest at least 

EUR 125,000 in a particular SIF or who have been subject to an assessment made by 

a credit institution, an investment firm or a management company certifying their 

expertise, experience and knowledge in adequately appraising an investment in this 

SIF. Well-informed investors now have an appropriate and specific legal framework 

suitable to their particular interests and needs. 


Product possibilities 

The SIF is a regulated entity offering many possibilities in terms of product definition 

and structuring. As vehicles investing in all types of assets can be created under the SIF 

law, both traditional funds (e.g. equity funds, bond funds, money market funds) as well 

as more sophisticated funds (e.g. real estate funds, private equity funds, hedge funds) 

can be launched. 

Similar to other funds, SIFs are required to adhere to the principle of diversification. The 

CSSF has clarified the diversification requirements in Circular CSSF 07/309. 

Legal form 

Large flexibility is granted as to the legal form adopted by a SIF. In contrast to the SICAR 

Act, the SIF Act permits the creation of UCIs of the contractual type (FCP). SIFs may also 

be created in a corporate form (investment companies) with fixed (SICAF) or variable 

(SICAV) capital. The law on SIFs also allows such vehicles to be established under the 

legal forms of a private limited company (Sàrl), a partnership limited by shares (SCA) or 

a cooperative company organised as a public limited company (SCoSA). 


CSSF approval is required before the SIF can start its activities. The promoters do not 

require the approval of the CSSF in order to launch SIFs. 

Custodian bank, central administration and auditor 

For SIFs, the depositary bank must also be a Luxembourg based bank authorised by the 

CSSF. The central administration has to be located in Luxembourg and a Luxembourg 

auditor (“Réviseur d’entreprises agréé”) has to be appointed. 

Taxation 

The SIF is exempt from corporate income tax, municipal business tax and net wealth tax. 

SIFs are subject in Luxembourg to an annual subscription tax (“taxe d’abonnement”) 

amounting to 0.01% p.a. of the net assets, such tax to be levied quarterly on the basis 

of the net assets at the end of each calendar quarter. There is no withholding tax on 

distributions paid by Luxembourg SIFs to investors (except if the EU Savings Directive 

or the Luxembourg final withholding tax on interest paid to Luxembourg resident 

individuals apply). 


corporate UCIs. 

DOING BUSINESS IN LUXEMBOURG | 27 

The Dancing House, Prague

f. SICARs 

The Société d’Investissement en Capital à Risque, SICAR, was created by the law dated 

June 15, 2004 on the investment company in risk capital (the SICAR Act). 

The SICAR is a vehicle reserved for investments in risk capital. As per the SICAR Act, the 

object of a SICAR is to “invest its assets in securities representing risk capital in order 

to provide its investors with the benefit of the result of the management of its assets 

in consideration for the risk which they incur”, where risk capital “is to be understood 

as the direct or indirect contribution of assets to entities in view of their launch, their 

development or their listing on a stock exchange”. The SICAR must fulfill the criteria of 

“high risk” and “intention to develop” the investee companies. 

Due to the high risk associated with the investments made by a SICAR, Luxembourg 

law restricts the access to the SICAR to investors who fully acknowledge the risks 

borne (referred to as “well-informed investors”, “eligible investors” or “qualified 

investors”), as mentioned above in the SIF’s description. 

Legal form 

A SICAR can adopt the form of a limited partnership, a partnership limited by shares, 

a cooperative organized under the form of a public limited company, a limited liability 

company or a public limited company. 

SICARs can have a “multi-compartment” structure with each compartment 

corresponding to a distinct part of its assets and liabilities. 

The SICAR benefits from a very attractive tax regime that depends on the legal form 

under which it has been incorporated. 


CSSF approval is required before the SICAR can start its activities. The promoter and 

the investment manager do not need to get approved by the CSSF. 

Custodian bank, central administration and auditor 

The custodian and the central administration of the SICAR have to be in Luxembourg. 

In addition, the annual accounts of a SICAR have to be audited by an auditor 

(“Réviseur d’entreprises agréé”). 


Giant Buddha in Grand 

Palace, Bangkok

Taxation 

The SICAR (set up as a limited liability company, a public limited company, a 

partnership limited by shares or a cooperative organized under form of a public 

limited company) is subject to income tax on its worldwide income. The SICAR is 

considered as a tax resident corporation but the benefit of tax treaties concluded 

with Luxembourg is not systematic. 

