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10 Essential insights about the Luxembourg holding company called SOPARFI

by | Sep 3, 2023 | Corporate Structuring

Luxembourg soparfi or holding and finance company

1. Introduction to SOPARFI

SOPARFI, short for Société de Participation Financière, is a widely used commercial entity in Luxembourg. Unlike a specific legal structure, SOPARFI is a broad term encompassing various legal forms, with private limited liability companies (S.à r.l.) and public limited liability companies (SA) being the most common. These entities are established under the Commercial Companies Law 1915 (as amended), which sets forth specific requirements, including minimum share capital – €12,000 for S.à r.l. and €31,000 for SA. Here are the 10 key aspects of Luxembourg SOPARFI about its formation and operations.

SOPARFI entities primarily take the form of S.à r.l. or SA. S.à r.l. structures are suited for smaller operations with a maximum of 40 shareholders, while SA structures, with a minimum of three board members, are better suited for larger ventures. Understanding these legal distinctions is crucial when considering SOPARFI for your business endeavors.

3. Incorporation of a SOPARFI: Step by Step

Incorporating a SOPARFI in Luxembourg involves a distinct process, overseen by a public notary. Regardless of the chosen legal form, the steps remain similar and encompass the following key elements:

4. Drafting Articles of Incorporation

Before establishing a SOPARFI, the founder(s) must prepare the Articles of Incorporation, which include essential details such as the founder’s name, registered address, share capital, types of shares, manager identification, financial year-end, and auditor information if necessary.

5. Opening a Bank Account

Next, initiate the process of opening a bank account for the SOPARFI. This step involves submitting Client Due Diligence documents for immediate owning and controlling parties, ultimate beneficial owners, draft articles of incorporation, and completed bank account opening forms, along with transferring the share capital to the bank account.

6. Obtaining a Blocking Certificate

Once the capital is transferred, the bank issues a blocking certificate. This certificate confirms to the public notary that the share capital is securely held, awaiting incorporation but not available for use at this stage.

7. Incorporation by the Public Notary

An appointment is scheduled with the public notary, who reviews the provided documents, including the blocking certificate, signed declarations of ultimate beneficial owners, powers of attorney (often given to a corporate administrator), and the draft articles of incorporation. Once satisfied, the public notary executes the articles of incorporation, officially incorporating the SOPARFI, enabling it to engage in transactions.

8. De-blocking the Bank Account

Following incorporation, the public notary issues a de-blocking certificate, which is provided to the bank. The bank then confirms the SOPARFI’s bank account is fully operational, granting access to the funds for the company’s use.

9. Registration with the Luxembourg Trade and Companies Register

The final step involves the public notary registering the articles of incorporation with the Luxembourg Trade and Companies Register, making the SOPARFI‘s existence publicly known and legally recognized.

10. Timeline for SOPARFI Incorporation

It is crucial to initiate the SOPARFI incorporation process early and work closely with a domiciliation agent. Under optimal conditions and with all necessary Client Due Diligence documents in order, SOPARFI incorporation can be completed within two to three business days. However, when complex provisions in the articles of association are required, it is advisable to allocate additional time for the formalities.

In conclusion, SOPARFI entities in Luxembourg offer versatile options for business operations, with different legal forms catering to various needs. Understanding the incorporation process and timeline is essential for anyone considering the establishment of a SOPARFI. By adhering to the necessary steps and requirements, entrepreneurs and businesses can leverage the benefits of SOPARFI structures to facilitate their financial activities in Luxembourg.

To register your Luxembourg holding company, then, please contact your Damalion expert now. 

Luxembourg SOPARFI holding company

10 essential insights about the Luxembourg holding company called SOPARFI

For international investors, entrepreneurs, family offices, private groups and corporate structures • Damalion helps you prepare, structure and coordinate with notaries, banks and other professionals. Decisions on incorporation, licensing and tax treatment always remain with the competent authorities and counterparties.

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What is a Luxembourg SOPARFI in practice?

A SOPARFI (société de participations financières) is a fully taxable Luxembourg company used as a holding and financing vehicle. It is not a separate legal form but a practical name for common company types (mainly S.à r.l. and S.A.) whose main purpose is to hold shares, manage participations and, in many cases, provide intra-group financing. In return, Luxembourg law offers a clear corporate framework, access to an extensive tax treaty network and participation exemption rules for qualifying dividends, capital gains and net wealth tax.

