WELCOME TO OCRA (LUXEMBOURG) S.A.

OCRA Worldwide is a global corporate service provider, established in 1975, operating in more than 20 countries on three continents. Located in this key European financial centre, OCRA Luxembourg has been providing professional services to clients since 1994.

OCRA Luxembourg meets the demands of international businesses and professionals for Luxembourg structures, companies formed in the world's offshore centres, and access to Luxembourg's banking facilities.

The office arranges for the incorporation, administration and domiciliation of all types of Luxembourg corporate entities such as Société Anonyme (trading, holding and mixed trading/holding companies with SOPARFI provisions) and Société à Responsabilité Limitée, which have specific and world-re-known advantages.

We warmly invite your enquiries
We would welcome the opportunity to assist you. Call us direct on +352 224 286 or make contact now for a free explanatory discussion without obligation. For more information about our services, follow the links below.

JOAO FERREIRA
Managing Director

Contact Us

OCRA (Luxembourg) S.A.
Parc d'Activité Syrdall 2
18-20 rue Gabriel Lippmann
L-5365 Munsbach
Grand Duchy of Luxembourg

T: +352 224 286
F: +352 224 287
E: luxembourg@ocra.com

Languages Spoken: English, Dutch, French, German, Portuguese and Spanish

Time in Luxembourg is:

WHY LUXEMBOURG

  • Internationally recognised financial centre
  • Strategic location in Europe with a high standard of living
  • The availability of a qualified multilingual workforce speaking English, French and German
  • Political and social stability
  • Favourable tax treaty agreements with 57 countries
  • Very competitive company taxation at 28.59% which is made up of a corporate tax of 21.00% plus an unemployment surcharge of 0.84% and a municipal business tax of 6.75% (for Luxembourg City).
  • Companies are also subject to a wealth tax of 0.5% of net assets with certain exemptions.
  • No withholding taxes on dividends, paid to EU or double tax treaty resident companies otherwise 15%.
  • No withholding tax on interest and royalties.
  • Lowest VAT rate in Europe at 15%.
  • Very competitive personal tax rates up to a maximum of 38.95%.
  • Very low social security rates of 12% for employees and 13% for employers

ABOUT LUXEMBOURG

OVERVIEW

Lying in the centre of Western Europe between Belgium, France and Germany, the Grand Duchy of Luxembourg covers an area of 2,586km2. It is one of the smallest Countries in Europe, but the countryside varies greatly, from the hilly Ardennes in the North, to a mineral rich and beautiful forest and farmlands in the South.

The Grand Duchy is an independent State and a founder member of the European Union. The location of the Duchy at the heart of the European Community provides easy access to some of Europe’s largest financial and industrial centres, such as Paris, Frankfurt, Köln, Amsterdam, Brussels and Strasbourg.

Traditionally, the country has followed an open economic policy promoting international trade which has attracted foreign capital investment in the Duchy evidenced by a number of significant treaties signed by Luxembourg with its neighbours, such as the Belgian-Luxembourg Union (1921) (implementing common trade between the two countries) and the Benelux economic co-operation treaty (1958) (signed with the Netherlands and Belgium), leading towards more advantageous economical unification.

THE ECONOMY

Luxembourg’s reputation is as a trustworthy political and economic partner. The economic policy of Luxembourg is characterised by the highly professional and dynamic spirit of the country. Historically, the economy has been largely influenced by the steel industry. In the early 1970s the government made significant efforts to diversify the economy in order to avoid the risk of over-reliance on this one industrial sector and diversify and attract foreign multinationals. As a result of this reform, the economy of the country has been growing rapidly and nowadays relies on a much broader broad range of industries such as chemistry, plastics and synthetic materials, mechanics, machine construction, processing of ferrous, non-ferrous metals, supplying parts to the automotive industry, precision instruments, as well as a burgeoning glass industry. All these industries improve the competitiveness of Luxembourg on the international market.

The most significant part of the Grand Duchy’s economy is its flourishing financial sector which comprise of more than 200 banks, 1,900 investment funds and 20,000 holding companies. The largest banks are Dexia-Bil, Fortis BGL, Kredietbank Luxembourg and a subsidiary of Belgian KBC. Luxembourg is considered to be one of the most important financial centres in Europe that offers the entire spectrum of financial services in both corporate and private banking. It is the third largest investment fund centre in the world.

A highly competitive tax regime, strict banking secrecy laws and international business environment have also made Luxembourg one of the leading locations for corporate headquarters and a highly suitable jurisdiction for holding companies. These holding companies are often very advantageous from a structural, administrative, financial and fiscal point of view. Insurance, private pension funds, securitisation and venture capital investment vehicles also represent a large part of the financial sector and as a result have increasingly become a main source of employment.

As a result of its continuous economical growth, Luxembourg residents have very favourable standards of living, with the one of the highest GDP (Gross Domestic Product) per inhabitant (approximately EUR 50 800 per inhabitant) and the highest social welfare per head. There is low inflation, low unemployment and a balanced budget.

