After the ruling of the European Commission and the transitional period allowing the 1929 Holding Companies to survive until 31 December 2010, the 1929 Holding Company tax regime will soon disappear and the 1929 Holding Companies will, as from 1 January 2011, become fully taxable companies. In certain cases such change of status will, on the one hand, not have any major impact on the tax situation of such "newly" taxable company, whereas, on the other hand, such change may have substantial impact on the tax situation of the concerned companies and further tailored tax planning would definitely be advisable.

Doing nothing will have consequences in that a 1929 Holding Company will lose its tax exempt status as of 1st January 2011 and become, a fully taxable company subject to:

(i) corporate income tax and municipal business tax at the current aggregate rate of 28.59% (expected to rise to 28.80% in 2011) and to

(ii) net worth tax at a rate of 0.5% levied on the net assets of the company as at 1st January of each year.

Instead of simply awaiting the automatic conversion, conversion would be done beforehand. This would permit the choice of the newly transformed company and avoid unexpected company or tax law surprises.

Depending on the existing structure, the investments and the needs of the shareholders, different choices can be made. The 1929 Holding Company can indeed simply be transformed into a Soparfi (and benefit from a "step-up" of its assets) or into a family wealth management company (the SPF, i.e. Société de gestion de patrimoine familial). While it does not seem necessary to present the already known "Soparfi", a word on the SPF could be useful in order to recall the basics: the SPF preserves many of the same tax exemption benefits as the 1929 Holding Company regime, although it is more clearly defined as only serving private investors and narrows to some extent the definition of passive investments.

Other solutions can consist in the transfer of the registered office of the 1929 Holding Company to another jurisdiction. Such transfer of registered office would also have some tax implications. In particular, such transfer is considered as a liquidation for Luxembourg tax purposes.Such a decision should therefore imply further analysis in particular from a tax perspective.

The liquidation of the 1929 Holding Company could also be a solution although a more "radical" one. The tax impact of such liquidation should be considered form the perspective of the shareholders of the 1929 Holding Company. At the level of the 1929 Holding Company itself, such liquidation should be tax neutral.

Another possibility that may be considered is the merger the 1929 Holding Company. Although this may seem at first glance a more burdensome solution, it often offers advantages that may be worth considering.

Luxembourg offers several legal and fiscal solutions to find a positive outcome to the end of the 1929 Holding Company regime. The needs of the investors, an international context, a maximum of flexibility and mitigating, any tax leakage maximum should be kept in mind in this respect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.