Income derived from transferable securities or capital gains realized at the sale of 

those securities are tax exempt. Losses realized on the sale of transferable securities 

are not tax deductible. The income derived from an investment in liquid assets is tax 

exempt if it is held for a period of maximum 12 months and if it is invested after this 

period in risk capital. All other income, like management fees, is fully taxable. 

The SICAR, set up as a limited partnership, is transparent for tax purposes, which 

means that its partners will be directly taxed on their share in the profit of the 

SICAR. The law exempts the limited partnership from the municipal business tax 

(impôt commercial communal). Thus, foreign partners of the limited partnership will 

not be subject to income tax in Luxembourg as the SICAR established as a limited 

partnership should not have a permanent establishment in Luxembourg. 

The SICAR may not benefit from the tax consolidation. 

The SICAR is not subject to net wealth tax, nor to the subscription tax (taxe 

d’abonnement). As from 1 January 2009, capital contribution duty has been abolished. 

A fixed registration fee of EUR 75 is levied at the incorporation of companies. 

Dividend distributions made by a SICAR are not subject to any withholding tax in 

Luxembourg. 

The capital gains realized by non resident investors at the sale of the shares of the 

SICAR are not taxable in Luxembourg. 

The management services provided to a SICAR are exempt from VAT. 

For more information, full details are available in the publications on www.rsm.lu. 


g. Securitisation vehicles 

The Law of 22 March 2004 enables the creation of securitisation vehicles in the form 

of regulated or unregulated securitisation companies and securitisation funds. These 

vehicles can be used to securitise any type of asset or risk and can be set up as an 

umbrella structure, that is, with segregated compartments enabling the same vehicle 

to be used securely for separate securitisation transactions. The law offers statutory 

protection on a number of standard securitisation issues such as true sale, ring fencing, 

non petition and limited recourse. 

The wide range of securitisation transactions covered by the law and a regime of tax 

neutrality give this investment vehicle additional potential and a correspondingly wide 

range of vehicles have been set up for different types of securitisation. 

For more information, full details are available in the publications available on www.rsm.lu. 

h. Other vehicles 

Pension pooling allows companies operating in several countries to pool their scheme 

assets into a single vehicle, which in turn invests in a diverse range of assets. As the 

pooling vehicle is composed of several asset classes, a number of pools may be created 

to match the varying objectives of pension sponsors. This framework retains the local 

character of pension schemes, allowing them to be offered as local products in their 

country of origin, ensures compliance with local legal or regulatory requirements 

and potentially avoids discriminatory taxation on cross-border contributions to, and 

payments of benefits from, pension schemes. 

Covered bonds: A covered bond (in French: lettre de gage and German: Pfandbrief) is 

a debt security issued by a covered bond issuing bank and guaranteed by a cover pool 

specifically allocated to these securities. The issuance of covered bonds is restricted to 

specialist banks that have been incorporated for this purpose. These banks are subject to 

supervision by the Luxembourg supervisory authority, the CSSF, as well as by an auditor 

specifically appointed to monitor the cover assets of a bank issuing covered bonds. 

Luxembourg based exchange traded funds are cost effective and benefit from a flexible 

legislative framework. Last but not least and due to a growing demand in recent years, 

Luxembourg offers a variety of attractive fund structures in terms of Shariah-compliant 

investment funds, microfinance investment vehicles and SRI vehicles. SRI vehicles 

(Socially Responsible Investment) is a generic term covering ethical investments, 

responsible investments, sustainable investments, and any other investment process 

that combines financial objectives with concerns about environmental, social and 

governance (ESG) issues. 

Further information can be obtained on www.alfi.lu or on www.rsm.lu. 


4. Recent developments regarding alternative investment funds: AIFMD 

In April 2009, the European Commission proposed a Directive on Alternative 

Investment Fund Managers (AIFMD) with the objective to create a comprehensive 

and effective regulatory and supervisory framework for alternative investment fund 

managers at the European level. In November 2010, the Alternative Investment Fund 

Managers Directive (the “AIFMD” or the “Directive”) was adopted. 

