Luxembourg Vehicles

The Soparfi

  1. Introduction

SOPARFI is the acronym for « Société de Participations Financières »  i.e. « Financial Shareholding Company » and refers to holding companies with thepurpose of holdingand managingparticipating interest in affiliated undertakings. Besides these holding activities, the SOPARFI might as well carry out any other object be it commercial, real estate or industrial providing that it has the correspondingauthorizationfor such other activity (lien vers autorisation of establishment).

The SOPARFI is therefore subject to the standardtax and legal framework.

 

  1. Eligible Investors

The shares of aSOPARFI are not restricted to any particular type of shareholder. The shares maybe subscribed by an individual, a group of individuals or any type of corporate shareholders.

 

  1. Capital requirement
  • Upon incorporation,
    • The SOPARFI set up as SA or SCA must have a minimum capital of EUR 30,000 whereas SPF set up with the form of SARL must have a minimum capital of EUR 12,000. No minimum applies to SCOOP SA.
  • SOPARFI’s are subject to the Company Law and accordingly SA, SCA and SàRL must constitute a legal reserve by allocating every year to that reserve account an amount equal to 5% of the profitafter deduction of losses carried over from previous years. Such obligation remains until the legal reserve reaches 10% of the share capital.

 

  1. Legal forms

A SOPARFI may elect for any of the below legal form, i.e.:

  • Public Limited Company (Société Anonyme)
  • Limited Company (SARL)
  • Simplified Public Limited Company (SAS)
  • Partnership Limited by Shares (SCA)
  • Cooperative Company organized as a Public Limited Company (SCoSA)

In practice, most  common legal forms preferred are the SA or Sàrl (see our comparative table).

 

  1. Authorization and supervision
  • There is no need for a SOPARFI to apply for any authorization of establishment as long as it does not carry out commercial or financial activities, nor make a public offering of its shares. Accordingly, the SOPARFI will limit its scope of activities to holdingparticipation, receiving and granting loans to affiliated entities, or provide management services to controlled subsidiaries
  • SOPARFI does not as such fall in the scope of any supervisory authority

 

  1. Investment policy and corporate purpose

A SOPARFI designed to hold participationsis not subject to any diversification requirement. A SOPARFI mayinvest in any type of assets withno limitation.

 

  1. Legal and regulatory framework
  •  SPF must maintain its registered office within the territory of the Grand Duchy of Luxembourg. It may however happen in specific situations that the registered office of the company would remain abroad, like when transferring the company to Luxembourg from a foreign country that considers the place of incorporation as registered office (for instance like the Netherlands). The SOPARFI is subject to the common legal and tax framework.

 

  1. Tax regime
  • As mentioned above, the SOPARFI is subject to general legal and tax framework(lien vers corporate tax).
  • As from 2020, they are subject to a combine corporate tax rate of 24,94 %, with a minimum of Net Worth Tax of 4.815,- EUR (for financial companies)
  • Dividends collected from qualified participation and capital gains derived from the sale of such qualified participation by a SOPARFI are tax exempt in Luxembourg. In such context, qualified participation means a stable and important participation held in another corporation subject to a normal tax regime (comparable to the Luxembourg tax regime). In the previous sentence, stable holding means a continuous 12 months holding period, and important holding means either a 10 % participation. In case the threshold of 10 % participation is not reached,the law provides for an alternative reference to consider the participation held at a percentage lower that 10 % is however important, ie:
    • in case of a dividend collected, the participation will be regarded as important if its acquisition price reaches EUR 1.200.000
    • in case of a gain realized upon sale, the participation will be regarded as important if its acquisition price reaches EUR 6.000.000
  • The SOPARFI tax exemption is subject to recapture rules in case of previously made depreciation on the participation or on a loan granted to that same participation.
  • Liquidation proceeds is deemed to be a dividend and are exempted under the same above mentioned condition
  • Dividends paidare exempted from withholding tax providing that
    • They are paid to a fully taxable company residing in the EU or a Treaty country(lien vers liste of Double tax Treaties)
    • At the time of the distribution, the shareholding in the SOPARFI represents 10% or the acquisition is at least 1.200.000 EUR
    • Such threshold of shareholding is maintained or will be maintained for an uninterrupted period of 12 months
  • Capital gain derived from the sale of the shares held in the SOPARFI are not subject to any tax if it is realized after more that 6 months of holding by non residents
  • Liquidation proceeds are not subject to any withholding tax without any condition
  • The SOPAFI may have to register for VAT purposes depending on the activities carried out

