Luxembourg’s tax system is comprehensive and primarily based on the principles of residence and source taxation. The main tax regimes relevant to individual clients, estates, trusts, and foundations are as follows.

Personal Income Taxes

Individuals who have their domicile or usual abode in Luxembourg will be considered tax resident and will be subject to personal income tax (PIT) on their worldwide income subject to the application of any relevant double tax treaty (DTT) signed by Luxembourg.

A person’s domicile is the location where they maintain a residence under conditions suggesting they intend to keep and use it. An individual is considered to have a habitual place of residence in Luxembourg if they have continuously stayed in the country for at least six months. This six-month period may span two different tax years, and brief absences are not taken into account.

Individuals who are not tax resident in Luxembourg will only be subject to Luxembourg PIT on their Luxembourg source income.

PIT rates are progressive, ranging from 0% up to 42%, plus a solidarity surcharge for employment fund of 7% or 9%, depending on the taxpayer’s level of income. The maximum tax rate, including the surcharge, amounts to 45.78% for the 2025 tax year.

Wealth Taxes

Since 2006, Luxembourg does not levy net wealth tax on individuals.

Capital Gains Taxation

Capital gains taxation varies depending on the asset type and residency status.

Capital gains on movable assets

• Short-term gains – gains on movable assets (such as shares or securities) realised within six months of their acquisition are fully taxable as miscellaneous income.
• Long-term gains – if the holding period exceeds six months, capital gains on the sale of movable assets are generally tax-exempt, unless the individual (alone, together with his/her spouse or partner and minor children) holds a substantial shareholding (broadly, more than 10% of the share capital) in certain Luxembourg companies at any time during the five years preceding the transfer.
• Gains on substantial shareholdings – for disposals of substantial shareholdings after a holding period that exceeds six months, capital gains are taxable at a half PIT rate.

An exemption of EUR1,500 (or EUR3,000 for married couples) applies to income from movable assets, which must be reported on a tax return.

Capital gains on immovable properties

Capital gains realised by an individual upon the sale of his/her main residence are fully tax exempt.

For the other real estate assets, the tax treatment will depend on the holding period.

• Short term gains – gains realised on properties sold within five years are fully taxable as speculative gains.
• Long-term gains – gains realised on real estate assets sold after five years are taxed at half tax rate.

A law enacted on 22 May 2024, established a temporary regime under which capital gains from immovable property held for more than two years and realised in 2024 are taxed at one fourth of the average tax rate applicable to the taxpayer’s total income, rather than at half of the average rate. A law dated 4 April 2025, extended the measure until 30 June 2025.

Non-resident shareholders who have neither a permanent establishment nor a permanent representative in Luxembourg to which the shares of a Luxembourg company are attributable, are only taxed on gains derived from Luxembourg real estate or from the disposal within six months of its acquisition of a substantial participation (more than 10%) in a Luxembourg company, subject to an applicable DTT.

Inheritance Tax and Transfer Tax

Luxembourg inheritance tax (droit de succession) only applies when the deceased person was domiciled or had established the seat of his/her fortune in Luxembourg. In such situation, inheritance tax will be due on the total value of the assets bequeathed by the deceased person irrespective of whether the heirs or legatees are resident in Luxembourg. The progressive rates will depend on the relationship between the deceased and the heir as well as the value of the net portion received by each. Generally speaking, the basic tax rates vary between 0% and 15% and are increased according to the net share received by the heir in question.

The assets collected or acquired are exempt from inheritance tax if the total value of the estate, excluding debts, does not exceed EUR1,250.

No inheritance tax is levied on immovable property located abroad, even if it forms part of the estate of a Luxembourg resident individual.

Transfer tax (droit de mutation) only applies upon the death of a non-resident of Luxembourg that holds immovable property located in Luxembourg. Transfer tax is levied on the fair market value (valeur venale) of all the immovable properties located in Luxembourg on the day of the death minus certain debts in relation with the building.

Gift Tax

Gift tax (droit d’enregistrement) applies if the gift is made by notarial deed in Luxembourg. The domicile of the donor and the beneficiary is irrelevant for the purpose of the application of the gift tax. The rates vary between 1.8% and 14.4% and depend on the relationship between the donor and the donee. Gifts between spouses or partners and between direct descendants are generally taxed at lower rates, while gifts to unrelated persons are subject to higher rates.

Trusts and Foundations

Charitable foundations, charitable associations and societal impact companies can be set up and governed by law in Luxembourg.

Luxembourg trusts cannot be set up in Luxembourg, but Luxembourg allows the recognition of foreign trusts that are governed by the law of another jurisdiction under the Hague Convention dated 1985 on the law applicable to trusts and on their recognition.

Luxembourg fiduciary agreements (contrat fiduciaire) can be entered into but are not commonly used in practice; partnership or corporate solutions for income tax planning are generally preferred.

Impatriation Regime

Luxembourg tax law provides, under certain conditions, a specific tax regime for qualifying highly skilled employees hired directly from abroad or seconded from group companies. This regime has been amended by the law dated 20 December 2024. While the former regime was used to provide for a full exemption of certain costs incurred by the employee (sometimes capped) and a partial exemption of an impatriate premium, the new regime now provides for a 50% exemption of the total gross annual remuneration of the employee. The amount of annual gross remuneration benefitting from this partial exemption is capped at EUR400,000 (ie, any exceeding amounts will be fully taxable). The exemption applies until the end of the eighth tax year following that of the employee’s entry into service in Luxembourg.

In Luxembourg, inheritance tax is levied on the transfer of assets upon death. The applicable rates depend, among others, on the relationship between the deceased and the beneficiary. Transfers between spouses or civil partners (if bound for at least three years by a declaration of partnership) and in direct line (eg, between parents and children) – are generally exempt from inheritance tax.

Gift tax is imposed on the transfer of assets during the donor’s lifetime. The tax treatment depends on the form of the gift and the relationship between the donor and the recipient.

Gifts of movable assets transferred by hand delivery (dons manuels) are generally accepted without a notarial deed and are, therefore, not subject to gift tax, unless the donor dies within one year of the donation.

Therefore, such donations are not taxed unless they are subsequently registered (eg, for legal certainty).

Luxembourg offers several tools for individuals, particularly in the context of private wealth management. The country’s tax system is relatively favourable for certain types of income and provides some flexibility for structuring assets and transactions.

• Capital gains taxation – in Luxembourg, capital gains realised by individuals on the sale of movable assets (such as shares) are generally exempt from tax if the assets have been held for more than six months and do not represent a substantial shareholding (ie, less than 10% of the share capital).
• Use of holding companies and investment vehicles – Luxembourg is well known for certain investment vehicles, such as the holding company and the SPF (Société de gestion de Patrimoine Familial). These vehicles can be used to hold private wealth, benefiting from participation exemption on dividends, capital gains and net wealth tax subject to certain conditions. In addition, Luxembourg investment funds (eg, RAIF, SIF, etc) may also offer tax advantages, particularly for non-resident investors.
• Wealth structuring – while there is no wealth tax for individuals in Luxembourg, careful planning of asset transfers (by gift or inheritance) can help to minimise exposure to inheritance and gift taxes, particularly by taking advantage of reduced rates for transfers between close family members. Bare ownership and usufruct transfers, also allow for a reduction of inheritance and gift tax, subject to conditions.
• Others – life insurance contracts (assurance-vie) are commonly used as tax-efficient investment and succession planning tools.

Non-residents owning real estate in Luxembourg are subject to Luxembourg tax on rental income (ie, (i) for individuals, PIT at progressive rates and (ii) for companies, corporate income tax (including surcharge for the employment fund contribution) (CIT) at the rate of 17.12% in 2025 and potentially municipal business tax (MBT) at the rate of 6.75% for Luxembourg City in case of a commercial activity carried out by a permanent establishment).

Capital gains taxation will depend on whether the property is held directly or via a Luxembourg company.

Capital gains realised by a non-resident company upon the direct disposal of a Luxembourg real estate asset will be subject to CIT at the rate of 17.12% in 2025. Capital gains realised by a non-resident individual upon the direct disposal of a Luxembourg real estate asset will be subject to PIT at progressive rate. Reduced rates may be applicable under certain conditions. In addition, the sale of a real estate property located in Luxembourg is subject to registration duties, municipal surcharge and transcription tax which vary on an aggregate basis between 7% and 10% depending on the municipality in which the property is located.

