| THE HOLDING 29 |
1 - DEFINITION The law of 31st July 1929 on the tax regime for holding companies applies to any company established under the law of 10th august 1915 on commercial companies, provided its statutory objects are confined to the acquisition and holding of participation of any kind in other companies, whether domiciled in Luxembourg or abroad, and to the management and administration of such participation, so that it neither engages in any commercial or industrial activity itself. The purpose of the 1929 law is to avoid double taxation. A holding company owns interests in industrial or commercial companies from which it receives dividends. The profits of the company in which the participation is held have already been taxed and withholding tax has levied on the dividends. If adequate tax legislation had not been passed the same income would be taxed again when it was received by the holding company and the dividends it paid would be subject to withholding tax a second time before being taxed yet again as income of the holding company’s shareholders. This repeated taxation of the same income and the same activity would violate the fundamental principle of « non bis in idem » in tax law. |
"H29 ABOLITION 01/01/2011, SEE under SPF" |
2 - THE ACTIVITIES a Luxembourg holding company can engage The acquisition and management of participations The holding company may subscribe, acquire, manage, administer and sell participation in Luxembourg or foreign companies. The management of a portfolio of shares and bonds The Holding company may acquire manage and sell shares or bonds issued by public or private entities of Luxembourg or foreign nationality. The holding of patents The acquisition, exploitation and sale of patents and the granting of licences to exploit these patents to companies in which the holding company has an interest is permitted. The holding company may also acquire licences relating to patents that complement or supplement those owned by the company itself. The financing of companies A Luxembourg holding company may grant loans and advances to companies in which it has an interest or provide them with guarantees. However, it may not advance funds to its own shareholders. The management of treasury A holding company is permitted to hold bank accounts in any currency with Luxembourg or foreign banks. |
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4 - TAX SYSTEM The Luxembourg holding companies are not taxable on their profit, whether deriving from dividends or interests, nor on realised capital gains. Luxembourg holding companies are liable to no tax apart from the capital composition duty payable at the time of establishment and the annual composition duty. Capital contribution duty (droit d’apport) The capital contribution is at the rate of 1% of the real value of assets of every kind contributed or to be contributed by shareholders. Composition duty (taxe d’abonnement) Shares issued by the holding company are subject to an annual composition duty on the paid up capital at the rate of 0,2%, with a minimum of EURO 50.- a year. |
5 - LEGAL SYSTEM As the corporation (“société anonyme”) is the form of company most commonly adopted, we have limited our analysis to the legal regime applicable to this company. Incorporation The issued share capital of a corporation must amount to at least EURO 31.000.-. The incorporation of the company requires the participation of at least two founding shareholders. They may be individuals or corporate entities. Management The board of Directors constituted by at least three members is in charge of the management of the company. The directors may be individuals or corporate entities, nationals or foreigners, residents or non residents. The directors cannot be appointed for a period of no more than six years. Annual financial statements The annual accounts underly the audit by either by a statutory auditor, called “commissaire aux comptes” or by a registered auditor. The annual financial statements include the report of the statutory or registered auditor, the balance sheet, the income statement or profit and loss account, notes on these statements, and the management report. The audited annual financial statements are then approved by the shareholders during the ordinary general meeting of the shareholders and then filed with the Trade Register along with the official approbation of the year’s profits and details of the directors and auditor. |