"About Substance" Written by PWC

Why do we care about substance?

The level of substance of a holding company is a means to achieve tax structuring benefits. Therefore, the risk that foreign tax authorities apply local tax to the Luxembourg company can be reduced.

The importance of substance in Luxembourg has increased as a result of the new economic environment and the recent developments on the OECD principles of transparency and exchange of information.

Recommended substance requirements.

Substance is more about creating a genuine and real underlying economic activity in Luxembourg than drawing up a list of specific requirements.

However, foreign tax authorities will mainly concentrate on factors in assessing whether an economic activity is being undertaken in Luxembourg. The generally recommended substance requirements are: Own office facilities, active senior decision-makers, Employees, Documentation, Board of Directors and shareholders’ meetings, Profits or financing.

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Office to rent in Luxembourg