What is SOPARFI?
The SOPARFI (Société de Participations Financières) is a fully taxable commercial company whose corporate purpose is limited to the holding of participation and related activities.
A SOPARFI LU takes advantages of the participation exemption and may benefit from double taxation treaties signed by Luxembourg.
SOPARFI 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’ primary activity is 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 profits distribution paid by subsidiary companies to their parent companies.
A Luxembourg SOPARFI may be used to:
Hold participations in Private Equity;
Finance other 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 other entities
LU SOPARFIs are subject to the General Tax regime. Therefore, the overall rate of corporation taxes is 20.22% which includes the corporate tax income (21%) on which a 7% soidarity surcharge is added and the municipal tax income at a rate of 6.75%.
Whatever their revenues, SOPARFIs must pay each year a minimum amount of corporate taxe equal in 2016.