SOPARFI

A Soparfi (used for HOLDING purposes) is a capital company (S.A., Sàrl, SCS, SC organized as an S.A.) governed by ordinary Luxembourg tax law, primarily intended for holding participations and engaging in other activities related to the management of those participations. Therefore, the Soparfi is subject to the same tax regime as any commercial corporation.

However, while commercial activities are taxed under common law, financial transactions (such as receiving dividends and realizing capital gains) may be exempt from taxes under certain conditions, in accordance with the parent-subsidiary tax regime.

This regime is based on the Luxembourg implementation of the European directive (90/435/EEC) concerning the common tax regime applicable to parent and subsidiary companies in EU Member States

• The registered office and central administration must be located in Luxembourg
• Requirement to maintain accounting records and file annual balance sheets
• Requirement for approval of accounts by a general meeting of shareholders (AGO)
• Fiscal integration is possible (holding >95% of subsidiary)
• The recommended maximum debt-to-equity ratio is 85%-15%

• The Soparfi must hold (or commit to holding) each participation for an uninterrupted period of at least 12 months
• The participation rate (direct or indirect) must not fall below 10% (or an acquisition price of €1,200,000/€6,000,000 for capital gains) of the subscribed and paid-up capital of the subsidiary
• The subsidiary must be a fully taxable capital company (effective rate >11%, unless an exemption is provided by a tax treaty)
• Eligible income includes dividends received by the Soparfi, liquidation bonuses of the Soparfi, and capital gains from disposals

• Exempt income is excluded from the tax base
• Value adjustments on participations, financing expenses, and management-related expenses are deductible insofar as they do not exceed exempt income
• The Soparfi fully benefits from double taxation treaties signed by Luxembourg (103 treaties)

Since January 1, 2009, no transfer tax is due upon the establishment of a Soparfi. Income from securities, as well as income from the sale, contribution, or liquidation of these assets, is excluded from the tax base. However, commercial profit is subject to a total tax rate of 24.94%.

A minimum net wealth tax of €535 (1) / €1,605 (2) / €4,815 (3) applies to Soparfis with over 90% of assets in securities, provided the balance sheet total is (1) less than €350,000 / (2) €2,000,000 / (3) more than €2,000,000.

VAT is not mandatory for Soparfi, unless it also conducts a commercial activity. For income distribution, there is no withholding tax on liquidation bonuses, and, in other cases, double taxation treaties and the parent-subsidiary regime apply.

• The Soparfi’s economic activity is limited to managing its participations in other capital companies, so it does not require a commercial license
• However, if the Soparfi wishes to engage in commercial activities, it must obtain a commercial license for those activities, and any profit generated is fully taxable