Luxembourg‘s SOPARFI (Société de Participations Financières) is a popular holding company structure that offers significant tax advantages for managing international investments. As of 2025, the SOPARFI tax regime provides attractive benefits for holding companies while remaining fully taxable under Luxembourg law.
Soparfi: tax regime
SOPARFIs are subject to the standard Luxembourg corporate tax rates, which have been recently adjusted:
- Corporate Income Tax (CIT): 16% (reduced from 17% in 2025)
- Municipal Business Tax (MBT): 6.75% in Luxembourg City
- Employment Fund Contribution: 7% surcharge on CIT
The combined effective tax rate for a SOPARFI in Luxembourg City is approximately 23.87% as of 2025.
2025 Recent Changes and Options
As of 2025, Luxembourg has introduced some changes to the SOPARFI regime:
- CIT rate reduction from 17% to 16%
- Simplified calculation of minimum NWT based solely on the company’s total balance sheet
- Option to waive participation exemption for dividends, liquidation proceeds, and capital gains on a per-shareholding basis.
Luxembourg holding company: tax exemptions on dividends
One of the key advantages of the SOPARFI structure is the potential for full exemption on inbound dividends under the “participation exemption” regime. This exemption is based on Article 166 of the Luxembourg Income Tax Law (L.I.R.). To qualify for this exemption, the following conditions must be met:
- Minimum shareholding: 10% of the subsidiary’s capital or an acquisition price of at least €1.2 million
- Holding period: At least 12 months (or a commitment to hold for 12 months)
- Subsidiary qualification: The subsidiary must be a fully taxable resident company, a fully taxable non-resident company, or an EU-resident company.
If these conditions are not met, a 50% automatic exemption may still apply for dividends from qualifying Luxembourg subsidiaries.
Luxembourg holding company: tax exemptions on capital gains
SOPARFIs can also benefit from a full exemption on capital gains derived from the sale of qualifying participations. The conditions for this exemption are similar to those for dividend exemptions, with some differences:
- Minimum shareholding: 10% of the subsidiary’s capital or an acquisition price of at least €6 million
- Holding period: At least 12 months
- Subsidiary qualification: Same as for dividend exemptions
This exemption is based on Article 166 of the L.I.R. and the Grand Ducal Decree of December 21, 2001, implementing Article 166, clause 9 of the L.I.R.
Additional Tax Advantages
Withholding Tax Exemptions:
- No withholding tax on arm’s length interest payments
- No withholding tax on liquidation distributions
- Exemption from withholding tax on outbound dividends paid to qualifying shareholders (subject to similar conditions as inbound dividends)
Net Wealth Tax (NWT):
SOPARFIs can benefit from a full exemption on shares held in qualifying subsidiaries.
Access to Tax Treaties and EU Directives
SOPARFIs have full access to Luxembourg’s extensive network of double tax treaties (103 treaties as of 2025) and can benefit from EU Directives. This makes them particularly attractive for international tax planning.
The SOPARFI structure offers significant tax advantages for holding companies in Luxembourg, particularly through its participation exemption regime for dividends and capital gains. The regime is based on Article 166 of the Luxembourg Income Tax Law, which provides the framework for these exemptions. However, it’s important to note that these benefits are subject to specific conditions and anti-abuse rules. As tax laws can change, it’s advisable to consult with a tax professional for the most up-to-date and personalized advice when considering establishing a SOPARFI in Luxembourg.
If you are considering setting up a SOPARFI for your investment needs, please contact your Damalion expert now.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor | External links are ownership of their respective owners and do not imply any economic link or interest with Damalion corporation.
