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The Luxembourg Soparfi tax regime

This publication aims at providing an overview of the tax regime applicable to Soparfi companies. It is intended for general guidance only and does not consist a basis to any advice whatsoever.

What is a Soparfi company?

The term Soparfi is the abbreviation for “société de participations financières” in French, and has arisen from professional practice.

A Soparfi is an ordinary commercial company governed by common law, and specifically the amended Law of 1915 on commercial companies. This type of corporate vehicle is fully taxable.

A Soparfi may be set up as a public limited company (“société anonyme” or SA), a private limited liability company (“société à responsabilité limitée” or Sàrl), a partnership limited by shares (“société en commandite par actions” or SCA), a cooperative (“société cooperative” or Scop), or a cooperative organised as a public limited company (“société cooperative organisée comme une société anonyme” or CoopSA).

What is the advantage of setting up a Soparfi company?

A Soparfi is commercial in its corporate form rather than by its corporate object. A Soparfi is generally an investment vehicle whose main but not exclusive activity consists in taking participations in Luxembourg and foreign companies. Within the context of an appropriate group structuring, a Soparfi allows to take advantage of the EU Parent-Subsidiary Directive with regards to tax exemption on dividends and capital gains, if all the following conditions are met:

  • The stake in the subsidiary amounts to at least 10 %, or the acquisition cost amounts to at least 1,200,000 EUR for dividends or 6,000,000 EUR for capital gains;
  • The company holds or commits itself to hold the minimum shareholding in order to fulfil the minimum shareholding requirement for an uninterrupted period of at least 12 months;
  • The subsidiary is a fully taxable resident company, an entity resident in an EU member state that is covered by Article 2 of the EU Parent-Subsidiary Directive, or a non-resident company fully subject to a tax comparable to Luxembourg corporate income tax (at least 9.5% for 2017), levied on a tax base that is determined according to rules and criteria that are similar to those applicable in Luxembourg).

Example:

A SOPARFI acquires 12 % of the capital of a French public limited company for a price of EUR 1,000,000 on February 10, 2017. It receives a dividend on March 31, 2017. That dividend is exempt from income tax provided the SOPARFI undertakes to hold at least 10 % of the capital of the subsidiary until February 10, 2018.

The exemption also applies to dividends and capital gains on qualifying participations held through qualifying fiscally transparent entities (for instance civil companies).

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