Situated in the heart of Europe, Luxembourg is a geographic and legal focal point within the European Union.
Luxembourg is the biggest investment funds hub in Europe and the second largest in the world. It is thus a location of choice for dominating private equity houses.
Luxembourg offers an extensive variety of investment vehicles. This includes a wide variety of investment funds such as securitization vehicles, partnerships, and SOPARFIs.
SOPARFI : what does it stand for?
SOPARFI (SOciété de PARticipations FInancières) is the most popular vehicle committed to holding and financing activities within Luxembourg. The company can also carry out extra activities, given they are provided for in the bylaws and a business license is attained if required. Any undertaken or private individual can be eligible as an investor.
A SOPARFI is a commercial company founded in accordance with the Luxembourg law of 10 August 1915 on commercial companies, as amended (the Company Law). The corporate purpose of the SOPARFI is the holding of participation and dividends in other entities. It is not subject to supervision by the CSSF (Commission de Surveillance du Secteur Financier) or main Luxembourg authorities (business permit requirement for example) and doesn’t need authorization unless the participation it holds is quoted and it carries out commercial activities.
A SOPARFI might qualify as an Alternative Investment Fund (AIF) if it meets specific standards and will therefore be subject to the application of the AIFM Law, including the duty to appoint an AIFM.
The type of eligible assets that a SOPARFI may hold is unlimited and there are no limitations on the types of investors.
On a fundamental level, the SOPARFI is subject to full Corporate Income Tax (CIT) and Municipal Business Tax (MBT), but, there is protection from taxation in the case of dividends/liquidation proceeds and capital gains emerging from a Qualifying Subsidiary based on the Parent-Subsidiary Directive and widened to all non-resident companies subject to corporate taxation corresponding to the Luxembourg CIT.
Soparfi is very beneficial in the global field, as it enjoys some advantages, such as:
- large network of anti-double taxation treaties signed by Luxembourg, and
- the operation of the European fiscal directives, by the integrity of which, it exempts taxes on dividends distributed by investments and profits from the disposal of investments.
Financing activities
It is normal for a Luxembourg SOPARFI to conduct group financing activities next to its holding activity. Luxembourg has fully incorporated the arm’s length principle to guide finance transactions.
SOPARFIs are the ideal vehicle to :
- earn or grant finance
- raise capital for investment
- issue bonds or debt securities
- listing in Luxembourg Stock Exchange
- invest in Intellectual Property
- co-investment with other Institutionals or Family Offices.
Depending on the necessities of the investor with respect to capital, management control, and share transferability, the SOPARFI can take one of the following structures:
- public limited company (S.A.)
- private limited liability company (S.à R.L.)
- partnership limited by shares (S.C.A.)
- cooperative in the form of a public limited company (CoopSA)
- European company (SE)
To register your Luxembourg holding company, please contact your Damalion expert now. We shall also help you to open the bank account for your SOPARFI.