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THE GOVERNMENT

The country is a representative democracy in the form of a constitutional monarchy headed by the Grand Duke Henri. The role of the Duke, however, is largely ceremonial. In practice the country is governed by the Cabinet of Ministers who exercise the executive power and by the Parliament which represents the legislative power in Luxembourg. The Cabinet of Ministers includes the Prime Minister, who serves as head of government. The Prime Minister is the leader of the political party or coalition of parties having the most seats in Parliament, known as the Chamber of Deputies. The members of the Chamber of Deputies are elected to a 5-year term. A second body, the Council of State (Conseil d’Etat), is composed of 21 ordinary citizens appointed by the Grand Duke, which advises the Chamber of Deputies in the drafting of legislation. However, the Council’s opinions have no binding effect.

The Grand Duchy is administratively divided into three districts, which are in turn divided into Cantons, Communes and Municipalities. Communes are administrative authorities possessing legal personality and administrating their patrimony. A Communal Council (Conseil Communal) is directly elected by the inhabitants. A Commune is administered by the mayor and the alderman (Collège des bourgmestres et échevins) chosen from the Communal councillors.

LAWS, REGULATIONS AND STANDARDS

The legal system of the Grand Duchy is mainly based on the Roman law. The Luxembourg Constitution provides with the constitutional provisions of the Grand Duchy, the fundamental rights of individual citizens and the organization of public bodies. It is superior to the ordinary law and to executive regulations, which have to be conformed to the Constitution.

The Luxembourg legislation consists of laws, codes and regulations. Many laws are based on French or Belgian legislation. An increasing amount of legislation has its source in European Union regulations, directives and decisions.

The main individually compiled codes are the Civil Code, Commercial Code, Penal Code, Criminal Procedure and Civil Procedure Codes. Current legislation for Luxembourg is first published in the official gazette – Mémorial.

THE PEOPLE

The population of the Grand Duchy is of approximately 449,000. The Luxembourgers are generally fluent in French, German and English in addition to their mother tongue, Luxembourgish. French is frequently used as the administrative and business language, although German and English are also quite common in business circles.

This multilingualism is also a direct result of the relative small size of the country as well as its association with both France and Germany. When going abroad (which literally is not very far) the Luxembourgers have to speak other languages, simply because their own is not understood elsewhere. It is hardly surprising therefore that many Luxembourgers speak several languages. For those wishing to work in the business areas of Luxembourg it is an essential to speak at least one foreign language.

The Luxembourgers are known for their politeness and intelligence. In addition to their multilingual skills the Luxembourg people have other professional qualities such as punctuality, perseverance, practical approach to business and a capacity for work. Cosmopolitanism and diversity of cultures may also be considered to be the main characteristics of the Luxembourgers.

On other hand, Luxembourgers are careful and prudent. They take time before they trust people and approach getting to know you in a deliberate, measured manner, which cannot be rushed.

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BUSINESS PRACTICE AND ETIQUETTE

  • The average working week is from 09am to 6pm.
  • Appointments should be made 1 to 2 weeks in advance and punctuality is highly emphasised.
  • Meetings adhere to strict timetables.
  • In general, the Luxembourg business etiquette is very formal. It is common in Luxembourg business to address partners by their honorific titles, Monsieur or Madame, and their surname.
  • Luxembourgers compartmentalize their business and personal lives.
  • Building a successful relationship with Luxembourg businesses requires a sincere interest in the country and the people.
  • Luxembourgers expect prompt replies to requests for information, price quotes and terms.
  • Foreigners who are fluent in the country’s languages are well respected.
  • Business attire is formal.
  • Greetings are reserved and formal until a relationship has been established. The most common greeting is a brief handshake.
  • This is a hierarchical culture, so it is crucial that you show proper respect and deference to those who have attained positions of importance.

GENERAL

Corporate Income Tax

Corporate income tax applies to all resident companies and to Luxembourg permanent establishments of foreign companies. Resident taxpayers are liable to tax on their world-wide income, unless income is exempted under the provisions of applicable double tax treaties. Non-resident taxpayers are liable to tax only on their Luxembourg sourced income. A company is considered to be a resident tax payer if its place of management is located in Luxembourg.

Corporate income tax includes two taxes applicable to the profits of a company:
- Corporate income tax (l’impôt sur le revenue des collectivités)
- Municipal business tax (l’impôt commercial communal)

Since 1 January 2006, companies incorporated in Luxembourg are subject to progressive corporation income tax (including municipal tax) with rates rising from 0% to a maximum 29.63%.

Withholding Tax

A withholding tax of 15% is levied on dividend payments, unless the double tax treaties provide for lower rates or the Luxembourg participation exemption is applicable (see below). Interest, royalties and liquidation proceeds are not subject to withholding tax.

Net Wealth Tax

Net wealth tax is levied annually on total gross assets reduced by the debts of the companies. The actual net worth tax rate is 0.5%.

Capital Duty

When a company is formed, the subscription of its capital is subject to a duty tax equal to 1% of the capital. The same is true for capital increase, whether in cash, in kind or for share premium.

However, if a company is formed in another European Country and can show that a similar tax has been paid in that country, the Luxembourg duty tax does not apply. This structure is used when a company requires large amounts of capital subscription.

