SOPARFI and SPF Investment Vehicles in Luxembourg

Luxembourg is one of the most reputable wealth management centers in Europe. Foreign investors and high net worth individuals are starting their businesses in Luxembourg due to its attractive economic landscape, enabling them to protect their financial assets through various strategies and further increase their wealth. Financial experts specializing in wealth management provides a wide variety of services to international businessmen who are seriously looking to expand their reach and gains in Luxembourg.

Let’s take a look at two of the most popular investment funding forms in Luxembourg- the SPF and SOPARFI. By learning their respective qualities, investors are empowered to make smarter decisions once they enter the Luxembourg market.

What are the main qualities of SPF?

• SPFs has to adhere to regulations to the law passed on 11 May 2007, also known as the SPF Law which regulates this specific business structure.
• Foreign investors do not need to gain authorization for opening a SPF in Luxembourg, however, this legal entity cannot be listed altogether.
• As a SPF will be registered as a capital company, the pre-determined capital shares may vary depending on the legal form chosen upon registration. Minimum capital may range between EUR 12,500 and EUR 31,000.
• All eligible SPF shareholders must be legally natural persons. While a SPF is termed as family wealth, its investors need not be related by blood or marriage altogether.
• A SPF company takes advantage of various tax exemptions, including corporate tax, municipal business tax, and net worth tax.
• A SPF is required to pay for subscription tax at a rate of 0.25% but is not mandated to register for value added tax.
• SPFs benefits from special tax regimes that are developed for incorporated legal entities that are meant only to manage the private wealth if individuals. To that end, an SPF is permitted to acquire, hold, and manage assets, financial instruments, and money during its period of operation.
• A SPF must be incorporated in accordance with EU rules. It is not permitted to conduct any commercial activities; hence is exempted from various taxes.
• For real estate investments, a variety of legal forms may be used, such as regulated entities via investment companies in risk capital or unregulated entities via commercial companies or securitization vehicles. The legal form will depend on the applicable tax regime and goals of an investor.

What are the main qualities of a SOPARFI?

Another popular investment vehicle used by foreign investors when starting a business in Luxembourg is SOPARFI or (société de participations financières). The sole purpose of a SOPARFI is the optimized management of group of companies under a Luxembourg subsidiary company. A SOPARFI benefits from double tax treaties approved by the Luxembourg Parliament with EU and non-EU countries.

• Simply put, a SOPARFI is a holding company that allows its shareholders to invest in various types of industries. It may also function as a specialty solution that provides management services to high net-worth individuals.
• A SOPARFI is also categorized as a trading company, but its transactions are limited by the rules on commercial companies imposed by the Luxembourg Parliament.
• To succeed in opening a SOPARFI, investors must choose a specific legal form. A SOPARFI may be registered and incorporated as a public limited company, a limited liability company, a partnership limited by shares, and many more.
• SOPARFI shareholders can invest in various assets, including material assets, bonds, shares, stocks, commodities, real estate properties, currencies, cash, and many more.
• A SOPARFI may be incorporated by natural persons, foundations, investment funds, holding companies, and trusts.
• The required minimum share capital of a SOPARFI will depend on its registered legal form. A public limited company is required a minimum share capital of EUR 31,000 while limited liability companies need a minimum share capital of EUR 12,500 to be deposited in lump sum.

Professional Wealth Management in Luxembourg?

To take full advantage of the huge opportunities as a holding or a finance company in Luxembourg, foreign entrepreneurs need to partner with a wealth management company with their best interest in mind. Of course, it goes without saying that investors need to do their research prior to entering the Luxembourg market.

Working with a reputable wealth management company will significantly help in making crucial business decisions when it comes to investments and allocation of business funds. Furthermore, a trusted wealth management company can expertly handle all asset management and financial  operations on your behalf.

For comprehensive guidance in starting a company in Luxembourg, you may contact our business formation experts here at Damalion. We will be more than happy to offer you the expert assistance you need on expanding your growth potential in Luxembourg.