Core legal features and insight highlights

  • 1 – Legal basis. A SOPARFI is incorporated under the Luxembourg Commercial Companies Law of 10 August 1915, as amended, and is treated as a standard commercial company.
  • 2 – Legal forms. The most common forms are the private limited liability company (société à responsabilité limitée, S.à r.l.) and the public limited company (société anonyme, S.A.); in some cases, a partnership limited by shares (S.C.A.) is used.
  • 3 – Minimum capital. For an S.à r.l. the minimum subscribed share capital is EUR 12,000; for an S.A. it is EUR 30,000 or the higher statutory amount applicable at the time of incorporation.
  • 4 – Corporate purpose. The articles of association usually allow holding of shares, acquisition and disposal of investments, granting of loans and other financing to group entities, and any activities that are accessory and directly linked.
  • 5 – Shareholders and governance. An S.à r.l. may have one to 100 shareholders and is usually managed by one or more managers; an S.A. has shareholders and a board of directors or a two-tier governance system.
  • 6 – Tax residency. A SOPARFI is considered Luxembourg tax resident when its registered office or place of effective management is in Luxembourg and is then subject to corporate income tax, municipal business tax and net wealth tax.
  • 7 – Participation exemption. Dividends and capital gains derived from qualifying shareholdings may be exempt from corporate income tax and municipal business tax if shareholding, holding period and subject-to-tax conditions are met.
  • Net wealth tax relief. Qualifying shareholdings can also benefit from an exemption from net wealth tax, subject to conditions similar to the participation exemption.
  • 9 – Use in cross-border planning. SOPARFIs are often used as regional or global holding platforms to centralise participations and financing and to access double tax treaties and EU directives, always within the limits of anti-abuse rules.
  • 10 – Substance and compliance. Banks, tax authorities and counterparties increasingly expect real decision-making, adequate equity, local directors and robust documentation to support the use of a SOPARFI in 2025 and beyond.

Most common legal forms for a SOPARFI

Topic SOPARFI in S.à r.l. form SOPARFI in S.A. form
Typical use Private groups, family holdings, single-asset structures, small and medium-sized investments. Larger groups, structures with a wider shareholder base, capital markets or institutional investors.
Shareholders 1–100 quota-holders; transfers of quotas often subject to restrictions. Shareholders hold freely transferable shares, subject to any contractual or statutory limits.
Minimum share capital At least EUR 12,000, fully subscribed and generally fully paid up. At least EUR 30,000 (or the prevailing statutory minimum), with at least 25% paid up on subscription.
Management One or more managers (gérant(s)), individuals or legal entities, resident or non-resident. Board of directors or management board and supervisory board, depending on the chosen model.
Corporate law formalities More flexible for private ownership; written resolutions commonly used. Stricter governance and publication rules; shareholders’ meetings generally held annually.
Market perception Widely used for private and family holdings; common for mid-market private equity structures. Often chosen where external investors, listing options or institutional counterparties are considered.

From planning to incorporated SOPARFI: main steps

  1. Define the role of the SOPARFI. Clarify which participations the company will hold, which financing it will provide and where its directors and key decision-makers will be located.
  2. Choose legal form and shareholding. Decide between S.à r.l., S.A. (or S.C.A.), set the share capital, currency, classes of shares and shareholder rights.
  3. Draft the articles of association. Prepare a clear corporate object, governance rules, transfer restrictions, profit distribution rules and any specific rights required by investors or lenders.
  4. Open a bank account and pay in capital. Work with a Luxembourg bank to open an account in the name of the future company and transfer the subscribed capital, subject to know-your-customer and anti-money-laundering checks.
  5. Obtain the blocking certificate. The bank issues a certificate confirming that the paid-in capital is blocked until the notary records the incorporation.
  6. Notarial incorporation. The Luxembourg notary reviews identity documents, corporate documents, powers of attorney and the blocking certificate, then signs the incorporation deed and the articles of association.
  7. Register the company. The notary arranges filing and publication with the Luxembourg Trade and Companies Register (RCS) and in the electronic official gazette where required.
  8. Release of capital and operational bank account. On the basis of the notary’s confirmation, the bank unblocks the capital and the SOPARFI can use the account for its operations.
  9. Tax and regulatory registrations. Where required, the SOPARFI registers with the tax authorities, the VAT administration and other competent bodies, and it sets up accounting and reporting procedures.
  10. Ongoing governance and substance. Board or manager meetings are held in Luxembourg, key decisions are documented, financial statements are prepared and annual tax and net wealth tax returns are filed in due time.