The Directive lays down rules for the authorisation, ongoing operations and 

transparency of Alternative Investment Fund Managers (“AIFM”) and also for the 

marketing of AIF. AIFM falling under the scope of the Directive are broadly defined 

as all managers of non-UCITS collective investment schemes which raise capital 

from a number of investors with a view to investing it in accordance with a defined 

investment strategy for the benefit of those investors. AIFMD will clearly impact 

Private Equity Funds, Real Estate Funds and Hedge Funds. 

However, the transposition into Luxembourg law of the AIFMD Directive is not yet 

finalized, and hence the legal framework is not yet defined at the date of publication 

of this brochure. 

Please find a general overview of available structures in the table overleaf. 


General overview of available structures 

SOPARFI SPF PART II FUND SIF SICAR SECURITISATION VEHICLE 

Companies Act (1915) SPF Act (2007) Investment Funds Act, Part II SIF Act (2007) Sicar Act (2004) Securitisation Act (2004) 

Applicable 

Legislation 

No No Yes Yes Yes No, unless issue of 

securities to the public 

more than 3 times a year 

(offers to institutional 

investors and private 

placements do not 

constitute “public offers”) 

Supervision by the 

CSSF 

Unrestricted 

Institutional Investors 

Professional Investors 

Unrestricted Institutional Investors 

Professional Investors 

Well-informed Investors 

Eligible Investors Unrestricted Individuals acting within the 

scope of the management of 

their private wealth 

Well-informed Investors 

Entities acting solely in 

the interests of the private 

wealth of one or more 

individuals; 

Intermediaries acting on 

behalf of the above investors 

Securitisation of risks 

linked to any types 

of assets / No active 

management of the assets 

Unrestricted All types of private equity / 

venture capital investments 

Unrestricted (Subject to CSSF 

prior approval) 

Unrestricted Financial assets only (no 

controlling activity over 

investments) 

Eligible assets / 

strategies 

Securitisation company 

(SA, SCA, Sàrl, SCoSA) 

Corporate Entity (SA, SCA, Sàrl, 

SCoSA) 

SICAV/Fs (SA, Sàrl,SCoSA) 

FCP 

SICAV(SA) 

SICAF (SA,SCA,Sàrl) 

FCP 

Entity Type Any corporate type of entity Corporate Entity (SA, SCA, 

Sàrl, Société Coopérative 

organisée sous forme de 

Société anonyme SCoSA) 

Securitisation Fund 

(organised under the 

contractual form or on a 

fiduciary (trust) basis 

No No Yes Yes Yes Yes 

Segregated Sub- 

Funds

SOPARFI SPF PART II FUND SIF SICAR SECURITISATION VEHICLE 

No depositary required, 

unless securitisation 

vehicle is subject to 

supervision of the CSSF 

Depositary (credit institution) 



Domiciliation and accounting 

agent 

Administrative agent (CSSF 

regulated) 


regulated) 


regulated) 

Domicilation and accounting 

agent. I 

ndependent auditors may be 

required depending on size of 

company and/or number of 

employees (if any) 

“Commissaire aux comptes” 

if SA 

Required service 

providers in 

Luxembourg 

“Commissaire aux comptes” 

if SA 

Administrative agent 

Independent auditor 




Not applicable for 

unregulated securitisation 

vehicles 

Launching of a SICAR is subject 

to prior approval by the CSSF of : 

• articles, prospectus and 

agreements with main service 

providers; 

• directors / managers (must be 

experienced and reputable); 

• choice of depositary and 

auditor 

No offer of securities may be 

made before CSSF approval 

Launching of the SIF is 

subject to prior approval by 

the CSSF of: 

• articles, prospectus and 

agreements with main 

service providers; 

• directors / managers 

(must be experienced and 

reputable); 


auditor 


made before CSSF approval 

Not applicable Not applicable Launching of a UCI is subject to 

prior approval by the CSSF of: 

• articles or management 

regulations, prospectus and 

agreements with main service 

providers: 

• directors / managers (must be 

experienced and reputable); 

• investment manager(s) (if any) 

(must be experienced and 

reputable); 

• eligibility of promoter 

(financial institution with 

sufficient financial means) 


auditor. 


made before CSSF approval. 

