Law & Numbers - News Tax

Fondation Patrimoniale

21.03.2014 (Luxembourg)

New tool to manage private assets had been introduced on July 22, 2013 by the Luxembourg's government to the Parliament will offer a new taxation structure fiscally attractive.

Fondation Patrimoniale: New Tool to Manage Private Assets

To maintain the position as a center of excellence when it comes to managing private health and with the aim to compete with other European Member States, the Luxembourg’s government introduced on July 22, 2013 a bill to the Parliament on the fondation patrimoniale.

This new orphan structure (no shareholders, associates and members) will likely be used in estate and succession structuring and planning. The foundation will offer a new taxation structure, flexible and fiscally attractive in accordance to the high net worth individuals’ needs.

1. Legal System in a Nutshell:

• Intended for individuals and wealth structuring entities which control and manage private wealth;
• Headquarter established or domiciled in Luxembourg;
• Initial capital contribution of EUR 50,000 paid in cash or in kind;
• Constituting deed signed off by notary established in Luxembourg;
• Registration to the Luxembourg Companies Registry.

2. Attractiveness of Tax System

The fondation patrimoniale is a separate taxable entity independent of the settlors, beneficiaries or administrators.

a) Direct Taxes

This entity presents some tax advantages …
• Fully exempted to the net wealth tax and value added tax;
• No withholding tax on payments or benefits conferred to the settlors, beneficiaries or successors;

… and tax exemptions apply on:
• Income from securities (interest payments, dividends);
• Capital gain on the sales of assets generating exempt income;
• Capital gain on the sales of movable property realized within 6 months after the purchase;
• Capital and surrendered value of a personal insurance policy contracted by the settlor covering life risk, invalidity risk and death risk.

b) Indirect Taxes

• Settlor alive
In case of transfer of an asset or right from the foundation to a beneficiary or liquidation or dissolution of the foundation: Gift tax is due which rate depends on the kinship.

• Settlor is dead
A registration duty of 0%, 12%, 40% calculated on the fair market value of the assets is due. For non-tax resident in Luxembourg, the registration duty is limited to real estate assets located in Luxembourg.

c) “Step up” Principle: Art. 34. 3 of the Bill of Law

A non-tax resident in Luxembourg who becomes a resident taxpayer can revalue, to the fair market value, the acquisition price of the asset at the time of the establishment in Luxembourg. This principle grants an advantage in case of significant capital gains and avoids double taxation of the capital gain generated before the day of the establishment of the tax residence in Luxembourg.

This new investment vehicle will be a cross-border management structure with an attractive tax treatment through the step up principle and tax exemptions. Furthermore, the fondation patrimoniale will grant benefits to private clients and high net worth individuals in Luxembourg, in particular to preserve the cohesion of the family wealth and to plan the succession.
Although the bill had not yet been approved by Parliament and still before the Commission des Finances et du Budget, a decision is expected by the end of 2014.

The bill is available under:

Warning: mysqli_close() expects parameter 1 to be mysqli, null given in /home/www/web614/html/inc/connclose.php on line 3
Die Datenbankverbindung wurde nicht geschlossen.