Costs, taxes and timeline (overview)

  • Incorporation costs. Notary fees, publication fees, legal and advisory fees and bank account opening costs depend on complexity, capital amount and language requirements.
  • Corporate taxation. A fully taxable SOPARFI resident in Luxembourg City is in principle subject to a combined corporate income tax and municipal business tax rate of around 23.87% on its taxable profits as from tax year 2025, before exemptions and reliefs.
  • Net wealth tax. Annual net wealth tax applies on the company’s unitary value, with a progressive minimum net wealth tax in 2025 that depends on the size of the balance sheet; qualifying participations may benefit from an exemption.
  • Professional fees. Ongoing costs include domiciliation, director fees, accounting, audit (where required), tax compliance and possible transfer pricing and legal support.
  • Typical timing. When all information and due diligence documents are complete, incorporation can often be achieved in a matter of days; more complex governance or financing structures usually require additional time.

Frequently asked questions about the Luxembourg SOPARFI

1. What is a SOPARFI under Luxembourg law?
A SOPARFI is a common name for a Luxembourg company whose main activity is to hold and manage participations and, where appropriate, provide related financing. It is a fully taxable commercial company incorporated under the Luxembourg Commercial Companies Law, not a separate legal form.
2. Which legal forms can a SOPARFI take?
In practice, a SOPARFI is usually set up as a private limited liability company (S.à r.l.) or a public limited company (S.A.). In some cases, a partnership limited by shares (S.C.A.) is used. All of these are opaque entities for Luxembourg tax purposes.
3. What is the minimum share capital for a SOPARFI?
For a SOPARFI in S.à r.l. form, the minimum subscribed share capital is normally EUR 12,000. For a SOPARFI in S.A. form, the minimum subscribed capital is normally EUR 30,000 (or the higher statutory amount in force). At least 25% of the capital of an S.A. must be paid up on incorporation.
4. Is a SOPARFI a regulated financial institution?
No. A SOPARFI is generally an unregulated company from a financial supervisory perspective. It is, however, subject to general company law, tax law, accounting rules, anti-money-laundering and beneficial ownership regulations, and to any sector-specific rules that apply to its concrete activities.
5. What activities may a SOPARFI carry out?
The core activity is the holding and management of shares and other participations. Many SOPARFIs also grant loans and other financing to group companies, provide guarantees or act as a central treasury. Any additional activities must remain compatible with the corporate object and may require analysis of licensing, VAT and regulatory aspects.
6. How is a SOPARFI taxed in Luxembourg as at 2025?
A SOPARFI that is tax resident in Luxembourg is subject to corporate income tax, municipal business tax and, in some cases, a solidarity surcharge. For a company located in Luxembourg City, the combined corporate income tax and municipal business tax rate is around 23.87% as from tax year 2025, before applying exemptions, deductions and reliefs.
7. How does the participation exemption for dividends work?
Dividends and liquidation proceeds received by a SOPARFI from a qualifying subsidiary may be exempt from corporate income tax and municipal business tax if, broadly speaking, the SOPARFI holds at least 10% of the subsidiary’s share capital or an acquisition cost of at least EUR 1.2 million, maintains this qualifying holding for at least 12 months (or commits to do so) and the subsidiary is fully taxable or subject to a tax comparable to Luxembourg corporate income tax.
8. How does the participation exemption for capital gains work?
Capital gains on the disposal of qualifying participations may be exempt from corporate income tax and municipal business tax if the subsidiary meets the same quality tests as for the dividend exemption, the SOPARFI holds at least 10% of the share capital or an acquisition cost of at least EUR 6 million, and the participation is held for at least 12 months without interruption.
9. When is withholding tax due on dividends paid by a SOPARFI?
Dividends distributed by a SOPARFI are in principle subject to Luxembourg dividend withholding tax at a rate of 15%. Exemptions or reduced rates may apply under the Luxembourg participation exemption rules, the EU Parent-Subsidiary Directive or applicable double tax treaties, provided that the relevant ownership, holding period and subject-to-tax conditions, as well as anti-abuse requirements, are satisfied.
10. Is withholding tax due on interest and royalty payments?
As a general rule, interest and royalty payments made by a SOPARFI are not subject to Luxembourg withholding tax. Exceptions exist, for example, for interest on certain profit-participating instruments or where the terms are not at arm’s length. In all cases, domestic law, tax treaties and anti-abuse provisions must be reviewed.
