To become an entity duly incorporated under Luxembourg law, a foreign company or a fund established abroad may elect to transfer its registered office and redomicile to Luxembourg.

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Company Law - two theories: seat of incorporation vs seat of establishment

To become an entity duly incorporated under Luxembourg law, a foreign company or a fund established abroad may elect to transfer its registered office and re-domicile to Luxembourg. There are two main incorporation regimes: Seat of Incorporation and Seat of Establishment.

For Seat of Incorporation countries, the registration into a company register is the main element to determine the nationality of a company while for Seat of Establishment the most important factor is the place where the company has its principal seat, head office, where is it managed. For the latter, the transfer of head office and adoption of a new nationality can be achieved by a simple transfer of the place where they are managed and controlled.



"Seat of Incorporation" countries are : United Kingdom, Denmark, Hungary, etc.
"Seat of Establishment" countries are : Luxembourg, Belgium, France, Italy, etc.
 

Important remark: Some countries while having a traditional Incorporation Seat regime allow re-domiciliation in their company law: e.g. Cyprus, Malta.



Transferring a company established in Cyprus to Luxembourg

Normally a simple notary act in the country of departure and another notary act in the country of election of domicile (Luxembourg) may be sufficient to change the nationality of most companies. In that case the company becomes a company duly incorporated under the law of Luxembourg and fully recognised as a Luxembourg national company.



Impact and Fiscal Law

When a foreign company transfers its registered office to or set its main place of management in Luxembourg, it will cut any links with its country of first incorporation unless it keeps a permanent establishment in this country. The company is not anymore taxable in the first country but will become taxable on its worldwide income in Luxembourg.

It will be considered as resident for tax purpose and taxable at the normal corporation tax rates unless its shareholders elect a tax regime in Luxembourg which grants a tax exemption in Luxembourg like :



• SOPARFI (Holding Company)
• SPF (Private Wealth Management Company)
• SIF (Specialised Investment Fund)
• SICAR (Venture Capital Fund)
• SICAV (Investment Fund)



The newly incorporated company may also enjoy the benefit of the vast Double Tax Treaty network that Luxembourg has signed with other countries.

It may also benefit from EU directives such as:



Parent Subsidiary Directive: subject to conditions, the participation exemption - absence of withholding taxes on dividends received from other companies established in other EU countries.



Interests Royalties Directive: subject to conditions, exemption of withholding taxes on interests or royalties received from companies established in the EU.



Merger-Acquisition Directive: subject to conditions, the shareholders can enjoy the delay of taxation on capital gains derived from contribution in kind (or exchange of shares upon contribution in kind) to a company or exemption of capital gain when contributing by shares to a holding company like a SOPARFI. Exemption of capital duty when contribution in kind is made on participations at the set-up of a SOPARFI.

The Luxembourg law grants exemptions like:



• The Luxembourg tax exemption of 80% granted to Intellectual Property Right companies
• The Luxembourg tax exemption of 100% - subject to conditions - of incoming dividends,  exemption of capital gain on participations, exemption of real estate incomes for estates established in a foreign DTT country, exemption of withholding tax in certain income paid like royalties, dividends, or interests.



Some considerations should be made before a transfer of registered office:

One will indeed verify that there is no discontinuation of the legal personality under the local law (departure)

Taxation of latent capital gains when the registered office is transferred abroad

Conservation of a permanent establishment in the country of origin

Considering the transfer as winding up the company

Indirect taxes due on assets' value of the company (Vat, Registration duties, Capital duty)

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The transfer of seat from Luxembourg to a foreign country

Likewise, a Luxembourg company can transfer its registered office to abroad.

The transfer of seat is assimilated to a dissolution of the company and trigger the taxation of any latent capital gains (which is subject to exemption eg on IPR and on qualifying participation).

To be noted that there is no withholding taxes at source on the profit carried forward and reserves upon transfer of seat abroad.