Despite its small size, the Grand Duchy of Luxembourg is the richest country in the world in terms of GDP.
This is due, to a great extent, to the fact that it is a top level financial centre and ranks number one in the world in the number of investment funds incorporated in the country.
Why has Luxembourg achieved such a recognition in the financial sphere? In our opinion, there are two main factors:
1. Luxembourg is a full member of the EU, which provides a legal framework unrivalled by other tax havens. In fact, we can say without a shadow of a doubt that Luxembourg does not suffer from the bad image that affects the functioning of other tax havens and even enjoys a higher legal prestige than other competing countries such as Switzerland.
Being a member State of the EU provides the country with additional advantages derived as much from the community laws [such as the free movement of capital or the repatriation of profits without limits] as from the proximity to Spain, since in about three hours we can be operating in any entity in Luxembourg compared to the long trips required to travel to other financial markets based in the Caribbean, Latin America or Asia.
2. The financial framework in Luxembourg allows a fiscal optimization difficult to equal elsewhere in the EU, and especially in Spain.
Thanks to the availability of flexible and easily adaptable business structures, Luxembourg is the ideal place to set up a business organisation to maximise tax savings.
One of the most used instruments of tax planning is the Company of Financial Participation (SOPARFI).
The SOPARFI is basically a company of fiscal efficiency that, through the holding of financial participations in other companies, one can get large tax advantages (total exemption in some cases) when taxing dividends, , interest income, holding assets, etc.
A SOPARFI can carry out a large range of activities, such as buying property, rights of any type, make loans to companies in which it holds participations and, generally, carry out any type of commercial or industrial trading.
Despite the enormous tax advantages of having a company in Luxembourg, surprisingly this type of entities are almost unheard of in Spain. Whereas in countries like Belgium, Holland or Germany it is frequent to find Groups with the parent company or one of its subsidiaries domiciled in Luxembourg, in Spain this is very unusual. However, to incorporate a SOPARFI in Luxembourg is not so expensive and it has enormous tax advantages.
In CE Consulting Brussels-Luxembourg we offer the service of the analysis of the optimal fiscal structure best suited for your company or Group and we do the incorporation of your company and provide the professional services to ensure full compliance with all the legal obligations.