In case of a share deal (ie, disposal of the shares of the Luxembourg company holding the real estate assets), taxation will occur only when the taxpayer disposes of a substantial participation (broadly, more than 10% of the share capital) within six months as from the shares’ acquisition subject to the application of a relevant DTT. In addition, given that Luxembourg tax law does not assimilate property rich companies to real estate, the sale of the shares of a Luxembourg company holding mainly real estate assets will, in principle, not be subject to registration duties.

Certain investment vehicles such as SIFs and standard RAIFs (ie, taxed similarly to a SIF) may be used to hold Luxembourg real estate. In such event, income and gains would not be subject to CIT or MBT, nor the real estate be subject to NWT although a real estate levy may apply in certain cases.

Luxembourg is known for its stable and predictable tax environment, which is a key factor in its attractiveness for international clients, particularly high-net-worth individuals and families seeking long-term private wealth and estate planning solutions. This stability is underpinned by Luxembourg’s strong legal, political, and financial foundations. Historically, Luxembourg has demonstrated a commitment to maintaining a competitive tax regime, particularly for ultra-high-net-worth individuals (UHNWIs) and estates. Concomitantly, as a member of the European Union and the Organisation for Economic Co-operation and Development (OECD), Luxembourg is subject to ongoing international tax developments, including anti-avoidance measures and transparency initiatives with a tax regime compliant with such framework. While the core principles of Luxembourg’s tax system remain stable, the jurisdiction has shown adaptability in response to international standards, which can introduce a degree of uncertainty for clients engaged in long-term tax and estate planning.

Recent Developments

In recent years, Luxembourg has implemented several significant tax reforms, largely in response to international initiatives.

• Implementation of ATAD and DAC6 – Luxembourg has transposed the EU Anti-Tax Avoidance Directives (ATAD) and the Directive on Administrative Cooperation on reporting of cross border arrangements (DAC6) into domestic law.
• Increased Transparency – Luxembourg has enhanced its transparency regime, including the establishment of registers of beneficial ownership for companies, trusts, and foundations. This has increased the reporting obligations for HNWIs and their advisers.
• Wealth Tax and Inheritance Tax – Luxembourg does not levy a wealth tax on individuals, and inheritance tax is generally low, especially for transfers between close relatives. There have been no recent proposals to introduce or significantly increase these taxes, but the government continues to review its tax policy in light of international trends.

Proposed Changes

As of 2025, there are no major legislative proposals that would fundamentally alter the tax treatment of private wealth in Luxembourg. Importantly, the current government has publicly reaffirmed its intention not to increase taxes, reinforcing Luxembourg’s position as a fiscally stable and investor-friendly jurisdiction.

Impact on Planning

While the tax environment remains fundamentally stable, clients must remain attentive to the increasing focus on transparency, economic substance, and anti-abuse provisions.

Luxembourg has taken significant steps in recent years to address both real and perceived abuses or loopholes in its tax laws. This has been driven by both domestic policy objectives and, more importantly, by its obligations as a member of the European Union and participant in global tax transparency initiatives. The country aligned itself with international standards, thereby enhancing its reputation as a responsible and transparent financial centre.

In this respect, Luxembourg has adopted the OECD’s Common Reporting Standard (CRS) and implemented US foreign Account Tax Compliance Act (FATCA) which require to identify and report information on accounts held respectively by foreign/US persons to the Luxembourg tax authorities which then exchange this information with the concerned tax authorities. This automatic exchange of information is designed to combat tax evasion and ensure tax compliance on a global scale.

• DAC6 – Luxembourg has also implemented the EU’s Directive on Administrative Cooperation (DAC), including DAC6, which imposes mandatory disclosure requirements on intermediaries and, in some cases, taxpayers themselves. Any cross-border arrangement that meets certain hallmarks indicating potential tax avoidance or evasion must be reported to the Luxembourg tax authorities, who then share this information with other EU member states. This has increased the level of scrutiny on cross-border tax planning and has led to greater caution and transparency in structuring arrangements for clients.
• Beneficial ownership registers – Luxembourg maintains a dual-register system for beneficial ownership in line with EU anti-money laundering directives. The register of beneficial owners (RBO) applies to corporate entities and other legal structures, while a separate register covers trusts and foundations. Although public access to the RBO was suspended in November 2022 following a ruling by the Court of Justice of the European Union (Joined Cases C-37/20 and C-601/20), access remains available to professionals subject to anti-money laundering obligations and to the entities concerned.
• Luxembourg national identification number – since March 2022, all individuals listed in the Luxembourg Trade and Companies Register (RCS) – such as shareholders, directors, managers, and auditors – must provide their Luxembourg national identification number (LNIN), enhancing traceability and regulatory oversight.
• Digital assets and future obligations – looking ahead, Luxembourg is preparing for new EU tax transparency obligations concerning digital assets within the framework of the adopted EU Council Directive (EU) 2023/2226 of 17 October 2023 amending Directive 2011/16/EU on administrative co-operation in the field of taxation, which should be transposed into Luxembourg legislation by the end of 2025 (DAC8). DAC8 is aligned with the OECD’s Crypto-Asset Reporting Framework and introduces reporting duties for crypto-asset service providers as of 1 January 2026.

While Luxembourg remains an attractive and stable jurisdiction for private wealth, clients must approach planning with a focus on transparency, compliance, and adaptability to ongoing regulatory developments.

In Luxembourg, succession begins on the date of death and is governed by the law of the country of habitual residence of the deceased, regardless of their nationality.

Inheritance tax applying to the estate of a deceased Luxembourg resident are, in principle, payable on the value of movable and immovable property located in Luxembourg. This is known as the “masse successorale” (inheritance estate), which consists of:

• the assets of the estate, consisting of assets existing at the time of death, namely:
1. movable property such as furniture, cars, shares, money, paintings, etc, located in Luxembourg or abroad if they are not subject to an inheritance tax due to the nationality of the deceased; and
2. immovable property located in Luxembourg,

less:

• the liabilities of the estate, consisting of existing debts (private or professional) on the day of death (and the related interest), taxes still to be paid, and funeral expenses.

All the assets of the deceased are in principle valued according to their market value on the day of death.

If the deceased was married on the day of death, the estate includes his/her own property and share of common property. It will be necessary to refer to the matrimonial regime of the spouses in order to determine the assets entering into the succession (liquidation of the matrimonial regime).

Inheritance taxes do not apply, in principle, to property given or transferred by the deceased to one or more of his/her heirs. However, it may happen that certain deeds are reintegrated into the estate of the deceased for the calculation of inheritance taxes.

At the time of death, it will therefore be necessary to take into account certain elements, such as for example manual donations that would have been made during the year preceding the death and life insurances for which the deceased is considered as head policyholder. The estate may then be distributed among the heirs and legatees.

There are no inheritance taxes to be paid in Luxembourg concerning:

• the assets acquired in a direct ascending or descending line (between parents, grandparents, children and grandchildren) on the legal share of the estate, that is to say the part collected by the heir based on the law;
• assets transferred between spouses or partners bound by a registered partnership declaration for at least three years before the opening of the estate;
• the estate not exceeding EUR1,250 (after deduction of debts);
• immovable property located abroad; and
• in some cases, movable property located abroad.

As for the donation, it may relate to movable property or immovable property, for the benefit of natural persons (spouses, parents, children, brothers and sisters, etc) or legal persons (associations, charities, etc).

To be valid under Luxembourg civil law, they must take the form of a notarial deed (except for real estate assets located abroad) and will therefore be subject to registration fees.

The registration fees applicable to donations of movable and immovable property vary depending on the family relationship between the donor and the recipient of the donation. They apply to the market value on the day of the donation without possible deduction of charges related to the property transferred and are generally borne by the beneficiary of the donation, unless otherwise stipulated in the notarial deed.

As donations of real estate assets located abroad are not subject to the formality of a notarial deed in Luxembourg, they are not subject to registration fees. However, they are generally subject to the donation duties in the country where the real estate assets are situated.

Finally, the registration fees are reduced by half for donations made by marriage contract or with a view to marriage.

