Equity financing - Taxation of contributions

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When a commercial company is formed or in the event of a capital increase, the shareholders or partners contribute funds or assets to the company in exchange for ownership rights (company shares, equities, bonds, etc.).

These contributions, like reinvested profits, then become part of the company's capital, constituting its equity capital.

As soon as they become part of the assets of the company, these funds or assets must then:

  • be valued in the case of contributions in kind (all tangible and intangible assets other than cash);
  • be subject to registration fees, where applicable;
  • be registered for VAT, in some cases.

Who is concerned?

In the case of a commercial company, the partners/shareholders contribute funds or assets to the company in exchange for company shares/equities.

As the company has a separate legal personality to that of the person/entity making the contribution, the assets or funds contributed therefore change hands. The contributions thus become the property of the company, which is then liable for any registration fees or VAT payable.

Furthermore, the company can deduct the cost for issuing equity shares (registration, lodging with the trade and companies register, etc.) from its taxable income as operating expenses.

In the case of a sole proprietorship, the trader transfers some of their own private assets or funds to their operating assets.

As the line between a trader and their business is not clear cut, these funds or assets do not change hands but simply allocation. These changes in allocation are not considered to be contributions and therefore have no tax implications for the trader or the business.

Advantages of equity financing

The more equity (own capital) the company has, the more third parties (banks, providers, etc.) are safe, because in the event of a liquidation:

  • third-party creditors have priority for repayment;
  • while it is not at all guaranteed that partners/shareholders will be able to retrieve their contributions.

The ratio between equity capital and external resources is therefore a key factor in obtaining a bank loan.

Disadvantages of equity financing

The partners/shareholders making contributions to the company bear more risk than its creditors. They may therefore:

  • either require a higher return (dividends) in return for their contributions;
  • or prefer to lend funds to the company (in the form of partners' current accounts) rather than investing directly in its capital in exchange for equities.

In the second scenario, the equity capital/loan capital ratio will make it difficult to raise funds with third-party investors.

Special case: contributions following a division

In the case of contributions resulting from the division of an existing business, the unrealised capital gains of the split-up company should be declared and taxed at the time of the contribution in accordance with the rules governing the transfer of businesses.

However, some provisions allow the immediate taxation of unrealised capital gains resulting from a division or a partial contribution of assets to be deferred.

How to proceed

Valuation of contributions in kind

Partners may make contributions:

  • in cash;
  • or in kind (tangible or intangible assets).

Contributions in kind are valued differently according to when they are made:

  • at the time of creation: the assets provided are valued at their going concern value as a maximum. However, the taxpayer has the option to value them at a lower figure;
  • during its lifetime: the assets must be valued at their going concern value, which will be the acquisition price of the asset and will be used, where applicable, as a basis for calculating future capital gains as well as the depreciation allowance.

Contributions in kind to a public limited company (société anonyme - SA) must be valued by an independent statutory auditor in a report attached as an appendix to the company's memorandum of association (excluding cooperative companies (sociétés coopératives) organised as public limited companies).

However, this report is not required if the following conditions are met:

  • the contribution represents 90 % of the equity value;
  • the company benefiting from the contribution renounces the report;
  • the legal entity or natural person making the contribution:
    • holds undistributable reserves of an amount at least equal to the value of the equities issued in exchange for the contribution;
    • acts as a guarantor for the debts of the beneficiary company for a year following the contribution, up to the amount of the contribution;
    • and keeps an amount equal to the contribution in reserve for 3 years.

Registration fees

Corporate deeds (deed of incorporation, changes to the articles of association, transfer of the registered office to Luxembourg, etc.) are subject to a fixed registration fee of EUR 75 payable to the Registration Duties, Estates and VAT Authority (Administration de l'enregistrement, des domaines et de la TVA).

If these deeds concern the contribution of a building or movable assets, given that the assets change hands to become the property of the company, the acquiring company is proportionally liable for the registration fees and subsequent transcription fees:

  • for the simple contribution of a building:
    • 0,5 % registration fee + 20 % of the amount of the contribution;
    • 0.5 % transcription fee;
  • for the contribution of a building in return for payment:
    • 5 % registration fee + 20 % of the amount of the contribution;
    • 1 % transcription fee;
  • for the simple contribution of movable assets: no proportional fee;
  • for the contribution of movable assets in return for payment: proportional fee depending on the type of assets contributed (in accordance with the rates of the law of 7 August 1920, as amended);

The transfers of the partners' shares are not subject to this proportional fee (except in the case of partnerships and economic interest groups (GIEs) that own buildings: in this case, the transfer is treated as a sale of immovable property).

If the amount of the proportional fee exceeds EUR 75, the company benefiting from the contribution pays only the proportional fee on the deed concerned and not the specific registration fee of EUR 75.

If the contribution of a building or movable assets follows a restructuring classed as a division or partial contribution of assets, no proportional registration fee is due.

The company benefiting from the contribution must pay the registration fees:

  • either upon the signature of the memorandum of association (or a change to the articles of association) before the notary (SARL, SA, SE, SECA), who then carries out the registration and files the articles of association with the trade and companies register (RCS);
  • or upon registering and filing the deed with the RCS if the intervention of a notary is optional (SENC, SECS, cooperative company, civil company).


Most contributions are VAT-exempt as:

  • the contribution of all of a taxpayer's assets is VAT-exempt;
  • the contribution of isolated assets by a non-taxpayer falls outside of the scope of VAT.

However, some contributions may be subject to VAT, for example in the case of the contribution of isolated assets by a taxpayer.


An SA subject to VAT contributes incorporeal rights (e.g. the right to receive royalties) without transferring all of its assets: this is therefore a contribution of isolated assets.

The contribution is made in exchange for equities/company shares.

Given that the transfer of incorporeal rights is considered to constitute the provision of a service and that it is carried out against payment by a taxpayer, the contribution is therefore subject to VAT.

Who to contact

Registration Duties, Estates and VAT Authority (AED)

Related procedures and links


Financing through loan capital - Interest deductibility Registration fees Value Added Tax (VAT)


Legal references

  • Loi modifiée du 4 décembre 1967

    concernant l'impôt sur le revenu

  • Loi modifiée du 7 août 1920

    portant majoration des droits d'enregistrement, de timbre, de succession, etc.

  • Loi du 19 décembre 2008

    - portant révision du régime applicable à certains actes de société en matière de droits d'enregistrement - portant transposition de la directive 2008/7/CE du Conseil du 12 février 2008 concernant les impôts indirects frappant les rassemblements de capitaux

  • Directive 2009/133/CE du Conseil du 19 octobre 2009

    concernant le régime fiscal commun applicable aux fusions, scissions, scissions partielles, apports d’actifs et échanges d’actions intéressant des sociétés d’États membres différents, ainsi qu’au transfert du siège statutaire d’une SE ou d’une SCE d’un État membre à un autre

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