Luxembourg recently took steps to more strictly supervise the activities of family wealth management companies (SPF) in the face of growing tax abuses. Against this backdrop, Finance Minister Gilles Roth presented a package of 16 measures aimed at boosting the country's purchasing power and competitiveness, and tackling the tax abuses committed by these companies.
Until now, the Registration, Inheritance and VAT Authority (AED) could only withdraw the tax benefits granted to SPFs in the event of infringements, a solution often deemed disproportionate for minor offences. With the reform, the AED will now have a graduated arsenal of administrative sanctions at its disposal, ranging from fines of up to 250,000 euros to withdrawal of SPF status, depending on the seriousness of the breaches. This amendment aims to provide a better framework for family offices, while offering more flexible means of action to the Luxembourg tax authorities.
This reform responds to long-standing concerns about the abusive use of SPFs to tax-optimize family fortunes, often on a cross-border basis. Luxembourg is thus seeking to maintain its attractiveness for family offices while enhancing transparency and preventing abuses that damage the country's reputation as a financial center.
The importance of family offices in the management of large fortunes is not to be overlooked, quite the contrary. Their ability to centralize investment strategies and optimize taxation across multiple jurisdictions makes these structures highly attractive to wealthy families. While the opacity surrounding certain transactions and structures has led to abuses that this regulatory framework aims to correct, the wealth management ecosystem as a whole is keeping a close eye on any additional regulatory initiatives, with over-regulation often singled out as an increasingly important brake on its development.
Visual via Unsplash, Clarisse Meyer.
This post was translated from the original French.