The SOPARFI in Luxembourg (Société de Participations Financières) is an unregulated financial holding that comes in many legal forms. The SOPARFI serves as a popular vehicle for issuing financial instruments. Moreover, it remains one of the popular strategic options for investing in various industries across the world. Some of these investments include real estate and intellectual property in countries with double tax treaties with Luxembourg. Learn more about the legal forms of a SOPARFI in Luxembourg and their advantages.
What is the SOPARFI and Who Is It For?
A SOPARFi in Luxembourg serves a wide range of purposes. For example, it could be strategically used to raise investment capital, issue bonds, and receive finance. In addition, shareholders can take advantage of the SOPARFI to invest across different industries from real estate to types of intellectual property. It also makes a strategic option for participating in cross-border transactions and co-invest with family offices.
Moreover, the SOPARFI comes in various legal forms, such as a public limited company (S.A.) or a private limited liability company (S.à R.L.). On the other hand, investors can also set it up as a cooperative in the form of a public limited company (CoopSA) or a European company (SE).
With its purpose and features, incorporating a SOPARFI in Luxembourg makes an attractive option for corporate groups, family businesses, multinational corporations, and cross-border investors. Read on about the different advantages of setting up a SOPARFI in Luxembourg.
Advantages of a SOPARFI in Luxembourg
Privacy for its investors and stakeholders ranks as one of the most attractive features of a SOPARFI. For instance, the SOPARFI is not regulated by the Commission de Surveillance du Secteur Financier (CSSF). Some of its major advantages include tax exemptions and investment strategies.
Double Tax Treaties and Exemptions
Luxembourg currently holds double tax avoidance treaties including in several countries across Europe, America, Asia, and Africa. This allows the holding to be exempted from submitting to the tax regimes of both countries involved. Instead, the SOPARFI answers to tax regulations of one country. Moreover, the tax regime in Luxembourg also includes the following tax exemptions provided that the legal provisions have been fully complied with:
- participation exemption on dividends, capital gains, and wealth tax;
- withholding tax exemption on dividends paid to qualified shareholders;
- withholding tax exemption on interest payments or payments following a liquidation.
Strategy for International Investments
Investment in real estate located in Italy is an example of how the tax for how double tax treaties benefit investors. Any income from a property in Italy, owned by a SOPARFI in Luxembourg through a contribution transaction, submits only to taxation in Italy due to the anti-double tax treaty. Also, certain conditions in specific countries require no taxes for exit from participation.
Simple Registration and Eligibility Requirements
There are no strict limitations on which investor type is eligible to invest in a SOPARFI. In fact, the public limited company (S.A.) only requires one shareholder and one director. Meanwhile, the S.C.A. (société en commandite par actions) needs to be incorporated by a minimum of two shareholders and three directors. The regulations on the number of shareholders vary depending on the type of holding.
Incorporate a SOPARFI in Luxembourg with Damalion
Incorporation formalities
Damalion offers to ease the process of incorporating your holding in Luxembourg by managing the process formalities for you. For example, we liaise with lawyers and tax experts to ensure compliance during the company formation process. We assist you in finding the right domiciliation service providers according to your business model as it becomes more and more important to consider substance locally in Luxembourg.
Financial and management operations
A 2016 Circular by tax authorities details the substance requirements for a SOPARFI in Luxembourg. First, the majority of the board members or directors that run the company must be tax residents of Luxembourg. Then, the company must be capable of managing financing transactions with qualified personnel. Additionally, outsourcing is possible if the company monitors the service provider’s performance and controls the risks. Lastly, the company must not be a tax resident of other jurisdictions.
Damalion offers directorship services to oversee the operational and administrative management of an incorporated holding. An incorporated SOPARFI holding complies with the submission of regular accounting including the annual balance sheet and profit and loss statement. The directorship service solves this issue by reviewing financial flows and oversight of the company’s compliance with accounting obligations and required documentation. Also, these directorship services include liaisons with local institutions, firms, and professionals to oversee the holding’s compliance with local laws and regulations.
