SOPARFI (SOciété de PARticipations Financières) is a financial holding company in Luxembourg. As a holding company, it offers, under specific conditions, the opportunity to mitigate or exclude corporate tax in Luxembourg.
Luxembourg is the largest investment funds center in Europe and the second largest in the world. And as such it offers a myriad and large range of financial services connecting investors and markets around the world. Being a location of choice for leading private equity houses, Luxembourg offers a wide variety of investment vehicles, one of which is the SOPARFI.
Features of the SOPARFI
| Practical use | SOPARFI is a vehicle used for the management and holding of financial participations in other resident and non-resident companies. |
| Applicable legislation | SOPARFIs are subject to the legal provisions of the Law of 10 August 1915 on commercial companies, as amended. |
| Eligible investors | Unrestricted to any undertaking or private person |
| Eligible assets | The SOPARFI may invest in any type of assets in Luxembourg or overseas |
| Risk diversification requirements | The SOPARFI is not subject to any risk-spreading requirements. |
| Legal Form | Depending on the needs of the investor, the SOPARFI can take one of the following forms: public limited company (S.A./société anonyme),limited liability company (S.à r.l./société à responsabilité limitée), partnership limited by shares (S.C.A./société en commandite par actions),cooperative company (S.C./société cooperative), orEuropean company(société européenne) |
| Capital requirements | The capital of SOPARFI in Luxembourg depends on the chosen legal entity, e.g, for SARL, the capital requirement is min. EUR12,500, while for the SA / SCA, is a min. of EUR 31,000. |
| SOPARFIs taxation | In Luxembourg, corporate entities are not subject to subscription tax but are subject to corporate income tax at the rate of 24.94%, and the Wealth Tax at a rate of 0.5%. Also, dividends distributed by a Luxembourg company are subject to withholding tax at a rate of 15% (unless a local law exemption or a lower tax treaty rate applies) |
| Benefit from double tax treaty network and EU Parent Subsidiary Directives | Yes. SOPARFIs benefit from access to Luxembourg’s extensive double tax treaty network and EU Directives |
| Authorisation and supervision by the CSSF | SOPARFIs are not subject to any supervisory authority. And no authorisation required unless quoted and/or commercial activities are carried out. |
| Possibility of listing | Yes. SOPARFI’s shares can be listed in Luxembourg Stock Exchange or abroad |
| European passport | No, unless it falls under the scope of the full AIFMD regime. |
| Thin capitalization rules (debt-to-equity ratio) | There is no provision in Luxembourg law. But according to the general tax practice holding companies have to respect a debt or/and equity ratio of 85/15 for all shareholder liabilities incurred by the company. |
| Required Luxembourg service providers | External auditor must be appointed if specific thresholds are surpassed (pertaining to total balance sheet, turnover and number of employees) |
SOPARFIs are unregulated and fully taxable ordinary commercial companies whose corporate objective consists of holding and similar financing activities.
SOPARFIs benefit from corporate tax exemptions on dividends and net wealth on qualifying participations. Further, SOPARFI is a suitable vehicle to receive or grant finance, raise capital for investment, invest in Intellectual Property, and Co-investment with other institutional or Family Offices.
Although the Grand Duchy is one of the smallest countries in the world, it was one of the first six members of the European Union and has a developed economy that draws on innovative banking and legal sectors.
To invest, open a company or set up your investment fund in Luxembourg, let’s go ahead and contact your Damalion expert now.