Some transactions are exempt of capital duty in Luxembourg in cases of:

  • Debt or advance by third party (debenture loan issued by the Luxembourg company, other debts)
  • Contribution of the majority of shares of a company having its head office in the EU (>65%) in a Luxembourg holding company
  • Head office transfer (redomiciliation) from an EU member state to Luxembourg, if a similar duty has been past during its incorporation
  • Transformation of a capital company in Luxembourg in Private Assets Management company, Holding 1929, SOPARFI established in Luxembourg
  • Incorporation of reserves or profits carried forward to the capital of a Luxembourg company
  • Other transactions listed in the frame of the merger/split or exchange involving a Luxembourg holding company (Directive 69/335)

Double Tax Treaties

Up until now, Luxembourg has signed bilateral taxation treaties with more than 50 countries. This tax treaties’ network is constantly expanded. For a complete list of the double tax treaties signed by Luxembourg, download the Doing Business in Luxembourg Brochure.

Tax Rate

Tax Rate
Corporate Income Tax 29.63% (Corporation Tax of 22.88% + Municipal business tax on profit of 6.75%)
Withholding Tax
Dividends 15%
Interests & Royalties 0%
Net wealth tax 0.5%
Capital Duty 1%

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HOLDING COMPANIES

There are two types of Luxembourg Holding Companies:

  1. Luxembourg companies qualifying for the participation exemption regime that are usually referred to as SOPARFI (Société de Participation Financière)
  2. Tax-exempt holding companies – 1929 Holding

Both holding companies are not special legal entities. They can be formed as SA, SARL, SCA and even as cooperatives SC (SOPARFI, however, may not take the last form). In practice, the large majority of Luxembourg holding companies are constituted as a SA or a SARL.

Click here to view a comparison between SA and SARL.

SPF – PRIVATE ASSET MANAGEMENT COMPANY

The regime “SPF” can be chosen by a company whose form must be: -- Sárl: capital 12,500 Euro, one associate, one director -- SA: capital 3,000 Euro (including at least 1/4 paid in), at least one shareholder and one director, one auditor -- SCA: capital 31,000 Euro (including at least 1/4 paid in), at least two shareholders and three directors, one auditor -- COOPSA: Co-operative Company having adopted the Form of a Limited company, at least three associates, 3 directors

Advantage: Variable Capital

The shares of a SPF can be nominative or at the bearer but cannot be quoted. The activity is strictly limited to acquisition, detention, management and realisation of financial assets such as: Shares, obligations, shares of quoted companies or private companies, securitisation funds, SOPARFI shares, variable capital companies, Holding 1929 (within the limits of the Law – 19/07/06), deposit accounts, SICAV, Luxembourg or foreign investment funds, structured products, hedge funds, precious metals, options, warrants, indices, currencies, etc to guarantee or make non-bearing interest loan to its subsidiaries.

The SPF cannot carry out commercial deals, hold building, intellectual rights or carry on an activity of management, trade or financial services.

It can obviously hold a subsidiary company which carries out such operations.

Debt

According to the type of company chosen, the “SPF” can issue securities, contract debts with its shareholders, with third parties like banks, natural persons, legal entities or other entities – resident or non-resident. There is no maximum debt equity ratio; the subscription tax is only due on the debts part which exceeds 8 times the increased paid-up capital of the capital premiums.

The shareholders of this SPF must be:

1) Individuals (other than company) resident or non-resident

  • A family group
  • A family office
  • An investment club
  • A group of investors managing their private savings

2) Entities known as managing patrimonial assets, resident or non-resident:

  • Trusts
  • Private foundations
  • Stitching
  • Administratie kantoor
  • Similar entities with or without the legal personality acting within the management individuals’ assets
  • Any type of nominee agreement by intermediaries holding the shares of the SPF as fiduciary (banks acting within a fiduciary contract, mandate)

Fiscal Regime of the "SPF"

Taxation at the Constitution

Contribution Duty of 1% at the constitution with possibilities of exemption:

  • On the part of the debt or the advance towards the shareholders or the third parties – max 8 x the subscribed capital (for subscription tax)
  • When the contribution is the majority of the shares of a company having its registered office in the European Union (>65%)
  • When there is a transfer of registered office from a Member State of the EU towards Luxembourg in so far as a Similar duty was charged at the constitution
  • When there is a change in the form of a Luxembourg Company into a SPF form (Holding 1929, SOPARFI);
  • When there is the incorporation of reserves or deferred results to the capital
  • Taxation of products, benefits, dividends or other profits perceived or carried out by the SPF because of its social object.
  • Total Exemption of income tax, communal tax but exclusion of all tax treaties.
  • Withholding at source on the interests paid on the advances and debts of the SPF towards the individuals:
    • If Luxembourg resident: either final withholding at the source = 10% (see article -- on law RELIBI) – or global taxation
    • If not a Luxembourg resident: final withholding tax at the source = 15% (saving directive)

Withholding Tax at Source

No withholding at source on the interests is to be paid on the advances and debts of the SPF towards the legal entities or other entities.

Wealth Tax

Exemption.