Inheritance tax in Luxembourg is levied on the estate of all Luxembourg individuals domiciled or having their seat of fortune in Luxembourg. Movable assets owned by individuals domiciled abroad are taxed in the country of domicile. Inheritance tax rates vary depending on the value of assets and the relationship between deceased and beneficiary. Luxembourg has not signed any double tax treaty with respect to inheritance tax and gift tax. However, since transfers to direct descendants/ascendants (children/parents), as well as between spouses and civil partners (see conditions previously listed), are not taxed or are taxed at relatively low rates, situations of double taxation should be limited.

Also, gifts made during lifetime of the donor are subject to registration duties if the gift is made by notarial deed in Luxembourg. The rates vary between 1.8% and 14.4% depending on the relationship between the donor and the donee and regardless of the donor’s or donee’s fiscal domicile. As mentioned in 1.1 Tax Regimes, gifts made without notarial deed (eg, “don manuel”) are generally not subject to gift tax unless voluntarily registered.

Luxembourg also offers advantages in relation to transfer of bare ownership and usufruct. When a property is inherited in usufruct or bare ownership, the valuation and taxation are handled differently compared to full ownership transfers. The law has established a system for determining the value of usufruct and bare ownership based on the age of the usufructuary or the bare owner. This system is designed to reflect the economic value of the rights transferred. The value of usufruct and bare ownership is calculated as a proportion of the full ownership value. This proportion varies depending on the age of the usufructuary or the bare owner on a digressive basis (ie, the younger the person the higher the fair market value allocated to the usufruct and the lower the value to the bare ownership).

Therefore, Luxembourg may be a favourable jurisdiction for succession planning.

In addition, it should be noted that Luxembourg applies the European Union Succession Regulation dated 4 July 2012, whose aim is to harmonise and simplify cross-border successions across European Union countries (except for Ireland and Denmark) to avoid the complications and conflicts of law that would typically arise in these type of successions. According to it, the applicable law to the entirety of an estate will be the law of the country in which the deceased had their habitual residence at the time of their death, unless the latter has chosen the law of the country of which they are a national at the time when they make their choice or at the time of their death. This is in the direct line of recommendations made in 2011 by the European Commission for unilateral relief measures by member states to avoid double taxation in matters of inheritance.

In the absence of a Will, the order of succession is as follows.

• The descendants, ie, the existing child(ren).
• The surviving spouse.
• The privileged ascendants and collaterals – ie, the father and mother, brother(s) and sister(s).
• The ascendants other than the father and mother.
• The collaterals other than the brother(s) and sister(s) of the deceased and the descendants of the latter.

The descendants are therefore the priority heirs. If the deceased has a surviving spouse, the latter will be entitled to:

• a share of a legitimate child, the least taking, in full ownership without it being less than one-quarter of the estate; or
• the usufruct of the immovable common to the spouses as well as the furniture therein, provided that the building belonged to the deceased in full or jointly with the surviving spouse.

If the couple does not have children, the spouse will benefit from the entire estate in full ownership.

As for ascendants and collateral heirs, they only have inheritance rights if there are no descendants or surviving spouses.

However, the surviving spouse, as well as ascendants or collateral heirs, may be disinherited by the deceased in their Will.

The representation allows the descendants of a person who would have inherited the deceased if this person had survived to take that person’s place in the inheritance. The children of the predeceased person will share the part that would have been given to this person.

The fact that all the assets of the deceased are transferred to their heirs simply by opening the estate does not imply that they are required to accept the succession. Heirs have, indeed, different options regarding the succession. They may accept the succession purely and simply, accept it under benefit of inventory, renounce or even contest it.

In Luxembourg, all married couples are compulsorily subject to a matrimonial regime which constitutes a set of rules governing the pecuniary interests of the spouses and whose object is to settle the fate of their property as well as their debts during, and upon the dissolution of, the marriage.

Spouses who have not concluded a marriage contract are subject to the regime of the community of property regime. However, they are free to choose and change their matrimonial regime before and during marriage.

The form of the marriage contract remains free as long as it is not contrary to good morals and certain imperative rules. In this respect, the spouses could not modify the legal order of succession. The marriage contract may also be subject to foreign law in the presence of an international connection (eg, if one of the spouses is a foreign national).

The Luxembourg civil code recognises the following matrimonial regimes.

• The primary regime – which must imperatively to be respected in all points where the provisions do not reserve the application of matrimonial agreements. It sets out rules of public policy like spouses owe each other fidelity, relief and assistance. They cannot appropriate the rights by which the family’s housing is ensured, nor the furniture with which it is furnished. Similarly, solidarity with household debts is presumed. The provisions of the marriage contract cannot contravene the respective rights and duties of the spouses. These obligations cannot be waived.
• The secondary regime – which provides additional rules under the following three community regimes: community of property, separation of property, and community of property acquired during marriage.

The Community of Property Regime (Régime de la Communauté Réduite aux Acquêts ou de la Communauté de Biens)

In which the spouses each have their own property next to the common property consisting mainly of their professional income and all property acquired with it. Under this regime, the property acquired after marriage falls into the community and, in case of dissolution of marriage, all assets are divided according to the three estates. Certain assets remain the property of one of the spouses, if the person is able to prove their ownership (assets acquired before the celebration of the marriage, assets of a personal nature or assets acquired by donation or succession).

Moreover, debts contracted before the marriage remain personal, but creditors can nevertheless pursue the indebted person both on their personal property and also on property that has entered into community due to this spouse (eg, on their income). Debts contracted by one of the spouses for the maintenance of the household or the education of children may be pursued out of all common property. When a debt has entered into community due to only one of the spouses, it cannot be pursued against the other spouse’s own property.

The Separation of Property Regime (Régime de la Séparation des Biens)

Under this regime, there is, in principle, no common good between the spouses. By signing a regime of separation of property, the spouses retain the administration, enjoyment and free disposal of their personal property. Nevertheless, the assets that would have been purchased in common will be deemed to belong jointly and equally to both spouses in case of dissolution of the marriage.

Each spouse remains solely responsible for his/her own debts, whether they were born before or during marriage, except as regards debts incurred for the maintenance of the household or the upbringing of children which are always binding on both spouses.

The Community of Property Acquired During Marriage Regime (Régime de la Communauté Universelle)

Providing for a kind of equal distribution of community upon dissolution of the marriage. Under this regime, all the couple’s property, acquired before and after marriage, belongs to the community. There are therefore no separate assets. With the exception of personal clothing and family souvenirs (personal belongings), everything is part of the community.

Also, all debts are common. The spouses are therefore jointly liable, even with regard to debts incurred by one of them before the marriage.

Gift tax is payable on the transfer of real estate assets situated in the Grand Duchy of Luxembourg, regardless of whether the notarial deed was executed in Luxembourg or abroad. Transferred assets are valued at their market value. It is not possible to subtract from this value the charges and debts which the donee is required to pay and which may encumber the property. Gift tax rates vary between 1.8% and 14.4% depending on the relationship between donor and donee.

Luxembourg law is extremely favourable to inheritance so that family assets can be passed on from generation to generation, without the family wealth suffering in the process. As mentioned in 2.4 Marital Property, insofar as the deceased had his/her last domicile in the Grand Duchy of Luxembourg, the transfer will be subject to Luxembourg inheritance tax (except in the case of real estate located abroad, for which the law governing the location of the property is applicable). Inheritance tax rates vary between 0% and 15% depending on the relationship between the deceased and the heir. The net market value of the property is taken into consideration for the calculation of inheritance taxes.

For direct tax purposes, inheritance and gifts are not considered as income-generating events. The assets are deemed to be acquired free of charge. Therefore, the acquisition price to be considered is the price paid by the previous holder who last acquired the asset for valuable consideration. This acquisition price is then revalued by applying a coefficient corresponding to the year in which the expenditure was incurred.

Given that inheritance taxes are quite low, particularly in the direct line, no specific planning is required to transfer assets in Luxembourg. In addition, manual gifts are not subject to gift taxes.

There is a growing interest in the use of foreign trusts and foundations. The former may be recognised under Luxembourg law (refer to 1. Tax). Subject to certain conditions, the use of trust provides for tax neutrality from CIT, MBT and NWT perspective. Depending on how the trust is structured it also allows to transfer assets with limited registration duties upon the trust constitution. The split between bare ownership and usufruct is also a tool to limit both inheritance and gift tax.