Approval process 

by the CSSF 

Fixed capital Fixed capital Fixed or variable capital Fixed or variable capital Fixed or variable capital Fixed capital for 

securitisation companies 

Capital (fixed / 

variable) 

For securitisation 

companies (upon 

incorporation). 

Upon incorporation: SA/SCA: 

EUR 31.000 

Upon incorporation: 


SA/SCA:EUR 31.000 


Minimum Capital 

/ net assets 

requirements 

Sàrl :EUR 12.500 

SA/SCA: EUR 31.000 

For FCPs 

Net assets must reach EUR 

1.25 mio within 12 months from 

authorisation 

For SICAV/Fs 



Sàrl: EUR 12.500 

Subscribed share capital and 

share premium must reach EUR 

1.25 mio within 12 months of 

authorisation. 

For FCPs 

Net assets must reach EUR 

1.25 mio within 6 months from 

authorisation 

For SICAV/Fs 


EUR 300,000 

Subscribed share capital and 

share premium must reach EUR 

1.25 mio within 6 months of 

authorisation. 




Subscribed share capital must 

reach EUR 1 mio within 12 months 

of authorisation 

SCoSA:no requirement 

SCoSA: no requirement 

No requirements for 

securitisation funds 


SOPARFI SPF PART II FUND SIF SICAR Securitisation VEHICULE 

Securitisation funds are 

considered to be investment 

funds. They are subject 

neither to corporate 

income tax nor the annual 

subscription tax (taxe 

d’abonnement) 

SIFs are subject to an annual 

subscription tax (taxe 

d’abonnement) of 0.01% p.a. 

of their net assets 

Part II Funds are subject to an 

annual subscription tax (taxe 

d’abonnement) of 0.05% p.a. 

of their net assets. Classes 

of shares which are reserved 

for institutional investors are 

subject to a subscription tax 

at a reduced rate of 0.01%. 

The SPF is subject to an 

annual subscription tax (taxe 

d’abonnement) of 0.25%, 

calculated on the subscribed 

and paid-up share capital 

(increased by any share 

premiums). The subscription 

tax cannot exceed EUR 

125,000 and applies to capital 

only and not to debt. 

Tax regime SOPARFIs are fully taxable 

companies, subject to an 

aggregate corporation tax 

burden which currently 

amounts to 28.80% for 

companies located in 

Luxembourg City. 

Securitisation companies are 

fully taxable. According to 

the law, any commitments 

of a securitisation company 

owed to the investors and 

other creditors are fully tax 

deductible. In practice, this 

means that securitisation 

companies should not realise 

any taxable profits and hence 

should not actually pay 

income taxes as provided that 

committments are taken to 

distribute any profit to the 

investors. 

Fiscally opaque SICARs (i.e. 

all SICARs except those 

established under the form 

of an SCS) are fully taxable. 

However, they can generally 

avoid any substantial tax 

in Luxembourg as they are 

authorised to exempt from 

their tax base all income and 

capital gains deriving from : 

i)investments in transferable 

securities and ii) temporary 

cash investments pending 

investments in risk capital for 

a maximum period of twelve 

months. 

Unlike SIF-FCPs, SIF-SICAV/ 

Fs should benefit from 

certain double tax treaties. 

Investments may be made 

through fully taxable 

subsidiaries benefiting from 

double tax treaties and the EU 

parent-subsidiary directive 

Unlike FCPs, SICAV/Fs benefit 

from certain double tax 

treaties. Investments may be 

made through fully taxable 

subsidiaries benefitting from 


parent-subsidiary directive. 

The SPF is exempt from 

corporate income tax, 

municipal business tax and 

net worth tax. 

However, SOPARFIs benefit 

under certain conditions from 

exemptions to corporation tax 

for dividends received from 

share-holdings, capital gains 

made on the sale of shareholdings 

and gains made on 

liquidation of companies in 

which shares are held. 


A fixed capital duty of EUR 75 

is payable upon incorporation 

of SICAV/Fs 

Fiscally opaque SICARs may 

in principle claim treaty 

protection and benefit 

from the parent-subsidiary 

directive. However, the 

eligibility of SICARs must be 

reviewed on a case-by-case 

basis depending on the 

jurisdiction of the target 

company. 



of SICAV/Fs. 

SPFs do not benefit from 


parent-subsidiary directive. 


is payable upon incorporation. 


is payable upon incorporation. 

