A Luxembourg SOPARFI is a non-regulated trading company. The SOPARFI stands for (Société de participations financières) which is French for Society of Financial Participants. Basically, this type of company acts a holding company for various financial activities. Luxembourg allows their “holding” companies to take several forms: Management Holding; Operational Holding; Finance Holding and Organizational Holding.
The main purpose for a SOPARFI is to acquire, manage, and realize investment profits in or outside of Luxembourg. This type of holding company can engage in many types of commercial enterprises as defined in its Articles of Association and Luxembourg’s laws.
In other words, a SOPARFI is a holding company which can engage in different commercial activities worldwide. This is known as a “mixed holding company”.
Luxembourg SOPARFI Advantages
A SOPARFI can have these advantages:
• can hold all types of real estate within Luxembourg or globally;
• deductions in capital gains taxes by meeting certain conditions;
• qualifies for favorable European “patent-subsidiary” treatment;
• when formed as a Société Anonyme (SA) can have its shares held by nominees for privacy; and
• can hold numerous intellectual property rights (patents, brands, designs, copyrights, and domain names).
Luxembourg SOPARFI Benefits
A Luxembourg SOPARFI can enjoy these benefits:
• Foreign Owners: Foreigners can own 100% of the shares.
• Privacy: Shareholders’ names are not in any public records for privacy.
• One Shareholder: Only a minimum of one shareholder is required.
• One Director: Only one director is required who can be the sole shareholder.
• No Audits: There is no requirement for audits.
• Low Taxation: Companies not conducting business in Luxembourg only pay an annual flat tax of 3,210 Euro. However, United States residents and all others residing in countries taxing worldwide income must report all income to their tax agencies.
Luxembourg SOPARFI Name
The company name must differ from all other company names in Luxembourg.
The company name must end with the appropriate words describing the type of company or with its appropriate abbreviation such as a “Limited Liability Company” or “LLC”; or a “Public Limited Company” or “PLC”, etc.
A Luxembourg notary files the Articles of Association with Luxembourg’s Trade and Companies Registrar. The Articles of Association are also published in the Official Bulletin (called an Official Gazette in other countries). One natural person or a legal entity from any country is required to sign the application for formation.
A SOPARFI is a corporation such as a Limited Liability Company (LLC), or a Public Limited Company (PLC), or a Partnership Limited by Shares (SCA). Most foreigners set up a PLC to be registered as a SOPARFI. One advantage of this type of legal entity is the ability to issue bearer shares for privacy.
If its sole purpose is to acts as a holding company of equity shares in other companies, no further registration is required.
However, before becoming registered, it is mandatory that a SOPARFI wishing to engage in commercial activities (whether primarily or secondarily) obtain prior written approval with a business license (a trade license, “autorisation d’établissement”) from the Ministry of Small and Medium Sized Businesses. In addition, application for a Value Added Tax (VAT) number will be required.
SOPARFI’s can only have one shareholder whether formed as a SA public company or a SARL private company.
Shareholders can be citizens and reside in any country and can be natural persons or corporate bodies.
The issuance of bearer shares and registered shares are permitted.
SOPARFI’s formed as a private company (SARL) a minimum of one manager is required. The manager does not have to be a local resident and can be a citizen of any country who has the option of holding shares in the company.
SOPARFI’s formed as a SA public company must appoint at least one director (who can be the sole shareholder), or three directors if not solely owned.
A SA must have a minimum capital of 31,000 Euro with at least 25% paid up. A SARL can be formed with a minimum capital of 12,500 Euro.
Capital can be paid with cash or in kind contribution. In kind contributions to a SA requires the company’s independent auditor’s report regarding its value. A SARL’s in kind contributions do not require this.
Registered Agent and Office
Every company is required to appoint a local registered agent and have a local office address.
SOPARFI’s are not required to obtain audits or file accounts with the government. However, a pubic SA corporation must appoint an independent auditor to certify annual accounts.
Since a SOPARFI is a mixed holding company, tax treatment of the pure holding company profits differ from those earned by commercial or trade activities.
All resident Luxembourg corporations not required to obtain a trade license to conduct business inside Luxembourg where all assets, bank accounts, and securities totals exceeds 90% of its total balance sheet will only pay the minimum corporate tax flat fee of 3,210 Euro.
Since 2013, the corporate tax rate of dividends and liquidation and sale proceeds is 29.22% (Municipal business tax rate of 6.75% plus a Solidarity Surtax of 7% on top of the corporate tax rate of 15.47%). However, these taxes can be exempt under a complicated system for the parent company and its subsidiary to follow.
In addition, there is a Value Added Tax (VAT) of 15% if a SOPARFI engages in commercial activities other than being a holding company.
Note: U. S. residents and all others residing in countries taxing global income must report all income to their tax authorities.
An annual general meetings of shareholders is mandatory.
Only companies engaging in trade or commerce within Luxembourg will have information in the public records.
The names of the shareholders are not part of the public records.
Time for Incorporation
It is estimated that the incorporation process may take up to one week.
Shelf companies and corporations are available to purchase in Luxembourg.
A Luxembourg SOPARFI enjoys these benefits: complete foreign ownership, low taxes, privacy, one shareholder, one director, and no audits.