In Luxembourg, succession law is primarily governed by the Civil Code, which does not specifically address digital assets. The general principle is that all assets forming part of the deceased’s estate, whether tangible or intangible, are transferred to the heirs or legatees according to the rules of succession. Therefore, digital assets are subject to inheritance tax in Luxembourg in the same way as other movable or intangible assets. The applicable rates depend on the relationship between the deceased and the heir.

Luxembourg offers a range of vehicles that is favourable for international wealth structuring. Depending on their needs, families can choose between regulated and non-regulated entities.

Charitable foundations and charitable associations can be set up and governed by law in Luxembourg. They can be structured to meet specific philanthropic or family objectives. However, trusts cannot be set up in Luxembourg, but Luxembourg recognises foreign trusts that are governed by the law of another jurisdiction under the Hague Convention of 1985 on the law applicable to trusts and on their recognition.

Soparfi

The Soparfi is a commercial acronym to refer to a holding company, is a fully taxable company that is subject to CIT including solidarity surcharge and MBT at the aggregate rate of 23.87% for Luxembourg City for 2025. The Soparfi is also subject to net wealth tax (NWT) which is levied at the rate of 0.5% on the unitary value (valeur unitaire) up to EUR500 million and at the rate of 0.05% on the unitary value exceeding EUR500 million. A minimum NWT which varies from EUR535 and EUR4,815 is payable when the standard NWT results in a lower tax liability. As a fully taxable company, the Soparfi is entitled to EU tax directives and as such benefits from certain exemptions (eg, dividends, liquidation proceeds, and capital gains) under certain conditions. Distributions made by the Soparfi are in principle subject to the Luxembourg 15% withholding tax (WHT) unless an exemption applies. Finally, the Soparfi is also entitled to the benefits of the DTTs signed by Luxembourg.

Luxembourg Private Wealth Management Company (SPF)

The SPF is the vehicle designed for private wealth management. It is a non-commercial company that can hold and manage financial assets for individuals and families. The SPF benefits from a favourable tax treatment including an exemption from CIT, MBT and NWT although it is subject to subscription tax of 0.25%. In addition, distributions made by the SPF are not subject to WHT. As a result, the SPF is not entitled to EU tax directives nor to the DTTs signed by Luxembourg. Finally, non-resident shareholders are not subject to Luxembourg income tax on gains realised upon disposal of the SPF’s shares.

Luxembourg Common Limited Partnership (SCS) and Special Limited Partnership (SCSp)

The SCS and SCSp are both tax transparent entities for CIT and NWT. Under certain conditions, they are also tax transparent for MBT. In the presence of a SCS and SCSp, the Luxembourg reverse hybrid mismatch rule needs to be monitored given that under certain conditions, these entities may become liable to CIT only (including the solidarity surcharge) with respect to the portion of their net income that is not taxed under Luxembourg domestic law or under the laws of any other jurisdiction. Distributions made by an SCS and SCSp are not subject to WHT. Being a tax transparent entity, the SCS and SCSp are generally not entitled to EU tax directives nor to the DTTs signed by Luxembourg. Finally, due to their tax transparency, the disposal of the units of the SCS and SCSp is deemed to be the disposal of their underlying assets pro rata to the units held by the partners therein. Non-resident partners who have neither a permanent establishment nor a permanent representative in Luxembourg to which the units of the Luxembourg SCS or SCSp are attributable, are only taxed in Luxembourg on gains derived from Luxembourg real estate or from the disposal within six months of its acquisition of a substantial participation (more than 10%) in a Luxembourg company, subject to an applicable DTT.

The Specialised Investment Fund (SIF)

SIF may be an alternative to structure families’ wealth. The SIF is not subject to CIT, MBT and NWT. Distributions made by the latter are not subject to WHT. The SIF is, however, subject to a subscription tax of 0.01%. Exemptions are available under certain conditions. Access to DTTs signed by Luxembourg will need to be assessed on a case-by-case basis. As exempt entities, the SIF is not entitled to EU tax directives.

Investment Company in Risk Capital (SICAR)

The SICAR is in principle subject to CIT and MBT, but they benefit from an objective exemption on income derived from investment in risk-bearing capital. The SICAR is subject to the minimum NWT and not to the standard annual NWT. Distributions made by a SICAR are not subject to WHT. Being fully taxable companies, SICARs benefit from a Luxembourg tax perspective from EU tax directives and DTTs signed by Luxembourg. Finally, non-resident shareholders are not subject to Luxembourg income tax on gains realised upon disposal of the SICAR’s shares.

Recent developments in AML regulations, beneficial ownership disclosure, tax reforms which include measures to prevent tax avoidance and ensure fair taxation have impacted the benefits and usage of certain of these entities.

Luxembourg ratified the Hague Convention of 1 July 1985, on the law applicable to trusts and their recognition, by the Law of 27 July 2003 (“2003 Law”), to facilitate the use of all forms of trusts governed by foreign jurisdictions.

For the implementation of the Convention, the 2003 Law specifies, as regards assets subject to a trust and located in Luxembourg, that the situation of the trustee will be determined by reference to that of an owner without this affecting the principle of separation between the assets formed by the trust’s assets and the assets constituted by the personal assets of the trustee.

Any trust constituted abroad is then recognised by Luxembourg law which gives it full legal effect to the extent that it is validly constituted under a foreign law, which it respects, and as far as it complies with public policy. As such, he/she cannot contravene the rules of forced heirship (réserve héréditaire).

Foreign citizens who are not habitually resident in Luxembourg can thus establish trusts in the country. Neither the settlor nor the beneficiaries or trustees are required to be residents of Luxembourg and assets held within the trust can be located anywhere in the world.

It should also be noted that a Law of 10 July 2020, creating a register of fiduciaries and trusts (and amending the 2003 Law), requires the trustees to report detailed information about the beneficial owners of the trust to this register established with the Luxembourg Administration de l’enregistrement, des domaines et de la TVA. In this respect, any trust for which a trustee is established or resides in Luxembourg must be entered in the register.

Luxembourg companies acting as trustees must also be authorised by the Commission de Surveillance du Secteur Financier (CSSF), which is the is the Luxembourg public institution which supervising the professionals and products of the Luxembourg financial sector.

When a Luxembourg citizen or resident serves as a fiduciary or is a beneficiary of a foreign trust, foundation, or similar entity, several tax consequences may arise depending on the specific circumstances, the tax qualification of the entity involved and the tax status of the beneficiary (economic vs legal owner of the assets). An analysis on a case-by-case basis is therefore required.

Luxembourg has not taken any measures to allow settlors to retain extensive powers over irrevocable trusts, foundations or similar entities. The main reason is that, strictly speaking, there is no Luxembourg trusts.

Luxembourg offers a range of vehicles to structure the transfer of family businesses, guaranteeing asset protection and enabling estate planning.

Transparent Arrangements

As regards transparent arrangements, and in the absence of an instrument comparable to a trust, Luxembourg has adopted specific provisions on fiduciary agreements (through the 2003 Law) that differs somewhat from the legislation applicable to trusts in the United Kingdom.

A fiducie is an agreement, called a “fiduciary agreement”, whereby one person, the fiduciant, agrees with another person, the fiduciaire, that the latter becomes the owner of assets which form a fiducie estate under obligations determined by the parties.

The fiduciaire must be a credit institution, an investment firm, an investment company with variable or fixed share capital, a securitisation company, a fiducie representative acting in the context of a securitisation transaction, a management company of common funds or of securitisation funds, a pension fund, an insurance or reinsurance undertaking or a national or international public body operating in the financial sector.

The main criterion of the fiduciary agreement is the transfer of ownership of assets to the fiduciaire. It is not necessary that the assets come from the estate of the fiduciant. In return, the fiduciaire assumes obligations agreed upon by the parties to the agreement. These obligations include the mission of fiduciaire, so clear instructions regarding the use that the latter must make of the assets entrusted to them.

More generally, the fiducie is subject to all the conditions commonly required for the validity of an agreement under Luxembourg law.

Another way to structure the property, consist in the division of ownership between usufruct and bare ownership. This civil right, called “usufruct”, allows its beneficiary (the usufructuary) to use and enjoy an asset belonging to another person (the bare owner).

The usufructuary has concretely the right to use an asset (reside in a house, use a car, etc) and to benefit from its fruits (rents, interest, etc) for a fixed period or until a predefined event (eg, his/her death). In return, the usufructuary has the duty to maintain the substance of this asset, in other words, they must ensure its proper preservation by assuming its maintenance costs.

