Open a SPF in Luxembourg

Updated on Saturday 03rd February 2024

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Luxembourg is the top European jurisdiction for investment purposes and the first country in which an investment fund was registered. Foreign investors interested in how to start an investment in Luxembourg may choose from a wide category of funds, including the private asset management company (SPF).

Quick Facts
Legislation	Company Law in Luxembourg
Types of entities available for registration	- limited liability companies, - partnership limited by shares, - cooperative
Recommended uses	- for holding purposes, - as an investment company, - for estate management purposes
Available for registration with natural persons	Yes, the SPF can be created by natural persons.
Possibility of having corporate shareholders	Yes, when used as an investment company
Special registration requirements (if any)	Yes, its trading name must bear Société de Gestion de Patrimoine Familial or SPF
Possibility to be used to create an investment fund in Luxembourg (YES/NO)	Yes
Types of investors addressed when used as an investment company	Qualified investors
Minimum share capital	The required share capital depends on the type of structure employed.
Restrictions	- it cannot offer services outside the purpose it was created for, - it cannot own real estate or royalties
Taxation	Annual subscription tax of 0,25%, plus withholding taxes that can be reduced under double tax treaties.
Accounting requirements	Annual accounts must be drafted and a balance sheet must be filed with the Trade Register.
Access to tax exemptions (if applicable)	- income tax, - municipal taxes
Registration timeframe (approx.)	Approx. 10 business days
Advantages	- quick registration, - possibility to be used for investment fund creation purposes, - various tax benefits

Steps to create a SPF in Luxembourg

Just like setting up another type of investment fund in Luxembourg, the registration of a SPF also implies completing several steps. These are:

choosing a trading name for the SPF;
choosing the legal structure for the fund's registration;
opening a bank account to receive the share capital deposits;
making the capital payment;
prepare the company incorporation documents.

The company can also be registered through a power of attorney and must be completed before a public notary.

If you want to know how to start a fund in another European country, you will find plenty of related articles in our magazine.

Main characteristics of the SPF in Luxembourg

The SPF in Luxembourg represents a type of company that has been incorporated in this country for a long period of time (since 1929). However, the regulations related to the registration of a SPF were modified in 2007 to comply with the European Union’s tax directives for this type of legal entity.

Luxembourg is also a great destination for asset protection. For this purpose, starting a hedge fund or a SPF can be a great option. By far, the SPF can be used because of its characteristics, among which:

its private nature with a focus on risk distribution;
limitations on liability through the distinct legal personality the fund has;
the possibility of using a holding company as opposed to placing money directly with particular individuals;
the adaptability in the structuring of investments;
streamlined and appealing taxation;
the easy incorporation procedure which provides for a low initial share capital and simplified requirements.

You can find out more about what it entails to create a SPF in Luxembourg from our partners in the Grand Duchy.

This type of entity can be set up under one of the following:

• public limited company;
• limited liability company.

Although it is registered as a corporation, its articles of association must respect the regulations applicable under the Private Asset Management Companies legislation, which provides the legal framework for the activities that can be carried out under this structure.

The company may issue shares and its trading name must also contain the “SPF” abbreviation.

The Cayman Islands can be a good option if you're seeking for offshore territories where you can set up money. The Cayman SPC, which can be utilized for numerous purposes, is one of the most often used entities there. By getting in touch with our regional affiliates, you may learn more about it.

Business activities of a SPF in Luxembourg

Even though the company is registered under the regular business forms available in Luxembourg, they are not allowed to enter commercial activities if they are incorporated as SPFs. As a general rule, the SPF is incorporated for investment purposes, such as:

• investments in financial instruments, which can be represented by shares, funds, bonds, bank accounts and other similar assets;
• the SPF may also invest in precious metals.

Investors interested in how to start a fund in Luxembourg may also set up a hedge fund startup, which provides the advantage of carrying multiple investment strategies at the same time.

A SPF can also be incorporated for performing management strategies of the private wealth of natural persons. It is important to know that the shares of a SPF can’t be traded on the local stock exchange.

The legal entity benefits from several tax exemptions and in this sense we mention that the company will be exempted from pay the value added tax, the corporate tax or the withholding tax on dividends or interest.

Types of investors addressed by the SPF

In accordance with Article 3 in the Luxembourg SPF Law, such a fund can address the following types of investors:

people managing their personal possessions;
organizations working solely to protect one or more people's private assets;
intermediaries representing qualified investors.

Corporations or commercial enterprises will not be regarded as qualified investors.

A domiciliary agent or chartered accountant must attest to the fulfillment of this requirement applied to companies in a certificate that is submitted to the tax authorities by July 31st at the latest each year.

Our affiliates in Luxembourg can also advise on how to start a hedge fund in this jurisdiction, as it is quite popular.

New regulations applicable to SPFs in Luxembourg

Numerous modifications were made to the Luxembourg tax system through the Budget Law starting with the year 2021. These changes also address the SPF which is no longer allowed to hold real estate assets directly or indirectly through this type of investment fund or any other tax transparent entity.

The SPF, which was established by the SPF Law, offers ultra- and high-net-worth individuals a suitable private asset management instrument to help them accumulate, safeguard, and distribute their estate.

The acquisition, holding, management, and disposition of qualifying investments will constitute the exclusive activities of the SPF.

If you are interested in a jurisdiction in which the legislation is more investor-friendly, we recommend the Cayman Islands. Here, the Cayman segregated portfolio company (SPC) is quite advantageous. If you want to know how to start an investment fund in another jurisdiction, we have various materials on our website.

Investors are invited to watch the following short presentation on the SPF in Luxembourg:

Taxation of SPFs

The SPF has various tax benefits and has to register with the Luxembourg Inland Department, as:

except for a fixed registration cost of EUR 75, there is no stamp duty on share capital subscriptions or transfers;
the SPF is levied an annual subscription fee of 0.25% on share capital and specific deductions are also available;
the subscription tax's value must be between EUR 100 and EUR 125,000 at most.

No municipal business taxes or corporate income taxes apply to the SPF. Also, it is not considered a fully taxable entity. As such, European directives and international double tax treaties do not apply.

For more information on how to start a fund or a SPF company, please contact our team of affiliates in Luxembourg, who can offer in-depth advice on this matter.