Company Formation Luxembourg

Transcription

1 Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC., LTD./SARL); Partnership Limited by Shares (SCA); Limited Partnership (LP./ SCS); General Partnership (GP./SNC); European Company, (SE); Branch Office; SOPARFI-Financial Holding Company; Trading and Service Company; Private Asset Management Company (SPF); Securitisation Vehicle (SPV); Company for Intellectual Property Rights (IP-Box); SICAV/SICAF Investment Funds; SICAR Investemnt Company; Specialised Investment Funds (SIF); Real Estate Company; E-Commerce Company The Tax and Legal Aspects of the Formation of a Corporate Structure in Luxembourg Start-up Luxembourg

2 This publication is provided for information purposes only and should not be treated as a substitute for a tax or legal consultation or for the reading of Luxembourg s legislation or public statements. The reader should not act on the basis of the information contained in this publication without having obtained individual, expert advice. In particular, individual advice from tax consultants or lawyers should be sought with regard to the information on the tax treatment of foreign investments. International Advokat Trust Management G.E.I.E accept no liability or responsibility for any damage or loss resulting from the reader s decision made on the basis of the information contained in this publication. 2

3 Legal forms Table of Contents Legal forms Which legal form of company best suits your project? Formation of a Public Limited Company (PLC., Corp./SA) in Luxembourg 11 I. Legal Structure of a Public Limited Company (PLC., Corp./SA) Concept Formation Minimum Capital Shares and the Transfer of Shares Organisation Annual Accounts Liquidation 13 II. Tax Structure of a Public Limited Company (PLC., Corp./SA) Corporate Taxation Net Wealth Tax 14 III. Advantages of forming a Public Limited Company (PLC., Corp./SA) 14 Formation of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg 15 I. Legal Structure of a Limited Liability Company (LLC., Ltd./SARL) Concept Formation Minimum Capital Share Transfer Organisation Annual Accounts Dissolution 17 II. Tax Structure of a Limited Liability Company (LLC., Ltd./SARL) Corporate Taxation Net Wealth Tax 17 3

4 Legal forms III. Advantages of forming a Limited Liability Company (LLC., Ltd./SARL) 18 Formation of a Partnership Limited by Shares (SCA) in Luxembourg 19 I. Legal Structure of a Partnership Limited by Shares (SCA) Concept Formation Minimum Capital Company Name Organisation 20 II. Tax Structure of a Partnership Limited by Shares (SCA) 20 Formation of a Limited Partnership (LP./SCS); in Luxembourg 21 I. Legal Structure of a Limited partnership (LP./SCS) Concept Formation Minimum Capital Company Name 22 II. Tax Structure of a Limited Partnership (LP./SCS) 22 Formation of a General Partnership (GP./SNC) in Luxembourg 23 I. Legal Structure of a General Partnership (GP./Société en nom collectif, SNC) Concept Formation Minimum Capital Company Name 23 II. Tax Structure of a General Partnership (GP./SNC) 24 4

5 Business forms Formation of a European Company (SE) in Luxembourg 25 I. Legal Structure of a European Company (SE) Concept Formation Minimum Capital Company Name Organisation Accounting 26 II. Tax Structure of a European Company (SE) 26 Formation of the Branch Office of Foreign Companies in Luxembourg 27 I. Legal Structure of a Branch Office in Luxembourg Concept Formation Name Representation 28 II. Tax Structure of a Branch Office in Luxembourg 28 Business forms Which tax advantages will your business benefit from? Formation of a SOPARFI-Financial Holding Company in Luxembourg 30 I. Legal Structure of a SOPARFI in Luxembourg Concept Formation 30 II. Tax Advantages of a SOPARFI in Luxembourg Exemption from Tax of Dividends and Sale and Liquidation Proceeds from Investments Deduction of Investment-related Expenses 32 5

6 Business forms 3. Exemption from Net Wealth Tax Exemption from Withholding Tax Double Taxation Agreements (DTA) Value-added Tax (VAT) 33 Formation of a Trading and Service Company in Luxembourg 34 I. Trading and Service Company: Concept 34 II. Formation 34 III. Tax Structure of a Trading and Service Company Corporation Tax Net Wealth Tax Value-Added Tax (VAT) 35 IV. Advantages of forming a Trading and Service Company in Luxembourg 36 Formation of a Private Asset Management Company (SPF) in Luxembourg 37 I. Private Asset Management Company (SPF): Concept 37 II. Legal Structure of a Private Asset Management Company (SPF) Legal Form Formation Activity Supervision 39 III. Tax Advantages of a Private Asset Management Company (SPF) Taxation Tax Exemptions 39 Formation of a Securitisation Vehicle (SPV) in Luxembourg 40 I. Securitisation: Concept 40 II. Legal Structure of a Securitisation Vehicle (SPV) in Luxembourg Formation 40 6

7 Business forms 2. Securitisation Structure Asset Classes (Securitisation Objects) Supervision 42 III. Tax Structure of a Securitisation Vehicle (SPV) in Luxembourg Securitisation Company Securitisation Funds 43 Formation of a Company for Intellectual Property Rights (IP-Box) in Luxembourg 44 I. Luxembourg s Tax Regime (IP-Box) 44 II. Intellectual Property Rights (IP) in Luxembourg 44 III. IP-Companies in Luxembourg: Tax Optimisation Instrument 45 IV. Further Tax Advantages in Luxembourg Tax Exemptions Further Advantages 46 Formation of a SICAV/SICAF Investment Fund in Luxembourg 47 I. Legal Structure of a SICAV/SICAF Investment Fund in Luxembourg Concept Investment Policy Investors Formation Investment and Distribution Policy Supervision 49 II. Tax Structure of a SICAV/SICAF Investment Fund in Luxembourg Corporate Taxation Tax Exemptions 49 Formation of a SICAR Investment Company in Luxembourg 50 I. Legal Structure of a SICAR Investment Company in Luxembourg Concept 50 7

8 Business forms 2. Investment Policy Investors Formation Issuance and Distributions Policy Supervision 52 II. Tax Structure of a SICAR Investment Company in Luxembourg Corporate Taxation Tax Exemptions 53 Formation of Specialised Investment Funds (SIF) in Luxembourg 54 I. Legal Structure of a Specialised Investment Fund (SIF) in Luxembourg Concept Investment Policy Investor Formation Issuance and Distributions Policy Supervision 56 II. Tax Structure of a Specialised Investment Fund (SIF) in Luxembourg Corporate Taxation Tax Exemptions 57 Formation of a Real Estate Company in Luxembourg 58 I. Real Estate Company in Luxembourg: Concept 58 II. Tax Aspects The Taxation of Income from the Sale of Real Estate The Taxation of Gains on the Sale of Shares Two-tier Company Structure 59 8

9 Business forms Formation of a E-Commerce Company in Luxembourg 60 I. E-Commerce Luxembourg: Concept 60 II. Tax Aspects of Direct E-Commerce The Taxation of Direct E-Commerce Services Taxation of Direct E-Commerce Services in Luxembourg 63 Questions on Company Formation in Luxembourg? 64 9

10 Legal forms Legal forms Which legal form of company best suits your project? Public Limited Company (PLC., Corp./SA) Limited Liability Company (LLC., Ltd./SARL) Partnership Limited by Shares (SCA) Limited Partnership (LP./SCS) General Partnership (GP./SNC) European Company, (SE) Branch Office 10

11 Legal form: Public Limited Company (PLC., Corp.) Formation of a Public Limited Company (PLC., Corp./SA) in Luxembourg I. Legal Structure of a Public Limited Company (PLC., Corp./SA) 1. Concept The Public Limited Company (PLC., Corp./SA) in Luxembourg is a legal person whose capital is determined in advance and segmented into shares. The assets of a Public Limited Company (PLC., Corp./SA) are wholly liable for the company s liabilities. A Public Limited Company (PLC., Corp./SA) in Luxembourg may be formed for the carrying on of commercial or non-commercial purposes. Moreover, registered shares as well as bearer shares may be issued. 2. Formation A Public Limited Company (PLC., Corp./SA) in Luxembourg is formed through the recording of the articles of association by a notary. Its articles of association will subsequently be published in the Official Bulletin (Mémorial C) and lodged with Luxembourg s Trade and Companies Register. At least one natural or legal person is required for the said formation. The person may be of any nationality and is not required to be resident in Luxembourg. 3. Minimum Capital The minimum capital of a Public Limited Company (PLC., Corp./SA) in Luxembourg is 31,000 EUR. This requires to be contributed in full in the form of a cash or non-cash contribution. Non-cash contributions are independently valued by an auditor. When a Public Limited company (PLC., Corp./SA) is formed, at least 25% of the nominal value of every share requires to be paid up. Notwithstanding this, bearer shares will only be issued once the complete capital contribution is made. 11

