Soparfi: all you have to know about the financial holding company in Luxembourg.
Soparfi: what is it?
Soparfi is a financial holding company in Luxembourg.
Soparfi is used as a vehicle for the management and holding of financial participations in other resident and non-resident companies.
It cannot carry out commercial trading activities or be involved in the management of any other company and cannot hold real estate, intellectual property or grant interest bearing financing.
The fact of not having any corporate purpose, not operating commercial or industrial activity, but having the sole purpose of managing participations, differentiates it from the "holding companies" (Law of July 31, 1929).
The parent company Soparfi is therefore a fully taxable resident capital company that may have different legal forms: SA (joint-stock company), SARL (limited liability company), SCA (limited partnership limited by shares) or cooperative organized as a company by shares.
- SARL: requires capital of € 12,500, a member and an administrator at minimum.
- SA: requires capital of € 31,000 (of which at least 25% must be paid), a shareholder and a director at minimum, as well as an independent auditor.
- SCA: requires capital of € 31,000 (of which at least 25% must be paid), two shareholders and three directors at minimum, as well as an independent auditor.
- COOPSA: a cooperative company that has adopted the form of a limited liability company that allows variable capital, requiring three shareholders and three directors at minimum.
Soparfi can otherwise be configured as:
- the local stable establishment of a company residing in one of the EU Member States (referring to Article 2 of the EC Directive 90/435 /EEC);
- the local permanent establishment of a limited liability company residing in a State with which the Grand Duchy of Luxembourg has concluded an agreement to avoid double taxation.
The subsidiary held by it may have the form of:
- a fully taxable resident capital company;
- company residing in an EU Member State;
- non-resident capital company which is fully taxable by way of a tax corresponding to the tax on the income of legal persons.
Soparfi is very effective in the international field, as it enjoys some benefits, such as:
- vast network of anti-double taxation treaties signed by Luxembourg;
- the operation of the European fiscal directives, by virtue of which, is exempt taxes on dividends distributed by investments and gains from the disposal of investments. The aforementioned exemptions mean that it is a valid alternative to the "holding 29" (also known as "exempt holding company", abolished on 1 January 2007).
The tax regime of Soparfi
The parent capital company resident fully taxable, or Soparfi, is subject in principle to all taxes, but the dividends and income from the sale of investments are tax exempt given the compliance with certain conditions. These conditions are set out in the Luxembourg Tax Code (art.166 LIR).
With regard to wealth tax, it is allowed to deduct the income of legal persons and the municipal commercial tax on profit. Moreover, the following are exempted in the country of the parent company:
- dividends received from the subsidiary;
- the residual assets received as a result of the liquidation of the subsidiary;
- the capital gain realized on the sale of the subsidiary.
Soparfi may also deduct the amount invested in the subsidiary from its taxable assets.
For withholding taxes on dividends paid to its shareholders, Soparfi may be exempt from these obligations, without the application of any withholding tax on the outstanding assets from liquidation granted to the shareholder.
Soparfi: legal and accounting aspects
Regarding the legal aspects, Soparfi is a resident capital company. The form most often used is that of an anonymous company, which must meet the following requirements in the Grand Duchy of Luxembourg:
- presence of at least two shareholders;
- each shareholder must participate in social capital divided into shares;
- the shareholder is only liable up to the extent of his contribution;
- the capital must be at least EUR 30,986.69 (or equivalent in a currency other than the euro) fully subscribed;
- every action must be paid at least a quarter, by cash or through contributions of another nature;
- the shares representing capital are of equal value;
- the board of directors is composed of at least three revocable members, who receive a salary or who exercise the function free of charge;
- one or more auditors constitute the supervisory board;
- no special condition of nationality or qualification is required for directors and auditors;
- the general assembly has the maximum power to operate or to ratify the acts that affect the company.
For accounting aspects, however, Soparfi is obliged to keep a regular accounting, in accordance with the provisions of the Commercial Code.
Therefore, every year the board of directors must draw up a balance sheet and a profit and loss statement.
The annual accounts, which must be clear and able to provide a true financial situation of the company, include:
- the balance sheet;
- the profit and loss statement.
A particularly widespread practice is the use of Soparfi for the management of real estate located in Italy according to the following scheme.
The real estate owned by an Italian can be transferred to a Luxembourg company, through a contribution transaction, thus implying the application of fixed registration tax, compared to 8% for contributions from individuals to Italian companies.
Moreover, if the bylaws of Soparfi foresees that the company carries out its activity mainly abroad, in Italy Soparfi will be considered as a non-commercial entity, with the consequence that the capital gain realized with the sale of an immovable property, in the name of the same foreign company, will not constitute "business income" but "other income".
The capital gain realized on the sale of the immovable property, after 5 years from the possession, will be exempt from taxation.
The income from properties located in Italy and owned by Soparfi are taxed only in Italy, according to the rules for the taxation of physical persons (by virtue of the anti-double taxation agreement).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.