The holding company “1929“
The holding company "1929" does not represent a special legal form, but is instead a typical company with a specific commercial purpose. In general, holding companies have the status of a corporation. The company itself may not undertake, on its own accord, any industrial or commercial activity.
The statute from 31 July 1929 defines a holding company as follows: “A holding company is considered any and every Luxembourg-based company – the exclusive purpose of which is the acquisition of holdings, in any form, in other Luxembourgian or foreign companies, and in the management as well as the utilisation of these holdings, so that the company does not, of its own accord, undertake any industrial activity and/or maintain any sales-and-marketing branch office open to the public.
The corporate purpose has evolved in the context of customary law - and nowadays also encompasses the following:
- Asset management (i.e., fixed-term deposits, securities, etc.)
- Issuance of loans
- Utilisation of patents
The holding companies to which the “1929“ status applies pay an annual subscription tax (in the amount of 0.2% of their share capital.
Otherwise, they are exempt from all taxes.
End of the holding statute
On 19 July 2006, the European Commission pronounced the tax exemption for the “Holding 1929“ unlawful. According to this pronouncement, new establishments of companies in this form are no longer permissible. Any already-existing holding companies are entitled to a transition phase until 31 December 2010.
The holding companies founded no later than 20 July 2006 can, according to this provision, benefit from the tax-exempt status in the transition phase (until 31 December 2010); subsequently, they become generally subject to taxes.
If (during the transition phase) the shares are sold to third parties, the benefits associated with the holding status (tax exemption) end at this earlier time. Exceptions:
- the holding shares are listed on the stock exchange
- the shares are sold to fellow shareholders or affiliated companies
- in the event of the holder’s death, the shares will be transferred, as a result of beneficence or in the context of a re-structuring of familial assets.
The Luxembourgian government has reacted to the abolition of the Holding 1929 - and created a new instrument for the management of private assets: the “SPF“ (Private Asset Management Company)
See: Private Asset Management Company - SPF
The Holding 1929 can – already at this point in time or at the end of the transition phase - be converted to a normal company or to an “SPF“.