However, the usufructuary does not have the right to sell the asset, give it away or even destroy it. This right is reserved for the bare owner, who also assumes major repairs, unless they have been caused by a lack of maintenance by the usufructuary.

Usufruct is often used in the context of a donation, when the current owner intends to transfer an asset before their death but wishes to retain the right to enjoy it. The value of usufruct (and bare ownership) varies according to the age of the usufructuary at the time of the donation and is based on a specific scale. This value allows in particular to determine the taxable base on which registration duties on donations or inheritance will be due.

In Luxembourg, the transfer of an asset “at a lower cost” really makes sense only if the gift is made to someone other than a descendant. Indeed, with some exceptions, inheritance taxes are low or even non-existent in a direct line.

In general, usufruct is for life (viager), meaning that it ends upon the death of its holder. Upon the death of the usufructuary, all rights of the ownership are therefore automatically consolidated to the bare owner. In this way, full ownership is restored to the latter without any actual transfer.

Non-Regulated Vehicles

Aside the Soparfi, which is the most common vehicle dedicated to holding and financing activities in Luxembourg, the transfer the family business may be assured in Luxembourg by common or special limited partnerships (société en commandite simple – SCS; or société en commandite spéciale – SCSp) since 2013. They provide a large contractual freedom to the partners and a smoothly transfer in terms of inheritance while guaranteeing a good level of legal certainty (eg, protection of the anonymity of limited partners, limited liability, security in the event of distributions, etc).

These vehicles are partnerships entered into, for a limited or an unlimited period of time, by one or more unlimited partners with unlimited and joint and several liability for all of the obligations of the partnership, and one or more limited partners who only contribute a specific amount constituting partnership interests, which may but need not be represented by represented instruments as provided in the limited partnership agreement.

Among the main differences between these two partnerships, it should be noted that the SCSp is not a separate legal entity from its partners and there is no need for it to prepare or approve its annual accounts.

Another private wealth management vehicle introduced in 2007, called “société de gestion de patrimoine familial” (SPF), enables individuals to structure their estate in a simple, flexible, unregulated and efficient on a tax point of view, thereby appealing to various types of investors.

The SPF aims to create a legal framework for the management of private assets and is designed as an investment company intended solely for natural persons acting within the framework of this kind of management.

It may take the form of a société à responsabilité limitée (limited liability company), a société anonyme (public limited company), a société en commandite par actions (partnership limited by shares) or a société coopérative organisée sous forme d’une société anonyme (co-operative company organised as a public limited company) whose sole object is the acquisition, holding, management and realisation of financial assets, excluding any commercial activity, within the meaning of the Law of 5 August 2005 on financial collateral arrangements, as amended (eg, shares, securities and other debt instruments, structured investments, etc) as well as cash and assets of any kind, held in account with professional financial service providers.

The SPF is only allowed to hold a participation in a company provided it does not interfere in the management of this company. It cannot grant interest-bearing loans, even to the company in which it holds a participation. However, the SPF may, on an ancillary basis and free of charge, make an advance payment or endorse the commitments of the company in which it holds a participation. It also cannot provide services, directly hold real estate assets or intellectual property, or conclude life insurance contracts.

The fact that the legal personality of the SPF is distinct from that of its investors limits the liability of the latter to their respective contribution and, consequently, clarifies their position in terms of liability towards third parties, especially in the case of borrowing operations as a means of estate planning.

It is a suitable solution for individuals wishing to organise and consolidate their private assets. The incorporation of a PSF does not require any special requirements and a standard limited capital. The limited liability, corollary of its distinct legal personality, allows it to develop a flexible management of investments, adapted to the specific needs of each family. It allows smooth management without heavy formalities of the transfer of wealth between generations, thus making asset management more efficient and secure.

Regulated or Supervised Entities

One of the main vehicles for structuring private assets is the specialised investment fund (SIF).

Established under the Law of 13 February 2007 (“SIF Law”), the SIF is a regulated investment vehicle with considerable flexibility regarding both investment strategies and structuring options. The scope of eligible investors is not limited to institutional investors and professional investors but encompass also other types of well-informed investors, such as sophisticated private investors meeting certain conditions. It is further distinguished by its favourable tax treatment.

Scope

Investing in a SIF is an activity reserved for well-informed investors who have the expertise and experience required to properly assess the risks inherent in this type of investment. Under the SIF Law, the definition of well-informed investors encompasses not only institutional investors and professional investors as set out in Annex II of MiFID, but also extends to other categories of investors, such as sophisticated retail or private investors, who:

• provide written confirmation of their status as well-informed investors; and
• either (i) invest at least EUR100,000, or (ii) obtain a certification from an European Union credit institution, a MiFID investment firm, a UCITS (Undertaking for Collective Investment in Transferable Securities) management company, or an authorised AIFM, attesting to their sufficient expertise, experience and knowledge to properly assess the proposed investment.

An investment vehicle reserved for one or more well-informed investors is not automatically subject to the SIF regime. The application of the SIF regime is indeed elective, requiring that the constitutive or offering documents explicitly state that the investment vehicle is governed by the provisions of the SIF Law. Consequently, the SIF could be constituted as an unregulated entity and falling under the general provisions of the Luxembourg Law of 10 August 1915 on commercial companies, as amended.

Legal forms

The SIF can be established under the form of a fonds commun de placement (FCP), which is a common contractual fund. The FCP does not have legal personality but constitutes a co-ownership of assets managed by a management company, generally created and governed in accordance with Chapter 15 of the UCI (Undertaking for Collective Investment) Law or Chapter 16 of the UCI Law, for the benefit of co-owners. Units subscribed by the investors in the FCP represent a portion of the SIF’s net assets. The liability of investors is strictly limited to the amount of their own contribution.

An investment company subject to the SIF regime can also be established through a société d’investissement à capital variable (SICAV) or a société d’investissement à capital fixe (SICAF), that is to say, through the form of a corporate-type fund.

Unlike SICAFs which are not subject to restrictions regarding their corporate form, when a SIF established under the form of a SICAV, it needs to adopt any of the following corporate forms as provide by the SIF Law: a public limited company (société anonyme), a partnership limited by shares (société en commandite par actions), a common limited partnership (société en commandite simple), a special limited partnership (société en commandite spéciale), a private limited company (société à responsabilité limitée) or a co-operative set up as a public limited company (société coopérative organisée sous forme de société anonyme).

It is noteworthy that, of the various corporate forms available for the establishment of an investment company, the SCSp is particularly well appreciated. Lacking legal personality, its structure is closely analogous to that of the UK limited partnership, a vehicle that has long been preferred as regards private investments.

Finally, a SIF must have its registered office and head office (central administration) in Luxembourg.

Flexibility

The SIF Law affords comprehensive flexibility regarding the range of assets in which a SIF may invest, provided that the investment objective, strategy, and policies receive prior approval from the CSSF. The SIF regime is specifically tailored to facilitate undertakings for collective investment (UCIs) that invest across all asset classes and pursue both traditional and alternative investment strategies. It expressly enables the structuring of funds of diverse nature, such as equity funds, bond funds, money market funds, real estate funds, hedge funds, private equity funds, debt funds, venture capital funds, green funds, infrastructure funds, to name just a few of them.

Structuring aspects

The net assets of a SIF may not be less than EUR1,250,000 (including share capital and share premium). The minimum capitalisation must be reached within 24 months of the SIF receiving authorisation from the CSSF. Where a SIF is constituted as an investment company, it is permitted to issue partly paid shares, provided that at least 5% per share is paid up upon issuance, subject to exceptions applicable to certain legal forms.

The assets of a SIF shall be valued at fair value determined in accordance with the rules specified in the constitutive documents, unless the latter provide otherwise.

The SIF Law expressly permits the creation of a SIF structured as an umbrella fund containing multiple compartments. Each compartment may be distinguished by a range of features, including, but not limited to, its investment policy, redemption policy, dividend policy, fee structure, reference currency, appointed investment manager or adviser and type of target investors.

According to the SIF Law, each compartment within such a SIF is associated with a distinct portfolio of investments which is separated from the portfolios of other compartments, except where the constitutive documents specify otherwise. Although a SIF containing multiple compartments is regarded as a single legal entity, the assets linked to a compartment are only available to satisfy the rights of investors and the claims of creditors relating to that specific compartment, unless the constitutive documents of the SIF expressly provide for the contrary.