Mother Subsidiary Treaty or Interests Royalties Directive

Exclusion.

Anti-abuse Measure

Interdiction of perception of more than 5% of its dividends coming from non-resident and non-quoted companies (ex EU) whose rate of taxation is lower than 11% (this measure only applies to dividends coming from these companies – so does not apply to capital gains, repurchases of capital stock, profit of liquidation, security lending, etc.).

Withholding at the source on wages paid to employees or directors

According to scales with reduction and exemption following the situation of the Beneficiary.

Withholding at the source on directors’ fees

20%

VAT

No registration possible.

Subscription Tax

Taxable basis = paid-up capital (CL) + capital premium (CP) + debts exceeding 8 times (CL+CP) (existing at January first).

Rate = 0.25% per annum with a minimum of 100 Euro and a maximum of 125,000 Euro.

The tax is payable per quarter (and pro-rata by day for the first and last exercise).

The Profit/Loss or the reserves are not taken into account in this calculation.

Tax on the capital gain realized on SPF’s shares.

Taxation for Luxembourg resident.

Exemption for non-resident person.

Tax on the profit of liquidation.

Taxation for Luxembourg resident.

Exemption for non-resident person.

Control Ad Supervision of the SPF

1. Only the Administration de l’Enregistrement is qualified. This administration is different from the Tax authorities. Control is strictly limited to the respect of the conditions of the SPF Regime. No spontaneous or no information communication can be carried out by this administration except in the event of non-respect of the obligations of the SPF itself.

2. Each year, the domiciliation agent (a chartered accountant, an Auditor) must Certify that:

  • The SPF is held only by qualified investors (the name of these people -- is covered by its professional secrecy and he cannot reveal it)
  • The SPF does not perceive more than 5% of its dividends coming from companies ex EU taxable at less than 11%
  • The SPF respected its obligations as a paying agent following the law “relibi” and the directive on the savings taxation

It is indeed a certificate of non-objection from the paying agent to the attention of the Registry Administration. If this administration does not receive the certificate of non-objection, it informs the Tax Authorities of it and the withdrawal of the benefit of the SPF Regime can be declared (applicable starting from the reception of the registered letter).

3. The SPF must keep a proper account and publish its annual statements once a year, respect the provisions of the company law and the law on Domiciliation of companies if applicable.

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SOPARFI COMPANY

The SOPARFI is on the contrary a normal and fully taxable commercial company and it can perform activities other than holding shares, including commercial, industrial or financial activities. However, the Luxembourg tax code provides SOPARFI for some special tax regime, referred to as the participation exemption. Under this regime, the following tax advantages are available for SOPARFI:

  • Tax exemption on dividends, capital gains and liquidation proceeds
  • Net wealth tax exemption on investments
  • No withholding tax or reduced rates under double tax treaties on distribution of dividends

The conditions, which must be met in order to qualify for the exemption, are summarised below.

Dividends, Capital Gains and Liquidation Proceeds

Dividends, capital gains and liquidation proceeds received by the SOPARFI from any non-resident company are fully exempt from income tax if the following conditions are fulfilled:

  • If SOPARFI owns at least 10% of the share capital of the distributing company or the acquisition cost of the shareholding is at least € 1,2 millions (€ 6 millions for capital gains exemption)
  • The shareholding is held for a straight 12 month period. This period does not need to be completed at the time of the distribution of the dividends if the SOPARFI commits itself to eventually hold the participation for the required period
  • The distributing company must be subject to a tax similar to Luxembourg corporate income tax (atleast 11%); OR
  • The distributing company must be resident in one of the EU member states and covered by the article 2 of the EU Parent-Subsidiary Directive
  • The distributing company is a permanent establishment of a capital company resident in a state with which Luxembourg concluded a tax treaty

Net Wealth Tax

If the participation meets the conditions mentioned above it is also exempt from net wealth tax in Luxembourg.

Withholding Tax

Dividends distributed by the SOPARFI to its shareholder are exempt from withholding tax in Luxembourg if the shareholders himself meets the conditions provided for SOPARFI (see above).

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SICAR COMPANY

The SICAR (Société d’Investissement en Capital à Risque) is a regulated entity whose sole objective is to invest in private equity or risk capital. It can achieve the same results as the Channel Islands and Delaware structures being more effective in jurisdictions such as France or Italy.

A SICAR is fully subject to tax and benefits from Luxembourg’s extensive treaty network. There are no restrictions on the type of investment, payment of dividends or redemption of shares as well as risk diversification.

There is a minimum share capital of €1 million that must be reached within 1 year period after the approval of the SICAR, which may be fixed or variable, but only 5% of it must be actually paid-up. Income from securities and gains from the sale, redemption or liquidation of assets are exempt from tax. Nevertheless, all non-investment income generated by the SICAR is taxable. Instead of the generally applicable 1% capital duty, the SICAR is subject to a maximum fixed duty of €1,250. No wealth tax or annual subscription tax is levied.

Non-resident investors are not subject to tax on capital gains from disposal of shares in the SICAR. Also, no withholding tax is applied on payment of dividends or interest by the SICAR, even in case where no tax treaty applies. Distributions on liquidation procedures are made free of tax.

