Luxembourg’s Société de Participations Financières (SOPARFI) is an unregulated company vehicle which has no restrictions on its field of activity and is commonly used as a holding company.

The SOPARFI is frequently used as a holding and/or financing vehicle for a group of businesses (it can hold all type of assets: movable and immovable property, tangible and intangible assets).

As a holding company it offers users, under certain well defined conditions, the opportunity to eliminate or mitigate corporate income tax in Luxembourg and Luxembourg withholding tax on dividends paid to EU and non-EU corporate shareholders where a relevant double tax treaty (DTT) is in place.

Benefits include:

  • Attractive participation exemption regime
  • Luxembourg’s extensive network of Double Tax Treaties
  • EU directives transposed into Luxembourg law (e.g., the EU Parent-Subsidiary Directive)

Structure of a SOPARFI

  • It is usually established as a Public Limited Liability Company (SA) or a Private Limited Liability Company (SARL) even if other legal forms can be adopted (i.e., Partnership Limited by Shares (SCA), Société coopérative (SC or SOCOOP), European company (SE))
  • Registered Office address must be in Luxembourg
  • Board meetings must be held in Luxembourg, unanimous consent resolutions may be used
  • Annual financial statements must be filed every year with the Luxembourg Trade and Companies Register
  • Tax returns must be filed annually with the Luxembourg Tax authorities
  • Approximately 4 to 5 days for incorporation, from the receipt of the share capital in the company bank account and the due diligence documents
  • Official corporate documents furnished within approximately four weeks by the Luxembourg Trade and Companies Register 

Taxation of SOPARFIs

Corporate Income Tax

  • Effective 2013, a SOPARFI will be subject to the aggregate combined tax rate of approximately 30% depending on the municipality of location.
  • From 2013, the minimum corporate income tax is EUR 3,210, applicable to all SOPARFIs whose financial assets (participations, loans to affiliates, securities, cash) exceed 90% of their total balance sheet.

Debt-Equity ratio

  • An 85:15 debt-equity ratio is generally acceptable by the Luxembourg tax authorities for a shareholding activity.
  • Within this limit, interests paid or accrued on debt are tax deductible and interest payments do not suffer any Luxembourg withholding tax (unless EU Savings Directive applies).

Net Wealth Tax

  • A SOPARFI is subject to NWT at the rate of 0.5%, assessed on its net asset value (unitary value) as at January 1st of each year.
  • Certain assets are exempt from NWT, notably qualifying participations, providing that relevant conditions are met.

Dividends Received

Dividends are tax exempt subject to the following criteria:

  • The SOPARFI must own a minimum of 10% of the issued share capital of the underlying subsidiary (or an investment of at least EUR 1.2 million).
  • The subsidiary, whether or not non-resident, must be subject to a similar tax regime (minimum 10.5% corporate tax).
  • Ownership of the interest in the subsidiary must have been held for a period of 12 months. Outgoing Dividends
  • Dividends paid to corporate shareholders established in an EU, a DTT, or an EEA country should not be withheld at source if the beneficiary of such dividends is subject to the above mentioned conditions. In other cases, a 15% withholding tax should be imposed on distributions.

Liquidation Proceeds

  • Liquidation proceeds received by a SOPARFI from a subsidiary are tax exempt in Luxembourg under certain conditions.
  • Liquidation proceeds paid by a SOPARFI to its shareholder are tax exempt.


  • Interest received is fully taxable at the corporate tax rate.
  • Interest paid abroad is tax exempt subject to EU Interest and Royalty directive (Directive 2003/49/EC).
  • The debt equity-ratio may not exceed 85:15.

Capital Gain Exemption

To qualify for capital gain exemption, the SOPARFI investment in the subsidiary must be 10% (or €6 million) and seller must have held the corresponding shares for a period of 12 months.


