Transfer of Shares in Luxembourg: Procedure and Taxation

Approval procedure for SARLs

In an SARL, the transfer of shares to a non-shareholder third party requires the approval of shareholders representing at least 75% of the share capital (the articles of association may provide for a different majority). Transfer between shareholders, spouses, ascendants and descendants is free unless otherwise provided in the articles. The procedure includes: notification of the proposed transfer to the company and to the shareholders, holding a general meeting to rule on the approval, and in the event of refusal, the obligation for the shareholders to present an alternative buyer or buy back the shares within 3 months.

Formalities and taxation

• Notarial deed required for the transfer of SARL shares (formality ad validitatem)
• Publication of the transfer in RESA and amendment at the RCS
• Taxable capital gain on transfer: difference between sale price and acquisition price (or nominal value)
• Possible exemption of the capital gain for individuals if participation is below 10% and holding period over 6 months
• Proportional registration duties of 0% to 0.5% depending on the nature of the underlying assets

Valuation and sale price

The determination of the sale price is free between the parties, but the tax administration may challenge a clearly undervalued price. Common valuation methods include: the revalued net asset value (patrimonial value), the DCF method (discounted cash flows) for operating companies, and market multiples (EBITDA, turnover). For holding companies, the intrinsic value of the participations is decisive. It is recommended to have an independent valuation carried out to secure the transaction from a tax perspective and protect the parties.