Luxembourg companies are best known for their holding functions rather than being corporations actively engaging in business and commerce.
A typical Luxembourg “Holding Company” is a legal corporation in regards to its tax status which is attractive to foreign investors.
A newly formed Luxembourg corporation must select a unique corporate name which is not similar to other corporations. The corporate name must also end with the initials “AG” or “SA” to designate the particular type of corporation that it is. Also, the corporation’s name cannot be similar to a corporate shareholder.
Luxembourg corporations choosing to be established as a SOPARFI (French acronym for Society of Participating Financiers) can hold and manage funds and assets while being able to lend and borrow money and collect royalty income. There are several tax benefits for this type of legal entity such as:
(a) Income tax exemption from dividends (including upon liquidation);
(b) Capital gains tax exemption on qualifying participations; and
(c) Pay dividends to qualified recipients exempt from withholding tax.
Office Address and Local Agent
Luxembourg corporations must have both a local office and local registered agent in order to receive process server requests and official notices. The corporation can have a main address anywhere in the world.
Directors and Officers
At least one director must be appointed. The director can reside in any country and be a private person or corporate entity.
At least one shareholder is required. The shareholder can reside in any country and be a private person or corporate entity.
Tax exemptions and concessions
Luxembourg does not levy corporate or income taxes on non-resident corporations not doing business within its territory. However, U.S. residents and citizens of countries which levy income taxes on their worldwide income will be subject to their own country’s taxes.
Types of Funds in Luxembourg
Luxembourg is the leading global centre for investment fund for a number of reasons.
(i) Undertakings for collective investments (UCIs)
UCIs are fund dedicated to professional investors and can be set up as:
- specialized investment funds (SIFs)
- common investment funds (FCPs)
- companies with fixed capital (SICAVs)
- companies with variable capital (SICAFs)
- companies with risk capital investments (SICARs)
(ii) Retail funds, which can be open-ended or closed-ended
Both types of retail funds can be marketed to professional and retail investors.
Open-ended fund: The first step to set up an open-ended retail fund is to select the suitable type of company, or better said investment vehicle, and then register it with the Trade Register.
Closed-ended fund: In order to establish a closed-ended retail fund in Luxembourg, one can must choose between the following types of investment companies:
- companies with variable capital
- companies with fixed capital
- common investment funds (FCP)
(iii) Hedge funds
Hedge funds are alternative investment vehicles that rely on capital pooled from different investors and have different strategies for investment. They are managed by a professional management firm and these business structures can be used to invest in broad range of markets.
(iv) Alternative investment funds
These include: Hedge funds, real estate funds, private equity funds, thematic funds (Investing in specific segments such as environment, investing in intangible assets such as patents.
(v) Traditional Investment Fund
These include: equity funds, bond funds, money market funds (MMF), mixed funds, multiple-asset class investment funds
In Mauritius, you can have access to local bonds such as treasury bills and government bonds and international bonds such as sovereign funds, supranational funds and INR-denominated bond with a USD-INR Cross Currency Swap.
We also have structured bonds which are divided into capital protected and non-protected bonds.