What is SOPARFI?
The SOPARFI also known as (SOciété de PARticipations FInanciéres) is a type of holding company, with the purpose of holding, managing and facilitate equity participation of Luxembourg, European and extra community companies.
It is a fully taxable resident company that is not regulated and is not subject to any supervisory authority. It is considered as the most common vehicle for financing activities in the Grand Duchy.
The Legal Framework
SOPARFIs fall within the scope of the Law of 10 August 1915 (as amended) on Commercial Companies. The SOPARFIs’ tax system is regulated by the General Tax Law of 22 May 1931 (as amended). Due to the fact that SOPARFIs’ has primarily holding and/or financing activities, it benefits from the Parent-Subsidiary European Directive of 30 November 2011 (2011/96/EU).
The EU Directive of 30 November 2011 was designed to eliminate tax obstacles for profit distributions between parent companies and subsidiary based in different Member States. Therefore, the Directive gives a tax exemption for dividends and other profit distributions paid by subsidiary companies to their parent companies.
Legal Forms of the SOPARFI in Luxembourg
SOCIÉTÉ ANONYME (S.A.)
similar to a public limited company (also in a form of a single shareholder s.a.);
SOCIÉTÉ À RESPONSABILITÉ LIMITÉE (S.À R.L.)
similar to a private limited company (also in a form of a single shareholder s.à r.l.);
SOCIÉTÉ EN COMMANDITÉ PAR ACTIONS (SCA)
similar to partnership limited by shares;
SOCIÉTÉ CO-OPERATIVE (S.C.)
co-operative (a cooperative can also be incorporated as a public company);
SOCIÉTÉ EUROPÉENNE (S.E.)
European company is a “société anonyme” incorporated in conformity with article 2 of the European council regulation (ce) no. 2157/2001 dated 8 October 2001 on the articles of incorporation for a European company.
Tax Treatment for SOPARFIs in Luxembourg
SOPARFIs are subject to the General Tax regime. Therefore, the overall rate of corporation taxes is 29.22% which includes the corporate tax income (21%) on which a 7% solidarity surcharge is added and the municipal tax income at a rate of 6.75%.
SOPARFIs are also subject to an annual net wealth tax at a rate of 0.5% on their worldwide income but are exempted from the withholding tax in case of a full or partial liquidation of a fully taxable company. Likewise, there is no withholding tax on fixed or floating rate interest payments made to corporate lenders and on royalty payments.
Hold participations in private equity;
Finance others entities;
Hold real estate in luxembourg or overseas, directly or through a company;
Hold financial assets (financial instruments, bonds for instance);
Own intellectual property rights to perceive royalties;
Exercise management control over others entities.