Offshore Company Formation Luxembourg Trading

Gereral Information about Luxembourg

Luxembourg is a small country in Central Europe bounded by France, Germany and Belgium. It has a land area of about 2,600 sq. km. and a population of 470,000. It was originally founded in 963 and has been an independent State since 1815. Its borders have changed over the centuries as a result of conflicts in Europe. The capital and financial centre is Luxembourg. The Grand Duchy of Luxembourg is a parliamentary democracy with a constitutional monarchy. Executive power is exercised by the Grand Duke together with the prime minister and cabinet. Legislative power vests in a directly elected Chamber of Deputies. It is a member of the European Union.

The Luxembourg 1990 Soparfi is a normal Luxembourg company. It is subject to the full range of taxes and receives the benefits of Luxembourg 's double taxation treaties. Taxable holding companies may carry out commercial, financial, and/or industrial activities. In the case of a Soparfi Trading company, a trading authorisation or license (delivered by the Luxembourg Ministre des Classes Moyennes) is necessary. A S.A.R.L. may also be used as a trading company.
 

Luxembourg Taxation

Corporate Income Tax (IRC) for Luxembourg trading companies is charged at on worldwide income, subject to foreign tax relief in accordance with applicable double tax treaties. A Municipal Business Tax (ICC) on profits is charged on taxable income. The maximum effective rate is 30.38%. Losses may be carried forward indefinitely. Fiscal integration is also possible if the parent company owns at least 75% of the subsidiary. Capital gains for corporation are treated as ordinary income and taxed accordingly. Wealth Tax is charged on the net asset value of a company as at 1st January of each year. There is a Withholding Tax of 20% on dividends (zero on dividends paid to an EC parent), one of 10% on royalties, but none on interest. Tax treaties may reduce withholding taxes. The Capital Registration Duty of 1% (Droit d'Apport) is charged on incorporation and substantial capital increases. Trading companies can benefit from Investment Tax Credit. These companies are subject to Value Added Tax and must register for VAT when their turnover exceeds the threshold.
 

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