11. How does net wealth tax apply to a SOPARFI in 2025?
A Luxembourg-resident SOPARFI is subject to annual net wealth tax on its unitary value, with specific rules for the valuation of assets and liabilities. Qualifying shareholdings may benefit from a participation exemption from net wealth tax. As of 2025, a progressive minimum net wealth tax applies, with brackets that depend on the size of the company’s balance sheet, regardless of the share of financial assets.
12. Are there substance requirements for a SOPARFI?
Luxembourg law does not prescribe a fixed list of substance criteria for all SOPARFIs. However, for tax treaty access, EU directive benefits and transfer pricing purposes, it is generally expected that the company has Luxembourg resident directors, real decision-making in Luxembourg, appropriate office or domiciliation arrangements, adequate equity and proper documentation supporting its activities.
13. How do interest limitation rules affect a leveraged SOPARFI?
Interest limitation rules may restrict the deduction of exceeding borrowing costs to the higher of 30% of tax EBITDA or a fixed monetary threshold (for example, EUR 3 million), subject to available exemptions and group-wide rules. These provisions implement EU anti-avoidance standards and must be analysed for each financing structure.
14. What anti-abuse rules apply to the participation exemption?
Luxembourg has implemented general and specific anti-abuse rules. Participation exemption benefits may be denied where profit distributions are deductible at the level of the payer or where arrangements are considered non-genuine and put in place mainly to obtain a tax advantage that defeats the purpose of the exemption regime.
15. Can a Luxembourg company waive the participation exemption as from 2025?
Recent legislative changes allow Luxembourg taxpayers, under defined conditions, to waive the application of participation exemption regimes and certain partial exemptions on dividend income and capital gains from qualifying shareholdings. The choice must be assessed carefully, as it can influence loss utilisation, foreign tax credits and future exit strategies.
16. Does a SOPARFI need to register for VAT?
A pure holding SOPARFI, which only acquires and holds participations and receives dividends, is generally not considered a taxable person for VAT purposes and does not need to register. If it also supplies services for consideration, such as management or financing services, a separate VAT analysis is required to determine registration duties and the right to deduct input VAT.
17. How are management and director fees treated for tax purposes?
Remuneration paid to directors and managers is usually treated as a tax-deductible expense for the SOPARFI, provided that it is at arm’s length and incurred wholly and exclusively for the company’s business. At the level of the individual directors, Luxembourg personal income tax rules apply; cross-border situations require treaty analysis.
18. How is a SOPARFI used in private equity and family holding structures?
Private equity sponsors, family offices and entrepreneurs often use SOPARFIs as intermediate holding vehicles to pool investments, ring-fence risks and centralise financing. The structure is usually combined with fund, co-investment or carried interest vehicles and must respect substance, transfer pricing and anti-abuse rules in all relevant jurisdictions.
19. Which reporting and filing duties apply each year?
A SOPARFI must keep proper accounting records, prepare annual financial statements in accordance with Luxembourg law, file annual corporate income tax and municipal business tax returns, file net wealth tax returns, and, where applicable, comply with VAT, DAC6, beneficial ownership register and other regulatory filing requirements.
20. When should the SOPARFI structure be reviewed?
The structure should be reviewed in particular when there are changes in ownership, financing, business model or exit plans, and when Luxembourg or foreign tax law is amended. Given the evolution of EU anti-avoidance rules and international tax standards, regular reviews with qualified advisers are recommended to confirm that the SOPARFI remains compliant and aligned with the intended objectives.

Banks in Luxembourg

  1. Banque et Caisse d’Épargne de l’État (Spuerkeess)
  2. BGL BNP Paribas
  3. Banque Internationale à Luxembourg (BIL)
  4. Banque de Luxembourg
  5. Banque Raiffeisen
  6. ING Luxembourg
  7. Société Générale Luxembourg
  8. Intesa Sanpaolo Bank Luxembourg S.A.
  9. Deutsche Bank Luxembourg S.A.
  10. HSBC Luxembourg

Asset management institutions in Luxembourg

  1. FundRock Management Company S.A.
  2. BLI – Banque de Luxembourg Investments S.A.
  3. Amundi Luxembourg S.A.
  4. BlackRock (Luxembourg)
  5. UBS Asset Management (Luxembourg)
  6. J.P. Morgan Asset Management (Europe) S.à r.l.
  7. Schroder Investment Management (Europe) S.A.
  8. Allianz Global Investors (Luxembourg)
  9. Pictet Asset Management (Europe) S.A.
  10. Swiss Life Asset Managers Luxembourg

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