The Current State of the French Economy
As of late 2024, the French economy is facing increasing fiscal pressures. The nation’s public debt has been rising, prompting the government to take significant steps to reduce it. Prime Minister Michel Barnier‘s administration has introduced a budget aimed at addressing France‘s growing deficit, which could reach 6% of GDP in 2024, surpassing earlier projections of 5.1%. To bring the budget deficit back in line with EU fiscal rules by 2029, the French government is planning €60.6 billion in savings, including €19.4 billion in tax increases and €41.3 billion in spending cuts. These measures are part of a broader fiscal consolidation plan designed to improve the state of public finances.
Fiscal Pressure on French Entrepreneurs
French entrepreneurs, especially those running successful businesses, are feeling the weight of this fiscal tightening. The Barnier administration has introduced an exceptional tax on the profits of large corporations, expected to generate around €8.5 billion. Additionally, the wealthiest 0.3% of households will also face increased tax burdens as part of the government’s efforts to boost revenue.
The combination of these fiscal measures, coupled with rising borrowing costs and subdued economic growth (forecasted at 0.5% for 2024), has made the domestic business environment more challenging. For entrepreneurs looking to expand their operations or protect their wealth, moving their holding structures to Luxembourg presents a compelling alternative.
Why Luxembourg to register your Luxembourg holding company
Luxembourg remains a top destination for French entrepreneurs seeking more favorable fiscal conditions. Its tax regime, political stability, and advantageous EU membership make it an attractive hub for holding companies. The Grand Duchy offers several advantages:
- Corporate Tax Rate: Luxembourg’s corporate tax rate is significantly lower than France’s. The effective corporate tax rate in Luxembourg is around 24.94%, while in France, it stands at 25.83% for companies with revenues exceeding €250 million.
- Dividends and Capital Gains: Luxembourg provides favorable conditions for the taxation of dividends and capital gains. Dividends received by a Luxembourg holding company from a qualifying subsidiary can be 100% tax-exempt, provided certain conditions are met. In contrast, French companies face higher taxes on capital gains and dividends, especially with the upcoming tax hikes.
- Favorable Regulatory Environment: Luxembourg has a flexible regulatory framework that encourages foreign investments. France is known for its sophisticated financial sector and ease of doing business, ranking consistently high in global competitiveness reports.
Steps to Set Up a Luxembourg Holding Company
- Choose the Legal Form Luxembourg offers various legal forms for holding companies, but the most common for entrepreneurs is the SOPARFI standing for “Société de Participations Finanicères”. SOPARFI can have different types of legal forms. Among the most common legal formas are the Société à Responsabilité Limitée (SARL), equivalent to a private limited liability company. For larger ventures, Société Anonyme (SA) might be more suitable.
- Capital Requirements For an SARL, the minimum share capital is €12,000, fully paid up upon incorporation. For an SA (société anonyme or limited liability company), the minimum share capital is €30,000, of which at least 25% must be paid up at the time of incorporation.
- Draft the Articles of Association The company’s articles of association must be drawn up and filed with Luxembourg’s trade and companies register. This document outlines the company’s objectives, share structure, and governance rules.
- Open a Bank Account Once the articles of association are ready, Damalion supports French entrepreneurs to open a corporate bank account in Luxembourg for their SOPARFI and deposit the required share capital. Luxembourg’s banking sector is renowned for its discretion and robust regulatory framework, attracting high-net-worth individuals and businesses alike.
- Appoint a Director Every Luxembourg company must have at least one director, who can be of any nationality and need not reside in Luxembourg. However, having a local director can be beneficial for certain tax and regulatory reasons.
The appeal of a Luxembourg Holding Structure for French Entrepreneurs
In light of the fiscal tightening in France, establishing a Luxembourg holding company offers numerous advantages for French entrepreneurs:
- Tax Optimization: By shifting profits to a Luxembourg holding structure, French entrepreneurs can significantly reduce their tax burden. Luxembourg’s tax regime allows for generous exemptions on dividends, royalties, and capital gains, providing substantial tax savings.
- Asset Protection: Luxembourg’s legal system offers robust asset protection mechanisms, making it an ideal jurisdiction for entrepreneurs seeking to safeguard their wealth from increasing fiscal pressures in France.
- Access to European Markets: Luxembourg’s central location within the European Union provides easy access to the single market, making it an attractive hub for multinational operations.
Time to setup your Luxembourg holding company
With the French government implementing stringent fiscal measures to rein in the national debt, French entrepreneurs face an increasingly challenging domestic environment. For those looking to optimize their tax liabilities and protect their wealth, setting up a holding company in Luxembourg presents a viable solution. The country’s favorable tax regime, business-friendly legal framework, and strategic location within the EU make it an attractive destination for entrepreneurs seeking to expand beyond France’s borders.
