LUXEMBOURG Law and Practice Contributed by: Frédéric Feyten, Alejandro Dominguez Becerra, Gérard Maîtrejean and Pawel Hermeliński, CMS
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 sub - stance 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 tax - able 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 there - fore 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 vehi - cle 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 part - ners 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 represent - ed instruments as provided in the limited partnership agreement. Among the main differences between these two part - nerships, 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 intro - duced in 2007, called “ société de gestion de patri- moine familial ” (SPF), enables individuals to structure their estate in a simple, flexible, unregulated and effi - cient on a tax point of view, thereby appealing to vari - ous 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 anon- yme (public limited company), a société en com- mandite 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, struc - tured investments, etc) as well as cash and assets of
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