“Luxembourg is a multilingual country with a strong and longstanding European tradition as it is a European Union and eurozone co-founder where the European Court of Justice and the European Investment Bank sit,” said Hélie de Cornois, partner and head of family office Luxembourg at Stonehage Fleming (one of the firm’s current partner’s uncles is Ian Fleming, the author of the James Bond spy novels). Additionally, he thinks that multilingual banks, multidisciplinary teams at legal firms and consultancies are key reasons for European families to set up a financial structure in the country.
Setting the scene: UHNWI and family office profiles
“The fortune of ultra-high-net-worth individuals generally starts at $30m.”
De Cornois explained that single-family offices usually require a minimum net worth--$200m--to justify the cost associated with dedicated services and setting up financial vehicles. Stonehage estimates that there are about 100 single-family offices based in Luxembourg. For net worth below $200m, a family office joining a multi-family office enables it to pool resources to reduce cost. It is worth noting that single-family offices may reach out to multi-family offices such as Stonehage Fleming for specific expertise, such as wealth planning in a country where it is not established.
Regulatory oversight
De Cornois noted that, since 2012, multi-family offices in Luxembourg carry a legal status that requires oversight by the Financial Sector Supervisory Commission (CSSF). “It constitutes a quality label for UHNWIs.”
Structuring two lives
“Private bankers do generally take care of marketable assets that may also include private investments.” Setting up a family office is often necessary when a stake in an industrial company is involved. He commented that family offices are experts in facilitating the buildup of a bridge between professional and personal assets.
Luxembourg: a unique European ecosystem
De Cornois noted favourably the close interaction between politicians and the business sector. He thinks that his clients see “great stability” in the legal system positively and in politicians’ understanding of the importance of the wealth management business and its financial tools.
Preferred financial vehicles and tools by families
Some financial vehicles are regulated while others are not. Some non-regulated entities are designed to host industrial holdings such as the Soparfi (société de participations financières), co-investments (SCSP or special limited partnership / société en commandite spéciale) or listed public assets (SPF, or family wealth management companies / société de gestion de patrimoine familial). On the other hand, regulated entities such as the Sicar (investment company in risk capital / société d’investissement en capital à risque) are dedicated to private equity and venture capital.
A reserved alternative investment fund (Raif) may not be regulated by the CSSF, but it is still necessary to appoint an authorised alternative investment fund manager. Interestingly, a Raif can invest in all types of assets. Without going into the details of all the financial vehicles, de Cornois stressed that their great variety in Luxembourg enables UHNWIs and family offices to set up an unlimited constellation of structures that reflect the specifics of each situation--and, importantly, all in one country.
Luxembourg life insurance contract: protective, flexible and “passportable.”
De Cornois explained that the Luxembourg life insurance contract is a highly sought-after tool by UHNWIs in Europe. The highest demand comes from France and Italy. Contrary to the regulation of most European countries, he explained, Luxembourg life insurance policyholders are first-ranking creditors. They therefore have a priority claim against the assets of the insurance company. This means that if the insurance company fails, policyholders are reimbursed before the state, social security organisations and employees. By way of comparison, in France, the policyholder comes second after the state, social security organisations and employees.
To ensure and ease the enforceability of the claim, de Cornois noted that assets are deposited with an independent custodian bank and are held segregated from the insurance company while being overseen by the supervisory authority for the insurance sector (CAA or Commissariat aux assurances).
In Belgium or France, for example, assets are on the balance sheet of the insurance company. In other European countries, the compensation system in the event of a problem is generally less favourable than in Luxembourg. In France, for instance, a maximum compensation of €70,000 is provided for if the insurance company goes bankrupt. The priority claims for Luxembourg policy holders “provides them full protection,” stated de Cornois.
The ability to hold a wide variety of assets (securities, private equity, etc.) is seen positively by UHNWIs. For comparison, in France, assets are limited to what is provided by the insurance company.
He explained that all the policy benefits are “passportable” throughout the European Union, a characteristic not often possible with other EU countries. It’s a flexible feature for UHNWIs often on the move.
What about the perspective of living in Luxembourg?
De Cornois noted that an increasing number of UHNWIs are solving their residency issues by moving to Luxembourg. Indeed, de Cornois considers Luxembourg a “friendly” place for UHNWIs to establish their residency. Beyond the high quality of life, de Cornois remarked that there is no tax on capital gain for securities held for longer than six months. Fifty percent of the dividend is exempted, resulting in a maximum margin of “around 22%,” a level “much lower” than many European countries. Finally, interest revenues are “often taxed at 20%.” Besides, there are no death duties between spouses in “most cases.” Without expanding on the details, de Cornois also thinks that there is a “quite favourable” donation regime in Luxembourg and there are no wealth taxes for individuals. There is, however, a wealth tax regime for legal entities.
Tax matters remain a key focus
Taxation remains an important consideration for UHNWIs and family offices when setting up their operations in Luxembourg. On Soparfis, for instance, de Cornois commented that a tax exemption on dividends is granted if the stake is held for at least one year (it is longer in many other countries) and a threshold of at least €1.2m of acquisition price allows for a total tax exemption despite “a very low stake” in a company. He explained that, in some other circumstances, capital gains may also be exempted from tax upon the sale of a stake.
[Regarding] ownership of financial assets, Luxembourg is often tax neutral for non-residents.
De Cornois commented that the Soparfi benefits from numerous double taxation treaties between Luxembourg and other countries. Whether or not the shareholder resides in Luxembourg, “a with–holding tax of 15% in most cases” is levied on dividends paid to shareholders. This is not the case in an SPF.
Yet, as the SPF does not pay taxes on revenues, it does not come as a complete surprise that its tax status is not recognised in several countries such as France and Belgium. For these countries, “it is as if the positions were held directly by the individual.”
Tax neutrality
“[Regarding] ownership of financial assets, Luxembourg is often tax neutral for non-residents.” For instance, death duties will apply should the owner of a holding based in France pass away even while abroad. There are no such death duties for a Luxembourg non-resident.
This article was written for the Wealth Management supplement to the April edition of the Paperjam magazine, published on 26 March 2025. The content is produced exclusively for the magazine. It is published on the site to contribute to the full Paperjam archive. Click on this link to subscribe to the magazine.
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