Damalion supports French entrepreneurs, investment groups and families who register their Luxembourg holding company. We provide local resident directors. Please contact your Damalion expert now.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
How to set up your Luxembourg holding company (Soparfi) — the practical route
Luxembourg combines legal predictability, a strong double-tax treaty network and seasoned providers. To move efficiently, this block sets out the common legal forms, realistic substance expectations, tax touchpoints and a step-by-step plan so your holding becomes operational without avoidable rework.
Why choose Luxembourg for your holding location?
Before incorporating, weigh how the jurisdiction’s framework will support acquisitions, refinancing and exits over the full cycle.
- Legal certainty & reputation: mature corporate law and consistent court practice trusted by banks and investors.
- Functional flexibility: Sàrl, SA or SCA with shareholders’ agreements tailored to governance needs.
- Bankability: broad acceptance at European banks when the file and local substance are coherent.
- Fund integration: easy linkage with private equity structures, parallel funds and master–feeder platforms.
Which legal form should you pick for a Soparfi?
Your choice shapes governance, capital rules and perception by counterparties; the matrix below helps you compare at a glance.
| Legal form | Key features | Typical use | Capital |
|---|---|---|---|
| Sàrl (private limited company) | Flexible decision-making; restricted share transfers | Family holdings, mid-market groups, PE portfolio layers | Legal minimum applies; banks often expect higher paid-in amounts |
| SA (public limited company) | Stronger board structure; easier transferability of shares | Group holdings, institutional investor contexts | Higher minimum; market practice often above the legal floor |
| SCA (partnership limited by shares) | General partner with control; limited shareholders participate economically | Sponsor-led models needing enhanced control mechanics | Aligned to investors and bank file requirements |
Unsure whether you need a pure holding or a fund-like vehicle? Compare Soparfi vs SPF and review PE structuring in Luxembourg for multi-layer designs.
What level of substance is realistic and necessary?
Substance is more than a registered address; it is decision-making, people and resources commensurate with activity and risk.
- Board and decision-making: meetings and minutes in Luxembourg; independent directors where appropriate.
- Operational resources: office and compliance setup proportionate to treasury, financing and oversight roles.
- Transfer pricing: arm’s-length terms for intragroup loans documented from day one.
- Bank file: coherent package—beneficial ownership chain, source of funds, org chart and cash-flow rationale.
Which tax topics deserve early attention?
Outcomes depend on source countries, treaty access and the holding’s function within the acquisition and exit chain.
- Participation exemption: conditions for dividend and capital gains exemption on qualifying shareholdings.
- Withholding taxes: align treaty access and beneficial-owner status with real substance.
- Financing rules: interest limitation, anti-hybrid provisions and prudent leverage thresholds.
- Distribution flows: coordinate with fund distributions and co-investments—see parallel funds advantages and challenges.
What are the steps from Paris to a live Luxembourg holding?
A disciplined roadmap avoids delays with the notary, the trade register and banks, and keeps governance consistent.
- Define purpose and role: investment, financing or asset protection; set scope and timeline.
- Select legal form: Sàrl, SA or SCA aligned to governance and bank expectations.
- Prepare documentation: articles of association, shareholders’ agreement, decision-making and compliance policies.
- File incorporation & UBO: register with the RCS (trade register) and complete ultimate beneficial owner filings.
- Open banking: onboarding with a complete KYC/AML pack and clear economic rationale.
- Go live: accounting setup, reporting calendar and intragroup documentation in force.
Working alongside funds or multiple vehicles? Explore our guide to launching a master–feeder or select a parallel fund architecture that dovetails with your holding.
FAQs (holding-specific, plain language)
These short answers cover the first issues investors and entrepreneurs raise when starting a Luxembourg holding.
Can I convert a Sàrl into an SA later?
Yes, via a formal conversion with notarial steps and amended articles. Plan the impact on governance and banking before moving.
Is a Luxembourg-resident board mandatory?
There is no nationality rule, but genuine substance requires decisions in Luxembourg and often independent local directors.
May the holding lend to subsidiaries?
Yes—on arm’s-length terms with transfer pricing documentation and appropriate cash-flow and security analysis.
How do I avoid bank onboarding delays?
Provide a coherent KYC/AML file, a transparent ownership chain, a clear activity narrative and a realistic budget.
How does a Soparfi differ from an SPF?
An SPF is for private wealth management and has restrictions; a Soparfi is the business holding used for participations and financing.
Can the holding operate alongside fund platforms?
Yes—holdings often sit next to PE structures and sub-funds with their own risk walls.
References: CSSF (Luxembourg regulator) · Guichet.lu (government portal)