 

  1. Amendment of the share capital
  • Issue of new shares by the SPF is ruled by the Law and the statutes, and is reserved to eligible investors only (individuals or assimilated). The legal form adopted by teh SPF and the possible existence of pre emptive rights or restriction on transfer of shares provided for in the statutes are thus the limitations to be considered.
  • At the occasion of a share capital increase, newly issued shares may be paid in either in cash or in kind. Contribution of industry is not allowed.

Contribution to the share capital without issuance of shares is also possible. No notarial deed is required and the documentation may be signed under private seal.

 

  1. Financial statements – Net Asset valuation
  • Annual accounts must be submitted to the approval by the shareholders within 6 months from the closing date and filed with the Registry of Trade and Companies in Luxembourg within a month after such approval by the shareholders. (check out our key dates calendar= lien vers key dates calendar)
  • SOPARFIs do not have to issue a Net Asset Valuation like investment vehicles offered to public investors have to provide.
  • For the annual accounts, the valuation method is the lowest of acquisition price or market value at the date of the closing of the social year.
  • Accounting law also allows the fair market value method for the valuation of financial instruments.

 

  1. Dividends payments
  • Dividend payments are subject to a decision to be adopted by the shareholders during a meeting to which annual accounts are submitted for approval.
  • Interim dividends may also be decided through a board of directors (S.A.) or a board of managers (S.à.r.l), subject to specific conditions laid out in a law issued in 2009.

 

  1. Central administration / domiciliation
  • A SOPARFI is not required to appoint a central administrative agent.
  • It needs to occupy adequate offices when it carries out activities subject to a business licence

 

  1. Compartments
  • There is no such segregation in an SPF like in a SICAR or a SIF that have compartments to separate investments from each other.
  • SOPARFI may issue tracking shares (each class of shares would then correspond to a specific investment / asset) in order to allocate specific income to a given investor.

 

  1. Depositary bank
  • There is no such obligation imposed to an SPF to have its assets deposited with a custodian bank.

The private wealth management company

  1. Introduction

Luxembourg has introduced thePrivate Wealth Management Company (hereafter referred as SPF) bythe law of May 8, 2007.

The SPF is designed to be a portfolio management vehicle dedicated to individuals, and offering a tax exempt regime deferring taxation to the time the profits realized by the SPF are distributed to the shareholders.

 

  1. Eligible Investors

Only individuals or entities acting on behalf of individuals (fiduciary estate, trusts and the like) may hold shares in a SPF.

Accordingly, most SPF are set up either by individuals for their own purpose, or vehicles like  atrust, foundation or “stichting administratie kantoor”, or sometimes a group of individuals gathered as an investment club.  Shares of anSPF may not be listedon a stock market.

 

  1. Capital requirement
  • Upon incorporation,
    • The SPF set up as SA or SCA must have a minimum capital of EUR 30,000 whereas SPF set up with the form of SARL must have a minimum capital of EUR 12,000.
  • SPF are subject to the Company Law and accordingly must constitute a legal reserve by allocating every year to that reserve account an amount equal to 5% of the profitafter deduction of losses carried over from previous years. Such obligation remains until the legal reserve reaches 10% of the share capital.

 

  1. Legal forms

Three legal forms which can be adopted by the SPF, i.e.:

  • Public Limited Company (SA)
  • Limited Liability Company (SARL)
  • Partnership Limited by Shares (SCA)

 

  1. Authorization and supervision
  • The set up of an SPF is not subject to any prior authorization and the supervisory administration of SPF’s is the Indirect Tax Administration (i.e. “Administration de l’Enregistrement et des Domaines”).
  • The domiciliation agent of the SPF must ensure that the shares of the SPF are duly held by eligible investors.
  • The SPF acts as paying agent when held by Luxembourg resident individual should it pay interest
  • A certificate must be sent on an annual basis by the domiciliation agent to confirm that those 2 requirements are complied with.

