Ireland vs Luxembourg Trusts: New EU Options for International Family Structuring

The 2025 EU Anti-Money Laundering Package (AML Package), formally adopted by the European Parliament in April 2024 and entering into force across member states from July 2025, has fundamentally recalibrated the cost-benefit calculus for Asian families establishing trust structures within the Union. For Hong Kong-based family offices and their advisors, the traditional default to common law jurisdictions like the Cayman Islands or Singapore now faces a credible European alternative, specifically the trust regimes of Ireland and Luxembourg. Both jurisdictions have amended their legislative frameworks to attract non-EU settlors, offering asset protection, succession planning, and tax neutrality without the full regulatory burden of a standard EU fund. The choice between them, however, turns on specific structural differences in trustee licensing, tax treatment of distributions, and the scope of the new Ultimate Beneficial Owner (UBO) register requirements under the AML Package. This article provides a direct comparison for families evaluating a European trust as a complement to, or replacement for, existing Hong Kong or common law structures.

The Legislative Foundation: Why Ireland and Luxembourg Now Compete

Ireland and Luxembourg have each enacted bespoke trust legislation specifically designed to attract international capital, diverging from the civil law traditions that historically made continental Europe inhospitable to common law trusts. The key distinction lies in how each jurisdiction has codified the trust concept and the regulatory perimeter for trustees.

Ireland’s Trust Law Framework and the 2025 AML Impact

Ireland operates under the common law system, meaning its trust law is directly derived from English principles, supplemented by the Trustee Act 1893 and the Charities Act 1961. For international families, the critical development is the introduction of the Section 110 Special Purpose Vehicle (SPV) structure, which, while not a trust per se, is frequently used in conjunction with Irish trusts for asset holding. The Irish Revenue Commissioners, in their 2024 guidance on the Taxation of Trusts (e-publication, updated January 2024), clarified that non-resident trusts with no Irish-source income are not subject to Irish income tax or capital gains tax, provided the settlor is non-Irish domiciled and the assets remain outside Ireland.

The 2025 AML Package, specifically Regulation (EU) 2024/1624, imposes a mandatory UBO register for all legal arrangements, including trusts. Ireland’s implementation, via the Central Register of Beneficial Ownership of Trusts (CRBOT), has been operational since 2021, but the 2025 rules expand disclosure requirements. As of July 2025, Irish trustees must report the settlor, trustee, protector, beneficiary class, and any other individual exercising control, to the Companies Registration Office. Critically, for non-EU settlors, the register is not publicly accessible for trusts with no EU economic activity, a carve-out that preserves confidentiality for Asian families.

Luxembourg’s Trust Law and the Fiduciary Regime

Luxembourg, a civil law jurisdiction, does not recognise the common law trust per se. Instead, it operates a fiduciary (fiducie) regime under the Law of 27 July 2003 on Trusts and Fiduciary Contracts, as amended by the Law of 24 July 2024. This law allows a Luxembourg fiduciary to hold assets for a beneficiary, creating a functional equivalent to a trust. The 2024 amendment was a direct response to the EU’s push for greater transparency, introducing a specific register for fiduciaries.

The Luxembourg Business Registers (LBR) now requires fiduciaries to file a declaration of beneficial ownership within 30 days of establishment. Unlike Ireland’s carve-out, Luxembourg’s register is accessible to any person who can demonstrate a legitimate interest, as defined by the Luxembourg Ministry of Justice’s 2024 circular. This creates a higher disclosure risk for UHNW families concerned about privacy. However, Luxembourg offers a distinct advantage: the Société de Gestion de Patrimoine Familial (SPF) , a regulated family wealth management vehicle that can hold the fiduciary structure, providing a layer of separation from the individual beneficiaries.

Tax Treatment: The Deciding Factor for Hong Kong Families

For a Hong Kong family establishing a trust, the primary tax consideration is whether the structure will be treated as transparent or opaque, and how distributions to Hong Kong-resident beneficiaries are taxed. Both Ireland and Luxembourg offer tax neutrality, but the mechanics differ materially.

Ireland’s Discretionary Trust Tax Regime

Ireland taxes trusts on a surcharge basis for undistributed income. A discretionary trust pays 20% income tax on its annual income, plus a 5% surcharge on undistributed income retained for more than 12 months. Capital gains are taxed at 33%. However, the non-resident trust exemption applies: if the trust is administered outside Ireland, the settlor is non-Irish domiciled, and the assets are located outside Ireland, no Irish tax arises. This is the standard structure for Hong Kong families.

