Creatrust > Family Office > Becoming Resident in Luxembourg

Becoming Resident in Luxembourg

The various advantages of moving residence to Luxembourg

Luxembourg offers businesses and entrepreneurs a range of interesting financial vehicles such as SOPARFI holding companies, Private Wealth Management companies, securitisation companies, real estate companies, etc. together with interesting Intellectual Property Rights legislation which promotes research and development (R&D) by reducing the taxation of income to less than 6%.

Luxembourg's legislation provides significant flexibility for incorporation and administration of Luxembourg companies (setting up, reporting, financing, etc.) and a varied system of double tax treaties. Plus, social security contributions are reasonable compared to other countries.

How Creatrust can help

Becoming a resident of Luxembourg can greatly enhance your tax position and aid the activities for family office. Creatrust can help you meet your personal and family financial objectives through intelligent and targeted wealth and asset management.

We are also on hand to provide guidance in relation to investments, taxation and asset consolidation with all the information you need to become resident.

Talk to our Family Offices specialists by calling us today or browse our website pages to find out more about our services.

Luxembourg for High Net Worth Individuals - HNWI

For individuals, the establishment to luxembourg can be done in a matter of days for EU nationals and in a matter of weeks for non EU nationals. They can thus benefit from a high standard of living and a good quality of life.

Situated in the heart of Europe, between Belgium, France and Germany, the Grand Duchy of Luxembourg covers an area of just 2,586 km2. The standard of living and quality of life is high, and there are many places of outstanding natural beauty, and historic and cultural significance, all situated within the compact nation.

Luxembourgers have a longstanding cosmopolitan tradition and the country boasts a unique mix of multi-cultural communities which co-existing happily. The ongoing integration of foreign nationals forms an important part of the country's history, culture and identity. Today, almost 40% of inhabitants are foreign incomers and this has led to local populations having a multilingual nature which enables visitors and new settlers to integrate rapidly into daily life.

Luxembourg is one of the safest cities in the world and has a highly sophisticated infrastructure which enables travel to many major European cities in just a few hours (London, Paris, Frankfurt, Barcelona, Rome, Copenhagen, Geneva, Nice, etc).

The free circulation of people and goods in the European Union is guaranteed by the Treaty of Rome and strengthened by Luxembourg's membership of the Schengen area.

The city boasts more than 2,300 restaurants, five golf courses, numerous museums, concert halls of all types, a prestigious philharmonic venue and ultra-modern sports centres; it is a hub for gastronomy, sports and culture.

Legislation exists to attract highly skilled employees to Luxembourg, so they can use their skills in the many innovative businesses and industries located in the country.

In terms of taxation, HNWIs can enjoy various tax benefits when they become a resident:

no wealth tax
no inheritance and succession tax (direct line descendants)
maximum tax rate: 41%
no capital gains tax: if under 10% and held for at least six months
tax on Luxembourg-source interest received: 20% withholding tax (flat rate)
tax on Luxembourg-source dividends: 15% withholding tax then standard rate with a 50% allowance
tax on life assurance income: nil, if held for at least 10 years
VAT on motor vehicles: 17%
a wide range of treaties to prevent double taxation
no CFC rule, which means that the Luxembourg residents are only taxable upon receipt of income from any company they may hold in Luxembourg or abroad
tax rate of 10.5% for Alternative Investment Fund Managers
attractive Luxembourg inpatriate tax regime

Luxembourg for Family Offices

Family Office may also find Luxembourg an interesting place to establish their activities for the following reasons:

wide range of banking facilities
company incoproration, fund, foundation and trust establishent, SPF, SOPARFI, Securitisation
Specialised Investment Fund, SICAR, etc.
absence of controled foreign company rules
no wealth tax
large network of double tax treaties

The Luxembourg Step Up Principle - An opportunity for capital gain exemption for HNWIs

Upon becoming a Luxembourg resident taxpayer, any individual can avoid a (double) taxation on latent capital gains on shares generated before moving his residence to Luxembourg.

If the individual is holding a participation in a company or some convertible debts issued by such a company, the appreciation in value from its acquisition to the day he transfers his domicile to Luxembourg is subject to a step up. This means that the capital gain subject to tax will be limited to the part of the capital gain accrued between the day domiciliation and the final sale price.

This is an attractive feature of the Luxembourg law allowing individuals to mitigate the taxation on any capital gains to be realised on a participation they hold in any company.