Luxembourg has signed with 75 countries for double taxation treaties, which makes setting up a holding company very attractive and allows a tax efficient business arrangement. The country has treaties with all EU member states and with OECD (Organisation for Co-operation and Development–has 34 member countries) members, and the network of double taxation treaties continues to grow with 19 other countries in the list. Holding company might qualify for the participation exemption regime, so dividends received and capital gains coming from the nominal paid-up capital of a subsidiary are completely exempt from Corporate Income Tax (CIT).
Purpose of holding companies The purpose of holding companies in Luxembourg applies to the management of the stockholdings in other businesses that have economic activities. When having at least 10% of the shares in the company, the holder can vote in the firm and also provide technical management, if it is the case and if the firm approve the agreement.