On 4 June 2024, the Luxembourg Tax Authorities (LTA) released administrative circular L.I.R. n° 159/2 (the “Circular“), offering important guidance on the issuance of residence certificates to Luxembourg family wealth management companies (société(s) de gestion de patrimoine familial, or “SPF(s)”) governed by the Law of 11 May 2007 (the “SPF Law“). This development is particularly relevant given the unique tax regime applicable to SPFs under Luxembourg law, as described below.

SPFs are specialized entities designed for individuals managing their private wealth. As provided by article 1 of the SPF law, various structures can be chosen from such as a limited liability company (S.à r.l.), a public limited company (“S.A.), a corporate partnership limited by shares (“SCA”), or a cooperative company organized as a public limited company (“SCoSA”), in order to best fit the individual needs. However, SPFs are restricted to the acquisition, holding, management, and realization of financial assets and are expressly prohibited from engaging in any commercial activities.

Under Article 4 of the SPF Law, SPFs benefit from a distinct tax regime, as they are exempt from income tax, municipal business tax, and net wealth tax. Instead, they are subject to an annual subscription tax. However, this favorable tax status has its limitations: SPFs are excluded from the benefits of Luxembourg’s double tax treaties and cannot claim advantages under European Union directives.

Regarding the issuance of residence certificates the Circular confirms that SPFs are considered Luxembourg residents if they meet the conditions set out in Article 159 of the Luxembourg Income Tax Law (L.I.R.). These conditions include (i) being constituted in one of the corporate forms specified in Article 159 L.I.R. and (ii) having their registered office or central administration in Luxembourg.

SPFs must be incorporated as corporate entities, ensuring the first condition is always satisfied. This certificate, issued by the Direct Tax Administration, is necessary for various administrative and legal purposes. When applying for a residence certificate, the SPF must provide:

• The company’s name, tax identification number, and address, as well as the date it adopted the SPF tax status;
• The language in which the certificate should be issued (French, German, or English);
• The reason for requesting the certificate, including a reference to the foreign legislation requiring it.

The tax office may request additional information or documents before issuing the certificate, which will be sent to the company’s registered office.

This new Circular offers essential clarity for SPFs regarding the issuance of residence certificates, helping to streamline compliance with Luxembourg’s tax laws. SPFs and their advisors should be aware of these updates to ensure all requirements are met efficiently.

Please contact us at https://www.cs-avocats.lu/expertise/private-wealth-management/luxembourg-spf-societe-de-gestion-de-patrimoine-familial-services/ for advice, personalized guidance and assistance with the establishment of your SPF.