The CSSF can revoke the authorisation granted to a single compartment without this decision necessarily affecting the authorisation granted to the other compartments. Furthermore, each compartment may be subject to separate liquidation proceedings and the liquidation of one compartment does not trigger the liquidation of any other compartment. It is only upon the liquidation of the last existing compartment that the SIF itself shall be considered in liquidation.

It is possible to create various classes of securities or partnership interests within the same SIF. This mechanism can also be used within a same compartment of a SIF structured as an umbrella fund. These classes may have distinct characteristics. Tracking shares are also possible under certain conditions.

In addition, the compartment of a SIF structured as an umbrella fund could invest in another (or more) compartment(s) of the same SIF subject to certain conditions. This is called a “cross-compartment investment”.

Supervision

SIFs are subject the ongoing supervision of the CSSF. Nevertheless, given that SIFs are reserved for well-informed investors, they are afforded more flexibilities, in terms of approval procedure and regulatory requirements, in comparison with UCIs.

A SIF is not required to be established by a financial institution possessing substantial financial resources. The CSSF’s primary consideration lies in assessing the professional competence and experience of the individuals responsible for the management of the portfolio.

A SIF must receive authorisation from the CSSF prior starting its activities. It is prohibited from initiating any operation until such authorisation has been formally granted. The CSSF’s approval process encompasses a thorough review of the fund’s constitutive and offering documents, as well as the selection of directors or managers, the designated portfolio management personnel or entities, the administration agent, the depositary, and the appointed auditor.

In this respect, the CSSF will assess whether the directors or managers of the SIF, as well as the individuals or entities responsible for portfolio management, possess a sufficiently good repute, demonstrate the requisite professional experience and are able to dedicate adequate time to their function. This evaluation ensures that they are capable of effectively fulfilling their responsibilities in connection with the SIF.

Any amendment to its constitutive or offering documents, as well as any change of directors or managers, or of the service providers, is subject to the prior approval of the CSSF. Furthermore, in the case of a SIF established as a FCP, authorisation by the CSSF is contingent upon the CSSF’s approval of the management company’s application to manage the FCP.

The CSSF also keeps an official list of the authorised SIFs that are subject to its supervision.

Moreover, one or more investment managers may be appointed by the SIF to perform investment management functions. They are registered as such and supervised by their relevant supervisory authority, eventually with the co-operation of the CSSF in the case of a delegation to a third-country investment manager.

Depositary requirements

A SIF is required to appoint a depositary for the safekeeping of its assets, having its registered office in Luxembourg, or, in the case of a registered office located abroad, be established in Luxembourg.

The safekeeping function must be considered as a “supervisory function”, requiring the depositary to maintain ongoing oversight of the assets invested, their location and availability. This supervision does not preclude the depositary from entrusting the physical safekeeping of the assets to local sub-depositaries where appropriate. However, the depositary remains liable towards investors for any losses arising from a wrongful failure to properly discharge its duties.

The depositary must be either a credit institution or an investment firm as defined under the Law of 5 April 1993 on the financial sector, as amended. However, investment firms may only assume the function of depositary provided they satisfy specific requirements set forth in the AIFM Law.

AML/CFT requirements

A SIF must comply with the Luxembourg laws and regulations on the fight against money laundering and terrorist financing (AML/CFT) and, in particular, with the AML/CFT Law, along with related regulations, circulars and guidelines issued by the CSSF in relation to AML/CFT issues.

In this context, the SIF must set an appropriate AML/CFT framework including an AML/CFT risk appetite and risk assessment, as well as policies, controls, procedures as well as training programme, proportionate to the nature, specificities and size of the vehicle, in compliance with all legislative and regulatory provisions applicable in Luxembourg.

A SIF is also required to appoint two different persons to carry out its AML/CFT obligations in terms of compliance and control of the compliance. The CSSF must be notified of these appointments.

Documentation for the investors and reporting requirements

A SIF must prepare an offering document which is subject to approval by the CSSF. While the SIF Law does not detail the minimum content of this document, the offering document must nonetheless provide all information necessary to enable investors to make an informed assessment of the proposed investment, with particular emphasis on the associated risks. Additionally, the offering document must include any specific disclosures required by the CSSF or requested by specific laws and regulations, which may vary depending on factors such as the legal structure of the SIF and the investment strategy.

Although it is not mandatory to continuously update the offering document, its essential elements must be revised whenever new securities or partnership interests are proposed to new investors. Furthermore, any modification to the offering document is subject to the prior approval of the CSSF.

If units, shares, or partnership interests of a SIF are made available within the European Union to well-informed investors who do not meet the definition of professional investors under MiFID, a key information document (KID), prepared in accordance with the requirements of the PRIIPs Regulation, must be provided to such retail investors prior to any offer or subscription of units, shares, or partnership interests.

The SIF needs to publish an audited annual report within six months following the end of the financial period to which the report pertains. The SIF Law includes an appendix detailing the specific information required in this report. It details qualitative and/or quantitative information regarding the investment portfolio to enable investors to assess the SIF’s performance and the development of its activities. A semi-annual report shall not be prepared or published.

Lastly, SIFs are not subject to the requirement to prepare consolidated accounts.

The same vehicles used for tax and estate planning in 3.1 Types of Trusts, Foundations or Similar Entities are also used for succession planning. The choice will depend on the needs and objectives of each family.

In Luxembourg, the transfer of a partial interest in an entity – whether during the lifetime of the owner or upon their death – can trigger several types of “transfer taxes”, depending on the circumstances of the transfer. The main taxes to consider are inheritance tax and gift tax. The applicable rates depend on the relationship between the parties. Generally, the fair market value of the partial interest transferred is not adjusted to reflect a discount for lack of marketability and control.

At present, no specific trends or emerging patterns are clearly identifiable as driving wealth disputes in Luxembourg.

There is a slight increase in the use of alternative dispute resolution methods, such as mediation or arbitration, as parties look for a faster and more confidential means of settlement.

Luxembourg has not established specific mechanisms for compensating parties aggrieved in wealth disputes. The general principles of compensation thus apply.

Typically, the aggrieved party is entitled to financial compensation to cover the damages effectively incurred. Punitive damages are not provided for under Luxembourg law.

The scope of application of the 2003 Law has been extended to all professionals who can perform the functions of fiduciaire, whatever their origin, and consequently the office of their authority of control and supervisory authority, and is not limited to professionals approved and supervised by the Luxembourg authorities, such as credit institution or investment firm, or those of another member state of the European Economic Area.

In other words, a fiduciary agreement concluded with a foreign bank having no establishment in Luxembourg or in the European Economic Area could be subject to Luxembourg law. This could also be the case with an agreement concluded by the Luxembourg branch of a credit institution whose the headquarter is located outside the European Economic Area.

The fiducie estate is distinct from the personal estate of the fiduciaire and is distinct as well from any other fiducie estate. The assets composing the fiducie estate may be seized only by creditors whose rights have arisen in connection with this fiducie estate and do not form part of the personal estate of the fiduciaire in case of liquidation or bankruptcy of the latter or any other situation of competition between its personal creditors.

To put it another way, the assets entrusted to the fiduciaire – the fiducie estate – is clearly and strictly separated from the personal estate of the fiduciaire. For each fiduciary agreement, a separate fiducie estate is created, separated from both the personal estate of the fiduciaire and all other fiducie estates entrusted to the fiduciaire.

The trustee must also account for the fiducie estate separately from its personal estate and other fiducie estates.

The fiducie is not subject to official publication. This particularity may entail certain risks such as when of third parties seeking recourse against a fiduciaire acting on its own behalf (or on behalf of other fiducie estates) seize assets forming part of a fiducie other than the one on which their claim arose. It would then be necessary to request the release of this seizure.

The fiduciary agreement will be enforceable against third parties as from its conclusion and the proof of the agreement must be submitted in writing.

However, there is an obligation to proceed with publication for buildings as well as for assets for which the status of owner must be recorded in a public register. In this case, this transfer will only be enforceable against third parties when the publication or registration is made.

In terms of third-party effectiveness, it should also be noted that the contractual limitations on the powers of the fiduciaire are only enforceable against third parties who have knowledge thereof. As result, the debtor is validly discharged from its obligations by paying the fiduciant as long as they are not aware of the transfer. More generally, a third party who is unaware of the existence of a fiducie agreement would therefore not be bound by its terms. But, in any case, no limitation of liability is possible in the event of gross negligence or wilful misconduct from the parties.

