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Newsletter | Articles Luxembourg Unveils New Holding Company Regime The Luxembourg government has launched the Family Private Assets Management Company (or SPF) in a bid to replace its 1929 holding company regime, which was terminated at the beginning of this year. The news comes following a decision by the European Commission (EC) that the 1929 regime, which exempted qualifying companies from corporate income tax, withholding tax on dividend payments and certain other Luxembourg taxes, should be terminated. The commission said the regime, alongside several other structures, violated EC Treaty State Aid rules by granting “unjustified tax advantages” to providers of certain financial services who set up holding structures in Luxembourg. Although the country announced the regime’s end on January 1, 2007, pre-existing publicly listed companies will continue to benefit from it until December 31, 2010. The new vehicles, which are subject to European Commission approval, will be banned from commercial activity and will be limited to private wealth management activity, which includes the holding of shares, bonds and other debt instruments. In order to participate in the new regime a Société à Responsabilité Limitée (SARL) must have a minimum capital level of EUR12,500, one associate, and one director. A Société Anonyme (SA) must have a minimum capital level of EUR31,000 (including at least 25 per cent paid in), at least one shareholder, one director and one auditor. If the SPF, of which shares can be nominative or bearer but may not be quoted, is used to hold voting rights in other companies it must ensure it does not involve itself in the running of them and it is banned from providing any services. It is intended the new vehicle will be exempt from corporate income tax, municipal business tax, net-worth tax and withholding tax on distributions. However, the SPF’s participation in non-resident and non-listed companies located in a country not subject to a roughly equivalent corporate tax regime can affect the tax exemptions. The SPF can also not reap further benefits from tax treaties held between Luxembourg and third countries. Although it has not yet happened, it is expected the EC will approve the new regime. For more information contact Stephen Colderwood.