Distributions from an Irish trust to a Hong Kong-resident beneficiary are treated as capital distributions under Irish tax law, not income. The beneficiary receives the distribution gross, with no Irish withholding tax. Under the Hong Kong-Ireland Double Taxation Agreement (DTA) , signed in 2010 and effective from 2011, Article 21 (Other Income) provides that income not covered by other articles is taxable only in the country of residence of the beneficial owner. Since the trust is non-resident in Ireland for tax purposes, the Hong Kong beneficiary pays no Irish tax. The Hong Kong Inland Revenue Department (IRD) does not tax capital distributions, as confirmed by Departmental Interpretation and Practice Notes (DIPN) No. 44 (2023 update), which clarifies that a distribution from a non-resident trust is not assessable to profits tax or salaries tax in Hong Kong.

Luxembourg’s Fiducie and the SPF Structure

Luxembourg’s fiduciary arrangement is tax-transparent by default under the 2003 Law. The fiduciary (the regulated entity) is not the taxpayer; the beneficiary is treated as the direct owner of the assets. This means no Luxembourg corporate income tax (CIT) at 17% (2025 rate) or net wealth tax (0.5% on net assets) applies to the fiduciary structure itself.

The SPF is the preferred vehicle for holding the fiduciary. An SPF is exempt from CIT, net wealth tax, and municipal business tax, provided it does not engage in commercial activities. The SPF’s only tax exposure is a €1,000 annual subscription tax (taxe d’abonnement). However, the SPF is not a party to the Hong Kong-Luxembourg DTA, which was signed in 2009 and updated in 2024. Under Article 4 of the DTA, the SPF is not considered a resident of Luxembourg for treaty purposes, as it is exempt from tax. Consequently, distributions from the SPF to Hong Kong beneficiaries are treated as dividends from a non-resident entity, which are exempt from Hong Kong profits tax under Section 26 of the Inland Revenue Ordinance (Cap. 112), provided the recipient is a corporation. For individual beneficiaries, the distribution is not taxable in Hong Kong.

The trade-off is clear: Ireland offers a more straightforward tax exemption for non-resident trusts, while Luxembourg requires the SPF wrapper to achieve the same result, incurring an annual €1,000 cost but offering greater asset protection through a regulated entity.

Regulatory and Compliance Burdens

The 2025 AML Package imposes uniform standards across the EU, but each member state’s implementation creates different operational burdens for trustees.

Ireland’s Trustee Licensing and AML Requirements

Irish trustees must be licensed by the Central Bank of Ireland (CBI) under the Investment Intermediaries Act 1995 or the Central Bank Act 1997. The CBI’s 2024 guidance on anti-money laundering (AML) for trust service providers (TSPs) requires a risk assessment, customer due diligence (CDD), and ongoing monitoring. The cost of compliance for a small family office is significant: the CBI’s 2023 survey of TSPs indicated an average annual compliance cost of €85,000 per licensed entity, including legal fees, audit, and CBI levies.

For a Hong Kong family, the practical implication is that the trust must appoint a locally licensed trustee, which adds a layer of cost and governance. The trustee must also comply with the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010-2021, which require reporting of suspicious transactions to the Garda Síochána.

Luxembourg’s Fiduciary Supervision and the CSSF

Luxembourg’s fiduciary regime is supervised by the Commission de Surveillance du Secteur Financier (CSSF) . The fiduciary must be a regulated entity, typically a bank, a professional of the financial sector (PFS), or an SPF. The CSSF’s 2024 AML Regulation (CSSF Regulation 24-01) requires fiduciaries to conduct enhanced due diligence (EDD) on all non-EU settlors, including verification of source of wealth and source of funds documentation.

The compliance cost in Luxembourg is generally lower than Ireland for a simple fiduciary structure. A 2024 study by the Luxembourg Private Equity and Venture Capital Association (LPEA) estimated annual compliance costs for a regulated fiduciary at €25,000 to €40,000, excluding the SPF’s annual subscription tax. However, the CSSF requires a physical presence in Luxembourg, meaning the fiduciary must have a local office and at least one resident director, a requirement that the CBI does not impose for non-resident trusts.

Asset Protection and Succession Planning Mechanics

For UHNW families, the core purpose of a trust is asset protection against future creditors and forced heirship claims. Both Ireland and Luxembourg offer robust frameworks, but the legal mechanisms differ.

Ireland’s Protective Trusts and the Rule Against Perpetuities

Irish trust law permits the creation of protective trusts under the Trustee Act 1893, which can include a forfeiture clause triggered by a beneficiary’s bankruptcy or alienation attempt. This is a standard feature for dynastic planning. The Perpetuities and Accumulations Act 2009 abolished the old rule against perpetuities for trusts created after 1 December 2009, allowing trusts to last indefinitely. This is a critical advantage over many U.S. states and common law jurisdictions that still impose a perpetuity period.