For detailed exemptions 

please refer to Soparfi 

section. 



of securitisation companies. 

SICARs established as an 

SCS are tax transparent and 

the profit share of foreign 

investors investing in these 

SICARs is not subject to any 

tax in Luxembourg. 



of a SICAR.

7 Audit Requirements 

Luxembourg companies and in particular all regulated entities are required to have 

their accounts audited by an independent auditor (“réviseur d’entreprises agréé”). 

Exemptions apply for companies classified as small companies, i.e. at the balance sheet 

date two of the following three limits are not exceeded: 

• ĉaverage number of full-time employees of 50; 

• ĉbalance sheet total EUR 4.4 millions; and 

• ĉturnover of EUR 8.8 millions. 

Small SAs are only required to have their accounts reviewed by a report by a 

“commissaire” or “commissaire aux comptes”, who need not have professional 

qualifications and need not be independent of the company (the Commissaire is indeed 

considered to be an officer of the company). The Commissaire is not required to opine on 

the “true and fair” position of the accounts but rather that the accounts are in accordance 

with the underlying records and the company has complied with Luxembourg rules and 

regulations. Small SARLs do not require such a report. 

As most holding companies have no employees and no turnover (in terms of sales of 

goods or services), an audit is usually not legally required, just a report by a “commissaire 

aux comptes” for SAs. However, for holding companies which are part of a multinational 

group, a full annual audit is generally performed for consolidation purposes, or at the 

request of the ultimate parent, or both. 


Ancient city walls, Grund, 

Luxembourg City 


8 Taxation in Luxembourg 

Luxembourg’s tax rates are at the European average level. Luxembourg-city resident 

companies are subject to corporate tax on their worldwide income at the rate of 

28.80% on their profits. The tax rate is composed of the following elements: 

Corporate income tax (CIT) 21.00% 

Contribution to the national employment fund 1.05% 

Municipal business tax (MBT)* 6.75% 

* for Luxembourg city 

28.80% 

Non resident companies are only subject to corporate income tax on profits made from 

Luxembourg source income. However, a relatively simple tax system and a pragmatic 

tax administration ensure a safe tax environment. 

Personal income tax rates and social security contributions are one of the lowest in 

Europe. Tax rates are progressive with a maximum rate of 41.36% (including a 4% 

surcharge for the employment fund). No wealth tax and no inheritance tax between 

family members and a final 10% tax at source on interest adds to the relatively low tax 

cost for residents. There is also an exemption from capital gains tax for certain types 

of assets. 

Since VAT was introduced in the European Union, Luxembourg has always applied the 

lowest VAT rates. Luxembourg VAT rates are: 3, 6, 12 and 15%. 

A wide array of tax incentives is available in Luxembourg for different kinds of 

investments and activities. The most relevant are the partial corporate income tax 

exemptions for new businesses. 

Other incentives cover, for example, investment in audiovisual production companies, 

corporate investments in certain redeemable assets, the hiring of people who were 

unemployed for more than three months, and sea shipping companies. 

For full details on the tax system in Luxembourg, please refer to the RSM publication 

“Taxation in Luxembourg”, which can be downloaded from our website www.rsm.lu. 


a. Exemption for New Businesses 

New undertakings, or existing undertakings introducing new productions in 

Luxembourg, may benefit from a reduction of their corporate income tax burden 

for eight accounting years. The reduction amounts to 25% of the tax due on profits 

generated by the new undertaking or production. The total eight year reduction is 

capped to a pre-set percentage of the investments allocated to such undertaking or 

production. 

b. Intellectual property rights 

In 2008 Luxembourg instituted a new legal regime for intellectual property (IP) one of 

the most favourable in Europe. The stated goal of the regime is to : 

a) encourage innovation and research and development within Luxembourg, and 

b) stimulate value-added activities by Luxembourg businesses. 

The IP regime in Luxembourg may be of interest to high-tech companies as it 

offers significant tax benefits for IP either created in Luxembourg or acquired by a 

Luxembourg company. 

Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic 

works, and symbols, names, images, and designs used in commerce. 

