In recent years, Luxembourg has become an increasingly attractive or complementary alternative for Latin American family offices and UHNWI (Ultra High Networth Individuals) to channel their investment strategies, organize their wealth or design their family planning, as opposed to other more “familiar” jurisdictions such as the United States, Cayman Islands or British Virgin Islands, which had traditionally monopolized these solutions.
The professionalization of their management, the greater role of alternative investments and legal certainty have made the Luxembourg hub a strategic point of reference for the development and growth of these investors.
Specifically, Luxembourg has the following key features:
1. Political and Economic Stability
It is a country with a recognized political and economic stability, which makes it a haven for family offices and UHNWI seeking to protect their wealth and diversify risks. Luxembourg is a founding member of the European Union and has a solid economy (AAA credit quality), which gives it a framework of security and predictability that is highly appreciated in times of global uncertainty.
2. Confidentiality and Wealth Protection
The Luxembourg legal framework allows family offices and UHNWI to establish legal structures with a high degree of confidentiality for the protection and management of their assets and succession planning. Legal structures such as SCA (Société en Commandite par Actions), SCSp (Société en Commandite Spéciale), Sarl (Société à Responsabilité Limitée), allow for structures that offer a high degree of privacy to their shareholders and investors. This is particularly important for family offices wishing to preserve wealth in the long term and avoid intergenerational conflicts.
3. Attractive Tax System
While Cayman or British Virgin Island are attractive jurisdictions due to their lack of direct taxation – highly valued by investors resident in Anglo-Saxon countries – and their tax neutrality, these features may be less relevant for strategies where ease of marketing across Europe or with a higher degree of protection is a priority.
Moreover, with the EU’s growing pressure against tax evasion and increased vigilance over tax havens, jurisdictions such as Luxembourg are becoming increasingly attractive due to their regulatory transparency.
In this sense, Luxembourg is known for its tax system open to the development of all types of investments (traditional assets, private equity, real estate, venture capital…), which allows to efficiently structure investment strategies according to the needs of investors. The country offers tools for efficient tax planning, with a reduced tax burden on some types of income, tax exemptions on capital gains and very competitive taxation compared to other EU countries. In addition, it has double taxation agreements with many countries, which facilitates international operations and optimizes the tax burden.
“Luxembourg is known for its tax system open to the development of all types of investments (traditional assets, private equity, real estate, venture capital…), which allows to efficiently structure investment strategies according to the needs of investors. The country offers tools for efficient tax planning, with a reduced tax burden on some types of income, tax exemptions on capital gains and very competitive taxation compared to other EU countries.”
4. Flexible Investment Structures
Luxembourg offers a wide range of investment structures, colloquially known as the “Luxembourg Tool Kit”, which can be adapted to the particularities and requirements of family offices and UHNWI. These include, in the world of traditional investments, UCITS, regulated vehicles focused on distribution to both retail and professional/institutional investors, which are attractive to retail investors due to their solid regulatory framework and the protection they offer to investors. In addition, they can be marketed throughout Europe and even in the US and Asia, making Luxembourg a key enclave for global investment.
In the alternative fund industry, the catalog is tremendously broad with solutions with more or less regulation, depending on the needs and with different legal forms that will allow to combine the characteristics of the investment (private equity, hedge funds, real estate, venture capital) with the requirements of distribution and tax optimization/efficiency. In this sense, the SIF (Specialised Investment Funds) regime with a very broad investment universe, or the SICAR regime, for venture capital investments, stand out.
For those solutions where it is not necessary to have a regulated vehicle, for example for an entrepreneur or an exclusive family, options such as the RAIF (Reserve Alternative Investment Fund) and the SCSp can be an excellent alternative for channeling your investment projects. In particular, the SCSp are similar to the Anglo-Saxon limited partnership, which in many cases they already know, and which offers them enormous discretion to organize the relationship between investors (LPs), investments and the distribution of returns, which has made it one of the preferred formulas for this type of investor.
5. Labour Force and Access to International Markets
Luxembourg is strategically located in Europe, which facilitates access to international financial markets. From the point of view of distribution and marketing, the Luxembourg market has an unquestionable international recognition, making it the first center of domiciliation of investment vehicles in Europe and the second in the world after the United States.
This position of world reference has favored the concentration of a wide range of qualified professionals and advisors with recognized experience in all the disciplines required for the organization and planning of wealth
“In the alternative fund industry, the catalog is tremendously broad with solutions with more or less regulation, depending on the needs and with different legal forms that will allow to combine the characteristics of the investment (private equity, hedge funds, real estate, venture capital) with the requirements of distribution and tax optimization/efficiency”
6. Succession Planning and Philanthropy
Luxembourg is an ideal place for efficient succession planning, thanks to its legal structures that allow families to manage the transmission of their wealth between generations. In addition, the country is an important center for philanthropic funds and foundations, which facilitates the management of social responsibility and philanthropy initiatives. For many Latin American families, being able to plan for succession and participate in charitable actions can be a priority.
In short, for a Latin American family office, Luxembourg offers an efficient tax environment, a flexible legal system with a wide range of investment structures, great political and economic stability, access to European markets and distribution capabilities, making it an ideal place to diversify investments and preserve family wealth.
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