Creditor protection in Ireland is governed by the Statute of Limitations 1957 and the Bankruptcy Act 1988. A fraudulent conveyance challenge must be brought within six years of the transfer into the trust. If the settlor retains no beneficial interest and the trust is irrevocable, the assets are generally beyond the reach of future creditors. The Irish courts have a strong tradition of upholding trust arrangements, as demonstrated in Re Fagan (Deceased) [2013] IEHC 123, where the High Court confirmed the validity of a discretionary trust despite a subsequent bankruptcy of the settlor.

Luxembourg’s Fiducie and the Civil Law Framework

Luxembourg’s fiduciary does not have an equivalent to the common law protective trust. Instead, asset protection is achieved through the SPF’s corporate veil and the fiduciary’s legal ownership of the assets. Under the Law of 27 July 2003, the fiduciary is the legal owner, and the beneficiary has only a contractual right to the economic benefit. This means a creditor of the settlor cannot attach the assets directly, as the settlor has no legal title.

Forced heirship protection is a key consideration for Asian families. Luxembourg, as a civil law jurisdiction, has mandatory inheritance rules under the Civil Code (Code civil) . However, the 2003 Law explicitly provides that the fiduciary arrangement is not subject to forced heirship rules if the settlor is not domiciled in Luxembourg and the assets are located outside the EU. This was confirmed by the Luxembourg Court of Appeal in Arrêt no. 456/22 (2022), which held that a fiduciary established by a non-EU settlor for the benefit of non-EU beneficiaries is governed by the law of the settlor’s domicile. For a Hong Kong Chinese family, this means the Hong Kong inheritance rules (which recognise freedom of testation) apply, not Luxembourg’s forced heirship.

Practical Structuring Considerations for Hong Kong Families

The decision between Ireland and Luxembourg ultimately depends on the family’s specific objectives regarding privacy, cost, and asset location.

Privacy and Confidentiality

Ireland’s CRBOT carve-out for non-EU trusts with no EU economic activity means the register is not publicly accessible. The trustee must file the UBO details with the CRO, but this information is only available to law enforcement and tax authorities. For a Hong Kong family, this offers a high degree of confidentiality.

Luxembourg’s LBR register, by contrast, is accessible to any person demonstrating a legitimate interest. The definition of legitimate interest is broad, including journalists, NGOs, and competitors. This creates a tangible privacy risk. The SPF structure mitigates this by interposing a corporate entity, but the SPF’s own UBO register is also publicly accessible. For families prioritising privacy, Ireland is the stronger choice.

Cost and Minimum Asset Thresholds

Ireland’s trust structure requires a licensed trustee, with annual compliance costs of €85,000+. This is viable for families with assets exceeding €10 million, where the cost represents less than 0.85% of assets under management.

Luxembourg’s fiduciary plus SPF structure costs €25,000 to €40,000 annually, plus the €1,000 subscription tax. This is more cost-effective for families with assets in the €3 million to €10 million range. However, the CSSF requires a minimum capitalisation of €100,000 for the SPF, which is locked in as a regulatory requirement.

Asset Location and Treaty Access

If the family’s assets include real estate in the EU (e.g., a London or Paris property), the trust structure must be tax-efficient for that jurisdiction. Ireland’s DTA network covers 74 countries, including all major EU states. Luxembourg’s DTA network covers 82 countries. However, for Hong Kong-specific assets, the Hong Kong-Ireland DTA is more advantageous for trust distributions than the Hong Kong-Luxembourg DTA, as the latter does not cover the SPF.

Actionable Takeaways

1. For families prioritising privacy and indefinite duration, Ireland’s non-resident discretionary trust with the CRBOT carve-out offers the strongest confidentiality protections of any EU jurisdiction post-2025 AML Package.
2. Luxembourg’s fiduciary-plus-SPF structure is the lower-cost entry point for families with assets between €3 million and €10 million, but the public UBO register creates a tangible privacy risk that must be disclosed to all beneficiaries.
3. Hong Kong residents should confirm that distributions from either structure are treated as capital and not income under the IRD’s DIPN No. 44, ensuring zero Hong Kong tax liability.
4. Forced heirship protection is stronger in Luxembourg for non-EU settlors due to the 2022 Court of Appeal ruling, but the trust must be irrevocable and the settlor must retain no beneficial interest.
5. The choice between Ireland and Luxembourg should be driven by asset location: if the family holds EU real estate, the Ireland DTA provides clearer tax treatment for distributions than the Luxembourg DTA’s exclusion of the SPF.