12 Legal form: Public Limited Company (PLC., Corp.) 4. Shares and the Transfer of Shares Bearer shares in a Public Limited Company (PLC., Corp./SA) are transferred through the agreement and transfer of the bearer securities. However, the transfer of registered shares is only effective on a Public Limited Company (PLC., Corp./SA) in Luxembourg if either a transfer statement dated and signed by both the transferor and the transferee is present in the Register of Registered Shares or if the Public Limited Company (PLC., Corp./SA) has been notified of the transfer or if the said transfer has been accepted by the Public Limited Company (PLC., Corp./SA) in the form of a notarial deed. 5. Organisation 5.1. General Meeting The general meeting of the shareholders is the supreme authority of a Public Limited Company (PLC., Corp./SA) in Luxembourg. It is authorised to make all decisions relating to the Public Limited Company (PLC., Corp./SA) including the appointment of the board of directors. The ordinary general meeting must be convened annually at the date prescribed in the articles of association. Furthermore, the board of directors as well as the auditor of a Public Limited Company (PLC., Corp./SA) in Luxembourg can convene an extraordinary general meeting. The said meeting shall appoint the board of directors of the Public Limited Company (PLC., Corp./SA) Board of Directors The board of directors is responsible for the management and representation of a Public Limited Company (PLC., Corp./SA). It must consist of at least one member (director). However, if a Public Limited Company (PLC., Corp./SA) has more than one shareholder, the board of directors must consist of at least three members (directors). The said members (directors) may be natural or legal persons resident in or outwith Luxembourg. Moreover, it is not required that the members of the board of directors be shareholders of the Public Limited Company (PLC., Corp./SA) Appointment of an Auditor A Public Limited Company may appoint one or more commissaire to supervise the Public Limited Company (PLC., Corp./SA), who may be shareholders or 12

13 Legal form: Public Limited Company (PLC., Corp.) non-shareholders, if the following upper limits are not exceeded: a balance sheet total of 6.25 million EUR, net turnover of 6.25 million EUR as well as having an average number of 50 full-time posts. Where these upper limits are exceeded, an independent auditor must be appointed to inspect the books. 6. Annual Accounts The annual accounts of a Public Limited Company in Luxembourg (PLC., Corp./ SA) consist of the balance sheet, the profit and loss account and the notes thereto. Following their approval, the annual accounts will be lodged with Luxembourg s Trade and Companies Register and published in the Official Bulletin (Mémorial C). 7. Liquidation If 75% of the share capital of a Public Limited Company (PLC., Corp./SA) in Luxembourg has been lost and 25% of the votes cast at the general meeting are in favour of liquidation, the company shall enter into liquidation. II. Tax Structure of a Public Limited Company (PLC., Corp./SA) 1. Corporate Taxation Since January 1st, 2013, all Public Limited Companies (PLC., Corp./SA) in Luxembourg have been subject to corporate taxation at a rate of 29.22%. This said rate consists of the following components: corporate income tax at a rate of 21% on income exceeding 15,000 EUR (or a rate of 20% for income not exceeding 15,000 EUR); the solidarity surtax at a rate of 7% as well as the municipal business tax at a rate of 6.75%. All Public Limited Companies (PLC., Corp./SA) resident in Luxembourg which do not require a trade licence and whose assets, securities and bank balance together exceed 90% of its balance sheet total are required to pay only the minimum corporate taxation of 3,210 EUR (3,000 EUR plus the 7% solidarity surtax). 13

14 Legal form: Public Limited Company (PLC., Corp.) Furthermore, Public Limited Companies (PLC., Corp./SA) in Luxembourg are liable to withholding tax at a rate of 15% on their dividend distributions. In contrast thereto, royalty and interest payments as well as proceeds from liquidation or partial liquidation are tax-free. 2. Net Wealth Tax Public Limited Companies (PLC., Corp./SA) in Luxembourg are further subject to a net wealth tax at a rate of 0.5%. Public Limited Companies (PLC., Corp./SA) resident in Luxembourg are therefore subject to a net wealth tax on their total assets (assets in and outwith Luxembourg). However, Public Limited Companies (PLC., Corp./SA) not resident in Luxembourg are subject to the said tax on their assets in Luxembourg only. III. Advantages of forming a Public Limited Company (PLC., Corp./SA) In Luxembourg, the legal structure of the Public Limited Company (PLC., Corp./ SA) is used by large- as well as small and medium-sized companies, particularly due to the possibility to issue easily transferable bearer shares. Furthermore, the Public Limited Company (PLC., Corp./SA) is suitable for numerous Luxembourg business forms. This includes, but is not limited to, the SOPARFI-, the Financial Holding, the Trading Company, the Private Asset Management Company and the Securitisation Company (SPV). 14

15 Legal form: Limited Liability Company (LLC., LTD./SARL) Formation of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg I. Legal Structure of a Limited Liability Company (LLC., Ltd./SARL) 1. Concept A Limited Liability Company (LLC., Ltd./Société à responsabilité limitée, SARL) in Luxembourg is a corporation whose assets are wholly liable for the company s liabilities. It may be formed for the carrying on of any type of commercial or non-commercial purposes. 2. Formation A Limited Liability Company (LLC., Ltd./SARL) in Luxembourg is formed through the recording of its articles of association by a notary. Its articles of association will subsequently be published in the Official Bulletin (Mémorial C) and lodged with Luxembourg s Trade and Companies Register. Moreover, the shareholders of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg must be registered in the Trade and Companies Register of which there must be at least two and no more than 40. The shareholders may be natural or legal persons. It is also possible to form a single-person Limited Liability Company in Luxembourg (LLC., Ltd./Société à Responsabilité limitée unipersonelle). 3. Minimum Capital The minimum capital of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg is 12,500 EUR. This requires to be contributed in full in the form of a cash or non-cash contribution. The company s capital is divided into registered shares. Each share is of the same value and each share will have a minimum value of 25 EUR. 15

16 Legal form: Limited Liability Company (LLC., LTD./SARL) 4. Share Transfer The shares of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg may be transferred to non-shareholders only with the consent of the general meeting at which at least 75% of the company s capital must be represented. The said transfer is required in notarised form. Such consent is not required when the transfer is to a fellow shareholder. 5. Organisation 5.1. General Meeting The general meeting is the supreme authority of a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg. The general meeting consists of all shareholders of the company and must be convened if the number of shareholders exceeds Managing Director A Limited Liability Company (LLC., Ltd./SARL) in Luxembourg has one or more managing directors who are not required to be company shareholders. Furthermore, the managing director(s) can be of any nationality and is not required to be resident in Luxembourg Supervision A Limited Liability Company in Luxembourg (LLC., Ltd./SARL) is subject to auditing obligations if it has more than 25 shareholders. The supervision is carried out by one or more commissaire who may be shareholders or non-shareholders. However, if a Limited Liability Company (LLC., Ltd./SARL) in Luxembourg exceeds two of the following upper limits, an independent auditor must be appointed to inspect the books: a balance sheet total of 6.25 million EUR, net turnover of 6.25 million EUR as well as having an average number of 50 fulltime posts. 6. Annual Accounts The annual accounts of a Limited Limited Company in Luxembourg (LLC., Ltd./ SA) consist of the balance sheet, the profit and loss account and the notes thereto. Following their approval, the annual accounts will be lodged with 16

17 Legal form: Limited Liability Company (LLC., LTD./SARL) Luxembourg s Trade and Companies Register and published in the Official Bulletin (Mémorial C). 7. Dissolution A Limited Liability Company (LLC., Ltd./SARL) in Luxembourg can be dissolved either through a decision of the general meeting at which 75% of the company capital must be represented or through a court order. II. Tax Structure of a Limited Liability Company (LLC., Ltd./SARL) 1. Corporate Taxation Since January 1st, 2013, all Limited Liability Companies (LLC., Ltd./SARL) in Luxembourg have been subject to corporate taxation at a rate of 29.22%. This said rate consists of the following components: corporate income tax at a rate of 21% on income exceeding 15,000 EUR (or a rate of 20% for income not exceeding 15,000 EUR), the solidarity surtax at a rate of 7% as well as the municipal business tax at a rate of 6.75%. All Limited Liability Companies (LLC., Ltd./SARL) resident in Luxembourg which do not require a trade licence and whose assets, securities and bank balance together exceed 90% of its balance sheet total are required to pay only the minimum corporate taxation of 3,210 EUR (3,000 EUR plus the 7% solidarity surtax). Furthermore, Limited Liability Companies (LLC., Ltd./SARL) in Luxembourg are subject to withholding tax at a rate of 15% on their dividend distributions. In contrast thereto, royalty and interest payments as well as proceeds from liquidation or partial liquidation are tax-free in Luxembourg. 2. Net Wealth Tax Limited Liability Companies (LLC., Ltd./SARL) in Luxembourg are further subject to a net wealth tax at a rate of 0.5%. Limited Liability Companies (LLC., Ltd./ 17

18 Legal form: Limited Liability Company (LLC., LTD./SARL) SARL) resident in Luxembourg are therefore subject to a net wealth tax on their total assets (assets in and outwith Luxembourg). However, Limited Liability Companies (LLC., Ltd./SARL) not resident in Luxembourg are subject to the said tax on their assets in Luxembourg only. III. Advantages of forming a Limited Liability Company (LLC., Ltd./SARL) In Luxembourg, the legal structure of the Limited Liability Company (LLC., Ltd./ SARL) is predominantly suited to medium-sized companies due to its many advantages including, for example, it suiting all commercial purposes from the trading of goods to asset management. 18

19 Legal form: SCA Formation of a Partnership Limited by Shares (SCA) in Luxembourg I. Legal Structure of a Partnership Limited by Shares (SCA) 1. Concept The Partnership Limited by Shares (Société en commandite par actions, SCA) is a corporation which, at the same time, shows the characteristics of a partnership. A Partnership Limited by Shares (SCA) consists of at least one shareholder subject to unlimited liability (general partner) as well as a natural or legal person who has contributed to the share capital with a particular contribution (limited partner). The latter is liable for the Partnership Limited by Share s (SCA) liabilities only for a sum matching his contribution. Insofar as not otherwise provided, the provisions on Public Limited Companies (PLC., Corp./SA) in Luxembourg apply to Partnerships Limited by Shares (SNC) in Luxembourg. 2. Formation A Partnership Limited by Shares (SNC) in Luxembourg is formed through the recording of its articles of association (Link Info-Seite) by a notary as well as its registration in the Trade and Companies Register (Link Info-Seite). At least one personally liable shareholder (general partner) is required to be mentioned by name in the said articles of association. 3. Minimum Capital The provisions on Public Limited Companies (PLC., Corp./SA) in Luxembourg apply in respect of the minimum capital of the shareholders of a Partnership Limited by Shares (SCA). According to that, the minimum capital of a Partnership Limited by Shares (SCA) in Luxembourg is 31,000 EUR. The Partnership Law provisions, which contain no minimum capital requirements, apply in respect of the capital contributions of the general partners. 19

