9 August 2006 |  Print this Article | Share on Facebook | Share on linkedin

1929 Holding companies

The European Commission has announced on 19 July 2006 that the Holding 1929 regime violated EU state aid rules (article 87 EC Treaty) and distorted competition and that the regime must be cancelled by the end of 2010. The Luxembourg government (and more in particular M. Luc Frieden, Minister of Justice) stays confident in his legislation and has taken this opportunity to announce a new tax regime for private asset management that will be launched in the next couple of months.

Under the current holding 1929 regime all income realized by the holding 1929 is not subject to income tax at all. There is only an annual subscription tax of 0,2% on the capital of the holding 1929 and a contribution duty of 1%.

Many companies and individuals have already changed the status of their holding 1929 into the SOPARFI regime which has many fiscal advantages in Luxembourg like the access to double tax treaty network and the mother subsidiairy directive, while holding 1929 companies cannot enjoy these tax advantages.

Nevertheless, all the existing holding 1929 companies that have enjoyed this favourable regime for many years won’t have to reimburse any of the benefits and a grand fathering regime will be granted to them until 31st of December 2010 and will thus leave them enough time to modify their tax regime.

Our law firm has studied a number of alternatives (which are set out here under) in order to reply to investors’ questions, guide them among the choices suggested by this amendment and advice them in the various opportunities offered in the future in order to enjoy similar tax benefits.

• Soparfi;
• Securitisation companies;
• Sicar – capital risk investment companies (we refer to our client memorandum regarding the sicar that you can obtain through our website upon request)

Do not hesitate to contact us for any further details and advices.