Private asset management vehicle
The société de gestion de patrimoine professionnel or SPF was introduced into the Luxembourg legal framwork by a law of 11 May 2007 on the SPF, as further amended by a law of 18 February 2012 (the “SPF Law”).
By introducing the SPF, the Luxembourg legislator aimed at replacing the abrogated 1929 holding company. Therefore, similarly as the former 1929 holding company, the purpose of the SPF is to tailor the specific needs and expectations of private individuals investing in investment-type assets.
Main legal features
Corporate object
The SPF regime applies to all companies whose corporate object is limited to the acquisition, holding and management of financial assets, with the exclusion of any commercial activity. Qualifying assets include cash and assets on deposit, as well as financial instruments, such as shares, bonds, depository certificates, trade receivables, monetary market instruments, futures, options and commodities.
In practice, the SPF allows a broad range of permitted activities and flexibility of business action.
Eligible assets
The SPF Law qualifies the eligible assets in a broad manner, even enabling the SPF to acquire instruments which were excluded for 1929 holding companies, such as options and futures (such investments were in the past sometimes considered as qualifying for a commercial activity, excluded under the law of 1929).
However, the SPF may not grant interest bearing loans to its subsidiaries in which it holds shares, and it is debated whether interest free loans would be acceptable. As such, as the SPF is a commercial company, the granting of interest free financing may in most cases be considered as violating its commercial purpose.
Eligible investors
The SPF is available only to private individuals’ investors, as well as to entities (including trusts, foundations, administratiekantoor, etc.) or intermediaries acting exclusively with a view to managing the private estate of one or several individuals.
A listing of securities issued by an SPF on a stock exchange or the offering of such securities for public placement is specifically excluded.
Corporate form
The SPF may be set up under the following legal forms:
- a joint stock company (SA)
- a limited liability company (Sàrl)
- a partnership limited by shares (SCA)
- a cooperative company organised as a public limited company (CoopSA)
The abbreviation “SPF” must be included in the corporate name of the company and its object must refer to the SPF Law. Where a SPF is incorporated under the form of a joint stock company (SA), it may avoid the publication of the name of its shareholder(s) and the shares may be under the form of bearer shares Such corporate structure provides a great deal of discretion to its shareholder(s).
In practice, The SPF triggers limited costs and formalities (notarized deed of incorporation, trade register filing and publication).
Tax treatment
The SPF is exempt from corporate income tax, municipal business tax, wealth tax and VAT reporting obligations. It is only subject to a flat EUR 75.- registration duty upon incorporation and to an annual subscription tax (taxed’abonnement) of 0.25%, calculated on the aggregate of (i) paid up share capital , (ii) share premium and (iii) indebtedness exceeding 8 times the share capital plus share premium (the thin capitalisation rule is therefore 1 equity to 8 debt). The subscription duty is levied at a minimum amount of EUR 100.- and is capped at EUR 125,000.- per annum.
Being a corporate tax exempt entity, the SPF is usually not considered as being a tax resident for double tax treaty purposes.
The annual subscription tax must be declared on a yearly basis and paid every three-month period to the registration office for succession estates and subscription taxes.
The law of 18 February 2012 amended the regime of perception by the SPF of dividends received from non-resident and non-listed companies. SPFs are no longer restricted by the form and level of taxation of those companies to benefit from the tax exemption.