LUXEMBOURG Law and Practice Contributed by: Claire-Marie Darnand, Victorien Hémery, Johan Léonard, Benjamin Marthoz and Tom Storck, Stibbe
(b) are more attractive and quicker to market than regulated funds, due to the absence of regulatory supervision and pre-approv - al requirements; (c) are flexible investment vehicles that may mirror the features of either the SIF (well- informed investors only, any asset class and risk diversification requirement) or the SICAR (well-informed investors only, “risk capital” qualifying assets and no risk diversification); and (d) may be established as standalone structures or with multiple compartments under a corporate or contractual form. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity A public limited liability company, a private lim - ited liability company and a partnership limited by shares may only be incorporated by way of a special notarial deed. Each of these company types will acquire its legal personality from the date of the relevant notarial deed. The incorpo - ration deed of each such company form will be published in its entirety. These entities are subject to corporate income tax and municipal business tax at a combined rate of 24.94% in Luxembourg City for 2024, and to net wealth tax on their unitary value (ie, adjust - ed net asset value, it being understood that the unitary value of real estate assets is determined based on the value of the property or of a simi - lar property in 1941, which is then multiplied by a communal rate) on 1 January each year at a rate of 0.5% up to EUR500 million of unitary value, and 0.05% for any unitary value exceed - ing EUR500 million. These entities are able to recognise tax-deduct - ible depreciation based on the asset’s expected useful life. Business expenses such as manage -
ment fees are deductible under certain condi - tions. Arm’s length borrowing costs can also be deducted annually, up to EUR3 million or 30% EBITDA (save for exceptions), whichever is higher. Furthermore, Luxembourg tax law allows (under certain conditions) a Luxembourg company to defer capital gains realised upon the disposal of a real estate asset if an amount corresponding to the sale proceeds realised is reinvested into another fixed asset. A common limited partnership and a special limited partnership can be incorporated by way of either a notarial deed or a deed under a pri - vate seal. While the special limited partnership is deprived of legal personality, the common lim - ited partnership will acquire its legal personal - ity from the day of execution of the partnership agreement, thus allowing for maximum flexibility. The constitutive document of each such partner - ship will be published by way of extracts only. The relevant extract will include the following: • the precise designation of the unlimited mem - bers; • the name of the entity, its object and the place of its registered office; • the designation of the managers as well as their signatory powers; and • the date on which the company starts and the date on which it ends, thus ensuring an appreciable level of confidentiality. The formation process is quite straightforward and can generally be completed within a few days. As a rule, these entities should be considered tax transparent and should therefore not be subject to corporate income tax, municipal business tax or net wealth tax.
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