Interview with Alexandre André, tax specialist in Luxembourg, about professional partnerships in Luxembourg
In which situation do you advise the creation of a professional partnership in Luxembourg?
Alexandre ANDRE: There are two main situations in which it is appropriate to create a professional partnership in Luxembourg.
Firstly, when a group of people want to acquire a property together. We will then create a Société Civile Immobilière (property management company).
Or when a group of people wish to acquire movable objects together, such as a collection of works of art or cars.
So you can also set up professional partnerships to register vehicles?
Alexandre ANDRE: Yes indeed, it’s perfectly possible to register a car in the name of a professional partnership: imagine for example a group of friends, car enthusiasts, who wish to get together to acquire one or more prestige or collector vehicles and then take turns driving at the weekend or going on holiday. In this case, the best solution for them to organise the joint ownership of the cars would be to create a property management company (SCI) and register the vehicles in the name of this property management company.
Secondly, since civil law offers the members of a Luxembourg property management company a great deal of latitude in drafting the Articles of Association, they will then be able to themselves define within the Articles the rules governing the operation of the company and the provision of vehicles between the members as well as the rules governing contributions to investments and expenses.
Is it complicated to organise a professional partnership from the administrative standpoint?
Alexandre ANDRE: The legal and administrative management of a professional partnership is simple.
For example, it’s not even necessary to go to a notary to set one up. All you have to do is find a registered address in Luxembourg, then draw up articles of association and register them with the Trade Register to set up the company.
Secondly, the tax obligations of a professional partnership (SC) are relatively simple since, in principle, the SC has to fill in only one tax return per year (the declaration for the joint establishment of income from collective enterprises and co-ownerships).
Note that if the professional partnership buys cars and registers these vehicles in its name, then it is up to the SC to insure these vehicles with an insurance company.
So what are the limits to the creation of a professional partnership concerning cars?
Alexandre ANDRE: The main limitation posed by the form of Civil Company to own vehicles will be that the company's activity will then be strictly limited to managing its fleet of cars with all reasonable and usual care, without being able to carry out commercial activities.
Thus, for example, the professional partnership will be able to own the cars and make them available to its partners, and may even occasionally rent them to third parties.
On the other hand, however, the property management company will neither be able to regularly lease its vehicles to third parties, nor too frequently buy vehicles with the intention of reselling them at a profit. Both of these activities (rental and purchase/sale) are commercial activities and cannot be carried out within the framework of a professional partnership.