Luxembourg is widely recognized as a premier destination for entrepreneurs seeking robust asset protection and wealth preservation. One of the most attractive structures for this purpose is the Société de Participations Financières (SOPARFI), a holding company model that offers numerous benefits for those looking to safeguard their assets. French entrepreneurs, in particular, have shown a growing interest in SOPARFI due to its flexible legal framework, tax efficiency, and strategic location within the European Union. Damalion explores why the Luxembourg SOPARFI is an attractive vehicle for French business owners.
Understanding SOPARFI: Legal Structure and Share Capital
A SOPARFI can be established as either a Société à Responsabilité Limitée (SARL) or a Société Anonyme (SA). These two forms provide flexibility in terms of governance and capital requirements:
- SARL (Private Limited Company): The SARL is popular for its simplicity and lower share capital requirement. The minimum share capital required is €12,000, which must be fully paid up at incorporation. This structure is often chosen by smaller businesses and family-owned enterprises due to its straightforward management and operational requirements.
- SA (Public Limited Company): The SA (société anonyme) is suitable for larger enterprises or those that might consider going public in the future. It requires a minimum share capital of €30,000, with at least 25% of the capital to be paid up at the time of incorporation. The SA offers more flexibility in terms of shareholder structures and the issuance of shares, making it an ideal choice for businesses anticipating rapid growth or external investment.
Tax Advantages of SOPARFI
Luxembourg’s favorable tax regime is a significant draw for French entrepreneurs. SOPARFI benefits from a comprehensive network of double taxation treaties and specific domestic tax exemptions:
- Dividend Taxation: SOPARFI enjoys significant tax advantages when it comes to dividend income. Under Luxembourg’s participation exemption regime, dividends received from qualifying subsidiaries (where SOPARFI holds at least 10% of the shares or the acquisition price is at least €1.2 million) are exempt from corporate income tax. This exemption is applicable if the holding has been maintained for an uninterrupted period of at least 12 months.
- Capital Gains: Capital gains derived from the sale of shares in subsidiaries can also benefit from the participation exemption. For this exemption to apply, SOPARFI must hold at least 10% of the share capital or an acquisition price of €6 million in the subsidiary for a minimum of 12 months. This provision significantly enhances wealth preservation by minimizing tax liability on the appreciation of assets.
- Liquidation Proceeds: In the event of liquidation, proceeds distributed to shareholders can be exempt from taxation, provided they meet similar conditions to those for dividend income and capital gains. This ensures that entrepreneurs can extract value from their businesses without facing prohibitive tax burdens.
- Tax Deductibility of Expenses: SOPARFI can deduct expenses related to the management and financing of its shareholdings, further reducing its taxable base. This includes interest payments on loans used to acquire participations, thus optimizing the company’s financial structure and improving cash flow management.
Additional Benefits
Beyond tax advantages, Luxembourg offers a stable political and economic environment, robust legal system, and high level of confidentiality. SOPARFI is not regulated by the financial supervisory authority, which simplifies compliance and administrative procedures. This is particularly appealing to French entrepreneurs who seek to minimize regulatory burdens while maintaining strong asset protection mechanisms.
For French entrepreneurs seeking effective asset protection and wealth preservation, Luxembourg’s SOPARFI offers a compelling option. With its flexible legal structures, minimal share capital requirements, and advantageous tax regime, SOPARFI stands out as a premier vehicle for managing international investments and protecting family wealth. The strategic location within the EU, combined with a favorable tax and regulatory environment, makes Luxembourg an attractive destination for those looking to optimize their business and investment strategies.
Damalion helps international families and entrepreneurs to protect their assets and maintain their wealth. 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.
Soparfi: Why French entrepreneurs still choose Luxembourg for asset protection and wealth preservation
For entrepreneurs, families, holding companies, and investment groups • We help you prepare a clear file so banks, notaries, and service providers review faster. Final decisions belong to the institutions.
Last updated:What is a SOPARFI?
A SOPARFI is a Luxembourg holding company used to own shares and manage group assets. It is a normal commercial company, not a regulated fund. Many French founders use a SOPARFI to centralize equity, receive dividends, plan exits, and organize succession.
Main legal forms
| Form | Share capital | Governance | Typical use |
|---|---|---|---|
| SARL (private limited) | EUR 12,000 minimum, fully paid at incorporation | Managers; limited share transfer | Family-owned groups, SMEs, holding of operating companies |
| SA (public limited) | EUR 30,000 minimum; at least 25% paid at incorporation | Board of directors or two-tier system | Larger groups, external investors, possible future listing |
Key tax points
- Participation exemption – dividends. Dividends from qualifying subsidiaries may be exempt at SOPARFI level if legal conditions are met (e.g., 10% holding or acquisition cost threshold; holding period; qualifying entity).
- Participation exemption – gains. Gains on qualifying shares may be exempt if conditions are met (shareholding/price threshold; holding period; qualifying entity).
- Outbound dividends. Domestic rules or tax treaties may reduce or remove WHT, subject to beneficial ownership and anti-abuse tests.
- Costs. Financing and management expenses may be deductible under Luxembourg rules (interest limitation, transfer pricing, anti-hybrid rules).
- GAAR / substance. Real decision-making in Luxembourg, adequate records, and local presence support compliance and treaty access.
2025 Tax Snapshot
CIT / MBT total rate
- CIT main rate: 16% from tax year 2025.
- Lower bracket: 14% up to EUR 175,000 taxable income; smoothing applies up to EUR 200,000.
- Municipal business tax (MBT): Luxembourg City 6.75% (varies by commune).
- Combined headline (CIT + solidarity + MBT): about 23.87% in Luxembourg City (2025).