20 Legal form: SCA 4. Company Name The company name of a Partnership Limited by Shares (SCA) is permitted only to contain the name of one or more than one of its personally liable shareholders (general partners). 5. Organisation 5.1. General Meeting The general meeting of a Partnership Limited by Shares (SCA) in Luxembourg has significantly less competences than those of a Public Limited Company (PLC., Corp./SA) in Luxembourg. In particular, its resolutions on the amendment of the articles of association require the consent of the Partnership Limited by Share s (SCA) managing director Board of Directors The board of directors of a Partnership Limited by Shares (SCA) in Luxembourg is not elected. Instead, it mandatorily consists of those shareholders subject to unlimited liability (general partners). The said shareholders are responsible for the management of and representation of the Partnership Limited by Shares (SCA) Commissaire At least three commissaire are required to carry out the supervision of a Partnership Limited by Shares (SCA) in Luxembourg. II. Tax Structure of a Partnership Limited by Shares (SCA) In respect of taxation, a distinction is made between the general partners as well as the Partnership Limited by Shares (SCA) itself together with the limited partners of a Partnership Limited by Shares (SCA) due to its hybrid structure. The general partners and their capital contributions are taxed in accordance with the Partnership Law provisions whilst the Partnership Limited by Shares (SCA) and its limited partners are treated as a corporation and/or shareholders for corporate taxation purposes. 20

21 Legal form: Limited Partnership Formation of a Limited Partnership (LP./SCS) in Luxembourg I. Legal Structure of a Limited partnership (LP./SCS) 1. Concept A Limited Partnership in Luxembourg (LP./Société en commandite simple) is a partnership having at least two shareholders, namely a general partner who is subject to unlimited liability and a limited partner subject to limited liability. The general partner is responsible for the management of a Limited Partnership (LP./SCS) in Luxembourg. Moreover, the liability of the said partner for the liabilities of the Limited Partnership (LP./SCS) is secondary, joint and several and unlimited. In contrast thereto, the limited partners are liable for the liabilities of a Limited Partnership (LP./SCS) only to the extent of that amount that they have contributed (the limited liability sum). Such partners are consequently not permitted to carry out the management of the business and have restricted controlling rights. 2. Formation A Limited Partnership (LP./SCS) is formed through the conclusion of a partnership agreement between at least two persons and will subsequently be registered in the Trade and Companies Register (Link Info-Seite). The registration in the Trade and Companies Register is accordingly of declaratory effect only. 3. Minimum Capital There is no minimum capital requirement for a Limited Partnership (LP./SCS) in Luxembourg. 21

22 Legal form: Limited Partnership 4. Company Name The company name of a Limited Partnership (LP./SCS) in Luxembourg must contain the surname of at least one of the partners subject to unlimited tax liability (general partners). The using of the names of other persons, particularly the names of the limited partners, is not permitted. II. Tax Structure of a Limited Partnership (LP./SCS) A Limited Partnership (LP./SCS) in Luxembourg is not subject to taxation as such. Instead, every shareholder of a Limited Partnership (LP./SCS) is liable to taxation in Luxembourg on their share of the income and assets of the company as well as on their private income and assets. 22

23 Legal form: General Partnership Formation of a General Partnership (GP./SNC) in Luxembourg I. Legal Structure of a General Partnership (GP./Société en nom collectif, SNC) 1. Concept The General Partnership (GP./Société en nom collectif, SNC) in Luxembourg is a partnership in which two or more natural and/or legal persons come together in order to carry on business under a single trading name. The liability of all shareholders of a General Partnership (GP./SNC) in Luxembourg for its liabilities is unlimited and joint and several. 2. Formation A General Partnership (GP./SNC) in Luxembourg is formed through the conclusion of a partnership agreement between at least two natural and/or legal persons. Moreover, a General Partnership (GP./SNC) is required to obtain a trading licence (Link Info-Seite) from the Ministry of the Middle Classes, Tourism and Housing as well as registering in the Trade and Companies Register (Link Info-Seite) in Luxembourg in order to carry on business. 3. Minimum Capital There is no prescribed minimum capital for the formation of a General Partnership (GP./SNC) in Luxembourg. 4. Company Name The company name of a General Partnership (LGP./SNC) in Luxembourg is only permitted to contain the names of its shareholders. 23

24 Legal form: General Partnership II. Tax Structure of a General Partnership (GP./SNC) A General Partnership (GP./SNC) is not taxed as such. Instead, its shareholders are subject to the standard taxation in Luxembourg. 24

25 Legal form: European Company Formation of a European Company (SE) in Luxembourg I. Legal Structure of a European Company (SE) 1. Concept The legal form of the European Company (Societas Europaea, SE; European Public Limited Company (PLC.,Corp.)) was introduced in 2001 as part of the EU Directive 2157/2001 on the Statute for a European Company (SE). The European Company (SE) is a Public Limited Company (PLC., Corp.) having its own legal personality and whose capital is divided into shares and which has branch offices in at least two other European Union Member States. The aim of the introduction of this new legal form was a uniform European company law. In particular, that businesses active in different Member States of the European Union or those wanting to become active in other Member States of the European Union being able to form companies in accordance with extensive uniform legal principles. And therefore not being required to be formed as subsidiaries in different countries accordance with different laws in each case. Instead, such businesses, insofar as they are active as a European Company (SE), subject to 2. Formation A European Company (SE) is formed independently of domestic law. Only legal persons are permitted to form a European company. This includes, for example, already existing companies such as Public Limited Companies (PLC., Corp.), European Companies (SE) and under certain restrictions- Limited Liability Companies (LLC., Ltd.). Furthermore, the registered office as well as the main place of central management and control of the founding companies must be located within the European Union (EU) or the European Economic Area (EEA). The newly formed European Company (SE) will be registered in the Commercial Register of the country in which its registered office is located. A Luxem- 25

26 Legal form: European Company bourg European Company (SE) will, for example, accordingly be registered in Luxembourg s Commercial Register. The said registration will subsequently be published in the Official Journal of the European Union. 3. Minimum Capital The minimum capital of a European Company (SE) is 120,000 EUR. 4. Company Name The company name of a European Company (SE) is required to contain the abbreviation SE. 5. Organisation Due to the different provisions among the Member States on the forms of company organisation, the Articles of Association of a European Company (SE) may provide for, in addition to the General Meeting, either a Board of Directors (monistic system, compare the Public Limited Company (PLC., Corp./SA) in Luxembourg) or a management and supervisory body (dualistic system, compare the Public Limited Company (PLC., Corp.) in Germany). 6. Accounting In respect of the obligation of a European Company (SE) to keep accounts, the law of the country in which its registered office is located applies. II. Tax Structure of a European Company (SE) No special provisions exist on the current taxation of the business activities of a European Company (SE). Instead, a European Company (SE) is subject to unlimited tax liability in the country in which its registered office is located. In respect of permanent establishments in other countries, a European Company (SE) is required to comply with its tax obligations in force in the respective countries. The distribution of profits (e.g. dividend payments) to the shareholders is likewise subject to the particular domestic provisions thereon. 26

27 Legal form: Branch Offices of Foreign Companies Formation of the Branch Offices of Foreign Companies in Luxembourg I. Legal Structure of a Branch Office in Luxembourg 1. Concept A Branch Office in Luxembourg is a permanent establishment which is geographically separated from the main business in a domestic or non-domestic Trading Company. From a business management point of view, it is a independent company carrying on commercial activities in Luxembourg which is fully authorised to conclude sales contracts. Legally, the Branch Office is seen as part of the Head Office due to it not having its own legal personality. The liability of the Branch Office for the liabilities of the Branch Office in Luxembourg is consequently unlimited. If the Head Office is a foreign company, the internal constitution of a Branch Office should be in accordance with the articles of association of the Head Office of the business and the particular foreign law. 2. Formation A Branch Office in Luxembourg is formed (Link Info-Seite) through the resolution of the management of the Head Office and through registration in Luxembourg s Trade and Companies Register (link Info-Seite). Therein, the said registration is of declaratory effect only. It is not required that a Branch Office in Luxembourg have an articles of association and the articles of association of the principal place of business shall be published in the Official Bulletin (Mémorial C). Moreover, the furnishing of the Branch Office with capital can be freely organised. A Trade Licence is required to be obtained by a Branch Office from Luxembourg s Ministry of the Middle Classes, Tourism and Housing for the carrying on of commercial activities. 27

28 Legal form: Branch Offices of Foreign Companies 3. Name The name of a Branch Office in Luxembourg must contain at least a description of the Head Office as well as the corresponding legal abbreviation in unaltered form. 4. Representation A Branch Office in Luxembourg is independently represented by the Branch Office manager vis-à-vis third parties. Notwithstanding this, the appointment of a Branch Office manager is not mandatory. An authorised signatory of the company, registered in Luxembourg s Trade and Companies Register, can accordingly be appointed to represent the Branch Office. II. Tax Structure of a Branch Office in Luxembourg A Branch Office in Luxembourg is liable as a permanent establishment to the standard tax for profits made there and consequently benefits from Luxembourg s preferential taxation. Moreover, the Branch Office may repatriate the said profits to the country in which its Head Office is located free from tax. 28

