The tax regime of SOPARFI in Luxembourg is advantageous for investors and companies, while being subject to strict conditions and increased surveillance to ensure compliance with international tax and financial standards.
SOPARFI is the acronym for « Société de Participations Financières » i.e. « Financial Shareholding Company » and refers to holding companies with the purpose of holding and managing participating interest in affiliated undertakings. It may as well provide financial support and legal assistance to its subsidiaries.
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 corresponding business license for such other activity.
Luxembourg is known for its favorable tax environment and flexible legislation regarding holding companies. SOPARFI is exempt from taxes on capital gains or dividends related to qualified participations, making it a very attractive structure for investors and companies seeking to establish their European headquarters.
For a participation to be qualified, it must represent 10% of the capital of a fully taxable capital company that will be held for at least 12 months.
The set-up of a SOPARFI – like other vehicles established in Luxembourg – is subject to strict rules regarding tax transparency and anti-money laundering. Luxembourg authorities ensure that all SOPARFI activities comply with international and European standards for taxation and financial transparency.
The private wealth management company
Luxembourg introduced the Private Wealth Management Company (hereafter “SPF”) by the law of May 8, 2007.
The Family Wealth Management Company (SPF) is a type of company that can be used for family wealth management in Luxembourg. It is designed to offer a flexible structure for wealthy families seeking to manage their wealth and succession effectively.
The SPF is exempt from taxes and pays an annual tax of 0.25% calculated according to a formula taking into account debts as well as capital and share premium. Minimum duty is 125 EUR and maximum is 125.000 EUR. This makes it a very attractive structure for families looking to protect their wealth and reduce their tax burden.
However, the activities of the SPF are limited. It cannot engage into commercial or industrial activities, and it cannot hold real estate assets other than the premises for its own use.
The SPF is a flexible type of company for family wealth management in Luxembourg, offering benefits for families seeking to manage their wealth and succession effectively. The SPF complies with European Union provisions (including taxation) and is subject to restrictions and strict rules regarding financial transparency and anti-money laundering.
Securitization in Luxembourg
The securitization regime in Luxembourg is a favorable legal and tax framework for companies seeking to transfer financial assets to a separate entity and issue 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 securitization regime in Luxembourg allows companies to transfer financial assets to a separate legal entity called a “securitization vehicle”. This entity then issues financial securities, such as bonds, which are sold to investors.
Luxembourg is a major center for securitization in Europe due to its favorable legal and tax framework, as well as its expertise in asset management. Securitization vehicles can be established in different legal forms, including corporations or mutual investment funds.
In terms of regulation, the Luxembourg securitization regime is subject to European Union rules on securitization. The regime also offers great transparency through requirements for financial information disclosure and annual reports.