Luxembourg is the European Union's financial workshop. A small Grand Duchy became the place where funds are domiciled, holding companies are parked, and payment and crypto firms get their EU passport. The reason is not tax exotica — rates here are ordinary European ones — but a rare combination: a single regulator (the CSSF), an English-speaking expert ecosystem, the deepest fund-servicing infrastructure in Europe, and a reputation that correspondent banks and institutional investors trust.
For private capital, Luxembourg is convenient because it closes several tasks in one jurisdiction: a fund (UCITS or alternative), a holding company (SOPARFI), a payment or neobank licence, and — from 2025–2026 — a crypto regime under MiCA. These pieces line up not as a menu of services but as a four-step route: holding company → bank → fund → licence. Below is the map of that route with links to dedicated write-ups; the detailed breakdown of each regime follows further down this page.
Step 1. The holding company
The entry point for most private clients is the SOPARFI: an ordinary Luxembourg S.à r.l. or S.A. acting as a holding vehicle. The participation exemption fully exempts qualifying dividends and capital gains, the IP box reduces tax on intellectual-property income, and EU directives plus the treaty network make the structure bankable for banks and tax authorities alike. The price of entry is substance: an office, local directors and decisions taken on the ground.
- Luxembourg SOPARFI: Classic Holding with Participation Exemption
- Holding Structures: NL, Luxembourg, Cyprus, Singapore, UAE — comparing the venues
- IP box (in Russian) · Economic substance
Step 2. Banks and private banking
A holding company does not work without an account, and capital needs a custody platform. Luxembourg banking is mature private banking and custody on top of the fund infrastructure: Banque de Luxembourg, CA Indosuez, Pictet and others. An operating account for the holding, a depositary for the fund and a private client's portfolio are three different tracks — the bank is chosen separately for each.
- Luxembourg: banks and private banking — a playbook for choosing the bank
- Banks by jurisdiction · Private banking: jurisdiction, capital and source of funds
Step 3. Funds
When co-investors and assets outgrow what a holding company can comfortably carry, the fund layer kicks in: a RAIF or SIF for qualified investors, UCITS for retail strategies. You do not need your own licensed AIFM for a single fund: the working setup is a third-party ManCo (AIFM as a service) with a depositary and administrator in Luxembourg.
- Luxembourg funds: UCITS, SIF and RAIF (in Russian)
- Third-party ManCo in the EU: AIFM as a Service
- Host AIFM in the UK — if the manager sits in London
Step 4. Licences
If the structure includes a payments or crypto business, Luxembourg closes that too: a CSSF neobank/PI licence passports across 30 EEA countries and carries a reputation correspondent banks accept — which is why PayPal, Amazon, Ripple and Coinbase are here. To see which regime fits your model — from neobank and PI to operating under a partner's licence — use the map of regimes.
Where to start
You need to hold stakes, dividends and IP — that is Step 1: a SOPARFI with the participation exemption and substance from day one.
The capital already exists and needs a platform — that is Step 2: choosing a private bank or depositary for the asset profile.
You are pooling co-investors' money or launching a payments business — start with Steps 3–4: the fund and the licence are designed around the strategy, not the other way round.
Describe your situation in the form below — we will come back with a route for your case.
Investment funds
Luxembourg is the world's second-largest fund domicile after the United States and the largest in Europe: roughly €7.6 trillion of assets under management (August 2025) and around 48% of all cross-border fund assets worldwide. Retail funds run through UCITS (passported across the EU and recognised in Asia and Latin America); alternatives run through AIFs under the AIFMD.
The working vehicles: the RAIF (launches fast, with no product-level CSSF approval — supervision runs through a licensed AIFM), the SIF and SICAR for qualified investors, the SCSp (Luxembourg's answer to the English LP) and ELTIF 2.0 for long-term assets. The depositary must be located in Luxembourg; the amended AIFM Law (AIFMD II) applies from 16 April 2026.
Holding companies: the SOPARFI
A SOPARFI is an ordinary Luxembourg company (S.à r.l. or S.A.) used as a holding vehicle. The headline corporate tax rate in the capital is about 23.87%, but the participation exemption fully exempts qualifying dividends and capital gains from subsidiaries (thresholds: a 10% holding, or an acquisition price of €1.2 million for dividends and €6 million for gains, with a 12-month holding period). Add a broad tax-treaty network and access to EU directives.
The price of these benefits is substance: a real office, local directors, decision-making and expenses in Luxembourg. Without it, the tax authority will confirm neither treaty benefits nor the participation exemption — a direct consequence of ATAD and BEPS.
Payments and neobank — the regime fintech chose
The CSSF grants the neobank (PSD2) and the e-money licence (EMD2, minimum capital €350k), both passportable across all 30 EEA countries. Luxembourg is more expensive and slower than Lithuania, but it offers what Lithuania does not — institutional trust: its neobanks and banks are readily accepted by correspondents. Historically, PayPal (operating from Luxembourg under a CSSF banking licence since 2007) and Amazon Payments Europe (an neobank, licence 36/10) came here.
In 2026 the crypto wave arrived: Ripple obtained a full EU neobank licence from the CSSF in February, and Coinbase on 5 March. The reason is simple: a stablecoin under MiCA (an e-money token) may be issued only by a bank or an neobank, so issuers went where such licences have long been granted.
Crypto: MiCA and CASP
Luxembourg's crypto regime is the CASP under the MiCA regulation: the licence can be standalone or an add-on to an e-money licence. The 'neobank + CASP under one regulator' combination is exactly what a stablecoin (EMT) issuer and a crypto wallet need, which made Luxembourg a natural entry point for regulated crypto in the EU. The mechanics of embedding crypto trading under a partner's licence are covered separately.
Private banking and custody
On top of funds and holdings sits a mature private-banking and custody layer: Banque de Luxembourg, CA Indosuez Wealth (named Luxembourg's best international private bank in 2026), Pictet and others. Alongside them are the depositaries and fund administrators servicing trillions in assets. For UHNW individuals, Luxembourg has long been the platform where wealth management, fund structures and asset custody converge.
Tax and substance
Luxembourg's tax logic for structures rests on three things: the participation exemption (0% on qualifying dividends and gains), access to EU directives and the treaty network, and a favourable IP box for intellectual property. The price of entry is substance: a formal 'letterbox' structure does not survive ATAD or a beneficial-ownership review in 2026. Luxembourg is about real presence, not a nameplate on a door.