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Luxembourg private foundation - 22/08/2013


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1. Introduction

On 22 July 2013, the Luxembourg government submitted to the Parliament a draft law introducing a new orphan tax structure (i.e. no members, shareholders or associates), called “fondation patrimoniale”, aimed at broadening the range of investment vehicles at the disposal of high net worth individuals in Luxembourg. This draft law follows the legislative trend endorsed by the Luxembourg government towards the creation of an attractive location for private clients1.

The new vehicle would grant significant benefits to Private Clients willing to use Luxembourg as an investment and estate platform. The Luxembourg “fondations patrimoniales” will allow for an asset and succession planning instrument which preserves the cohesion and integrity of the family wealth whilst granting, at the same time, flexible mechanisms to adapt the structure to the particular needs of the clients.

Furthermore, the draft law introduces an amendment to the Luxembourg Income Tax Law under which a step-up scheme applies for individuals who decide to become Luxembourg tax resident. This legal innovation is not exclusive to “fondations patrimoniales” but applies to any situation where the taxpayer decides to relocate his tax residence to the Grand Duchy.

2. General features

As it stands, the use of “fondation patrimoniales” is limited to individuals and patrimonial entities with the objective of managing private wealth (and with no involvement in any commercial, industrial, agricultural or liberal activity).

“Fondations patrimoniales” will have their own legal personality and will be able to hold movable or immovable properties, (including life insurance policies). In addition, “fondations patrimoniales” will be able to carry out holding activities, providing no managerial decisions are taken in relation to the held entities.

Similar to all Luxembourg entities, “fondations patrimoniales” will need to have a “constituting deed ” that will have to be signed off by a notary established in the Grand Duchy. In addition, an initial capital contribution of EUR 50.000, paid in cash or in kind, will be required.

For your understanding we’ve illustrated the “fondation patrimoniale” fonctioning mechanism in a concise chart.

Discover the whole newsletter in the attached PDF.

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