29 Busines forms Business forms Which tax advantages will your business benefit from? SOPARFI-Financial Holding Company Trading and Service Company Private Asset Management Company (SPF) Securitisation Vehicle (SPV) Company for Intellectual Property Rights (IP-Box) Investment Funds SICAV/SICAF Investment Company SICAR Specialised Investment Funds (SIF) Real Estate Company E-Commerce 29

30 Business form: SOPARFI-Financial Holding Company Formation of a SOPARFI-Financial Holding Company in Luxembourg I. Legal Structure of a SOPARFI in Luxembourg 1. Concept A SOPARFI-Financial Holding Company (Société de participations financières) in Luxembourg is a non-regulated Trading Company in Luxembourg which is fully liable to tax. It benefits from the inter-corporate privilege of the parent subsidiary Directive and is able to carry on Holding activities in addition to its financial activities. A Holding describes a parent organisation which can take the following forms: Operational Holding; Management Holding; Finance Holding and Organisational Holding. The purpose of a SOPARFI in Luxembourg is predominantly the acquisition, management and realisation of investments in companies in or outwith Luxembourg. A SOPARFI is permitted to carry on all types of commercial activities insofar as they are consistent with the articles of association or Luxembourg s statutory provisions. 2. Formation A SOPARFI in Luxembourg is formed through the recording of its articles of association by a notary. The articles of association will subsequently be published in the Official Bulletin (Mémorial C) and lodged with Luxembourg s Trade and Companies Register. A natural or legal person of any nationality, regardless of where they are resident, is required and authorised for the formation. A SOPARFI in Luxembourg is formed as a corporation as, for example, a Public Limited Company (PLC., Corp./SA.), a Limited Liability Company (LLC., Ltd./ SARL) or a Partnership Limited by Shares (SCA). In practice in Luxembourg, the legal form of the Public Limited Company (PLC., Corp./SA) is the preferred form for the formation of a SOPARFI. This is particularly so due to it being possible to issue bearer shares which can be easily transferred. 30

31 Business form: SOPARFI-Financial Holding Company It is a mandatory requirement that a SOPARFI in Luxembourg carrying on commercial activities as its primary or secondary activity obtains prior written consent (a trade licence, autorisation d établissement) from Luxembourg s Ministry of Small and Medium-Sized Businesses. II. Tax Advantages of a SOPARFI in Luxembourg 1. Exemption from Tax of Dividends and Sale and Liquidation Proceeds from Investments Since January 1st, 2013, the rate of corporate taxation on the distribution of dividends and sale and liquidation proceeds to a SOPARFI in Luxembourg has been 29.22% (21% or 20% corporation tax, plus the Solidarity Surtax at a rate of 7% as well as the Municipal Business tax at a rate of 6.75%). All corporations resident in Luxembourg which do not require a trade licence and whose assets, securities and bank balance together exceed 90% of its total balance sheet are required to pay only the minimum corporate taxation of 3,210 EUR (3,000 EUR plus the 7% Solidarity Surtax). Notwithstanding this, in the context of the application of the inter-corporate privilege, the dividends and sale and liquidation proceeds distributed to a SOPARFI in Luxembourg are exempt from tax upon satisfaction of the following requirements: 1.1. Requirements for the Parent Company The parent company (SOPARFI) must be either a corporation resident in Luxembourg with unlimited tax liability or the permanent establishment in Luxembourg of an EU Company within the meaning of the parent subsidiary Directive or must be a corporation resident in a country which has agreed a double taxation agreement (DTA) with Luxembourg. Furthermore, the parent company is required to hold at least 10% of the capital of the subsidiary company or to have acquired the said investment for at least 1.2 million EUR (or 6 million EUR for sale profits) and at the time of the making available of the dividends, the investment must have been held for an uninterrupted period of at least 12 months or a commitment existed to do so. 31

32 Business form: SOPARFI-Financial Holding Company 1.2. Requirements for the Subsidiary Company The subsidiary company must either be a corporation which has its registered office in Luxembourg with unlimited tax liability or a foreign corporation with unlimited tax liability which is liable to a tax comparable to Luxembourg s corporation tax or be an EU-subsidiary company fully liable to corporate taxation (congruity with Luxembourg s rate of corporation tax is not mandatory) within the meaning of the parent subsidiary Directive. If these requirements are not met, dividends can be at least 50% tax exempt if they are distributed by a corporation which is resident in Luxembourg with unlimited tax liability or a foreign corporation which is liable to corporate taxation (corresponding with Luxembourg s rate of corporation tax) and which has its registered office in a country which has agreed a DTA with Luxembourg or an EU-Subsidiary Company within the meaning of the parent subsidiary Directive. 2. Deduction of Investment-related Expenses Investment-related expenses are deductible to the extent they exceed the taxfree income generated from investment in the respective year. This also applies to value adjustments as well as losses suffered from the sale of investments. 3. Exemption from Net Wealth Tax The net wealth tax in Luxembourg applies, in principle, at a rate of 0.5%. Notwithstanding this and in accordance with the following requirements, the value of an investment remains exempt from the net wealth tax. For the application of the parent subsidiary privilege herein, no minimum holding period is prescribed: The parent company (SOPARFI) in Luxembourg must hold at least 10% of the capital of the subsidiary company or must have acquired the investment for a sum amounting to at least 1.2 million EUR and the subsidiary company must have been a resident or non-resident corporation with unlimited tax liability. 4. Exemption from Withholding Tax 4.1. Withholding Tax on Dividend Distributions In principle, the dividend distributions of a SOPARFI in Luxembourg are subject 32

33 Business form: SOPARFI-Financial Holding Company to withholding tax at a rate of 15%. However, the said tax will not be levied if the following requirements are satisfied: Firstly, the company distributing the dividends must be a resident legal person with unlimited tax liability. The benefiting company must also be a resident corporation with unlimited tax liability or a corporation resident in an EU member state within the meaning of the parent subsidiary Directive or the resident permanent establishment of a parent company with its registered office in a country which has agreed a DTA with Luxembourg. In addition, the benefiting company is required to have an investment in the SOPARFI in Luxembourg amounting to at least 10% of the company s share capital or of a purchase price amounting to at least 1.2 million EUR and which has been held for a period of 12 months or a commitment existed to do so. In the case of the dividends of a SOPARFI in Luxembourg being distributed to companies from countries outwith the EU yet which have agreed a DTA with Luxembourg, there exists a reduced rate of withholding tax of 5%. 4.2 Withholding Tax on Royalty Payments, Interest and Liquidation Proceeds Royalty payments, interest payments as well as the distribution of liquidation proceeds are also exempt from withholding tax in Luxembourg. 5. Double Taxation Agreements (DTA) Moreover, a SOPARFI in Luxembourg can benefit from Luxembourg s multiple double taxation agreements (DTA s) due to the use of the tax exemptions arising from the inter-corporate privilege not affecting the general tax liability of a SOPARFI. 6. Value-added Tax (VAT) If the business activity of a SOPARFI in Luxembourg is not exclusively limited to the holding of investments, it will be liable to value-added tax (VAT) and is consequently required to register for value-added tax (VAT). Luxembourg s rate of value-added tax (VAT) is 15%. A reduced rate applies to certain goods and services (e.g 3% on e-books). 33

34 Business form: Trading and Service Comapany Formation of a Trading and Service Company in Luxembourg I. Trading and Service Company: Concept If a company carries on a skilled trade, industrial or other commercial activities, such company is a Trading and Service Company. In this regard, there is a distinction made in Luxembourg between Trading Companies, in the strictest sense, which possess legal personality and Commercial Associations which do not. Trading Companies in the strictest sense include Public Limited Companies (PLC., Corp./SA); Limited Liability Companies (LLC., Ltd./SARL); Partnerships Limited by Shares (SCA); Limited Partnerships (LP./SCS); General Partnerships (SNC); Co-operative Societies (SC) as well as European Companies (SE). In contrast thereto, Commercial Associations are subdivided into Temporary Commercial Associations and Commercial Associations by Participation. II. Formation How a Trading and Service Company in Luxembourg is formed is determined by the particular legal form chosen. Irrespective of nationality or residence, any person may form a Trading and Service Company in Luxembourg. Furthermore, it is required that all companies in Luxembourg carrying on commercial activities obtain prior written consent (a trade licence, autorisation d établissement) from Luxembourg s Ministry of Small and Medium-sized Businesses. The requirements therefor are, firstly, that the manager of a Trading and Service Company in Luxembourg possesses certain professional qualifications and, secondly, that the company has a physical presence in Luxembourg. Moreover, a Trading and Service Company is required to register the business and to apply to the competent tax authority for a value-added tax (VAT) ID. number in Luxembourg. 34

35 Business form: Trading and Service Comapany III. Tax Structure of a Trading and Service Company The following information on the tax structure exclusively addresses corporations in Luxembourg due to Trading and Service Companies in Luxembourg being predominantly formed as Public Limited Companies (PLC., Corp./SA) or as Limited Liability Companies (LLC., Ltd./SARL): 1. Corporation Tax Since January 1st, 2013, all corporations in Luxembourg have been subject to corporate taxation at a rate of 29.22%. This said rate consists of the following components: corporate income tax at a rate of 21% on income exceeding 15,000 EUR (or a rate of 20% for income not exceeding 15,000 EUR), the solidarity surtax at a rate of 7% as well as the municipal business tax at a rate of 6.75%. All corporations resident in Luxembourg which do not require a trade licence and whose assets, securities and bank balance together exceed 90% of its balance sheet total are required to pay only the minimum corporate taxation of 3,210 EUR (3,000 EUR plus the 7% solidarity surtax). Furthermore, corporations in Luxembourg are subject to withholding tax at a rate of 15% on their dividend distributions. In contrast thereto, royalties and interest payments as well as proceeds from liquidation or partial liquidation are tax-free in Luxembourg. 2. Net Wealth Tax Corporations in Luxembourg are further subject to a net wealth tax at a rate of 0.5%. Corporations resident in Luxembourg are therefore subject to a net wealth tax on their total assets (assets in and outwith Luxembourg). However, corporations not resident in Luxembourg are subject to the said tax on their assets in Luxembourg only. 3. Value-Added Tax (VAT) Trading and Service Companies in Luxembourg are liable to value-added tax (VAT) at a rate of 15% on their activities. Notwithstanding this, certain supplies 35

