Why choose a SOPARFI?
There are a number of benefits to the SOPARFI. Firstly, with regard to tax benefits, there are a number of conditions under which exemptions from taxation can be received. Noteworthy stipulations include the absence of subscription tax and the absence of withholding tax in the liquidation process of a SOPARI. Another major benefit is privacy that is available to shareholders in a holding company in Luxembourg since names are not required to be published. It is also easy to register this type of company and registration only requires one shareholder.
Definition
SOPARFI stands for Societe de Participations Financieres and refers to companies with financial investments. This type of company is one that is required to abide by general legal law of Luxembourg as well as tax-related company law. In order to form a SOPARFI, the company’s articles of association must be recorded by a notary. After this, these articles of association must be published in the Official Bulletin (Memorial C) and lodged with Luxembourg’s Trade and Companies Register. This company only requires one natural or legal person of any nationality.
Legal form
There are three types of legal form that a SOPARFI may take. The most common is a Public Limited Company (PLC., Corp./SA). The other two are a Limited Liability Company (LLC., Ltd/SARL) and a Partnership Limited by Shares (SECA).
Company purpose
The main purpose of SOPARFI is the acquiring of investments in companies as well as their management and realization. This type of company is allowed to carry out all types of commercial activities as long as they do not go against the law of Luxembourg. Written consent from the country’s Ministry of Small and Medium-Sized Businesses is required in order to conduct commercial activities as a primary or secondary activity.
Taxation
There are a number of tax-related advantages associated with a SOPARFI.
Corporation Tax Exemption
Profits from the dividends, sale or liquidation of a subsidiary company is exempt from corporation tax if it satisfies particular conditions with respect to the status of the parent and subsidiary companies, the extent of the investment and the period of ownership.
Double Taxation Agreements (DTA’s)
SOPARFI benefits from DTA’s that Luxembourg have with other countries. This means that these companies are not required to pay taxes to different countries.
These companies also have advantages related to the deduction of expenses, net wealth tax and withholding tax. On the other hand, a SOPARFI may be liable to value-added tax at a rate of 17% depending on if its business activities include commercial activities.
