LUXEMBOURG Law and Practice Contributed by: Frédéric Feyten, Alejandro Dominguez Becerra, Gérard Maîtrejean and Pawel Hermeliński, CMS
10.2 Common Charitable Structures Incorporation
commitment by partnership or marriage is entered into with the recipient of child support.
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 com - mercial operations and does not pursue the realisa - tion 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 activi - ties of the foundation must have a real substance in Luxembourg. A request for creation must be addressed to the Min - ister of Justice who approves the request after consul - tation with the Minister of Finance. The foundation will not enjoy legal personality until its articles of associa - tion 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 disso - lution. Indeed, the assets must be assigned to another foundation of public utility or to an association recog - nised as being of public utility, having its headquar - ters 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 per - cent of impact shares, to the state, to a commune or to a public institution, and whose purpose is as close
10. Charitable Planning 10.1 Charitable Giving
Different charitable organisations may be set up in Luxembourg through various legal structures allow - ing 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 founda - tions 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 generat - ing 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 asso - ciation) – 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 inter - est objective with a permanent nature, through a special-purpose assets ( patrimoine d’affectation ), forming part of an approach beneficial to the com - mon 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 com - pany) – which is direct to one or more person(s) (natural or legal) who intend(s) to create a commer - cial company to carry out an economic activity with a social or societal purpose.
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