SOPARFI (Société de Participations Financières)
Are you looking for a tax-efficient, legally secure holding company in a stable, reputable country ? Soparfi, or SOciété de PARticipations FInancières, can be the solution.
Céliance helps you setting up your SOPARFI in Luxembourg. As certain conditions must be met, here are the main features.
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The Soparfi is an essentially asset-based company, which does not enjoy a special tax status, as one might think, but only different taxation depending on the nature of its income.
It was introduced in 1989 in application of a European directive, which is reflected in Article 166 of the French Tax Code.
Major advantages
- it pays no tax on dividends or capital gains from its subsidiaries: a good group holding company,
- no taxation of liquidation surpluses at the end of the company’s life,
- it can carry out intra-group business activities (management, lending, intellectual property management, etc.), under attractive conditions,
- it doesn’t need its own premises, and can use a domiciliation for its head office, making it a flexible and inexpensive structure to set up,
- its standard use is to capitalize dividends from its commercial or industrial subsidiaries, to develop the shareholder’s personal assets and avoid tax friction before reinvestment.
Other uses exist, as detailed below.
Corporate purpose
Soparfi is any company governed by common law whose main purpose is to acquire interests in other Luxembourg or foreign companies, and to manage these interests.
Soparfi may engage in commercial activity, but only in the provision of services to its subsidiaries. If the commercial activity goes beyond this, the company will have to comply with the legislation governing the exercise of a commercial activity (its own premises and authorization of establishment).
In concrete terms, the following situations are frequently encountered :
- shareholdings in other national or international companies, sometimes in addition to a directorship,
- ownership of intellectual property,
- direct ownership of movable assets (vehicles, boats, aircraft, etc.),
- direct ownership of real estate located in the country or abroad, or indirect ownership via an interest in a SCI or other similar structure.
Common provisions to SOPARFI
Capital
- Public Limited Liability Companies
The minimum capital to subscribe shall amount to 30,000 euros.
The minimum to be paid up shall amount to 25% i.e. 7.500 euros. The subscribed capital balance constituted by contributions in kind is to pay up within 5 years.
The capital may be subscribed in cash or in kind.
Contributions in kind shall be certified by a specific Auditor (Réviseur) on a documented files.
- Limited Liability Companies
The minimum capital to subscribe and pay up shall amount to 12,000 euros.
The capital may be subscribed in cash or in kind.
Contributions in kind shall be certified by the shareholder who bring the contribution, and documented (invoices paid).
Shareholders
- Public Limited Liability Companies
The minimum number of shareholders is 1, legal or natural persons.
Shares may be:
- registered, in this case their ownership is established by the registration in the shareholders register held at the registered office,
- bearer, in this case their ownership is evidenced by the simple holding. It should be emphasized that shares are fully paid up prior to their conversion in bearer shares. An authorized depository agent should be appointed (Depository name published at the Registry of Commerce). Céliance is an authorized depository agent. Moreover, a bearer share register is updated by the depository (private document).
- Limited Liability Companies
The minimum number of shareholders is 1, legal or natural persons.
Shares are always registered; their ownership is established by the registration in the shareholders register held at the registered office.
The company shareholding is always public (Registry of Commerce publication).
Directors
The administrators or directors do not need to prove any kind of competence in company management or Luxembourg residence of nationality.
- Public Limited Liability Companies
The minimum number of Directors is 3, legal or natural persons provided that more than one person owns the capital.
The number of Directors may be reduced to 1 if the Company has a sole shareholder.
If the Director is a legal entity, it shall be represented by a natural person.
- Limited Liability Companies
The minimum number of the Directors (“Gérants”) is 1, legal or natural person
If the Director is a legal entity, it shall be represented by a natural person.
Managing Directors are allowed to get paid by a wage with a luxembourg withholding tax (this income has to be reported in Directors country as foreign income).
Economic substance
A company registered in a country should have a significant economic substance in this very country. The economic substance location determines the applicable tax regime on the profits.
Thus, the company headoffice location is not the sole criteria from a tax point of view. Setting up a company in one country to benefit from a local tax regime while the company management is assumed abroad is not coherent. It is clearyly a tax risk.
Economic substance evidences are :
- the place where all the management decisions are made, where the services/goods are delivered,
- local management mandate(s), Luxembourg payroll, national expenses,
- company headoffice, bank account, products storage location or the workforce daily location,
- the clients location, …
It should also be noted that a SOPARFI holding interests in one or more companies based in the same foreign country is more subject to the notion of economic substance than a SOPARFI holding interests in companies based in several different countries.
The evolution of this concept is crucial in the light of the OECD’s work, particularly on BEPS.
Auditors
For Public Limited Liability Companies, under the Luxembourg Law, the Companies are bound to appoint an Auditor in charge of certifying the financial statements.
We provide this service for small companies. Our certified auditor (Réviseur d’entreprises agréé) also provides this service for larger companies.
Registered office
It shall be located in the Grand-Duchy of Luxembourg.
Should the Company have no premises, it may be domiciled with a qualified professional under the Law dated May, 31st 1999.
We benefit from all approvals to domicile your Company in Luxembourg.