36 Business form: Trading and Service Comapany and services are subject to the reduced rate of value-added tax (VAT) in Luxembourg. For example, e-books are subject to a rate of 3%. IV. Advantages of forming a Trading and Service Company in Luxembourg There is very little red tape surrounding the formation and management of a Trading and Service Company in Luxembourg. Moreover, Luxembourg s tax assessment framework in the form of the so-called tax rulings is flexibly administered. Questions on the scope of tax liability and undertakings relating to the taxation can be sought from Luxembourg s tax authority prior to the tax being due. In principle, these can be relied upon by both sides. In Luxembourg, such tax ruling procedures can be completed within weeks. Luxembourg is a signatory to several double taxation agreements (DTA s) which prevent the double taxation of Trading and Service Companies. 36

37 Business form: Private Asset Management Company (SPF) Formation of a Private Asset Management Company (SPF) in Luxembourg I. Private Asset Management Company (SPF): Concept The Private Asset Management Company in Luxembourg (Société de gestion de patrimoine familial, SPF) is not a new business form. Instead, it is a suitable investment vehicle for the management and planning of family assets, of a system for matrimonial property and of the succession of natural persons. The Private Asset Management Company (SPF) has been in existence in Luxembourg since 2007 and is the successor to the abolished Luxembourg Holding II. Legal Structure of a Private Asset Management Company (SPF) 1. Legal Form A Private Asset Management Company (SPF) in Luxembourg is only permitted to be formed as a corporation (Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC., Ltd./SARL); Partnership Limited by Shares (SCA) or Co-operative in the form of a Public Limited Company (SCOSA)). In practice in Luxembourg, the SPF is however predominantly formed in the legal forms of the Public Limited Company (PLC., Corp./SA) and the Limited Liability Company (LLC., Ltd./SARL). 2. Formation A Private Asset Management Company (SPF) in Luxembourg is formed through the recording of its articles of association by a notary. The articles of association will subsequently be published in the Official Bulletin (Mémorial C) and lodged with Luxembourg s Trade and Companies Register. It is required that the articles of association expressly regulate that the company is subject to the provisions of Luxembourg s law on Private Asset Management Companies. The minimum capital of a SPF in Luxembourg is dependent upon which legal form is chosen. 37

38 Business form: Private Asset Management Company (SPF) The shareholders of a SPF in Luxembourg, whose number must remain restricted, must be natural persons who are resident or not resident in Luxembourg who will be active in the management of the private assets. Furthermore, trustees or patrimonial entities with or without legal personality, such as Trusts or private Foundations managing the private assets of natural persons, may be used. In contrast thereto, other corporations are not permitted to hold the position of shareholder in a Private Asset Management Company (SPF) in Luxembourg. 3. Activity 3.1. Permitted Activity The permitted activities of a Private Asset Management Company (SPF) in Luxembourg are as follows: the acquisition, possession, management and realisation of investments in financial instruments, in the broadest sense, including derivatives; shares; investments; Funds; futures; bonds; options; precious metals as well as bank accounts. Furthermore, as long as a SPF is not involved in the management of the individual companies, a SPF in Luxembourg is permitted to hold majority or 100% company shareholdings. The unlimited taking out of loans from shareholders or from external third parties as well as the issuing of securities are also permitted Prohibited Activity A SPF in Luxembourg is prohibited from carrying on any type of commercial activity including the provision of management activity or financial services to third parties or shareholders. Furthermore, the guaranteeing of loans is not permitted even where a SPF has an interest in the respective company. The exception thereto is where the guaranteeing involves a gratuitous deposit or surety. A Private Asset Management Company in Luxembourg is likewise not permitted to hold patents or rights, to directly possess real estate, to receive more than 5% of the complete dividend income of the shareholders which is liable to taxation of less than 11% as well as the stock market flotation of SPF shares or their public offering. Notwithstanding this, a SPF can have a financial interest in structures carrying on the prohibited activities listed. 38

39 Business form: Private Asset Management Company (SPF) 4. Supervision A Private Asset Management Company (SPF) in Luxembourg is subject to the supervision of Luxembourg s Indirect Tax Administration (Administration de l Enregistrement et des Domaines, AED) and to no further supervision. III. Tax Advantages of a Private Asset Management Company (SPF) 1. Taxation In Luxembourg, a SPF is liable to the so-called subscription tax annually at a rate of 0.25% on its paid-up share capital, the share premium plus on a proportion of its debts exceeding 8 times the paid-up share capital and the share premium. 2. Tax Exemptions The income and gains of a Private Asset Management Company (SPF) in Luxembourg are exempt from corporation tax, municipal business tax as well as from the net wealth tax. Furthermore, gains from the transfer or sale of shares in a SPF in Luxembourg by a non-resident shareholder as well as a SPF s liquidation proceeds are exempt from taxation. The afore-mentioned tax exemptions consequently mean that a SPF is not permitted to benefit from Luxembourg s multiple double taxation agreements (DTA s). Moreover, the distributions of a SPF in Luxembourg in the form of dividends to non-resident investors as well as interest are exempt from withholding tax. In the absence of commercial transactions, a SPF in Luxembourg is not liable to value-added tax (VAT) and is consequently not required to register for valueadded tax (VAT). 39

40 Business form: Securitisation Vehicle (SPV) Formation of a Securitisation Vehicle (SPV) in Luxembourg I. Securitisation: Concept Luxembourg s Securitisation Law of March 22nd, 2004, defines the concept of securitisation as follows: a business transaction in which a Securitisation Structure or Securitisation Vehicle (Special Purpose Vehicle, SPV) acquires or assumes direct or indirect risks from receivables, from other assets, assumed from third parties or from all or some obligations inherent in the business activities of third parties. The securitisation is wholly performed by such a Securitisation Vehicle (SPV) or a SPV is involved in such a transaction through the complete or partial assumption of the securitised risks or through the issuing of securities. A Securitisation Vehicle (SPV) finances itself from the issuing of securities whose value or the proceeds from which are dependant upon the assumed risks. A distinction requires to be made regarding Securitisation Vehicles (SPV) in Luxembourg between non-regulated Securitisation Companies and Securitisation Funds. II. Legal Structure of a Securitisation Vehicle (SPV) in Luxembourg 1. Formation 1.1. Securitisation Company A Securitisation Company in Luxembourg can only be formed as a corporation and subsequently as a Public Limited Company (PLC., Corp./SA); a Limited Liability Company (LLC., Ltd./SARL); a Partnership Limited by Shares (SCA) or as a Co-operative in the form of a Public Limited Company (SCOSA). In practice in Luxembourg, the Public Limited Company (PLC., Corp./SA) is the preferred form, particularly if issued securities are to be publicly sold. Such activity is not possible with a Limited Liability Company (LLC., Ltd./SARL). 40

41 Business form: Securitisation Vehicle (SPV) A Securitisation Company in Luxembourg is formed through the recording of its articles of association by a notary. Its articles of association will subsequently be published in the Official Bulletin (Mémorial C) and lodged with Luxembourg s Trade and Companies Register. The minimum capital of a Securitisation Company is dependent upon the legal form chosen Securitisation Funds In contrast to a Securitisation Company, a Securitisation Fund in Luxembourg does not have legal personality and is managed by a Management Company resident in Luxembourg which must be a Trading Company. A Securitisation Fund in Luxembourg is formed in contractual form as jointly owned assets or as trust assets. However, the Securitisation Fund s assets must be separated from those of the Management Company. No minimum capital is prescribed for a Securitisation Fund in Luxembourg. The managing Management Company must satisfy the minimum capital requirement prescribed for its legal form Separate Compartments The assets of a Securitisation Vehicle (SPV) in Luxembourg may be separated into a single or several compartments if so permitted by the articles of association of a Securitisation Company in Luxembourg or the contractual provisions of a Securitisation Fund. 2. Securitisation Structure The permitted Securitisation Structures are the True Sale transaction and the Synthetic transaction. In a True Sale transaction, the securitisation takes place through the transfer of the legal ownership of the assets. In a Synthetic transaction, the securitisation takes place through the transfer of the credit risks of the assets. 3. Asset Classes (Securitisation Objects) There exist no restrictions on which assets may be securitised. Securitisation transactions may consequently pertain to moveable and immoveable assets including but not limited to, for example, diamonds; intellectual property; recei- 41