According to the Law of 10 July 2020 creating a register of fiduciaries and trust, the fiduciaires must report detailed information about the beneficial owners of the fiducie to this register established with the Luxembourg Administration de l’enregistrement, des domaines et de la TVA. In this respect, any fiducie for which a fiduciaire is established or resides in Luxembourg must be entered in the register.

The fiducie cannot be constituted by a simple unilateral act as is the case for the trust.

The rules of the mandate provided by the Luxembourg Civil Code, excluding those based on representation, are applicable to the relations between the fiduciant and the fidiciaire to the extent that they are not derogated by the 2003 Law or by the will of the parties.

With respect to representation, the fiduciaire cannot represent the fiduciant or create obligations on behalf of the latter. If the fiduciaire intends to represent the fiduciant in any other transaction, it is presumed that they will do so based on other contractual provisions, because they cannot confuse the capacities in which they act.

Moreover, neither the fiduciant nor third parties, even if they have knowledge of the fiduciary agreement, may rely on it to create a direct relation between themselves.

But the other principles of the mandate agreement remain applicable: the fiducie is free if no specific provision provides for the right to remuneration, the fiduciaire is only liable in the event of simple negligence and he/she needs to inform the fiduciant of the performance of their obligations at the end of the agreement at the latest.

Although the fiduciant may, in principle, always give instructions to the fiduciaire, he/she may waive this right if the interests of the parties or a third-party beneficiary so require.

Unless otherwise agreed, neither the fiduciant nor the fiduciaire may unilaterally terminate a fixed-term agreement.

Finally, the fiduciant, the fiduciaire or a third-party beneficiary may request in court, for serious reasons (eg, the loss of the assets), the provisional or final replacement of the fiduciaire or the early termination of the fiduciary agreement.

As regards fiduciary, there are no specific investment rules or diversification requirements in Luxembourg.

Residency

Citizens of the European Union or persons coming from an assimilated country (Iceland, Liechtenstein, Norway or Switzerland) do not need a prior residence/work permit to reside/work in Luxembourg. However, for a stay of more than 90 days, they must declare their arrival and then register with their new commune of the place of residence.

A third-country national who is legally resident in the territory of another member state of the European Union or in an assimilated country and who wishes to work in Luxembourg without residing there must, in principle, have a work permit, and this before starting to work in Luxembourg.

They must apply in writing for a work permit from the Luxembourg Direction générale de l’immigration du ministère des Affaires intérieures. First, they will be subject to the employment market test (via the Agence pour le développement de l’emploi – ADEM, upon the employer’s declaration of vacant position).

The first work permit is valid for a maximum of one year (without exceeding the validity of the residence permit), for a single profession, with one employer and in one sector. From the first renewal, the work permit is renewable for a maximum duration of three years and gives access to any sector and any profession.

As regards third-country national (ie, from a country which is neither a member of the European Union nor considered assimilated to the EU member states), an authorisation to stay, followed by a residence permit, is required for any person:

• resides abroad and wishes to establish residence in Luxembourg and work there as an employee;
• already legally resides in Luxembourg without having worked there and wishes to work there as an employee; or
• already resides and works legally in Luxembourg but wishes to work in a sector or profession for which it is not yet authorised.

They will first be subject to the employment market test (via the ADEM, upon the employer’s declaration of vacant position).

The first work permit for salaried workers is valid for a maximum of one year, for a single profession, with one employer and in one sector. From the first renewal, the work permit is renewable for a maximum duration of three years and gives access to any sector and any profession.

Third-country nationals may obtain a special residence permit (long-term) for investor in Luxembourg if they meet one of the following criteria:

• the investor may invest at least EUR500,000 in an existing company in Luxembourg and commits to maintaining this investment for a duration of at least five years;
• the investor may invest at least EUR500,000 in a newly created company in Luxembourg and commits to maintaining this investment for a duration of at least three years;
• the investor may invest at least EUR3 million in an existing or newly created management and investment structure in Luxembourg and there maintains a suitable substance; or
• the investor may invest at least EUR20 million in the form of a deposit with a financial institution in Luxembourg and commits to maintaining this investment for a duration of at least five years.

The period of validity of the residence permit runs from the date of declaration of arrival at the commune. It is valid for a period of three years and renewable, for the same period of validity, as long as the conditions for obtaining remain fulfilled.

An investor who has invested at least EUR500,000 in an existing company or in the creation of a company may also apply for a business licence, if they meet the required conditions.

Citizenship “By Law”

Luxembourg nationality may be attributed by the sole effect of the law, that is to say automatically, without any intervention by the person concerned, in the following situations.

• Luxembourg nationality by filiation – a minor (child) obtains Luxembourg nationality if he/she was born to a parent who also has/had Luxembourg nationality at the time of birth or when the filiation with the child is established.
• Luxembourg nationality by adoption – a minor obtains Luxembourg nationality if, for example, his/her adoptive parent/s has/have Luxembourg nationality or obtain/s it by naturalisation, option or recovery.
• Luxembourg nationality by birth – Luxembourg applies the second-generation jus soli principle, according to which a minor born in Luxembourg automatically obtains Luxembourg nationality if one of his/her parents or adoptive parents was born in Luxembourg.

Luxembourg citizenship may be applied for in the following three situations.

Citizenship “By Naturalisation”

To apply for Luxembourg nationality by naturalisation, adults must meet the following conditions:

• have legally resided in Luxembourg for at least five years and the last year of residence immediately preceding the application for naturalisation must have been uninterrupted;
• have knowledge of the Luxembourgish language, as attested by le certificat de réussite de l’examen d’évaluation de la langue luxembourgeoise;
• have taken part in a civic education course titled “Vivre ensemble au Grand-Duché de Luxembourg” (“Living Together in the Grand Duchy of Luxembourg”) or passed the exam covering the subjects taught in this course; and
• fulfil a condition of good repute.

The applicant is not required to renounce their original nationality under the principle of dual nationality provided that the legislation of their country of origin allows this.

Citizenship “By Option”

Any non-Luxembourg person who fulfils the conditions listed below may acquire Luxembourg nationality by option:

• adults who have a parent, adoptive parent, or grandparent who is or was a Luxembourg national;
• parents of a Luxembourg minor;
• in the event of marriage to a Luxembourg national;
• persons born in Luxembourg who are over 12 years of age;
• adults who have completed seven years of schooling in Luxembourg;
• adults who have been legally resident in Luxembourg for at least 20 years;
• for adults who have fulfilled the obligations arising from the “Contrat d’accueil et d’intégration” (“Welcome and Integration Contract”);
• for adults who settled in Luxembourg before the age of 18;
• for stateless adults, or adults with refugee or subsidiary protection status; or
• for volunteer soldiers.

In addition to the condition of good repute, each situation listed above must meet specific prerequisites for obtaining this naturalisation.

For example, the option is open to adults whose a parent, adoptive parent or grandparent is or was a Luxembourg national when:

• the parent or adoptive parent possesses or possessed Luxembourg nationality and this nationality has not been attributed to them; or
• the grandparent has or had Luxembourg nationality and this nationality has not been attributed to the parent.

Citizenship “By Recovery”

Luxembourg nationality can still be obtained by recovery.

It is open to any adult who has lost their Luxembourg nationality. All the rights and duties attached to Luxembourg nationality will be attributed to this person following the recovery.

The hypotheses are nevertheless limited and recovery always requires compliance with the condition of good repute.

Luxembourg does not have a specific planning mechanisms for minors or adults with disabilities.

The appointment of a guardian, curator, or similar person requires legal proceedings and ongoing supervision by the court.

For the interested parties and their entourage, these schemes are both a protection against malicious third parties and a means of expression in the face of administrative and financial requirements.

Requests for protection should be addressed to the guardianship judge.

They can notably emanate from hospitals, care and retirement homes. The guardianship judge must have a certificate from a specialist doctor before being able to issue a protective regime. It shall hear the person concerned and may order a social investigation.

The judge normally gives preference to a family member, available and reliable, to perform the functions of curator or tutor. Failing this, the judge may appoint an independent third party, eg, a lawyer or a specialised association.