Note: Recalculate if your company is registered in another commune.
Participation exemption
- Dividends / liquidation proceeds: 10% holding or EUR 1,200,000 acquisition price; typical holding period ~12 months.
- Capital gains: 10% holding or EUR 6,000,000 acquisition price; typical holding period ~12 months.
- 2025 option: you may waive (fully or partly) the participation exemption and the 50% dividend exemption on a per-participation, year-by-year basis (not for NWT). Consider recapture effects.
Minimum Net Wealth Tax (MNWT)
- ≤ EUR 350,000 balance sheet: EUR 535
- EUR 350,001 – EUR 2,000,000: EUR 1,605
- > EUR 2,000,000: EUR 4,815 (cap)
The simplified MNWT now depends only on total balance-sheet size.
Interest limitation & anti-abuse
- Interest limitation (Art. 168bis LITL): clarifications apply for FYs starting 1 Jan 2024; update includes a “single-entity group” concept under conditions.
- ATAD / GAAR: anti-hybrid, exit tax, beneficial ownership and principal-purpose tests continue to apply. Keep commercial reasons and substance.
- Share class redemptions: 2025 law codifies conditions for buy-back and cancellation of an entire share class to qualify as a “partial liquidation” (no dividend WHT), subject to strict conditions.
Banking and payments
- Prepare a clear profile: owners, activity, and expected payments (amounts, currencies, countries, counterparties).
- Provide KYC: ID, proof of address, tax status, register extract, articles, shareholding chart with UBOs, signatory powers.
- Explain incoming and outgoing flows for the next 12 months. Keep documents consistent and traceable.
How to set up
- Choose the form. SARL or SA based on owners and capital.
- Draft core documents. Articles, capital proof, governance rules.
- Notary and registration. Sign and obtain the RCSL extract.
- Open the bank account. Provide KYC and describe payment flows.
- Maintain records. Minutes, accounts, registers, and tax filings.
When a SOPARFI fits
- Holding operating subsidiaries in France and the EU.
- Receiving dividends and reinvesting at group level.
- Preparing a sale, partial exit, or succession plan.
- Long-term family ownership with simple governance.
Costs and timelines
- Notary and registration vary by form and capital.
- Accounting, legal, and domiciliation are ongoing costs.
- With a complete file, incorporation and banking may take days to weeks, case by case.
Related reading
Frequently asked legal questions
1) Is a SOPARFI regulated as a fund?
2) Which legal forms are common?
3) What is the minimum share capital?
4) May the SOPARFI own French companies?
5) Are dividends received by the SOPARFI exempt?
6) Are capital gains on shares exempt?
7) Is Luxembourg withholding tax due on outbound dividends?
8) Are financing and management costs deductible?
9) What level of substance is expected?
10) Can a director live in France?
11) Do accounts need an audit?
12) How are distributions to French individuals taxed?
13) Can the SOPARFI charge management fees to owners?
14) Which anti-abuse rules apply?
15) Can the SOPARFI hold IP or grant loans?
16) Does a minimum net wealth tax apply?
17) Are there French CFC risks?
18) How are share sales by the SOPARFI taxed?
19) Is a 12-month holding period required?
20) How are share class redemptions treated in 2025?
10 Best Things to Do in Luxembourg City in 24 Hours
Maximize a tight schedule with official, easy-to-reach highlights in the Upper Town, the Grund, and Kirchberg. Jump to map
- Old Quarters & Fortifications (UNESCO) – heritage core and fortress remains.
- Grand Ducal Palace – official residence; summer tours.
- Notre-Dame Cathedral – late Gothic landmark.
- Bock Casemates – historic tunnels and views.
- Chemin de la Corniche – balcony over the Alzette valley.
- Grund – riverside quarter with bridges and cafés.
- Lëtzebuerg City Museum – the city’s story and panoramic lift.
- Mudam Luxembourg – contemporary art in Kirchberg.
- Philharmonie Luxembourg – concert hall; check the program.
- City Tourist Office tours – official guided options.
Jump to hotels • Jump to restaurants
10 Best Hotels in Luxembourg City
Central picks for business and leisure. Walkable or short tram ride to sights.
- Le Royal Hotels & Resorts – classic 5★ near the park.
- Hotel Le Place d’Armes – boutique elegance on the square.
- Sofitel Luxembourg Le Grand Ducal – skyline views.
- Sofitel Luxembourg Europe – quiet Kirchberg location.
- Meliá Luxembourg – modern rooms by Mudam.
- Park Inn by Radisson Luxembourg City – value near Gare.
- Novotel Luxembourg Centre – reliable midscale by Grund access.
- Mama Shelter Luxembourg – playful design in Kirchberg.
- Parc Hotel Alvisse – larger property with pool; short drive.
- Hotel Parc Beaux-Arts – intimate stay in the Old Town.
10 Best Restaurants in Luxembourg City
Trusted tables across styles and budgets. Reserve ahead for peak nights.
- Mosconi – refined Italian on the Alzette.
- Ryôdô – Japanese fine dining near Avenue Poincaré.
- Um Plateau – creative kitchen and cocktails.
- Le Sud – rooftop views over Clausen.
- Brasserie Guillaume – seafood platters and brasserie classics.
- Um Dierfgen – Luxembourgish specialities in the center.
- Kaempff-Kohler – pâtisserie, cheese, and brasserie dishes.
- Restaurant Clairefontaine – elegant dining off the square.
- IKKI – fusion kitchen and lounge at Rives de Clausen.
- Chiche! – Lebanese fare with a social mission.
Map – Luxembourg City
Note: Opening hours and access may change. Check official sites on the day of your visit.
