5 reasons to set up an SPV in Luxembourg

30 May, 2024

Europe Capital Markets SPV Administration SPV Accounting, Reporting & Tax

Luxembourg is one of the world’s great financial centres and a gateway to European markets for international investors.

Why is Luxembourg a financial hotspot?

Since the country’s dedicated securitisation law came into force in 2004, over 1,000 securitisation vehicles and thousands of related compartments – which ring fence different assets and liabilities – have been set up in Luxembourg. In fact, Luxembourg accounts for 29% of the euro area’s financial vehicle corporations – SPVs that handle securitisation transactions.

What are the key reasons SPVs should be housed in Luxembourg?

1. Securitisation law

This makes the country an attractive choice for structured-finance transactions, offering legal certainty alongside flexibility. One major benefit of the law is the ability to create compartments within an SPV. The law is regularly updated to reflect evolving market conditions.

2. Double-taxation agreements

While securitisation vehicles are subject to corporate income tax and municipal business tax, in practice SPVs benefit from a tax regime that aims to achieve tax neutrality. There’s no withholding tax or VAT on Luxembourg SPVs.

3. Highly supportive government

This, combined with the country’s reputation for political and economic stability, has made Luxembourg the European hub for a significant number of international corporations and banks. Luxembourg’s financial power is a major draw for companies wanting to raise investment capital.

4. Structure flexibility

While SPVs can be created as nearly any kind of company, in practice they’re usually set up as public limited liability (SA) or private limited liability (SARL) companies. The SA is considered the structure of choice for larger companies, while the SARL is more suited to midsized businesses and investments.

5. Fast incorporation

SPV set up is usually quick and efficient in Luxembourg, typically taking between five and 10 days. The main challenge is stringent but necessary KYC requirements. This process has reduced the appetite of banks for securitisation business in Luxembourg and opening a bank account can take a number of weeks.

Why choose Ocorian as your SPV partner in Luxembourg?

Most companies and funds use a third-party corporate services provider to help establish and manage their SPVs. Outsourcing the administration reduces the burden on employees whilst ensuring all compliance, legal and reporting obligations are met and gives back valuable time to focus on higher-value activities.

Ocorian has earned an excellent reputation in Luxembourg with decades of experience keeping structures in good stead. We’ll work alongside your legal and tax advisors and combine industry experience with international and local knowledge, a network of contacts and, essentially, boots on the ground. In short, Ocorian makes SPVs easier to set up, manage and dissolve and be with you every step throughout the lifecycle.

“Incorporating an SPV in Luxembourg is generally straightforward, but there can be delays, especially when it comes to banking. Ocorian is an experienced service provider with local relationships can help smooth the process. A good provider will also help entities stay compliant with the spider’s web of EU regulations, which can be daunting for overseas businesses.” Luis Rebelo, Ocorian’s head of capital markets in Luxembourg.

Contact Luis and the team for more information and to get the support you need.