42 Business form: Securitisation Vehicle (SPV) vables as well as all activities having a real value or which are expected to generate proceeds in the future. The securitised assets will finally be represented by registered or bearer shares including, for example, shares, certificates and bonds. 4. Supervision If a Securitisation Vehicle (SPV) in Luxembourg issues securities to the public, it requires the consent of and is subject to the supervision of Luxembourg s Financial Market Authority (CSSF). Moreover, a Securitisation Vehicle (SPV) in Luxembourg must entrust its current assets, including its securities, to a bank in Luxembourg on a fiduciary basis. III. Tax Structure of a Securitisation Vehicle (SPV) in Luxembourg 1. Securitisation Company 1.1. Corporate Taxation All Securitisation Companies in Luxembourg are subject to corporate taxation at a rate of 29.22%. This said rate consists of the following components: corporate income tax at a rate of 21% on income exceeding 15,000 EUR (or a rate of 20% for income not exceeding 15,000 EUR); the Solidarity Surtax at a rate of 7% as well as the Municipal Business tax at a rate of 6.75%. Therein, the rate of corporation tax may be reduced through the obligations arising from the investors remuneration such as interest or dividends. All Securitisation Companies resident in Luxembourg which do not require a trade licence and whose assets, securities and bank balance together exceed 90% of its balance sheet total are required to pay only the minimum corporate taxation of 3,210 EUR (3,000 EUR plus the 7% Solidarity Surtax). Due to a Securitisation Company in Luxembourg having unlimited tax liability, it can benefit from Luxembourg s network of double taxation agreements Tax Exemptions A Securitisation Company in Luxembourg is neither liable to the net wealth tax nor to withholding tax on distributions to its investors. 42

43 Business form: Securitisation Vehicle (SPV) 2. Securitisation Funds Due to a Securitisation Fund in Luxembourg lacking its own legal personality, it is the shareholders and their income which is liable to tax and not the Fund itself. A Securitisation Fund in Luxembourg is neither liable to income tax nor to the so-called subscription tax ( Tax d Abonnement ). As also applies in the case of a Securitisation Company in Luxembourg, a Securitisation Fund in Luxembourg is not liable to withholding tax on distributions to its investors. 43

44 Business form: Company for Intellectual Property Rights (IP-Box) Formation of a Company for Intellectual Property Rights (IP-Box) in Luxembourg I. Luxembourg s Tax Regime (IP-Box) The so-called IP-Box (Intellectual Property Box) is a special tax regime in which income from intellectual property rights is subject to preferential taxation. In Luxembourg, such a tax regime takes the form of tax relief for income from intellectual property rights. In Luxembourg, net income and capital gains from the use, licensing and sale of intellectual property rights are accordingly only subject to corporate taxation at a rate of 20%. This results in 80% of the said income being exempt from tax. The effective tax burden of the said income subject to preferential taxation is therefore 5.84%. The following criteria must be satisfied for Luxembourg s tax relief to apply: Firstly, the intellectual property rights must have been acquired or developed after December 31st, Secondly, the intellectual property rights and the development costs already spent must have achieved a favourable trade balance. Furthermore, proof is required when intellectual property rights are acquired that they were acquired for reasons unrelated to taxation. The transfer of intellectual property rights between parent and subsidiary companies with a shareholding exceeding 10% and by subsidiary companies with common shareholders is not permitted. II. Intellectual Property Rights (IP) in Luxembourg In accordance with Luxembourg s tax relief, the following constitute intellectual property rights (IP): patents; copyright; software; trademarks; industrial designs and utility models; models; domain names; brands for services and goods such as production and marketing know-how. 44

45 Business form: Company for Intellectual Property Rights (IP-Box) III. IP-Companies in Luxembourg: Tax Optimisation Instrument The value of a Company for Intellectual Property Rights (IP) can increase through having a tax efficient structure. Foreign IP-Companies are therefore used and their intellectual property rights transferred to be managed and exploited. The resulting gains are subsequently subject to preferential taxation at the residence of the company to which the said rights are transferred. By so doing, it can be ensured that income from the use and exploitation of one s own or thirdparty intellectual property rights is taxed efficiently. Accordingly, if intellectual property rights are transferred to an IP-Company formed in Luxembourg, gains made from the intellectual property rights can be preferentially taxed in accordance with Luxembourg s tax relief. To do so, it is required that the IP-Company has a business address in Luxembourg and that at least one of its directors be resident in Luxembourg. In respect of the use of such IP-Companies in practice in Luxembourg, the structure of the IP-SOPARFI-Holding Company, which belongs to a group of companies, is chosen. The IP-SOPARFI-Holding Company is within the scope of application of the parent subsidiary Directive and which, among other advantages, can profit from dividend distributions being tax-free. An IP-SOPARFI-Holding Company in Luxembourg is formed in the legal form of a corporation and thus as a Public Limited Company (PLC., Corp./SA); a Limited Liability Company (LLC., Ltd./SARL); a Partnership Limited by Shares or as a Cooperative in the form of a Public Limited Company (SCOSA). The particular formation requirements will be determined by the legal form the said company takes. IV. Further Tax Advantages in Luxembourg 1. Tax Exemptions In Luxembourg, intellectual property rights are not subject to the net wealth tax. Similarly, gains made from liquidation, royalties payments or interest payments are exempt from taxation. 45

46 Business form: Company for Intellectual Property Rights (IP-Box) 2. Further Advantages Luxembourg s tax assessment framework in the form of the so-called tax rulings is flexibly administered. Questions on the scope of tax liability and undertakings relating to the taxation can be sought from Luxembourg s tax authority prior to the tax being due. In principle, these can be relied upon by both sides. In Luxembourg, such tax ruling procedures can be completed within weeks. Luxembourg is a signatory to several double taxation agreements (DTA s) which prevent the double taxation of Trading and Service Companies. 46

47 Business form: Formation of a SICAV/SICAF Fund Formation of a SICAV/SICAF Fund in Luxembourg I. Legal Structure of a SICAV/SICAF Investment Fund in Luxembourg 1. Concept The SICAV and SICAF are investment fund structures in Luxembourg which may be formed as UCITS (Collective Investment of Transferable Securities) Funds or as Specialised Investment Funds (SIF). Their purpose is the investment of the share capital in securities or in other liquid financial investments in accordance with the principle of diversification to allow the shareholders to receive the earnings generated from the management of their assets. The SICAV and SICAF Investment Funds are only permitted to manage the assets in their own portfolios. A SICAV (Société d Investissement à Capital Variable) in Luxembourg is an investment fund in the form of an Investment Company whose share capital is variable and the value of which at any time matches the value of the net assets of all the sub-funds, constituted as shares without a statement of their nominal value. In contrast thereto, a SICAF Investment Fund (Société d Investissement à Capital Fixe) in Luxembourg exists in the form of an Investment Company whose share capital is fixed. Due to both of the afore-mentioned Investment Funds not having their own legal personality, they are either self-managed or externally managed Investment Companies. 2. Investment Policy Due to it being possible to mix both both the SICAV and SICAF Investment Funds with other investment assets, they may be formed as, among others, Security-; Real Estate-; Money market- as well as Holding-Funds. 47

48 Business form: Formation of a SICAV/SICAF Fund 3. Investors If a SICAV and SICAF in Luxembourg are formed as UCITS funds, no restrictions apply as to who may be an investor. Only in respect of Specialised Investment Funds (SIF) is a qualified investor required. 4. Formation A SICAV in Luxembourg is formed as a Public Limited Company (PLC., Corp./ SA), whereas a SICAF can be formed as any type of corporation in Luxembourg (e.g. Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC., Ltd./SARL); Partnership Limited by Shares (SCA)). A SICAV and SICAF in Luxembourg can be formed as umbrella funds with several sub-funds, each of which being independent of the others. The registered office and main place of control and management of a SICAV and SICAF under the articles of association must be located in Luxembourg. Furthermore, the assets of a SICAV and SICAF must be transferred to a custodian (depositary bank) to ensure that the income or profits are used in accordance with its articles of association. The custodian is liable to both Investment Funds in Luxembourg as well as the shareholders only for loss arising from the culpable non-performance or defective performance of its duties. The subscribed capital of a SICAV/SICAF Investment Fund, amounting to at least 1.25 million EUR, requires to be reached within a period of 6 months following the obtaining of consent from Luxembourg s Financial Market Authority (CSSF) if it is an UCITS Fund and within a period of 12 months in the case of a Specialised Investment Fund (SIF) respectively. The minimum share capital is dependent upon which legal form is chosen. 5. Investment and Distribution Policy A SICAV and SICAF in Luxembourg can issue, and cancel, at any time new shares not exceeding its net asset value and may regulate the distribution of dividends or other repayments to its investors by way of formal conditions in its article of associations. Both Investment Funds in Luxembourg are not subject to a duty to create legal reserves. 48

49 Business form: Formation of a SICAV/SICAF Fund 6. Supervision A SICAV and SICAF in Luxembourg are subject to the permanent supervision of Luxembourg s Financial Market Authority (CSSF). Both Investment Funds, as well as the investment managers and advisers of the said funds, require a licence prior to commencing business. In addition, a SICAV and SICAF must produce annual accounts and half-yearly accounts which must be audited by an independent auditor. The accounts are subsequently required to be published no later than 4 months (and no later than 6 months in the case of a Specialised Investment Fund (SIF) in Luxembourg) after the conclusion of the year. Moreover, Investment Funds in Luxembourg are required to prepare, with the exception of those Investment Funds in the form of a closed UCITS Fund, a sale prospectus which must contain, among others, the founding documents in order to provide investors with the opportunity of carrying out an informed evaluation of the investment and the associated risks. II. Tax Structure of a SICAV/SICAF Investment Fund in Luxembourg 1. Corporate Taxation The SICAV and SICAF Investment Funds in Luxembourg are neither liable to income tax nor corporate taxation. They are liable to the so-called subscription tax at an annual rate of 0.05% on their net worth or at a rate of 0.01% if the Investment Funds are formed as a Specialised Investment Fund (SIF) in Luxembourg. 2. Tax Exemptions A SICAV and SICAF in Luxembourg are exempt from the net wealth tax and withholding tax on the distribution of dividends to non-resident investors. Moreover, Fund management services provided by a Management Company in Luxembourg are not subject to value-added tax (VAT). Notwithstanding this, other services may be still subject to value-added tax (VAT) in Luxembourg at a rate of 15%. 49