Due to the high degree of risk, investment is reserved by law to institutional or “well informed” investors.

In accordance with the law, the following investors may be regarded as well-informed:

  • Institutional investors, which under certain guidance would include banks, insurance companies, pension funds, commercial companies, investment funds and certain holding companies
  • Professional investors defined as “a client who possesses the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs”
  • Any other investor who cumulatively a) has confirmed in writing that he adheres to the status of well-informed investor AND b) invests a minimum of Euro 125,000 in the company

The registered office and administration of the SICAR must be located in Luxembourg. Nevertheless, there are no residency restrictions regarding the management function.

Personal Income Tax

Resident taxpayers of Luxembourg are liable to personal income tax on their worldwide income while non-residents are subject to tax on their Luxembourg-source income only.

Luxembourg income tax law takes into account only 8 categories of income for the determination of total taxable income, including income from trading and business, employment, pensions and annuities, capital and investment, rentals and leases and sundry net income.

Personal income tax rates are progressive varying from 0% to 38%. Income taxation is based on the personal situation of the taxpayer (e.g. family status, number of children, etc). Married couples are taxed jointly.

Dividends and interests received by a resident taxpayer from a resident or non-resident company are also subject to progressive income rate. However, a 50% tax exemption can be obtained on dividends received from a taxable resident company, a company resident in an EU Member state or a State that has concluded a tax treaty with Luxembourg.

Capital gains on the sale of the taxpayer’s main residence are tax exempt while the capital gains received from the sale of other real estate are normally taxable at the progressive tax rate. Capital gains from shares and other securities are taxed depending on the holding period (6 months or more) and shareholding percentage.

Under Savings Directive implemented into Luxembourg tax legislation, effective from 1 July 2005 Luxembourg paying agent is required to withhold tax on interest paid to individuals in other EU Member States unless these individuals opt for the exchange of information or provide the paying agent with certificate issued by the tax authorities of their home country.

Effective from 1 January 2006, Luxembourg residents are subject to a 10% withholding tax on interest. This is considered a final tax.

Regular Social Security Contributions

Mandatory social security contributions consist of an employers and an employee’s portion. These contributions cover pension and health insurance. Contributions for pension, illness, accident and health are computed based on the annual gross remuneration of the employee and result in the total of 10.8% for the employee and 11.52% – 16.91% for the employer.

The rate of the social contributions for self-employed individuals is approximately the same as for employers and employee combined.

Inheritance and Gift Taxes

The inheritance tax is calculated based on the market value of the entire net estate of a deceased at the time of his death. The tax rate varies from 0% to 40% depending on the degree of parentage.

Gifts and donations are subject gift tax payable at the rate raging from 1.8% to 14.4%, depending on the relation between the donor and the donee.

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DIFFERENT TYPES OF BUSINESS ENTITIES

  • The Luxembourg corporate legislation defines six forms of entity through which business can be carried out from Luxembourg. Each of these 6 forms has a legal personality distinct from that of its members.
  • The choice of legal form depends on economic and legal considerations (e.g. the extent of members’ liability, the extent to which shares are transferable, etc).
  • No company may adopt a name giving rise to confusion with that of an existing company.
  • The principal forms normally used are:
  • Société en Nom Collectif (SENC), considered to be a partnership, which may be formed by two or more persons all of whom are personally, jointly and indefinitely liable for the partnership’s debts. In principle, shares of an SENC are not normally transferable, though the articles of association may provide for departures from this rule.
  • Société en Commandite Simple (SECS) or limited partnership, which is formed by one or more partners (the “general partners”) who are jointly and indefinitely liable for the partnership’s debts and by one or more “limited partners” whose liability, is limited to their contribution. Both SENC and SECS are not subject to tax in their own name, but to personal income tax which is payable by the partners to the extent of their share in the partnership’s income.
  • Société Anonyme (SA), considered to be the equivalent of the public limited company whose members are liable only to the extent of their contribution in the company’s capital.
  • Société à Responsabilité Limitée (SARL) or the private limited liability company.
  • Société en Commandite par Actions (SCA) or the partnership limited by shares. The SCA is comparable to the limited partnership (SECS), the only difference being that the limited partners’ shares are freely transferable.
  • Société Coopérative (SC) or the cooperative company whose members’ responsibility may be limited by the statutes of the company to a certain amount. Shares of an SC are not transferable to third parties.
  • In practice, the SA and SARL have proved to be the most popular. Click here to review the main features of these two corporate forms presented in a summary table.
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TRADING PERMIT

The Luxembourg constitution of 1868 guarantees to every citizen the freedom of trade and industry, as well as the freedom to establish a business.

However, in the interest of industry and commerce and in order to guarantee the administrative supervision of the business environment of the country, local legislation lays down some specific conditions for access to and exercise of trades and occupations.

Under the law of 28 December 1988, a government permit is required for any industrial or trade activity to be carried out in Luxembourg. The permit is issued by the Ministry of Middle Classes based on the applicant’s professional qualifications and good standing. The permit is strictly personal, and cannot be transferred to other persons. Legal entities, including partnerships, must apply in the same way as physical persons, demonstrating necessary professional qualifications and good standing of the firm’s management.

