AGEFI Luxembourg - juin 2025

AGEFI Luxembourg 12 Juin 2025 Conseil / RSE By Xavier M ARTINEZ (Partner Tax, Global Mobility Services), Sacha T HILL (Partner Tax, Family Office & Private Clients) and Henri P RIJOT (Partner Tax, Family Office & Private Clients), KPMGLuxembourg* I t has beennearly a year sincewe published “ UKNon-DomTax- payersGettingReady toRun: Luxembourg in Foreign Investors andHighEarners’ Crosshairs .”With the benefit of hindsight, we can nowtake a sharper look atwhere UKnon-doms are trulyheading— particularly those unsettledby the UK’smost recent financial and tax legislative reforms. The UK’s tax landscape for non-domi- ciled individuals is about to undergo a seismic transformation. From 6 April 2025, the long-standing remittance basis—akeyelementofnon-domperson- al tax planning for generations — was abolished.Initsplace,thegovernmenthas introduced a four-year Foreign Income andGains (FIG) regime, designed topro- videtransitionalreliefforindividualswho have been non-resident in the UK for at least ten years. But as the details unfold, many non-doms remain unconvinced that this limited window offers a com- pelling enough reason to stay. As the UK tightens its grip on offshore income and aligns its tax policies with globalstandards,high-net-worthindivid- uals are increasingly exploring opportu- nities beyond Britain’s borders. Luxembourg, known for the strengths of its personal tax regime, strong financial servicessectorandreputationasaprivate wealth hub, is swiftly becoming a pre- ferred destination for those seeking sta- bility, flexibilityandefficiency.After con- sulting with experts from some of the world’s most attractive jurisdictions, we feel justified in saying that Luxembourg offers unmatched political stability, a vibrant social environment, a robust economy and a reliable legal framework (including robust Anti-Money Laundering Standards)—making it a strongchoiceforthoselookingtonotonly relocate but also redefine their lifestyle and future tax planning. The key question now confronting advi- sors, investors and policymakers is this: Can the new FIG regime truly stem the outflow of international wealth—or is Luxembourg,alongwithotherlike-mind- ed jurisdictions, poised to write the next chapter in the story of theworld’smobile elite? Now the April 2025 deadline has passed, the implications could extend far beyond the UK’s fiscal landscape, poten- tially redrawing the global map of high- net-worthmigration. TheUK’sNewFIGRegime: AttractiveBenefits, LimitedDuration TheUK’s new tax rules offer a real incen- tive for people moving to the UK from overseas. For thefirst four years ofUKtax residency,foreignincomeandgainswon’t be taxed—even if the money is brought into theUK. This is a big change fromthe old remittance basis, which only gave tax reliefiftheincomeorgainsstayedoffshore and couldbe claimed for up to 15 years. Now,individualscanenjoytheiroverseas wealthintheUKwithoutworryingabout triggeringataxbill.It’ssimpler,moreflex- ibleandmaymaketheUKmoreattractive to skilled professionals, business owners andwealthy individuals thinking of relo- cating. However, there’s a clear limit: the tax break only lasts four years. After that period, full UK tax applies to all income andgains—nomatterwheretheyarekept or used. This is amuch shorter timeframe than under the previous system, and it could discourage people from staying in theUK long-term. In short, it’s a great opportunity for new- comers—butonethatcomeswithaticking clock. Luxembourg:AFocusedAlternative forWealth and Investment Meanwhile, Luxembourg continues to demonstrate confidence and determina- tioninitsstrategytoattractbothkeybusi- ness players and investors. The country’s stablepoliticalenvironment,robustfinan- cial infrastructure and investor-friendly regulatoryframeworkmakeitanappeal- ing destination for high-net-worth indi- viduals and businesses alike. By offering competitive tax incentives, a strong com- mitment to innovation and a high stan- dard of living, Luxembourg has posi- tioned itself as a leading European hub forwealthmanagementandinternational investment. Via the Pearl and Attract Program (1) ,Luxembourgalsooffersasup- portiveframeworktoattractcutting-edge research programs in areas such as fin- tech, AI and biotech, that may be ideally complementedbyinvestmentcapabilities developing in the principality. This approach highlights Luxembourg’s long-termvision of growing its economy throughsustainableandstrategicengage- ment with global talent and capital. Unlocking FamilyWealth Potential: Luxembourg’s