Company Redomiciliation

Typically, a simple notary act in the country of departure and another notary act in the country of election of domicile (Luxembourg) may be sufficient to change the nationality of most companies. In that case the company becomes a company duly incorporated under the law of Luxembourg and fully recognised as a Luxembourg national company.

When a foreign company transfers its registered office or seats its main place of management in Luxembourg, it will sever any links with its country of first incorporation unless it keeps a permanent establishment there. The company will not be taxable in the first country, but will become taxable on its worldwide income in Luxembourg. It will be considered as resident for tax purposes and taxable at the applicable corporation tax rates - unless its shareholders elect a tax regime in Luxembourg which grants a specific tax exemption such as:

• SOPARFI (Holding Company)

• SPF (Private Wealth Management Company)

The newly incorporated company may also enjoy the benefit of the generous double tax treaty network that Luxembourg has signed with other countries.

It may also benefit from EU directives such as:

Parent Subsidiary Directive: subject to conditions, the participation exemption - absence of withholding taxes on dividends received from other companies established in other EU countries.

Interests Royalties Directive: subject to conditions, exemption of withholding taxes on interests or royalties received from companies established in the EU.

Merger-Acquisition Directive: subject to conditions, the shareholders can enjoy the delay of taxation on capital gains derived from contribution in kind (or exchange of shares upon contribution in kind) to a company, or exemption of capital gain when contributing by shares to a holding company such as a SOPARFI (Exemption of capital duty when contribution in kind is made on participations at the set-up of a SOPARFI.)

The Luxembourg law grants exemptions such as:

• Luxembourg tax exemption of 80% granted to Intellectual Property Rights companies

• Luxembourg tax exemption of 100% - subject to conditions - of incoming dividends, exemption of capital gain on participations, exemption of real estate incomes for estates established in a foreign DTT country, exemption of withholding tax on certain income paid, such as royalties, dividends, or interest.

However, when a registered office is transferred certain considerations should be made as follows:

• The legal personality of the company will be governed by local Luxembourg law and regulations (departure)

• When the registered office is transferred abroad there may be some taxation of latent capital gains

• Whether conservation of a permanent establishment in the country of origin is required

• The transfer could be considered to be the winding up of the company

• Indirect taxes may be due on value of the company assets (VAT, Registration duties, Capital duty)

Likewise, a Luxembourg company can transfer its registered office to abroad.

The transfer of seat is assimilated to a dissolution of the company and trigger the taxation of any latent capital gains (which is subject to exemption eg on IPR and on qualifying participation).

To be noted that there is no withholding taxes at source on the profit carried forward and reserves upon transfer of seat abroad.