50 Business form: SICAR Investment Company Formation of a SICAR Investment Company in Luxembourg I. Legal Structure of a SICAR Investment Company in Luxembourg 1. Concept A SICAR Investment Company (Société d investissement en capital à risqué) in Luxembourg is an instrument for venture capital investments which is regulated by the SICAR law and which has legal personality separate from its investors. A SICAR Investment Company in Luxembourg is designed for the investment of its resources in high-risk assets in order to distribute the result generated therefrom to qualified investors. The said result offsets the risk borne. 2. Investment Policy The Luxembourg investment vehicle SICAR is permitted to invest in venture capital (private equity) only. This means that funding is directly or indirectly contributed to a company for assistance during its early stage, for its development or its flotation on the stock market. Investments in real estate are only permitted under certain conditions. A SICAR Investment Company in Luxembourg is not under a duty to comply with the principle of diversification in choosing its investments. It is therefore possible for it to invest in one or several companies active in a particularly crowded segment of the market. 3. Investors The Luxembourg SICAR investment vehicle is exclusively reserved for qualified investors, namely professional investors as well as institutional investors. Moreover, natural persons, who invest at least 125,000 EUR, are required to submit written proof of their well-informed investment status (e.g. in the form of a letter from their bank). 50

51 Business form: SICAR Investment Company 4. Formation A SICAR in Luxembourg is formed either as a corporation or as a partnership (Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC., Ltd./SARL); Partnership Limited by Shares (SCA); Co-operative in the legal form of a Public Limited Company (SCOSA) and Limited Partnership (SCS). It is not permitted to be organised in the form of a contractual Investment Fund (fonds commun de placement, FCP). A SICAR in Luxembourg may however take the structure of a Holding Fund constituted by several sub-funds, each of which being independent of the others. The registered office and main place of central management and control of a SICAR, under its articles of association, must be located in Luxembourg. Moreover, the assets of a SICAR are to be transferred to an independent custodian (financial institute) resident in Luxembourg. This ensures that the subscription price of shares in the company will be received on time, that transactions involving equivalent assets are transferred or paid and that the proceeds are used in accordance with its founding documents. Furthermore, the company management and custodian of a SICAR in Luxembourg require to be sufficiently qualified and to provide proof of their corresponding experience in the area of venture capital investments. Notwithstanding this, they must not necessarily have a Sponsor/Promoter. Beginning from the date when a SICAR in Luxembourg was approved by Luxembourg s Financial Market Authority (CSSF), a SICAR must reach its subscribed share capital of at least 1 million EUR within 12 months. However, the minimum share capital is dependent on the particular business form chosen. If a SICAR in Luxembourg is formed as a corporation, the shares issued required to be fully subscribed and at least 5% of every share requires to be paid up through a cash or non-cash contribution. 5. Issuance and Distributions Policy The provisions contained in the articles of association are wholly authoritative with regard to the issuance of new shares due to the SICAR law containing no specific provisions thereon. This is also the case for the regulation of the formal 51

52 Business form: SICAR Investment Company criteria for the distribution of dividends or other repayments to the investors. Furthermore, a SICAR in Luxembourg is not required to create reserves. 6. Supervision A SICAR in Luxembourg is subject to the permanent supervision of Luxembourg s Financial Market Authority (CSSF). A SICAR requires a licence prior to commencing business. A SICAR may be quoted on Luxembourg s stock market directly after obtaining approval from the CSSF. Moreover, its annual accounts must be audited by an independent auditor and must be published no later than 6 months after the close of the year. Moreover, a SICAR in Luxembourg is required to prepare a sale prospectus which must contain, among others, the founding documents in order to provide investors with the opportunity of carrying out an informed evaluation of the investment and the associated risks. II. Tax Structure of a SICAR Investment Company in Luxembourg 1. Corporate Taxation In principle, a SICAR corporation in Luxembourg is subject to corporate taxation at a rate of 29.22%. This said rate consists of the following components: corporate income tax at a rate of 21% on income exceeding 15,000 EUR (or a rate of 20% for income not exceeding 15,000 EUR); the solidarity surtax at a rate of 7% as well as the municipal business tax at a rate of 6.75%. In contrast thereto, income from securities as well as from the sale, contribution or liquidation of its securities is exempt from income tax. If a SICAR in Luxembourg is formed as a Limited Partnership, it is the persons carrying on business as partners and not the partnership itself that is liable to tax. The SICAR consequently remains exempt from corporate income and the municipal business tax. In contrast thereto, its investors remain liable to tax in the country in which they are resident. 52

53 Business form: SICAR Investment Company 2. Tax Exemptions A SICAR in Luxembourg is neither liable to the net wealth tax nor to withholding tax on the distribution of dividends to investors as well as investment income from the disposal of such investments. It is likewise exempt from the so-called subscription tax (Tax d Abonnement). In addition, withholding tax does not require to be paid by non-resident investors on interest paid by a SICAR as well as on liquidation proceeds. Moreover, management services provided to a SICAR by a Management Company in Luxembourg remain exempt from valueadded tax (VAT). Due to a SICAR in Luxembourg in the form of a corporation being fully liable to tax, it is able to benefit from Luxembourg s double taxation agreements (DTA s). 53

54 Business form: Specialised Investment Funds (SIF) Formation of Specialised Investment Funds (SIF) in Luxembourg I. Legal Structure of a Specialised Investment Fund (SIF) in Luxembourg 1. Concept A Specialised Investment Fund (SIF) in Luxembourg is a type of investment fund which is regulated and which is not intended for the general public. In contrast to UCITS Funds (Collective Investment of Transferable Securities) which fall within the scope of application of the EU Directive and which invest in securities such as shares and bonds, the Specialised Investment Fund (SIF) offers greater flexibility. 2. Investment Policy A Specialised Investment Fund (SIF) in Luxembourg is permitted to deal with all types of assets including traditional and alternative investment strategies. This includes, for example, securities or money market Funds; real estate; private investment capital; infrastructure; private equity and hedge Funds. A Specialised Investment Fund (SIF) in Luxembourg must comply with the diversification principle when choosing its investments in order to protect the investors and is subsequently not permitted to invest more than 30% of its assets in securities of the same type and from the same issuer. 3. Investor The Luxembourg investment vehicle which is the Specialised Investment Fund (SIF) is reserved for qualified investors, namely professional investors and institutional investors as well as all those investors investing at least 125,000 EUR. The latter are required to submit written proof of their well-informed investment status (e.g. in the form of a letter from the bank). 54

55 Business form: Specialised Investment Funds (SIF) 4. Formation A Specialised Investment Fund (SIF) is formed either in contractual form and consequently as an Investment Fund represented by a Managing Company (fonds commun de placement, FCP) or in the form of a company, namely as an Investment Company whose capital is variable (SICAV) or fixed (SICAR). If a SIF is formed as a company, it may be formed as a Public Limited Company (PLC., Corp./SA); a Limited Liability Company (LLC., Ltd./SARL); a Partnership Limited by Shares (SCA) or as Co-operative in the form of a Public Limited Company (SCOSA). A SIF in Luxembourg may take the structure of a Holding Fund constituted by several sub-funds, each of which are independent of the others. The registered office and main place of central management and control of a Specialised Investment Fund (SIF) under its articles of association must be located in Luxembourg. If a Specialised Investment Fund (SIF) is formed as an Investment Fund FCP in Luxembourg, it will be managed by a Management Company in Luxembourg. Moreover, the assets of a Specialised Investment Fund (SIF) are to be transferred to an independent custodian (financial institute) resident in Luxembourg. This ensures that the subscription price of shares in the company will be received on time, that transactions involving equivalent assets are transferred or paid and that its proceeds are used in accordance with the founding documents. Furthermore, the management of a Specialised Investment Fund (SIF) in Luxembourg or the Management Company (in the case of an Investment Fund FCP) and the custodian require to be sufficiently qualified and to provide proof of their corresponding professional experience. Notwithstanding this, a Specialised Investment Fund (SIF) must not necessarily have a Sponsor/Promoter. Beginning from the date when a Specialised Investment Fund (SIF) in Luxembourg was approved by Luxembourg s Financial Market Authority (CSSF), the net assets of a SIF must amount to at least 1.25 million EUR within 12 months. Furthermore, a minimum share capital is required for the formation of a Specialised Investment Fund (SIF) and is dependent upon the business form chosen. 55

56 Business form: Specialised Investment Funds (SIF) 5. Issuance and Distributions Policy The provisions contained in the articles of association are wholly authoritative with regard to the issuance of new shares due to the SIF law containing no specific provisions thereon. This is also the case for the regulation of the formal criteria for the distribution of dividends or other repayments to the investors. Furthermore, a Specialised Investment Fund (SIF) in Luxembourg is not required to create reserves. Provisions regarding the method of valuation of the assets of a Specialised Investment Fund (SIF) in Luxembourg should be regulated in the founding document. This is despite a SIF in Luxembourg having a degree of freedom in the regulation thereof. 6. Supervision A Specialised Investment Fund (SIF) is subject to the permanent supervision of Luxembourg s Financial Market Authority (CSSF). A Specialised Investment Fund (SIF) requires a licence prior to commencing business. Notwithstanding this, a SIF may commence activity before such time if its application for the said licence was submitted within 1 month following its formation. A SIF can be quoted on Luxembourg s stock market directly following obtaining the said licence from Luxembourg s CSSF. Moreover, its annual accounts require to be audited by an independent auditor and must be published no later than 6 months after the close of the year. Moreover, a Specialised Investment Fund (SIF) in Luxembourg is required to prepare a sale prospectus which must contain, among others, the founding documents in order to provide investors with the opportunity of carrying out an informed evaluation of the investment and the associated risks. 56