COMPARE S.A.R.L. TRADING & 1990 SOPARFI

Formation
Legal Form: Société anonyme (SA/NV);
Société à responsabilité limitée (SARL/BVBA)
Minimum Subscribed Capital: €31.000 (SA)
€12.500 (SARL)
Minimum Paid-Up Capital: €7.750 (SA)
€12.500 (SARL)
Number of Shareholders: 2 (SA) (1 if 1 director)
1 to 40 (SARL)
Number of Directors: 3 (SA) (1 if 1 shareholder)
1 (SARL)
Type of Shares: Registered or bearer (SA)
Registered (SARL)
Substance Requirements: Nil
Taxation
Capital Duty: EUR 75
Net Worth Tax: 0.5%
Corporate Income Tax: 29,22% (including 6,75% municipal business tax and 7% solidarity tax)
Double Tax Treaties: 80+
Dividends Exemption: 100%
Holding Requirements: 10% or €1,2M for 1 year;
Resident in a tax treaty jurisdiction
Capital Gains Exemption: Yes
Holding Requirements: 10% or €6M for 1 year
Tax Credit: Yes
Relief of Losses: Carry forward indefinitely
CFC Rules: No
Debt-to-Equity Ratio: 85:15
Withholding Taxes
Dividends: EU Parent Co- 0%2
Treaty Countries Co- 0%2-15%
Others- 15%
Interest: 0%
Royalties: 0%
Liquidation: 0%

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KEY ADVANTAGES

Luxembourg, a traditionally non-Marine nation, has developed a competitive legal framework for shipping companies. Among other minor advantages, the merchant shipping status of Luxembourg offers VAT exemption (EU-wide), an unlimited right of anchorage in EU waters, tax-free storage of fuel, EU flagging, advantages of the financial centre of Luxembourg for ship financing and the following competitive tax regime:

  • The existence of a favourable rate of taxation on profits (29.22%);
  • The existence of favourable depreciation arrangements, i.e. the normal working life of ships should not be greater than ten or twelve years, and;
  • Sliding-scale depreciation must be allowed;
  • A favourable regime that permits carrying forward losses;
  • Profits from the sale of a ship that are reinvested in the purchase of another ship or in the modernization of another ship benefit from exemption of tax;
  • Finally, the Luxembourg shipping company is taxed under the general provisions of the Luxembourg Income Tax Law, and does not benefit from an exempt status. This is of supreme importance in the context of the application of double tax treaties particularly with regard to repatriation of dividends and profits. Tax credit on investment.

WHICH VESSELS CAN BE REGISTERED?

The Luxembourg law allows the registration of all vessels of at least twenty-five tonnes which are, or are intended, to be used on a regular basis for the sea transport of persons or things, for fishing, towing or any other gainful form of shipping activity. The law lays down an age limit of fifteen (15) years for an initial registration.

By derogation from the tonnage limit laid down in the law, passenger ships may be entered in the Luxembourg public shipping register provided that they satisfy the provisions of the 1974 International Convention on the Safety of Life at Sea, as subsequently amended.

Yachts should be over 24 meters (loadline) for registration in the maritime register.

Who is authorised to register a ship?

Those ships that are more than 50% owned by residents of the European Union or by commercial companies that have their registered office in a member state of the Union, and those chartered by such persons or companies, provided that in all such cases all or part of the management of the ship in question is carried out from Luxembourg territory.

TAX REGIME

Rate of Taxation (Corporation Income Tax)

Revenue earned by a Shipping company from the operation of Ships is subject to income tax (Impôt sur les Revenus de Collectivités, IRC) at a rate of 29.22. % plus a 47% of 29.22. % as employment tax (taxe pour l'emploi). Shipping companies are exempted of municipal business tax.

In addition to Corporation Income Tax, a wealth tax is levied at a rate of 0.5% on the net asset value.

There are tax credits for investment made in an establishment located in the Grand-Duchy and intended to remain there permanently and which are physically in evidence on Luxembourg territory and which are other than buildings. On the question of supplementary investment, the law provides for a tax credit equal to 8.4% of the said investment relating to a given operating year.

"Supplementary investment" is taken to be the difference between the book value of the assets in question at the end of the operating year and the arithmetical average of the respective book values of these same assets at the end of five previous financial years. This amount is increased by the depreciation operated on the eligible assets in the year of the investment.

In addition there also exists a further credit granted as a function of the gross investment. This credit (in respect of a given operating year) is fixed at a 4.2% of the acquisition price for that part that does not exceed Euro 150,000 and at 1.4% for the part above Euro 150,000.

Rules Governing Depreciation

Sliding-scale depreciation is permitted. There are two kinds of depreciation which are accepted: linear depreciation and accelerated depreciation.

Linear depreciation: the purchase price of the ship may be depreciated over a minimum period of 12 years OR on the basis of a percentage of the order of 8% of the purchase price.

Accelerated depreciation: it may be adopted at a maximum rate of 24% (three times the linear rate of depreciation) until such time as the amount written off according to this latter method is less than the amount applying under linear depreciation, where after the amount resulting from the application of linear depreciation may be adopted.