IP is divided into two categories: Industrial property, which includes inventions 

(patents), trademarks, industrial designs and geographic indications of source; and 

copyright, which includes literary and artistic work such as novels, poems and plays, 

films, musical works, artistic works such as drawings, paintings, photographs and 

sculptures, and architectural designs. Rights related to copyright include those of 

performing artists in their performances, producers of phonograms in their recordings, 

and those of broadcasters in their radio and television programs. 

The IP tax law exempts from income tax 80% of the net income deriving from the right 

of use or the concession for the use of software, patents, trademarks, designs or models 

and also domain names. The net income corresponds to the gross income decreased 

by all expenses (including depreciation), which are in direct economic relation to this 

income. The exemption only applies to IP created/acquired from 2008 at the earliest 

and, in case of acquisition, it needs to have been acquired by a nonaffiliated company. 


A tax payer who has developed and uses the IP within his own activities, is entitled to a 

notional deduction of 80% of the net estimated income, which he would have received if 

he had conceded the use of this right to a third party. In this case, the right to deduction 

starts as of the date of the IP registration request. The notional deduction is only 

available for patents. 

Finally, 80% of the capital gain realized on the sale of IP is exempt from income tax. 

However, the capital gain remains taxable up to 80% of the sum of the negative net 

income generated by the IP during the year of sale and during the previous years. 

Special measures in terms of valuating the IP on the sale exist for small and medium 

companies. 

c. Double taxation agreements (tax treaties) 

Luxembourg has bilateral tax treaties with all EU Member States and with a number of 

other countries. This network of tax treaties is constantly being expanded. The treaties 

are generally based on the OECD model convention. For each category of income, the 

right to levy tax is generally assigned to one contracting state only, while the other 

state exempts that income from taxation, subject to a so-called “progression clause” 

(which generally provides that the tax rate levied by one State on taxable income is 

determined on the basis of the taxpayer’s total income-including income exempt by 

the treaty). 

Luxembourg’s tax treaties generally have the following characteristics: 

• They apply to taxable holding companies that benefit from the participation 

exemption (Soparfi companies); 

• Their application to corporate collective investment companies (SICAVs and 

SICAFs) depends on the wording of the treaty provisions and their interpretation 

by the relevant foreign authorities. Investment funds in the form of an FCP 

may generally not benefit from treaty provisions as an FCP is considered to be 

transparent for tax purposes; 

• Tax exempt SPFs are generally excluded; 

• SICAR and securitisation companies do, from a Luxembourg perspective, benefit 

from double tax treaties. 

• Luxembourg generally applies the exemption method. 


d. Filing deadline for tax returns 

Corporate income tax 

In general the fiscal year coincides with the calendar year unless otherwise provided 

in the articles of incorporation. Tax returns must be filed before 31 May in the year 

following the previous fiscal year end. Extensions to these deadlines may be granted. 

VAT 

Monthly and quarterly reports have to be filed within fifteen days of the period 

under consideration. An annual VAT return has to be filed before 31 May if periodical 

VAT returns are due. Otherwise the annual VAT return has to be filed by 31 March. 

Extensions to these deadlines may be granted. 

Personal income tax 

Tax payers must file annual income tax returns by 31 March for income earned during 

the previous calendar year. Extensions to these deadlines may be granted. 

Withholding taxes 

A withholding tax return must generally be filed and paid by the debtor within 8 days 

from the distribution of the income. 

For more information full details are available in the publications available on www. 

rsm.lu. 


9 Conclusion 

The steel industry dominated Luxembourg’s economy up to the 1970’s. Since then, 

industrial diversification became one of the first Government objectives in its economic 

policy. That fostered the emergence of new industrial sectors including automotive 

and advanced technologies. However, Luxembourg mainly owes its current economic 

health to its evolution towards a service-based economy. Luxembourg became an 

international financial centre thanks to its unique approach contributing to build a 

centre of excellence in the financial sector. 

More than 35,000 companies from all over the world have chosen Luxembourg as 

their base to do business. U.S. firms are among the most prominent foreign investors 

in Luxembourg. Luxembourg hosts 143 banks (source: CSSF, 30 April 2012) among 

them 141 foreign banks have established subsidiaries or branches in Luxembourg. The 

foreign subsidiaries or branches of those banks come from 32 different countries. The 

principal international insurance groups are all present in Luxembourg and make full 

use of the freedom to offer cross-border services to distribute life insurance products 

in the EU. 

