Introduction to Registering a Company in Luxembourg

Luxembourg Corporate Structuring and Tax Positioning

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A Strategic EU Jurisdiction for Holding, Investment, and Intellectual Property

As a long standing member of the European Union, Luxembourg continuously adapts its legal and tax framework to remain aligned with evolving EU directives and international tax standards. This dynamic regulatory environment makes professional, up to date advisory support essential for investors and companies seeking to establish or maintain a compliant presence in the jurisdiction.

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At HPT Group, we assist clients in navigating Luxembourg’s regulatory, tax, and corporate landscape with precision and foresight. From selecting the appropriate legal structure to ensuring ongoing compliance with local and EU tax requirements, our approach is designed to support long term stability, efficiency, and regulatory confidence.

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Is Luxembourg a Low Tax Jurisdiction for Everyone

Luxembourg is often associated with tax efficiency, but it is not universally a low tax jurisdiction across all business models or investor profiles. Standard corporate income tax, including municipal business tax, currently sits at approximately 27.22 percent, while wealth taxes and personal income tax rates can also be relatively high.

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However, Luxembourg’s attractiveness lies in its specialised corporate structures rather than its headline tax rates. Certain entities, particularly holding and investment structures that meet defined criteria, can benefit from significantly reduced effective tax rates. In well structured cases, corporate taxation can be reduced to below 0.5 percent, provided the entity complies fully with Luxembourg and EU substance and governance requirements. This makes Luxembourg particularly appealing for groups that qualify under these regimes and require a reputable EU base.

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Standard Corporate Structures in Luxembourg

Luxembourg offers a range of well established corporate entities designed to accommodate different business objectives, levels of complexity, and investor profiles.

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The Joint Stock Company, known as the SA, is commonly used for larger enterprises and holding structures. It requires a minimum share capital of 30,000 euros, at least one director, and a registered office in Luxembourg. Depending on size and activity, audited accounts may be mandatory.

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The Limited Liability Company, or SARL, is a more flexible option and is frequently used by small to medium sized businesses and holding companies. It requires a minimum share capital of 12,000 euros and allows up to 100 shareholders. A registered office in Luxembourg and at least one director are required, with audit obligations determined by company scale and turnover. In some cases, share capital may be structured to cover incorporation related costs.

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In addition to these core entities, Luxembourg also provides access to various partnership structures, including general partnerships, limited partnerships, and special limited partnerships, as well as branch registrations for foreign companies seeking an EU footprint without forming a standalone subsidiary.

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Setting Up a Low Tax Holding Company in Luxembourg Through SOPARFI

The Société de Participation Financière, commonly referred to as SOPARFI, is one of the most frequently used structures for tax efficient holding and investment activities in Luxembourg. While SOPARFI is not a standalone legal form, it operates through standard entities such as an SA or SARL, benefiting from Luxembourg’s participation exemption regime.

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To maintain its favourable tax status, a SOPARFI must comply strictly with substance, governance, and activity requirements. Any deviation from these rules can result in the loss of tax benefits. When properly structured and managed, SOPARFI entities are highly effective for holding shares, receiving dividends, managing intercompany financing, and supporting international group structures.

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Private Wealth Management Company Structure Through SPF

The Private Wealth Management Company, known as the SPF, is designed specifically for private investors managing personal wealth rather than commercial activities. This structure offers several distinctive advantages for non resident individuals and families.

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SPFs are subject to an annual subscription charge of 0.25 percent but benefit from exemptions from corporate income tax, municipal business tax, and net worth tax. This makes the SPF particularly attractive for long term wealth preservation and passive investment holding.

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In addition, SPFs offer favourable treatment for dividends and are structured to operate within a controlled regulatory framework that supports private asset management without engaging in active commercial operations.

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SOPARFI Tax Features and Treaty Access

SOPARFI structures benefit from several important tax considerations when properly implemented. Dividends received from qualifying subsidiaries are generally exempt from taxation, and Luxembourg’s extensive double taxation treaty network allows for efficient cross border dividend and interest flows.

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The structure also benefits from favourable treatment on capital gains and profit distributions when participation exemption criteria are met. These advantages make SOPARFI a preferred vehicle for multinational groups, investment holding companies, and private equity structures seeking a compliant and efficient EU base.

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Luxembourg Intellectual Property Tax Regime

Luxembourg offers a highly competitive intellectual property tax regime that supports innovation driven businesses. Income derived from eligible intellectual property assets, including patents, trademarks, trade names, and domain names, may be taxed at an effective rate of approximately 5.72 percent.

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This regime operates alongside standard corporate income tax and typically requires an advance agreement with the Luxembourg tax authorities. When properly structured, the IP regime offers significant benefits for technology companies, licensing entities, and groups centralising intellectual property ownership within the EU.

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Employment and Workforce Environment in Luxembourg

Luxembourg maintains one of the lowest unemployment rates in Europe and is widely recognised for its highly skilled workforce, particularly in finance, legal services, and fund administration. This workforce is further strengthened by cross border commuters from neighbouring countries, providing companies with access to a diverse and multilingual talent pool.

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HPT Group supports clients not only with corporate structuring but also with strategic considerations related to staffing, substance requirements, and operational presence in line with Luxembourg labour market realities.

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Regulatory and Compliance Environment

Luxembourg is sometimes perceived as more administratively demanding than other EU jurisdictions, but this reflects its commitment to regulatory compliance and alignment with EU standards. The country adheres strictly to European labour, health, safety, and tax directives, providing investors with a stable and predictable regulatory environment.

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Both domestic and foreign investors are free to establish businesses in Luxembourg, and its holding company regime remains a notable exception within broader EU tax harmonisation efforts. This balance between compliance and flexibility underpins Luxembourg’s continued relevance as a financial centre.

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Financial Incentives and Government Support

Luxembourg offers a range of financial incentives aimed at encouraging investment and economic diversification. These include grants, subsidies, and equity funding for companies operating in manufacturing, technology, and other strategic sectors.

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The government actively promotes innovation and diversification beyond traditional industries, creating opportunities for businesses aligned with long term economic development objectives.

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Banking and Financial Infrastructure in Luxembourg

Banking remains a central pillar of Luxembourg’s economy, with a strong emphasis on cross border fund administration and international financial services. Although the domestic market is relatively small, Luxembourg’s financial sector serves a global client base.

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Companies operating in Luxembourg are generally required to maintain a local bank account, and navigating the banking landscape requires careful preparation and compliance readiness. HPT Group provides structured support throughout both the company incorporation and banking onboarding process, ensuring clients are positioned correctly from the outset.