57 Business form: Specialised Investment Funds (SIF) II. Tax Structure of a Specialised Investment Fund (SIF) in Luxembourg 1. Corporate Taxation A Specialised Investment Fund (SIF) is neither subject to income tax nor corporate taxation. A SIF is liable to subscription tax annually at a rate of 0.01% on its net worth. Notwithstanding this, several investments are not liable to the said tax. 2. Tax Exemptions A SIF in Luxembourg is exempt from the net wealth tax as well as from withholding tax on the distribution of dividends to non-resident investors. Moreover, value-added tax (VAT) is not payable by a Management Company in Luxembourg for Fund management services. Notwithstanding this, other services may remain liable to value-added tax in Luxembourg at a rate of 15%. 57

58 Business form: Real Estate Company Formation of a Real Estate Company in Luxembourg I. Real Estate Company in Luxembourg: Concept A Real Estate Company in Luxembourg is a business carrying on or the purpose of which under its articles of association is exclusively or predominantly the acquisition, management, use of and sale of real estate. A Real Estate Company in Luxembourg can be formed in the form of a corporation (as a Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC., Ltd./SARL); Partnership Limited by Shares (SCA) or Co-operative in the form of a Public Limited Company (SCOSA)). The particular formation requirements will be determined by the legal form the said company takes. II. Tax Aspects 1. The Taxation of Income from the Sale of Real Estate In principle, gains made from the sale of real estate are taxed in accordance with the situs principle, namely where the real estate is situated. 2. The Taxation of Gains on the Sale of Shares In principle, gains made on the sale of shares of a Real Estate Company, which owns the real estate, are taxed in the country in which the seller is resident. If the Real Estate Company is a Luxembourg corporation, the gains on the sale of the shares shall be taxed in Luxembourg. However, some of the new double taxation agreements (DTA s) which Luxembourg has agreed with many countries extend the situs principle to cover the sale of shares to Real Estate Companies whose assets, directly or indirectly, consist of at least 50% real estate. In such cases, the gains on the sale of the shares are taxed at the location of the Real Estate Company rather than where the seller is resident. Consequently, such Real Estate Companies in Luxembourg 58

59 Business form: Real Estate Company are unable to make use of Luxembourg s preferential tax regime if the real estate is located outwith Luxembourg. 3. Two-tier Company Structure However, the provisions permit exceptions to that effect meaning the extended situs principle does not apply to parent companies which are resident and the management of which is located abroad. In respect of a two-tier structure, gains from the sale of the shares of a Real Estate Company continue to be taxed where the seller is resident. Accordingly, if real estate owned by a resident Real Estate Company is to be held by a foreign corporation and shares in the resident Real Estate Company are to be sold, the tax liability remains with the foreign corporation. In this regard, the following procedure has developed in practice in Luxembourg: Firstly, a Luxembourg corporation is formed in the form of a SOPARFI-Financial Holding Company. The said Holding Company is particularly attractive due to its tax status whereby it benefits from the inter-corporate privilege under the parent subsidiary Directive and is exempt, in accordance with certain requirements, from corporate taxation and withholding tax. The SOPARFI-Financial Holding Company is formed in the legal form of a Public Limited Company (PLC., Corp./SA) in Luxembourg which is preferred herein due to the ability to issue bearer shares which are easily transferable. The Luxembourg SOPARFI-Financial Holding Company forms or acquires shares in the capital of an EU Real Estate Company which are subsequently sold. The resulting gains are subject to taxation in Luxembourg. Within this framework, dividends and the sale proceeds and liquidation proceeds resulting from investments remain exempt from tax. The SOPARFI-Financial Holding Company in Luxembourg will finally be liquidated and the liquidation proceeds subsequently distributed free from withholding tax. 59

60 Business form: E-Commerce Company Formation of an E-Commerce Company in Luxembourg I. E-Commerce Luxembourg: Concept E-Commerce is the electronic trading of goods and services on the internet and is divided into indirect and direct E-Commerce. In the case of indirect E-Commerce, the contract is concluded on the internet whilst the performance of the contract takes place outwith the internet. With regard to value-added tax (VAT), this transaction is treated in the same way as a conventional commercial transaction. In contrast, in the case of direct E-Commerce transactions, the entire legal transaction and the subsequent exchange of goods and services take place on the internet. In light of this special feature, the remainder of this text will exclusively focus on direct E-Commerce: E-Commerce includes the following services:» The provision of websites, web hosting and the maintenance of programmes and equipment;» The provision of software and the updating thereof;» The provision of texts and information for, but not limited to, e-books and other electronic publications as well as online advertisements;» The provision of databases such as those required for search engines;» The provision of music, films and games used for gambling and lotteries as well as for programmes and events from the worlds of politics; culture; sport; science and entertainment;» The provision of long-distance learning;» Online auctions, insofar as this is not already dealt with by web hosting services, through automated databases where the customer is required to input data and where no or minimal human intervention is necessary; 60

61 Business form: E-Commerce Company» Internet service packages which include more than mere access to the internet, instead including -but not limited to- news; the weather forecast; travel information; gaming forums; web hosting and access to chatlines. In Luxembourg, E-Commerce Companies are specifically designed for such direct E-Commerce services. E-Commerce Companies may be formed as corporations or as partnerships in Luxembourg. The particular formation requirements will be determined by the legal form the said company takes. II. Tax Aspects of Direct E-Commerce In accordance with the European Directive on E-Commerce, direct E-Commerce services are subject to a special EU value-added tax (VAT) regime. The said Directive will remain in force until January 1st, 2015: 1. The Taxation of Direct E-Commerce Services For the purposes of value-added tax (VAT), every supplier of E-Commerce direct services will be treated as a business person and is accordingly required to pay value-added tax (VAT) on the services he provides. The place of performance is decisive therefor and is to be measured against the following criteria:» The residence of the performing business person» The status and residence of the purchaser 1.1. Business persons outwith the EU (1) Services to Customers in the same EU Member State Where an EU business person provides E-Commerce services to a private person in the same EU member state or to a commercial customer in the same EU member state, value-added tax (VAT) requires to be paid by the EU business person providing the services. (2) Services to Customers in another EU Member State Where an EU business person provides E-Commerce Services to a commercial customer in another EU member state, value-added tax (VAT) requires to be 61

62 Business form: E-Commerce Company paid in the member state in which the commercial customer is resident. In cases such as this, the so-called reverse charge procedure, a special regulation which uniformly applies to all EU member states, will operate. Thereafter, the commercial customer -as the recipient of the services- is to calculate the value-added tax (VAT) liability in accordance with the tax rates in force in his country and to pay the tax to the competent tax office. In so doing, the said commercial customer has the right to deduct input tax for the same amount. Where an EU business person provides direct E-Commerce services to a private person in another EU member state, tax requires to be paid in the member state in which the performing business person is resident. Notwithstanding this, from January 1st, 2015, where an EU business person has provided direct E-Commerce services to private persons, value-added tax (VAT) will required to be paid in the customer s member state. (3) Services to Customers outwith the EU Where direct E-Commerce services are provided by EU business persons to customers outwith the EU, no EU value-added tax (VAT) is paid. In such cases, tax is levied in the jurisdiction of the customer Business Persons Resident outwith the EU (1) Commercial EU Customers Where a business person resident outwith the EU provides direct E-Commerce services to a commercial EU customer, value-added tax (VAT) will be paid on the said services in the jurisdiction of the customer through the reverse charge procedure. The non-eu business person is not required to be registered in the EU for value-added tax (VAT) purposes due to the commercial customer himself paying the value-added tax (VAT) within the reverse charge procedure. (2) EU Private Person Likewise, where a business person resident outwith the EU provides direct E-Commerce services to a private person in the EU, value-added tax (VAT) will be paid in the EU. However, in this case the said business person must be registered in the EU, in a member state of his choice, for value-added tax (VAT) purposes and must bill such customers at the standard rate of value-added tax 62

63 Business form: E-Commerce Company (VAT) in force in the EU member state in which the customers are resident. The said business person is thereafter required to pay value-added tax (VAT) to the tax authority in the member state in which he is registered every three months and to simultaneously provide an electronic statement detailing the transactions during that period. In accordance with the said statement, the taxes will thereafter be forwarded to the relevant member state of the customers. 2. Taxation of Direct E-Commerce Services in Luxembourg Luxembourg is an attractive location for direct E-Commerce due to its favourable and, with respect to certain services, reduced rates of value-added tax (VAT). The provision of goods and services is subject to value-added tax (VAT) at a rate not exceeding 15% in Luxembourg. In Luxembourg, a reduced rate of value-added tax (VAT) of 3% applies to the supply of e-books to end-customers. The said reduced rate is in force until January 1st,

64 Questions on Company Formation in Luxembourg? START-UP LUXEMBOURG is an independent information platform providing information on all questions regarding company formation in Luxembourg free of charge. Our lawyers and tax experts stand ready to advise you personally and free of charge and to guide you through the decision-making process and the company formation process. START-UP LUXEMBOURG INTERNATIONAL ADVOKAT TRUST AND MANAGEMENT G.E.I.E. 11 A, Boulevard Joseph II L Luxembourg The Grand Duchy of Luxembourg (Monday Friday, between 9am and 4pm) 64