Sophisticated Structuring Toolbox Whenitcomestoprotectingandgrowing family wealth, Luxembourg stands out withflexible solutions. Thanks to amod- ern legal framework, families can choose fromabroadspectrumofoptions—rang- ing fromtax-efficient investment compa- nies and versatile partnerships to inno- vative life insurance products—all designed to fit diverse goals and needs. Are you looking to keep it simple and tax-smart? An unregulated passive wealth management company might be the perfect fit. Do you needmore control and tailoredgovernance?Luxembourg’s partnership structures—often dubbed the local alternative to trusts—offer that. Whatever the asset or investor profile, Luxembourg’s structures deliver smart tax planning, strong asset protection and governance flexibility that make it an attractive destination. Luxembourg’s Tax Perks: What Individuals Need to Know Beyond smart ways to structure family businesses, Luxembourg offers individ- uals some significant taxperks that often fly under the radar. Firstly, dividends fromEU-basedparent companies—or firms in countries with tax treaties—can qualify for a 50% per- sonal tax exemption. Inaddition, interest onprivate savings is often taxedat a 20% final rate, whether paid in Luxembourg or by a paying agent elsewhere in the EU/EEA. When it comes to capital gains, Luxembourg rewards a long-term approach. If you sell shares within six months, you’re taxed fully. But if you hold on longer, the tax bill shrinks sig- nificantly. Rental income and business assets enjoy their own set of attractive personal tax rules, too. Then there is inheritance and gift taxes. Here, Luxembourg provides generous exemptions for direct heirs—making it easier to pass on wealth without losing the family legacy. Furthermore, with the wealth tax abolished in 2006 for individ- uals, Luxembourg is a smart, family- friendly destination for wealth preserva- tion across generations. In addition, the revamped Inpatriate Regime is agame-changer—havingnow beensimplified tooffer agenerous annu- alpersonaltaxexemptionofupto200.000 EUR, making Luxembourg even more attractive for international talent. Finally, for investors subject to the FIG regime (or any flat tax regime without controlled foreign company rules), the unregulated passive wealth manage- ment vehicle ( Société de Gestion de Patrimoine Familial – SPF ) may be an attractive consideration, offering a tax- efficient structure for holding andman- aging a diversified portfolio of passive investments. Notably, the SPF benefits from a full exemption on income and net wealth taxes. It is therefore a popular choice for private investors seeking a simple, secure and efficient corporate vehicle to manage assets. Next steps With the future wealth taxation of high- net-worth individuals remaining a topic of continuous debate at OECD and EU levels,ourviewremainsunchangedfrom lastyear:Luxembourghasthecredentials tobecomethepremierpersonalandbusi- nessdestination, especiallywith theUK’s old non-dom regime coming to an end, and other EU comparable tax regimes being limited or cancelled recently. Forthosereadytocatchthewaveofhigh- net-worth migration, there’s no time to waste—start rethinking your strategy todaytosecureyourplaceattheforefront of this exciting shift. 1) https://lc.cx/6s6KKE *TheauthorswishtothankFredericScholtus(Mobility & Immigration Lead-Director, Global Mobility Services),RobinJanLijzenga(DirectorTax,Commerce & Industry) and Juan Alberto Velasco Carrasco (ManagerTax,GlobalMobilityServices)fortheirvalu- able contribution to this article. UK Non-Doms Eye Luxembourg: Tracking the ShiftAfterUKTaxChanges E Y present the fourth edition of its LuxembourgAttractive- ness Survey – a widely reco- gnized study to assess what makes the country competitive on an in- ternational level and the main bar- riers to growth as perceived by (potential) investors. At the European level, the study has been serving as a benchmark for over 20 years. It uncovers both the reality of foreign direct investment (FDI) in the country through the analy- sis of investments that create new facilities and jobs, and the percep- tions of international decision-makers via a survey. “Now in its fourth year, we havemore of a story to tell,” says Olivier Coekelbergs (portrait), EY Lux- embourg Country Managing Partner. “The first year of research was a real journey of exploration, not having a standardagainstwhich tomeasure the results.Moreover, the research captured foreigndi- rect investment data from 2021, a year where in- vestment was impacted