  • A total of 80% of royalty and other income (e.g., capital gains) derived from intellectual property rights (copyrights on software, patents, trademarks, designs, models and even internet domain names) is tax exempt.
  • The balance (20%) is taxable at the corporate rate, giving an effective tax rate of approximately 6% depending on the municipality of location.
  • Royalties paid abroad are tax exempt subject to EU Interest and Royalty directive (Directive 2003/49/EC).


  • VAT applies to the transfer and exploitation of intellectual property rights by a SOPARFI.
  • Current standard VAT rate: 15% (to be increased to 17% as from 2015).

Double Tax Treaties

The SOPARFI is eligible to use Luxembourg’s extensive network of Double Tax Treaties.

Liquidation – Depreciation – Recapture Rule

  • Expenses such as financing costs, bank charges and fees, audit fees, management fees and surveys linked to participations are fully deductible up to the amount of the annual exempted income. Capital gains are subject to tax the calculation of which will include the sum of all related expenses that were deducted for tax purposes in the year of disposal or in previous financial years.
  • Depreciation of participations is allowed.
  • Liquidation losses are fully deductible.
  • Losses can be carried forward indefinitely.


PRIVATE WEALTH MANAGEMENT COMPANY (Société de Gestion de Patrimoine Familial – SPF)

The Private Wealth Management Company (SPF) is aimed at private investors and individuals. It is fully tax exempt on income received from shares, bonds, notes, mutual funds, deposit accounts and any financial instrument.

Eligible investors 

An SPF is only open to investors managing their private wealth, in particular:

  • An individual or group of closely related individuals managing his/their private wealth
  • Private wealth entities acting for one or more individuals (which include trusts, foundations, anstalts, stichtings, etc.)
  • Intermediaries acting for shareholders in either of the above two categories

Legal Forms of an SPF

An SPF can be established in one of four forms:

  • SARL: requires capital of EUR 12,500, a minimum of one associate and one manager
  • SA: requires capital of EUR 31,000 (of which at least 25% must be paid in), a minimum of one shareholder and one director, as well as a statutory auditor
  • SCA: requires capital of EUR 31,000 (of which at least 25% must be paid in), a minimum of two shareholders, a general partner (actionnaire comandité) and a limited partner (actionnaire comanditaire), and one manager, as well as three statutory auditors
  • COOPSA: a co-operative company that has adopted the form of a public limited liability company allowing variable capital, requiring a minimum of one shareholder and one director

Permitted Activities of an SPF

An SPF is strictly limited to the acquisition, holding, management and disposal of financial assets and can passively invest in any type of security. It cannot undertake commercial trading activities or be involved in the management of any other company and cannot hold real estate, intellectual property or grant interest-bearing loans.

Financial assets an SPF can hold include:

  • Shares or equivalent in public or private companies, including SOPARFIs
  • Bonds
  • Warrants
  • Derivatives, put/call options on securities, indexes and currencies
  • Interests in securitisation and investment funds
  • Deposit accounts

Taxation of an SPF

At the level of the SPF

  • Exempt from corporate income tax, municipal business tax and net wealth tax
  • A subscription tax of 0.25% is applicable on the paid-in share capital, including share premium with a minimum of EUR 100 and maximum of EUR 125,000 a year
    • Subscription tax also applies to that part of the debt (if any) that exceeds an equity-to-debt ratio of 1 to 8
  • Not entitled to benefit from Luxembourg’s double tax treaties or the EU Directives
  • Any dividend and interest payments on financial assets received by an SPF might be subject to withholding tax, if any, in the State of source in accordance with the domestic tax rules of that State

At the level of the shareholders

  • No withholding tax on the distribution of profits from an SPF to its shareholders and on liquidation proceeds
  • Withholding tax levied at source on the interest paid on the advances and debt of the SPF to individuals at a rate of 10% for Luxembourg residents, 35% for EU residents and 0% in all other cases

Our partner Luxembourg office can provide all services required for the establishment and ongoing representation and administration of SOPARFIs and SPFs