Reach out to Damalion experts about incorporating a SOPARFI in Luxembourg here.
Incorporate a SOPARFI in Luxembourg — legal forms, share capital, governance, participation exemption (dividends/capital gains), withholding rules, and practical steps from draft statutes to bank activation.
For investors, entrepreneurs, family offices, private equity and multinational groups • Damalion helps you scope the project, prepare documents, and coordinate providers. Acceptance by banks and public bodies remains at their sole discretion.
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What makes a successful SOPARFI setup?
Define purpose (holding, financing, exits), choose a suitable legal form (most often S.à r.l. or S.A.), secure substance appropriate to the activities, and keep documentation consistent (UBO chart, financing terms, shareholder decisions). A clean file shortens notarial work, RCSL registration, and account opening.
Main legal forms and minimum capital
| Form | Minimum capital | Shareholder(s) | Notes |
|---|---|---|---|
| S.à r.l. (private limited) | EUR 12,000 fully subscribed (can be paid-up as required by law) | 1–100 | Most common for holding; flexible governance via managers. |
| S.A. (public limited) | EUR 31,000 subscribed (paid-up % per law) | 1+ | Suitable for larger groups; board of directors or one-tier/two-tier governance. |
| S.C.A. (partnership limited by shares) | EUR 31,000 | 2+ (incl. general partner) | Hybrid features; often used in PE structures. |
| SCS / SCSp (limited partnerships) | No statutory minimum | 2+ (GP/LP) | Frequently combined in group charts; SOPARFI is usually a company, but partnerships appear in wider arrangements. |
Documents usually requested
- UBO identification: passports/IDs, proof of address, tax residency (TIN; US indicia where relevant).
- Ownership chart and control description.
- Draft corporate purpose and financing outline (intra-group loans, equity contributions).
- For existing entities: certificate of incumbency/registry extract, articles, good standing, and notarized/apostilled copies as required.
- Substance plan: directors’ residency, decision-making in Luxembourg, office/domiciliation, qualified oversight of financing activities.
- Bank account file: expected flows, currencies, counterparties, first funding.
Tax points at a glance (overview)
| Topic | Outline |
|---|---|
| Corporate income tax (CIT) + municipal business tax (MBT) | SOPARFI is a fully taxable company. Combined headline rate depends on municipality (commonly cited around ~23.87%). |
| Participation exemption — dividends | Exemption subject to conditions (e.g., ≥10% or EUR 1.2m acquisition price; minimum holding period, qualifying subsidiary). |
| Participation exemption — capital gains | Exemption subject to conditions (e.g., ≥10% or EUR 6m acquisition price; minimum holding period, qualifying subsidiary). |
| Withholding tax on outbound dividends | Domestic rate may be reduced to 0% under conditions (e.g., EU Parent-Subsidiary Directive, treaties, and anti-abuse rules). |
| Interest and liquidation proceeds | No domestic withholding tax on arm’s length interest and liquidation bonus, subject to conditions. |
| Net wealth tax (NWT) | Ordinary rules apply; a minimum NWT may apply depending on balance sheet composition/thresholds. |
| Substance | Board composition, effective decision-making in Luxembourg, and control of risks are important to support treaty/EU benefits. |
Always confirm current rates and thresholds. Conditions and anti-abuse rules apply.
Damalion support for your Soparfi setup
- Scoping. Purpose, form (S.à r.l./S.A.), share capital and governance.
- Name & drafts. Company name check, draft statutes, director/manager acceptances.
- KYC/UBO. Complete identification, apostilles/translations if requested.
- Notary & RCSL. Execution before notary, deposit of capital, registration with RCSL.
- Aftercare. VAT (if relevant), economic operator number (if relevant), bank account, accounting setup.
Timing and costs (indicative)
- Notary, RCSL, publication fees, translations/apostilles if any.
- Domiciliation/directorship, accounting and annual compliance.
- Bank account: setup and monthly fees depend on the provider and profile.
