Situated in the centre of the European Community, Luxembourg is recognized as an excellent jurisdiction for international tax planning and financial structures. The Luxembourg participation company ('SOPARFI') can receive tax-free dividends and capital gains, obtain tax deductions for capital losses and benefit from an exemption on capital tax. This type of company has full access to the many double income taxation agreements to which Luxembourg is a partner.

The structures outlined below are usually set up with a société de participations financières, (or 'Soparfi') which is a normally taxable company with the ability to conduct all types of financial activities.

A Soparfi is mainly used as a holding company to operate as principal European holding company or for holding private equity investments

For Private Equity and Venture Capital investments the SICAR has been created. The SICAR is part Soparfi and part investment fund. It is a normally taxable company but enjoys some of the benefits of investment funds and falls under the supervision of the Luxembourg financial services supervision commission.

There is no withholding tax on interest payments from Luxembourg. As such, it is often an ideal location for structured financing whether involving intra-group financing, bond issuances, securitisation or factoring activities.

A special regime for securitisation undertakings exists in Luxembourg. Securitisation is the conversion of certain assets, which are not securities, into securities. Repackaging is the transformation of existing securities into securities with different characteristics (e.g., a different interest rate or a different currency). The main benefit to the seller of securitisations is that certain assets (e.g. trade receivables, mortgages, credit card loans) that bear risks can be sold in return for cash.

Licensing and sublicensing structures can be established with a Soparfi. Royalty income streams received can be offset by the royalty expense leaving an arm's length remuneration for the company's activity.

Luxembourg often provides for a full exemption from local taxation of income from foreign permanent establishments ('branch operations'). A branch is often an ideal way to establish activities through Luxembourg at a minimum of cost and limited tax exposure.

Soparfis can be used for real estate investments in other countries either indirectly through a local company or held directly by the Soparfi. In such structures, the capital gain is tax exempt in the hands of the Luxembourg Company.

Luxembourg generally levies a 20% withholding tax on income from movable capital (e.g., dividends) distributed by a Luxembourg company. However, no tax is levied on liquidation distributions as they are considered to be capital gains. Therefore, a liquidation scenario is commonly used to provide a tax-free exit from Luxembourg.

Languages spoken: French, English, German, Portuguese, Spanish and Dutch.