Many efforts towards integration and long experience of international competition can 

most probably be considered as assets in an economic environment that is becoming 

ever more international, not to mention global in character. Moreover, the recent 

emergence of the concept of “sustainable development” clearly shows that economic, 

social and environmental issues are closely linked. 

Luxembourg has for the greater part been successful in achieving international 

integration and in implementing structural change, notably through the implementation 

of EU regulations. Its specialisation in promising and high-performance sectors has 

enabled Luxembourg to reinforce the surplus in its current account balance. 

From the beginning of its industrial development, a very small economy in geographical 

terms has no choice but to be open to the outside world, an obligation that imposes 

itself in various areas from access to the factors of production and technology to the 

procurement and sale of goods and services. Throughout its economic development, 

Luxembourg has made major use of foreign capital and workers originating from 

other countries. With one of the most dynamic economies in the world, Luxembourg 

forms an integral part of one of the largest monetary and economic areas in the world. 

Luxembourg also plays a key role in the development of a larger cross-border area 

formed by Luxembourg and neighbouring regions in France, Germany and Belgium. 


10 Sources & websites for further reading 

www.rsm.lu 

www.eubusiness.com 

www.bcc.lu (British Chamber of Commerce for Luxembourg) 

www.alfi.lu (official representative body for the Luxembourg investment fund 

industry) 

www.luxembourgforfinance.lu (agency for the development of the financial sector, 

public-private partnership between the government and the financial industry) 

www.luxembourgforbusiness.lu (trade promotion agency liaising with international 

promotion networks) 

www.impotsdirects.public.lu (Administration des Contributions Directes) 

www.cssf.lu (Commission de Surveillance du Secteur Financier) 

www.commassu.lu (Commissariat aux Assurances) 

www.snci.lu (Société Nationale de Crédit et d’Investissement) 

www.guichet.public.lu (Gateway for accessible official informations) 

www.cc.lu (Chambre de Commerce du Luxembourg) 

www.espace-entreprises.lu (Chambre de Commerce du Luxembourg) 

http://europa.eu (Gateway for European Union) 


Contacts 

RSM Henri Grisius & Associés 

RSM Audit Luxembourg 

6 rue Adolphe 

L-1116 Luxembourg 

BP 908 

L-2019 Luxembourg 

T +352 26 97 97 1 

F + 352 26 97 97 3460 

W www.rsm.lu 

RSM International 

11 Old Jewry 

London 

EC2R 8DU 

T +(0)20 7601 1080 

F +(0)20 7601 1090 

W www.rsmi.com 

RSM Audit Luxembourg 

Pierre Leroy – Partner 

pierre.leroy@rsm.lu 

Raymond Lejoncq - Director 

raymond.lejoncq@rsm.lu 

Kris Fagard – Senior Manager 

kris.fagard@rsm.lu 

Marion Leenaert – Manager 

marion.leenaert@rsm.lu 

RSM Henri Grisius & Associés 

Laurent Heiliger – Managing Partner 

laurent.heiliger@rsm.lu 

Manuel Hack - Partner 

manuel.hack@rsm.lu 

Stéphanie Grisius - Partner 

stephanie.grisius@rsm.lu 

Nathalie Gautier - Director 

nathalie.gautier@rsm.lu 

Francesco Notarangelo - Manager 

francesco.notarangelo@rsm.lu 

Corinne Jamin – Manager 

corinne.jamin@rsm.lu 

Goeffrey Arend – Manager 

geoffrey.arend@rsm.lu

Notes

Notes 

DOING BUSINESS IN LUXEMBOURG Art deco | window, 45 


RSM International Executive Office 

11 Old Jewry 

London 

EC2R 8DU 

United Kingdom 

T: +44 (0)20 7601 1080 

F: +44 (0)20 7601 1090 

E: rsmcommunications@rsmi.com 

www.rsmi.com 

RSM is the brand used by a network of independent accounting and advisory firms each of which practices in its own right. The network 

is not itself a separate legal entity of any description in any jurisdiction. 

The network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) 

whose registered office is at 11 Old Jewry, London EC2R 8DU. 

The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International 

Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug. 

© RSM International Association, 2012

Doing Business in Luxembourg - RSM International

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