Fiduciary services in Luxembourg
What are fiduciary services?
These services are based on the relationship of trust between the parties: the trustee (the person or entity that manages the assets) and the settlor (who entrusts the assets). This notion of trust is in fact embedded in the name given that the exploration of the etymological roots of the word fiducia shows that it is a Latin word that means exactly that: “trust”.
The trustee then has a legal and ethical obligation to act in the best interest of the beneficiary, following the terms set forth in the fiduciary agreement.
These types of services have been established to lend a hand to the beneficiary in various areas, such as accounting, tax and legal matters and administrative commitments. Below we will detail the different services offered by these types of companies.
Accounting, administrative and financial services
Some of the main services fiduciary service providers offer are accounting, administrative and financial services. These are intended to ensure the proper management and regulatory compliance of the entities they manage and include the following services:
- 💼 Accounting: preparation of accounting records, financial statements and internal audits.
- 🧾 Taxation: preparation of tax returns and tax optimizations.
- 📢 Financial reporting: creation of reports for shareholders, investors or regulators.
- 💸 Payroll administration: management of salaries and labor obligations.
- 🏦 Administrative support: supervision of contracts, correspondence and coordination with third parties.
Incorporation, domiciliation and management of legal entities.
One of the most frequent cases in which fiduciary services are used is related to the opening of a company in Luxembourg. This includes strategic advice from the first steps, such as the choice of the appropriate legal form to the provision of ongoing services such as domiciliation and corporate administration.
The aim of these services is to ensure that business structures are efficient, aligned with the client's objectives and comply with local regulations.
The main services in this area include the following:
- Advice on company incorporation. This includes the choice of the most appropriate legal form, be it a SARL, an SA or other structure, support in drafting the articles of association and handling the registration of the company with the relevant authorities.
- Domiciliation services, which are very common in Luxembourg, are a set of administrative and legal services that allow a company to have a registered address in the country without the need to maintain a physical office or staff on site. These services include the provision of a legal seat, administrative management, receipt of correspondence, and representation before local authorities.
- Corporate administration: fiduciaries can manage boards of directors, ensure the drafting of minutes, and preserve proper maintenance of required legal records.
Services related to fiduciary contracts
In Luxembourg, fiduciary contracts are the functional equivalent of common law trusts within the civil law framework. While trusts are based on a common law system, Luxembourg fiduciary contracts derive from civil law legal principles and are regulated by the Law of July 27, 2003, adopted according to the Hague Convention of 1985. These contracts allow a settlor to transfer the legal ownership of certain assets to a trustee, who undertakes to administer or manage them for the benefit of a third party.
In this regard, fiduciary services companies provide the following services:
- ✍️ Creation and structuring of trust contracts: service of drafting and customization of fiduciary contracts adapting them to the specific needs of the client and clearly defining the obligations of the trustee and the rights of the beneficiaries.
- 🤝 Acting as trustee: trust companies assume the role of trustee, which includes the management, administration and preservation of the entrusted assets, ensuring compliance with legal provisions and the terms of the trust agreement.
- 🏢 Administration and supervision of assets under fiduciary contracts or trusts: these companies also manage and supervise assets that have been transferred through fiduciary contracts in Luxembourg or under trusts established in other common law jurisdictions ensuring that the assets are efficiently administered and that local and international regulations are complied with.
Estate and succession planning
Estate and succession planning is paramount to ensure the efficient transfer of assets between generations and to protect wealth over the long term. Luxembourg fiduciary companies offer customized solutions that may include the creation of trust contracts or corporate structures such as holding companies, the elaboration of tax optimization strategies in the succession or the creation of testamentary strategies.
Regulatory compliance services
Trust companies ensure that the structures under their management comply with local and international regulations. Their services include the implementation of Know Your Customer (KYC), Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) policies. They also ensure compliance with regulations such as Base Erosion and Profit Shifting (BEPS) and the Common Reporting Standard (CRS).
Other specialized services
Trust companies also offer additional services that complement the management of assets and corporate structures, these include the administration of real estate, the management of intellectual property rights such as trademarks and patents or assistance in litigation.
What are the benefits of using fiduciary services?
The success of a business depends to a large extent on access to specialized professional support and, in this respect, fiduciary companies play a pivotal role by offering a wide range of services as we saw in the previous section. This expert support not only facilitates efficient operation and risk management but also ensures that companies can take full advantage of the Luxembourg financial and legal framework and avoid countless problems and headaches.
By understanding the services offered it is possible to already have an idea of the advantages of this type of company, however, we will summarize these benefits to see them more clearly and emphasize the importance of this type of company and the services they offer.
1. Efficiency in asset and wealth management
Trust companies provide professional and expert management of financial and non-financial assets, ensuring their maximization, preservation and protection against legal, financial or tax risks.
2. Personalized estate and succession planning
They allow structuring tailored solutions for the transfer of assets between generations, minimizing tax burdens and ensuring an orderly succession. This is especially relevant for high-net-worth individuals and families with diversified assets.
3. Tax optimization
In-depth knowledge of local and international tax regulations allows the design of efficient structures that legally reduce tax burdens.
4. Regulatory compliance and transparency
Trust companies guarantee compliance with international standards, reduce legal risks and reinforce the legal security of financial operations.
5. Flexibility in the incorporation and management of companies
From the incorporation of legal entities to their day-to-day management, these companies simplify administrative processes, offer domiciliation services and ensure that companies comply with regulatory requirements.
6. Asset protection
Trust services include the creation of fiduciary contracts that protect assets from seizure, legal disputes or financial problems and ensure their preservation for the designated beneficiaries.
7. Time Savings
Outsourcing administrative, accounting and regulatory services to a fiduciary company allows companies to concentrate on their core business.
How to choose a fiduciary services company?
To conclude, we will examine some of the main criteria to take into account when choosing a fiduciary services company.
1. 🔍 Specialization in your needs
Not all companies offer the same services or have the same expertise in each one. It is therefore important to make sure that the company you select has expertise in the specific services you need, such as estate planning, business formation or corporate domiciliation.
2. ✅ Regulatory compliance and professional ethics
The company must be regulated, comply with regulations such as AML/CFT and demonstrate high ethical standards to ensure trust and confidence.
3. 🔄 Customization and flexibility
It is important to choose a company that offers solutions tailored to your particular needs and can adjust to future requirements. It is important that these companies can offer additional services as your needs grow.
4. 📊 Transparent and budget-friendly costs
Costs are always a factor to evaluate, so it is extremely important to choose a company that offers clear rates and flexible cost structures to suit your needs. It is worth comparing the rates of several companies taking into account the cost-benefit ratio of the services provided and choosing the best one making sure that the chosen offer fits your budget.
5. 📞 Communication and availability
It is important to have a contact person who is easy to reach and with whom there is fluid communication. Evaluate their ability to respond quickly to your queries and their willingness to explain technical concepts in a simple and understandable way. Also evaluate the company's workload, making sure that it will have enough time for your needs. If it is a small company and the services you need are extensive and require a lot of time and dedication, this company may not be able to keep up with your needs as it has to attend to the needs of other clients as well.
6. 🚀 Technology and Innovation
Prefer companies that use secure digital tools for efficient asset management and compliance. These technology solutions make management easier, however, it is essential to ensure that they fit into the company's IT infrastructure.
7. 🏅 Certifications and affiliations
Look for companies with relevant certifications, affiliations with professional associations that endorse their quality and professionalism, and make sure that their members follow continuous training that allows them to keep abreast of the latest changes in regulations.
