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Expert in corporate and international corporate law. Has extensive experience in supporting the acquisition of financial licenses in Ukraine, as well as business incorporation in the EU, the United Kingdom, Switzerland, the UAE, and key Asian jurisdictions.
Tax structuring in Luxembourg
In today’s global competition between tax jurisdictions, Luxembourg remains one of the most attractive locations for international business. Its high level of financial stability, predictable legislation, extensive network of double taxation agreements and flexible corporate forms create a strong potential for tax structuring.
However, it is worth remembering that despite the favorable tax climate, the Grand Duchy of Luxembourg is built on a complex and demanding tax administration system – any negligence, errors in documentation or a formalized approach to tax support can result in significant losses and risks for the company. That is why the issue of tax optimization within this jurisdiction should be resolved with the participation of experienced lawyers from Prikhodko & Partners. Our team has many years of experience and relevant expertise, helping clients not only effectively implement tax structuring in the Luxembourg jurisdiction, but also avoid violations of local and international tax legislation.
Advantages of Luxembourg as a tax jurisdiction
- Transparency of the tax system – corporate income of Luxembourg-resident companies is taxed comprehensively, at a competitive rate within the European Union, and consists of corporate income tax (CIT), municipal business tax (MBT) and a solidarity surcharge. Luxembourg has also introduced a net wealth tax (NWT), and for large companies – minimum taxation rules according to OECD standards (Pillar Two).
- An extensive network of international double taxation treaties – Luxembourg currently has more than 80 international double taxation treaties (DTAs) in force. This makes the Grand Duchy an important and tax-efficient hub for holding structures, investment funds and international groups of companies.
- Compliance with the international tax course – Luxembourg is actively implementing OECD tax initiatives and initiatives for the disclosure and exchange of financial information – CRS and FATCA. This ensures a stable market situation and its saturation with understandable and transparent companies.
Thus, Luxembourg is a highly developed tax system that provides legal, comprehensive and transparent tools for optimizing business. However, its use requires in-depth knowledge of international and local law, as well as careful compliance with procedures.
Potential pitfalls and risks of tax structuring in Luxembourg
Lack of real economic presence
One of the key principles of tax structuring in Luxembourg is real presence in the jurisdiction. Formally established companies, without an office, manager, employees and real management and actual activity, are recognized by local tax authorities as “shell companies”. Such a company status jeopardizes the fact of company residency, deprives the company of the right to benefits under international agreements, and also causes potential problematic situations with the tax authorities.
Underestimation of transfer pricing rules
Luxembourg tax authorities pay special attention to financial transactions between related companies. Without properly executed documentation, expenses can be excluded from tax accounting.
Changes in tax legislation
Luxembourg’s tax environment is constantly updated. For example, in 2025 the CIT rate was reduced, the minimum capital tax was changed, and new OECD requirements (Pillar Two) were introduced. Therefore, a structure that was beneficial a year ago may lose its effectiveness without regular analysis and review.
Impact of international initiatives
Luxembourg’s implementation of international financial reporting standards (CRS, FATCA) and the OECD’s global minimum taxation initiative mean that opaque tax optimizations no longer have a place in Luxembourg’s jurisdiction. Modern structuring must be legal, documented and meet international standards of integrity.
Even experienced entrepreneurs face difficulties when dealing with the Luxembourg tax authorities. The problem lies not only in the language of the documents (French/German), but also in the complexity of the regulatory field, where every step requires precise legal justification.
How can corporate lawyers of the company “Prikhodko & Partners” help?
It is worth noting that the lawyers of “Prikhodko & Partners” take into account all possible risks in advance and provide the client with the necessary mechanisms in the legal sphere to minimize the latter. Our team can provide full consultation or help your company directly with:
- Preliminary analysis and preparation of the company, namely: audit of the current corporate model (issues of residency, cash flows, capitalization, liabilities, etc.), determination of the purpose of structuring, assessment of the feasibility of the Luxembourg jurisdiction, assessment of the need to create an economic presence, consideration of the possibility of using investment structures, analysis of potential risks and unique problematic aspects.
- Design and implementation of the structure in the company, namely: selection of the organizational and legal form (SOPARFI, SCSp, S.A., S.C.A., etc.); choosing a capitalization model and economic presence of the company in the jurisdiction (providing an office, management, active actions, etc.); registering the company, opening bank accounts, obtaining a tax number, other registration actions; establishing communication with tax authorities (in particular, regarding obtaining tax advice and decisions); implementing and supporting transfer pricing operations, intra-group agreements, etc.; setting up tax declarations and general compliance with reporting schedules.
- Further support and monitoring, namely: providing regular advice on changes in national and international tax legislation; conducting regular audits of economic presence and operational activities in light of potential tax audits; internal control and updating of the company structure; developing contracts, protocols, justifications for tax decisions, transfer pricing documentation, etc.
The law firm “Prikhodko & Partners” provides comprehensive services in international tax structuring and business support in foreign jurisdictions. Our experience allows us to guarantee compliance with legislation and minimize all potential risks or inconsistencies before they arise. If you are considering Luxembourg as a jurisdiction to optimize your corporate structure, contact us and we will help you develop a reliable, legal and effective model that will work within the framework of European legislation.
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