Carrying Forward of Losses

A company's trading losses may be carried forward indefinitely. Therefore, losses may be used to offset future profits.

Provisions concerning large-scale repair and maintenance work on ships

Those are fully deductible.

Tax treatment of capital gains on the sale of ships

Tax on capital gains on the re-sale of a ship owned by a Luxembourg company for at least 5 years is deferred (tax deferral) provided the proceeds of the sale are reinvested (within 2 years) in certain classes of fixed assets, e.g. ships, real estate, shares held as participations in either Luxembourg or foreign companies.

Tax treatment of dividends received

Dividends received by a Luxembourg company and distributed by a Luxembourg or foreign subsidiary shall be exempt from tax (privilege of parent companies and subsidiaries) on the following conditions:

  • the participations must have been held since the beginning of the year and for at least twelve months or there must be a compromise to hold them for one year since the date of acquisition;
  • it must represent at least 10% of the capital of the other company, or the acquisition price must have been at least Euro 1,200,000
  • the company paying the dividend must be a Luxembourg resident company which is fully liable to local tax or a non-resident company which is subject to a comparable tax to Luxembourg income tax

In order for the tax rate in question to be "comparable", the Luxembourg tax authorities consider 11% to be the minimum rate of tax.

Tax treatment of capital gains on disposal of participations Capital gains on disposals of participations in companies limited by shares are free of tax on the following conditions: the participations must represent at least 10% of the capital or the acquisition price must have been at least Euro 6 million; the company must hold or commit itself to hold the participation of a minimum of the 10% of the share capital to be sold for a period of at least 12 months; the subsidiary must be a Luxembourg resident company which is fully liable to local tax or a non-resident company subject to a comparable tax to Luxembourg income tax. 15% is the minimum rate required to make the tax comparable.

Value-added Tax (VAT)

Article 43/1 (f) of the 6th EU directive states that services to the shipping industry shall be exempt from VAT. Indeed, Luxembourg, differently to other EU states that have not fully applied the "spirit" of the directive above mentioned, exonerates VAT in advance. In other EU states, such as France, Spain, or Italy, it is very difficult, if not impossible, to get the VAT that has been already paid back. In Belgium, it will take around two years.

Taxation of Seamen/ Social Security

In general, the rate of a seaman's tax is fixed at 10% of 90% of gross earning, plus a lump sum abatement of LUF 35,000 a month (or LUF 1,400 a day throughout the duration of the contract of employment). This flat rate tax is not applicable to seamen who are resident in Luxembourg, but only to non-resident seamen. Social security is in accordance with EU Directive 1408/71 or bilateral agreement or private insurance.

The place of actual management

In general, in order to ensure that a shipping company will be treated as resident in Luxembourg and will thus be granted all the advantages provided for by double taxation agreements, the company in question must actually be managed from Luxembourg, that is to say, the place where the Board of Directors and the Shareholders' AGM actually meet, the place where the accounts are kept and where the company's offices are located and that where the company is actually managed.

Dividends, interest and royalties received by the Luxembourg Company

These various types of income that may be received by a company operating ships engaged in international trade are subject to Luxembourg tax but may also be subject to a limited withholding tax in the country in which they originate. In absence of a double taxation agreement, this withholding tax is likely to be much higher.

Withholding Tax

Luxembourg does not levy any withholding tax on interest. As far as dividends are concerned, the standard rate of withholding tax is 15%. In the case of a participation in the Luxembourg company of at least 25%, the rate of tax varies from 5 to 10% according to the different tax agreements. The dividends paid by a Luxembourg company to its parent company established in another EU member state are no longer subject to any withholding tax if the participation is at least 10% and is held at least for a period of 1 year.

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MORTGAGES

Luxembourg has ratified the 1926 Brussels Convention on Liens and Mortgages. There is only a limited fee for the Register.

Luxembourg law provides effective protection to mortgagees and other holders of liens and/or security interests.

There is no fee for registration of mortgage deeds on ships.

Is parallel registration permitted?

Yes, Bareboating in and out is authorised.

PORT FACILITIES

As a member of the EU, Luxembourg flagged ships benefit from agreements and arrangements concluded by the EU with third countries concerning freight taxes or similar dues.

EXPERTISE & FOCUS

LUXEMBOURG BUSINESS SERVICES

OCRA Worldwide offers effective business solutions for companies and entrepreneurs wishing to establish a presence in one of the world’s leading international financial centres.