 

  1. Investment policy and corporate purpose
  • Activities of the SPF are strictly limited to the management of the private wealth, which excludes:
    • any commercial activities
    • holding of real estate
    • grant a loan, even to a participated or controlled company.
  • On the other hand, SPF may
    • hold a participation, without interfering in the conduct of the activities of such participation
    • invest in almost any kind of financial assets (metal, currencies, securities such as bonds, etc.)

 

  1. Legal and regulatory constraints

SPF must maintain its registered office within the territory of the Grand Duchy of Luxembourg. It may however happen in specific situations that the registered office of the company would remain abroad, like when transferring the company to Luxembourg from a foreign country that considers the place of incorporation as registered office (for instance like  the Netherlands).

 

  1. Tax regime
  • An SPF is tax exempt, and therefore not subject to corporate income tax, municipal business tax and net wealth tax.
  • An SPF is subject to an annual subscription duty calculated at a rate of 0,25% on the aggregate share capital and share premium and increased by the amount exceeding 8 times of the total of the share capital + the share premium. Such annual tax has a minimum of EUR 100 and is limited to a maximum of EUR 125.000 per year. Examples of calculation of the annual tax are provided at the bottom.
  • For the first year of existence of the SPF as well as for the year during which it is liquidated, a pro rata basis applies.
  • No withholding tax is levied on dividends paid by an SPF
  • Dividends collected by an SPF do not enjoy the benefit of treaties for the avoidance of double taxation, and are therefore subject to a withholding levied at source at a rate depending on the tax legislation of the country from which such dividend payment arises.
  • Dividend distributed by the SPF to resident shareholder do not benefit from tax reduction in the hands of the recipient as provided for in the Luxembourg Income Tax Law. Such dividends are therefore fully taxable in the hands of Luxembourg residents.
  • Capital gains at the occasion of the sale of shares held in an SPFby non-resident individuals are exempt from taxation in Luxembourg subject to certain conditions.

 

  1. Amendment of the share capital
  • Issue of new shares by the SPF is ruled by the Law and the statutes, and is reserved to eligible investorsonly (individuals or assimilated). Thelegal form adopted by the SPFand thepossibleexistence of pre emptive rights or restriction on transfer of shares provided for in the statutes are thus the limitations to be considered.
  • At the occasion of a share capital increase, newly issued shares may be paid in either in cash or in kind.
  • Contribution to the share capital without issuance of shares is also possible. No notarial deed is required and the documentation may be signed under private seal.

 

  1. Financial Statements – Net Asset valuation
  • Annual accounts must be submitted to the approval by the shareholders within 6 months from the closing date and filed with the Registry of Trade and Companies in Luxembourg within a month after such approval by the shareholders. (check out our key dates calendar= lien vers key dates calendar)
  • SPF do not have to issue a Net Asset Valuation like investment vehicles offered to public investors have to provide.
  • For the annual accounts, the valuation method is the lowest of acquisition price or market value at the date of the closing of the social year.
  • Accounting law also allows the fair market value method for the valuation of financial instruments.

 

  1. Dividend payments
  • Dividend payments are subject to a decision to be adopted by the shareholders during a meeting to which annual accounts are submitted for approval.
  • Interim dividends may also be decided through a board of directors (S.A.) or a board of managers (S.à.r.l), subject to specific conditions laid down in a law issued in 2009.

 

  1. Central administration / domiciliation

Being subject to a light regulation, SPF do not know the concept of centraladministration meaning that the administration of an SPF mainly consists in providing a registered address, accounting services and tax services.

 

  1. Compartments
  • There is no such segregation in an SPF like in a SICAR or a SIF that have compartments to separate investments from each other.

SPF may issue tracking shares (each class of shares would then correspond to a specific investment / asset) in order to allocate specific income to a given investor.

 

  1. Depositary bank

There is no such obligation imposed to an SPF to have its assets deposited with a custodian bank.

Securitization in Luxembourg

Coming Soon