The Luxembourg government has launched a replacement of its 1929 holding company regime known as the Family Private Assets Management Compan...

The Luxembourg government has launched a replacement of its 1929 holding company regime known as the Family Private Assets Management Company, or SPF. The holding company regime was terminated on 1 January 2007 following an EC decision that it violated state aid rules by granting "unjustified tax advantages" to providers of certain financial services who set up holding structures in Luxembourg. The new vehicles will be prohibited from commercial activity, and will be limited to private wealth management, for example the holding of financial instruments such as shares, bonds and other debt instruments, in addition to cash and other types of bankable asset. The new regime, which is subject to European Commission approval, is intended to be exempt from corporate income tax, municipal business tax and net-worth tax, and from withholding tax on distributions. But these exemptions can be affected by the SPF's participation in non-resident, non-listed companies, if those companies are located in a country not subject to a roughly equivalent corporate tax regime. Companies participating in the new scheme must have a minimum capital level of €12,500 ($16,200) one associate, and one director in order to participate in the new regime. SPF shares can be nominative or bearer, but may not be quoted. If it is used to hold voting rights in other companies, it must ensure that it does not involve itself in the running of those companies, and it is prohibited from providing any kind of service.