The financial companies in Luxembourg
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What are the different financial companies in Luxembourg ?
SOPARFI (financial holding company)
The tax regime for SOPARFI in Luxembourg is highly beneficial for both investors and businesses, while being subject to strict conditions and increased oversight to ensure compliance with international tax and financial standards.
SOPARFI stands for “Société de Participations Financières” and refers to holding companies whose purpose is to own and manage stakes in affiliated companies. It can also provide financial support and legal assistance to its subsidiaries.
In addition to these holding activities, a SOPARFI can also engage in other activities, whether commercial, real estate, or industrial, provided it holds the appropriate business license for such activities.
Luxembourg is known for its favorable tax environment and flexible legislation regarding holding companies. SOPARFI is exempt from taxes on capital gains or dividends from qualifying holdings, making it an attractive structure for investors and businesses looking to establish their European headquarters.
For a holding to be considered qualifying, it must represent at least 10% of the share capital of a fully taxable company and be held for a minimum of 12 months.
Establishing a SOPARFI – like other vehicles set up in Luxembourg – is subject to strict rules concerning tax transparency and anti-money laundering regulations. Luxembourg authorities ensure that all financial activities in the country, such as those of a SOPARFI, comply with international and European standards for taxation and financial transparency.
SPF (Family Asset Management Company)
Luxembourg introduced the Family Asset Management Company (hereinafter ‘SPF’) by the law of 8 May 2007.
The SPF can only be established by individuals or entities acting on behalf of individuals (such as a trust, for example).
Instead of income or corporate tax, the SPF is subject to an annual subscription tax, which is a flat fee of 0.25% calculated on the value of its adjusted paid-up capital. Adjusted paid-up capital refers to the paid-up share capital increased by the issue premiums and the portion of the debt exceeding eight times the amount of the paid-up share capital and existing issue premiums as of January 1st.
However, the SPF’s activities are limited. It may not engage in commercial or industrial activities, and it may not hold any property assets other than premises for its own use.
The SPF is a flexible type of company for family wealth management in Luxembourg, offering advantages to families wishing to manage their wealth and succession efficiently. The SPF complies with the provisions of the European Union (including taxation) and is subject to strict restrictions and rules on financial transparency and the fight against money laundering.
Securitisation (EU regime)
The securitisation regime in Luxembourg provides a favorable legal and tax framework for businesses wishing to transfer financial assets to a separate entity, which will finance itself by issuing financial securities to investors. The regime offers great flexibility in the choice of eligible assets, within a strict regulatory framework to ensure transparency and compliance with European provisions.
The securitisation company holds assets (and the associated risks) which it manages on behalf of the investors. The investors finance these assets and therefore assume the economic risk. In return for their investment, they receive the income generated by these assets, after the deduction of a fee – known as the securitisation fee – paid to the securitisation vehicle for its management services. Therefore, the securitisation vehicle acts as a risk management instrument: it organizes the holding and management of the assets, but without assuming the economic risk itself, which remains entirely the responsibility of the investors.
Luxembourg is a major centre for securitisation in Europe due to its favourable legal and tax framework, as well as its expertise in asset management. Securitisation vehicles can be established in a variety of legal forms, including public limited companies or mutual funds.
In terms of regulation, the Luxembourg securitisation regime is subject to European Union securitisation rules. The scheme also offers a high level of transparency through financial disclosure and annual reporting requirements.
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