The OCRA Worldwide team in Luxembourg has particular expertise that enables Small to Medium Enterprises and Multinationals to gain access to the many opportunities that Luxembourg has to offer, including:

  • Company formation and day-to-day management
  • Physical presence and cubicle operations
  • International tax planning
  • Administration and Business Support Services
  • Preparation of accounting records for Luxembourg companies
  • Audit
  • Tax compliance
  • Business advice and introductions
  • Restructuring of offshore and onshore companies

We would welcome the opportunity to assist you with more information. Call us direct +352 224 286 or make contact now for a free explanatory discussion without obligation:

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LUXEMBOURG COMPANY FORMATION & TAX PLANNING SERVICES

  • Expertise in structuring Luxembourg companies namely 1990 SOPARFI, SPF and trading companies
  • Expertise in setting up EU parent subsidiary directive structures
  • Structuring companies for tax planning purposes in European centres with specific advantages namely United Kingdom, Ireland, Cyprus, Iceland, Malta and Madeira
  • Provision of professional directors and nominee shareholders
  • Company maintenance, administration and company secretarial services
  • In-house accounting and VAT administration services
  • Independent audit services
  • Business advice and introductions

We would welcome the opportunity to assist you with more information. Call us direct +352 224 286 or make contact now for a free explanatory discussion without obligation:

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OFFSHORE COMPANY FORMATION & TAX PLANNING SERVICES

As a group, OCRA Worldwide is located in the world's key fiscal centres with a global team of over 350 legal, accounting and commerce specialists who are fully conversant with international business and tax treaties.

OCRA (Luxembourg) SA are therefore positioned to assist with the establishment of the correct company or trust structure, and can provide a full management service to meet the statutory requirements of the structure. We also undertake the administration of the structure on an ongoing basis.

Our end-to-end service is designed to ensure a robust and comprehensive solution to meet your international tax planning requirements. Our services include:

  • Advice on the selection, establishment and maintenance of company or trust structures, both 'offshore' and onshore.
  • Advice on the establishment and maintenance of foundations
  • Advice to clients seeking to establish or restructure international or offshore operation
  • Advise on market entry into the EU
  • Corporate structuring, financial engineering and tax and VAT planning
  • Assistance with the implementation of trading, investment and other structures
  • Advice on utilising structures domiciled in high tax areas for international tax planning
  • Advice and implementation of business start-ups
  • Advice and implementation of cubicle/physical presence operations
  • Expertise in utilising double tax treaties

We would welcome the opportunity to assist you with more information. Call us direct +352 224 286 or make contact now for a free explanatory discussion without obligation:

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LUXEMBOURG YACHT & MEGA YACHT REGISTRATION SERVICES

Purchasing a yacht is a major acquisition which requires careful planning and consideration. As a dedicated division of OCRA Worldwide, OCRA Marine is positioned to assist at every level.

Our professional services go beyond yacht registration and include ownership structuring that provides for beneficial VAT planning and tax mitigation (and/or deferral). We are also able to arrange for yacht finance and vessel insurance, and will take care of any project management requirements in addition to the day-to-day maintenance and management of the vessel. In short, we take care of all aspects of yacht ownership providing owners with a single and dedicated point of contact for the ongoing management of their vessel.

Our services include:

  • Management & Administration
  • Luxembourg Registration (Also Isle of Man, Madeira, Malta, Mauritius and Seychelles)
  • Tax/Vat & Ownership Solutions
  • Marine Finance
  • Insurance Services
  • Technical Services
  • Crew Solutions
  • Payroll Management
  • Project Management

We would welcome the opportunity to assist you with more information. Call us direct +352 224 286 or make contact now for a free explanatory discussion without obligation:

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MEET THE TEAM

We would welcome the opportunity of being able to assist you with your personal wealth management. Please feel free to contact any of our key team members listed below for a free explanatory discussion without obligation.

Joao Ferreira - MANAGING DIRECTOR

Joao Ferreira is a qualified public accountant in Luxembourg and has a Masters degree in Economics. He is Managing Director of OCRA Luxembourg and is responsible for day to day operations.

T: +352 224 286
F: +352 224 287
E: ferreira@ocra.com
Eveline Karls - SENIOR MANAGER - FIDUCIARY SERVICES

Eveline has been assisting OCRA Worldwide for nineteen years and specialises in the management and administration of Luxembourg and offshore corporate structures.

T: +352 224 286
F: +352 224 287
E: karls@ocra.com

BROCHURES & DOWNLOADS

Download the following PDF documents for reference:

LUXEMBOURG INFORMATION DOWNLOADS

Doing Business in Luxembourg The Luxembourg Trust The Luxembourg Shipping Registry
Luxembourg Sicar Company Pension Funds and Life Assurance Policies
Luxembourg Sopfari Company Luxembourg Securitisation Vehicle
Visit our Offshore Knowledge Base on ocra.com for information on over 90 other key jurisdictions

BROCHURE DOWNLOADS

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Completed Questionnaires and Order Forms should be sent to luxembourg@ocra.com

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Download the relevant questionnaire below if this is the first time you are applying for our services:

Offshore Company Questionnaire Luxembourg Company Questionnaire

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Offshore Company Order Form Luxembourg Company Order Form
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CONTACT US

OCRA (Luxembourg) S.A.
Parc d'Activité Syrdall 2
18-20 rue Gabriel Lippmann
L-5365 Munsbach
Grand Duchy of Luxembourg

T: +352 224 286
F: +352 224 287
E: luxembourg@ocra.com

Languages Spoken: English, Dutch, French, German, Portuguese and Spanish

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Disclaimer: Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. OCRA Worldwide does not accept any responsibility, legal or otherwise, for any errors or omission.