How to create a holding company in Luxembourg ?
INTRODUCTION :
First of all, it is important to specify that the fact of setting up a company in Luxembourg does not constitute an abuse of rights.
It is therefore possible to create a company freely in Luxembourg, provided that the rules of substance and the criteria of tax residence for companies are respected.
These rules are set out, in particular, in the tax treaties between Luxembourg and the signatory countries. (See list at bottom of page).
DEFINITION :
The holding company allows a person or a group of natural or legal persons to control a multitude of national and international companies, without appearing as the manager of all the companies in which it holds stakes, most often the majority.
Most of the time, the shareholders of the holding company constitute a portfolio of financial holdings by targeting a set of companies with common activities or interests.
However, it can also diversify its interests into a wide variety of activities.
A company controlled by a holding company is called a subsidiary company.
The different types of holding companies
Holding passives
A passive holding company corresponds to a company whose sole purpose is to manage a portfolio of equity securities.
The role of these entities is limited to behaving as shareholders in the companies in which they hold interests.
A passive holding company has a civil activity since it is limited to managing its movable assets. In principle, this type of holding does not employ any employees.
Holding assets (or mixed)
An active holding company is defined as an entity which, in addition to managing investments, controls its subsidiaries and actively participates in the conduct of the policy of its group (element to be proven; by an assistance agreement for example).
It provides, where applicable, effectively and purely internally, specific administrative, legal, accounting, financial or real estate services.
Active (or mixed) holding companies often include salaried staff when services are provided to group subsidiaries.
The creation steps
1 – The choice of legal form.
The most popular legal forms of holding company in Luxembourg are the Société Anonyme (SA) or the Société Anonyme à Responsibility Limité (SARL).
2 – The administrative formalities to be carried out.
The first step in creating a company is the application for a business permit.
This can be done online or by post to the General Directorate of the Ministry of the Economy.
To obtain the authorization, the manager, director and majority shareholder of the company must meet the legal conditions of professional qualification and integrity for the activity to be carried out.
It is then necessary to block the capital, on a bank account domiciled in Luxembourg and then to have the articles of association drawn up by a notary.
A release certificate is then issued, and registration with the RCS can take place.
3 – The starting capital.
In the case of an LLC: €12,000 minimum capital.
In case of SA: €30,000 minimum capital.
Added to this cost are the costs of publication in the RCS, notary fees and any other administrative costs (about €2,000 in total).
Taxation
The “mother-daughter” regime consists of avoiding double taxation.
In summary, the dividends paid by the subsidiary and coming from profits normally taxed at its level go up in quasi-tax-free status at the level of the parent company which therefore does not pay tax in this respect.
- Raising of cash by exempt distribution of dividends or intra-group cash agreement.
- In the event of the sale of subsidiaries, there is exemption from taxation of capital gains.
- Use of this cash, with leverage, for the creation or acquisition of new subsidiaries.
- Transfer to Luxembourg, to the “development” or “finance” departments.
- Easy access to the financial market for a quotation.
IN CONCLUSION :
This assembly will allow you to win on 3 levels:
1. Throughout the duration of your activity, you will be able to send dividends back to your holding company.
Article 166 of the Luxembourg income tax law taxes income received from French companies at 0%.
2. Afterwards, you can reinvest these dividends from your holding company using Luxembourg as an investment platform. You will then be able to benefit from all the Luxembourg financial and tax advantages.
3. . If you decide to sell your company, it is your holding company that will receive the capital gain because it is your holding company that owns the French company, not yourself. For example, in France, this capital gain would be taxed at 33.36%. In Luxembourg, this capital gain is taxed at 0%.
List of international conventions between Luxembourg and the signatory countries (EU and non-EU): Link