Income Tax
The tax opportunities are (as long as the company abides by the related legislation in force, detailled in figure 1 & 2) :
- no tax on dividends coming from subsidiairies,
- no tax on capital gains coming from subsidiairies share transfer,
- no tax on subsidiairies liquidation proceeds.
According to current IPBOX regime (BEPS compliant), an 80% exemption from corporate income tax and municipal business tax on the net income derived from eligible IP assets, leading to an effective tax rate of 5.202% has been implemented. This regime also brought a 100% exemption from net worth tax on eligible IP assets
- inter alia patents,
- software protected by copyrights,
- various forms of medicinal product rights.
The Soparfi is a fully taxable company which benefits from tax exemptions, related to its income’s nature. The national tax rate is around 18% in 2018 plus a 7% communal tax rate.
Examples of fully taxable profit :
- net income coming from quoted financial assets,
- net income from service providing to subsidiairies,
- etc.
Tax treaties
As the Soparfi is a fully taxable company, it benefits from all the signed tax treaties and European directives (especially the Parent / Subsidiary directive).
Net wealth tax
From January 2017, for holding and finance companies (those for which the sum of their fixed financial assets, transferable securities and cash at bank – as reported in their commercial accounts presented in the standard Luxembourg form – exceeds 90% of their total gross assets ans EUR 350,000), there’s a minimum net wealth tax is EUR 4,815.
For all others companies, fully taxable, the minimum income tax amount is related to the balance sheet total.
|
Minimum income tax amount |
Total of balance sheet |
|
535 € |
< 350,000 € |
|
1,605 € |
350,000 € < BS < 2 millions € |
|
5,350 € |
2 millions € < BS < 10 millions € |
|
10,700 € |
10 millions € < BS < 15 millions € |
|
16,050 € |
15 millions € < BS < 20 millions € |
|
21,400 € |
20 millions € < BS < 30 millions € |
| 32,100 € |
BS > 30 millions € |
Thereafter, as the tax return of the 1st year ended is submitted, the tax administration analyses the total of the balance sheet, determines the final minimum tax amount and can change the next tax installments for the next financial year.
Any tax surplus paid for a ended financial year is paid back to the company.
VAT taxation
Due to its activity, a Soparfi Company is not liable to pay the VAT since it does not provide commercial services.
If the Company carries out subsidiary activities liable to pay VAT,
- either this is an exploitation of intellectual property and the registration shall be granted with licensing contract signed given as proof,
- either this is a services providing by the Soparfi to its subsidiaries and a registration shall be granted with contract signed by each part given as justification,
- either this is a trading activity and the related rules shall be complied with for this activity (business licence, own premises).
Natural person shareholder taxation
The Soparfi can pay a part or all of its profits after taxation to its shareholder(s), as dividends.
When distributing income in the form of dividends to their Luxembourg resident partners/shareholders, the Company must deduct a 15 % withholding tax.
When distributing income in the form of dividends to their non-resident partners/shareholders, the Company must deduct withholding tax at the normal rate of 15% or, where applicable, at the reduced rate as provided for in the double taxation treaty between the 2 countries.
Corporate shareholder taxation
The dividends paid undergo no Luxembourg withholding tax, neither no taxation from the shareholder point of view, if the corporate shareholder is a EU company (parent-daughter Directive).
In any other case, the tax treaty in force between the corporate shareholder country and Luxembourg applies.
The holding of interests in subsidiaries
Tax exemptions of the Soparfi
Provided that some of the conditions laid down in the percentage of participation and the term of holding, the Soparfi is taxed at 0% on dividends and capital gains (share transfer or liquidation) coming from its subsidiaries.
The aim is to reinvest the cash generated by the subsdiaries, after income tax paid by the said subsdidaries, without any tax consequence (especially natural person income tax).
This tax exemption applies on all :
> Dividends and liquidation proceeds of its subsidiaries provided that:
- it holds at least 10% of the capital of the subsidiary or the interest has been acquired for a minimum amount of 1.2 millions Euro
AND
- it holds those interests or undertakes to hold them for more than 12 months, both conditions without interruption
> capital gains on disposal of interests, provided that :
- it holds at least 10% in the subsidiary or the acquisition cost due to the participation amounts at least 6 millions euro
AND
- it holds those interests for over 12 months without interruption (The EU Parent-Subsidiary Directive rises at 24 months the minimum interests holding period)
> Liquidation proceeds of the Soparfi :
At the international level, the Soparfi will benefit from the application of:
- the EU Parent-Subsidiary Directive (90/435/CEE dated 20 July 1990)
- double taxation agreements concluded between Luxembourg and non-European countries
The holding of real estate
A Soparfi owning real estate represents an alternative of option above.
This ownership can be considered in two different ways:
- a direct holding, in this case the Soparfi is directly owner of the building located in the Grand-Duchy of Luxembourg or abroad;
- an indirect holding through a local real estate company for a property located abroad. In this case, the Soparfi is the shareholder of the local real estate company.
If the real estate is located abroad, let us never lose sight that, according to double taxation agreements, revenues from a real estate property are taxed in the country of its location.
This taxation is calculated according to the tax rules of the country where the property is located.
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