In specific circumstances, elderly individuals may qualify for support under the Social Inclusion Act, which ensures a basic standard of living for those whose pensions or other sources of income are inadequate. Furthermore, anyone in need may approach the social services department in their local municipality. The responsibilities of this department include taking all appropriate measures to provide social services and financial aid, arranging for supervision by the guardianship judge where applicable, and addressing the risks associated with illness, disability, and old age for those who are not insured.

In Luxembourg, children born in or out of wedlock have the same rights.

With regards to adoption, the law distinguishes between:

• full adoption – where the adoptee loses all legal ties with his/her family of origin, with the new filiation completely replacing the original filiation; and
• simple adoption – where the adoptee retains their filiation with their family of origin while acquiring inheritance rights in their adoptive family.

Within their adoptive family, adopted children enjoy the same civil rights as other children, except for the right to the forced heirship in the estate of the ascendants of their adoptive parent.

In matters of succession, if the adoptee dies without descendants or a surviving spouse, the assets given by the adoptive parent or collected in their estate returns to the adoptive parent or their descendants, on condition that they contribute to the debts and subject to the acquired rights of third parties. The surplus of the adoptee’s assets belongs to their own parents.

If during the lifetime of the adoptive parent, and after the death of the adoptee, the children or descendants left by the latter die without leaving any offspring, the adoptive parent succeeds in the assets given by the adoptee, but this right belongs only to the adoptive parent and cannot be transmitted to their heirs, even in a descending line.

With regard to nationality, if the adoptive parent is a Luxembourg national, the adopted minor child also obtains Luxembourg nationality.

Where the adoptive parent in respect of whom filiation is established obtains nationality by naturalisation, option or recovery, the adopted minor child also acquires Luxembourg nationality.

If the adoptive parents are of different nationalities but at least one of the two is Luxembourg national, the adopted child will acquire Luxembourg nationality and may also acquire the nationality of the other parent if the conditions in this respect are fulfilled as Luxembourg law accepts dual nationality.

Since 2015, Luxembourg recognises same-sex marriage and thus creates a situation of equality between heterosexual couples and homosexual couples regarding the rights and duties of couples, the recognition of marriages celebrated abroad, the dissolution of a union and the right to inheritance.

Luxembourg has also recognised the right to enter into a civil partnership since 2004.

Partners (of the same sex or not) enjoy the same social protection as married persons and benefit from the same tax relief as married persons, in particular with regard to registration fees, inheritance duties and direct taxes.

However, in terms of succession, unlike marriage, civil partnerships do not automatically confer inheritance rights on the surviving partner. Indeed, the latter will only be able to inherit in the presence of a Will. As well, the inheritance received by the surviving partner will be subject to the same regime as that of married couples regarding the inheritance tax only if the partnership has been concluded for more than three years at the time of death.

Regarding marital relationships, partners have also fewer rights than spouses. For example, it will only be possible to terminate the partnership by mutual agreement by a joint declaration of the partners before the civil status officer of the commune having received the partnership declaration, or by a unilateral declaration under condition that the other partner has been previously informed by service issued by a judicial officer.

In addition, when the partnership is terminated, mutual material assistance ceases, unless otherwise agreed by the partners or decided by the judge. Exceptionally, an assistance may indeed be granted by the judge but this can always be reviewed in the event of a change in circumstances and will no longer be due if another commitment by partnership or marriage is entered into with the recipient of child support.

Different charitable organisations may be set up in Luxembourg through various legal structures allowing donors to benefit from a deduction from taxable income as special expenses. The annual total of donations must be equal to or greater than EUR120, however the annual deduction for donations cannot exceed 20% of the total net income, nor EUR1 million.

The initial cash allocation provided by the founder to an eligible foundation also falls within the scope of tax-deductible donations.

Due to their public purposes, Luxembourg foundations are exempt from tax in Luxembourg. On the other hand, if a foundation carried out a commercial or industrial activity, that is to say an activity generating a profit, it should be taxed on the part related to this activity.

The existing organisations in Luxembourg are:

• the association sans but lucratif (charitable association) – which is dedicated to the pursuit of non-profit purposes and therefore do not seek to generate profits for their members;
• the fondation (charitable foundation) – which is dedicated to the achievement of a general interest objective with a permanent nature, through a special-purpose assets (patrimoine d’affectation), forming part of an approach beneficial to the common good through actions carried out in different sectors (philanthropic, social, religious, scientific, artistic, cultural, sporting, touristic, environmental, etc); and
• the société d’impact sociétal (societal impact company) – which is direct to one or more person(s) (natural or legal) who intend(s) to create a commercial company to carry out an economic activity with a social or societal purpose.

Incorporation

Foundations are common charitable structures in Luxembourg. They can be created, for a limited or an unlimited period, by any natural or legal person, through a notarial deed or a Will, irrevocably allocating all or part of their assets to this purpose.

They do not include either members or associates and their constitution requires approval by grand-ducal decree as well as an initial allocation of at least EUR100,000. This allocation represents the assets, properties or rights transferred to the foundation at the time of its incorporation.

The foundation is more limited in its action than a charitable association since it is confined to an aim of general interest and it is legally required to have a significant initial capital.

The foundation does not engage in industrial or commercial operations and does not pursue the realisation of a material gain. Similarly, it may not procure any material gain for the founders, directors or any other person, except in the latter case if it is a matter of achieving a general interest purpose. The activities of the foundation must have a real substance in Luxembourg.

A request for creation must be addressed to the Minister of Justice who approves the request after consultation with the Minister of Finance. The foundation will not enjoy legal personality until its articles of association are approved by Grand-Ducal decree.

The articles of a foundation must mention at least, in addition to the precise description of the purpose for which it is set up and the activities it proposes to carry out to achieve that purpose, the initial assets allocated to it and their intended use in case of dissolution. Indeed, the assets must be assigned to another foundation of public utility or to an association recognised as being of public utility, having its headquarters in a member state of the EU or of the European Free Trade Association, to a societal impact company whose share capital is composed of one hundred percent of impact shares, to the state, to a commune or to a public institution, and whose purpose is as close as possible to the purpose for which the dissolved foundation was created.

As the purpose of the foundation is mentioned in its articles of association, it could not, for example, allocate its assets or income to a purpose other than that for which it was set up without risking a dissolution pronounced by the court (judicial dissolution).

If the incorporation of a foundation needs to be made by authentic Will, the testator can appoint an executor who will take care of the steps.

Following its incorporation, the foundation shall be registered with the Luxembourg Trade and Companies Register under a registration fee of EUR14.61.

Management

The foundation is managed by a board of directors composed of at least three directors. The board of directors of the foundation has the power to perform all acts necessary or useful for the achievement of the purpose for which the foundation was established. The directors carry out their function, free of charge, in a collegial manner and take their decisions by a majority of the members present or represented.

The members of the board of directors are appointed by the board of directors, with the exception of the members of the first board of directors who are appointed by the founder. The directors may be natural or legal persons, unless otherwise provided for in the articles of association.

The board of directors represents the foundation vis-à-vis third parties and in court, but the articles of association may give one or more directors the capacity to represent the foundation in legal proceedings or in court, either alone or jointly.

The daily management of the foundation and its representation, regarding this management, may be delegated to one or more natural or legal persons, whether directors or not, acting alone or jointly.

The liability of the persons delegated to daily management is determined in accordance with the general rules of the mandate.

The Foundation is bound by the acts of the board of directors, by the directors having the capacity to represent the foundation in legal proceedings or in court or the persons delegated to daily management, even if such acts are beyond the purpose for which the foundation was set up, unless it proves that the third party knew that the act exceeded this purpose or that he/she could not ignore it, given the circumstances, without the mere publication of the articles of association being sufficient to constitute such proof.

The foundation is liable, in accordance with ordinary law, for any misconduct attributable either to the board of directors or to its representatives.

The directors and persons delegated to daily management do not incur any personal obligation in relation to the commitments of the foundation. Their liability is limited to the execution of their mandate and to the faults committed in their management.

In addition, the court may, at the request of an interested third party or the State Prosecutor, order the dismissal of directors who have shown negligence or incompetence, who do not fulfil the obligations imposed on them by law or by the articles of association, or who dispose of the assets of the foundation contrary to their intended purpose or for purposes contrary to public order. In this case, the new directors shall be appointed in accordance with the articles of association or, if the court so decides, by the Minister of Justice.