What is a Family Wealth Management Company?
The Luxembourg Family Wealth Management company (Société de patrimoine familial or SPF) refers to a special tax regime applicable to companies whose sole purpose
is management of private wealth of individuals. An SPF is the most widely used personal wealth management tool in Luxembourg.
The Purpose of SPF
The corporate purpose of an Luxembourg SPF is limited to acquisition, holding, management and disposal of financial instruments, cash and other types of assets. An SPF may not perform any type of commercial activity. The name of the company should include a designation “SPF”.
An SPF is available only for investors managing their private wealth. Shares of an SPF cannot be used for public placement and cannot be quoted on a stock exchange. Benefits of the SPF regime are not available to corporate investors and they cannot be used within a corporate group.
Eligible Investors within the meaning of the SPF law are:
Individuals managing their private wealth;
Private wealth management entities acting for one or several individuals (trust etc.);
Intermediaries acting on behalf of either of the above;
Intermediaries holding shares in the SPF on a fiduciary basis or in a similar capacity, on behalf of investors who are themselves eligible.
Private wealth management entities usually (but not exclusively), include entities such as trusts, foundations or any other types of entities the purpose of which is management of private wealth of one or more individuals.
Tax Treatment for SPF Companies in Luxembourg
An SPF company in Luxembourg is exempt from corporate income tax, municipal business tax and wealth tax.
It is subject to an annual registration tax (taxe d’abonnement) at the rate of 0.25%, subject to a minimum of 100 EUR and a maximum of 125,000 EUR. The tax base is the amount of the paid-up capital plus any existing share premiums. The portion of debts that exceeds eight times the amount of the paid-up capital and the share premium is also included in the tax base for the registration tax.
Distribution of dividends by an SPF to its shareholders is exempt from withholding tax at source in Luxembourg regardless of tax residency Save of individual shareholder. Dividends paid to Luxembourg shareholders (individuals) will be fully taxed when they are received and may not benefit
from the 50% exemption defined in article 115/15a of the Luxembourg Law on Taxation of Income, given the subjective exemption granted to the SPF.
Interest paid by an SPF on its debts towards individuals are subject either to the final 10% withholding tax for individuals resident in Luxembourg or subject to withholding tax under the provisions of the “Savings Directive” for EU resident individuals.
SPF Tax Supervision in Luxembourg
The tax supervision of the SPF is carried out by the Administration de l’Enregistrement et des Domaines of GD Luxembourg. This audit is limited to checking facts and data concerning the company’s tax status.
If an SPF is found to be in breach of any of the rules on eligible investors and/or investments and/or activities, its special tax status may be suspended.