by the pandemic”. “The secondyearwas similar to the first – therewas nowa benchmark, but one year’sworthof datawas insufficient to uncover persistent trends”. “The third survey took place on the other side of national elections – perhaps a bit too soon to mea- sure the true impact of newly launched govern- ment initiatives. Research in year four has taken place amidst an uncertain geopolitical situation which has knocked FDI and the in- vestment outlook across the globe, and to a certain extent in Luxembourg too”. Economic and geopolitical woes take toll on European FDI in 2024 FDI in Europe dropped by 5% to 5,383 projects – the secondyear in a rowof decline and the low- est in nine years. Projects an- nounced by US investors fell by 11% compared to 2023 and by 24% from 2022. For the first time since 2018, France, the UK, and Germany collectively attracted less than half of Europe’s FDI, with double-digit percentage decreases in France (-14%), the UK (- 13%) and Germany (-17%). However, Spain, now the fourth-largest country for FDI (+15%), and Italy (+5%) illustrate SouthernEurope’s competitiveness. Unfortunately, investment in manufacturing pro- jects dropped 9% – the lowest since 2020. Further, industrial activity projects announced by US in- vestors 21%. Looking at other FDI activities, busi- ness services projects experienced a 9% reduction, while FDI in the software and IT services sector – historically the largest investment area in Europe – declined 17%.Aside fromall this doomandgloom, signs of growth are emerging in niche sectors like semiconductors, defense, and pharmaceuticals. R&D investments are evident in AI, energy, phar- maceuticals, and semiconductors, thoughmodest. Luxembourg FDI muted despite “biggest ever intentions to invest” last year Despite “biggest ever intentions to invest” last year, Luxembourg FDI has dropped from 36 in 2023 to 33 in 2024. Investment is skewed toward business services, which account for 55% of all projects – more than double that of Europe. Headquarter operations (15%) and logistics (12%) follow, while manufacturing represents only 9% of activity. FDI in the finance sector declined 5% in Europe, yet Luxembourg experienced a 20% in- crease – reinforcing its status as a premier destina- tion for finance (namely investment funds). Finance accounted for 36% of all Luxembourg FDI projects in 2024, followed by business and professional services (15%) and software and IT services (15%). Non-European companies find Europe less attractive than the US and China Only 62% of investors expect Europe’s attractive- ness to improve over the next three years – down from 75% – while expectations are considerably higher for the US (74%) and China (67%). Further, 37% of respondents have postponed, scaled back, or canceled investment plans in the region. Luxembourg perceptions of attractiveness fairly stable, while plans to invest decline Intent to invest in Luxembourg dips slightly from 60% to 56%, while plans to expand operations in Luxembourg declined sharply from 72% to 57%. Luxembourg now ranks 13th in attractiveness, just behind Belgium and Italy. Positively, however, Luxembourg has among the highest proportion of investors in Europe who have not postponed, canceled, or scaled back their investment plans. Other key takeaways include: - Finance is expected to remain the leading growth engine in Luxembourg, but talent re- mains a critical bottleneck. Investors cite com- plexities around frameworks for newly relocated staff and challenges in attracting and retaining talent. - Investors say Luxembourg must prioritize sup- port for strategic industries like cleantech, AI, and defense to stay competitive. Almost half (45%) of investors say Luxembourg needs greater regulatory flexibility for emerging sectors likeAI and fintech. - Luxembourg’s tax environment is seen posi- tively – 53% of investors reported a positive im- pact on business decisions from recent tax changes. Tax predictability and certainty are ranked as the second-highest priority, after sim- plification of tax codes and compliance proce- dures. - Forty-one percent (41%) of Luxembourg-based investors identify enhancing expertise in technol- ogy, engineering, and energy as a priority, higher than the European average of 34%. Increasing workforce productivity is considered the second most important talent concern. Report here: ey.com/en_lu/insights/financial-services/luxembourg-attractiveness-survey EY Luxembourg releases its fourth Attractiveness Survey: “Luxembourg’s tax environment is seen positively”