Related Resources Luxembourg Key Elements
The SOPARFI (Société de Participation Financière) is an ordinary company which beside its holding activity can carry out or take part in any other activity such as financing, real estate, … It falls within the scope of general tax law and may benefit from the double taxation treaties concluded by Luxembourg and the European tax directives.
The SOPARFI can be constituted either as a “société anonyme” (public limited company- SA), a “société à responsabilité limitée” (private limited company- SARL) or a “société en commandite par action” (limited partnership by shares).
The minimum share capital for incorporation of a Luxembourg Company is €12.500 for a “société a responsabilité limitée”, which must be fully paid up, and €31.000 for a “société anonyme” of which a minimum of 25% must be paid up. A company incorporated as a “société anonyme” may have bearer shares. However, shares are nominative until the entire capital has been paid-up.
A SOPARFI is a company fully subject to tax at a normal rate of 29,63% and is eligible to benefit from the double tax treaties concluded between Luxembourg and third countries and from EU directives.
A 1% capital duty is due to the tax authorities on any contributions made to the SOPARFI. However, this tax will not be applied if:
Business tax is not levied on a Luxembourg Company. However, it is subject to a net worth tax of 0,5%.
The taxable income of a SOPARFI is based on the annual financial statements prepared in accordance with generally accepted accounting principles. Expenses incurred exclusively for the purposes of the business are deductible while expenses incurred with exempt income are not deductible.
Income in form of dividends, capital gains on disposal of shares and winding-up exceedents can be exonerated under certain conditions.
To be able to benefit from dividends exemption, the following conditions must apply:
The distributing company must be:
The receiving company must be:
The holder of the participation must hold or undertake to hold the shares for an uninterrupted period of at least 12 months during which the participation must not fall under a 10% limit and or the acquisition price being under €1,2 million.
The conditions for a SOPARFI to benefit from the exemption are similar to those of the exemption of dividends. The only difference is the amount of acquisition price that is €6 million.
See income above.
Besides the common advantages of a holding company, the SOPARFI may also enjoy from the following:
In case of a winding-up of a SOPARFI, dividend payments are transmitted free of withholding tax to the beneficiaries.
Dividends paid by the SOPARFI are exempt from withholding tax if the distributing company is a fully taxable limited company under Luxembourg law and the receiving company is:
At the date on which the income is made available the beneficiary must hold or undertake to hold directly for an uninterrupted period of at least 12 months a participation of at least 10% in the share capital of the distributing company or an acquisition price of at least €1,2 million.
According to the law, no withholding tax shall be imposed on payment of interest by a Luxembourg company.
According to the law of 9 July 2004, no withholding tax shall be imposed on payment of royalties by a Luxembourg company, taking effect from the year of 2004.
The basis to calculate the net worth tax applicable on fully taxable companies is their net operating assets reflected by the unit value of the company. However, participations can be excluded from the calculation of the unit value of the company if:
The SOPARFI is:
The subsidiary is:
The direct participation must be at least 10% of the share capital or the acquisition price to be at least €1,2 million at the end of the operational year taken into consideration for the calculation of the unit value of the SOPARFI.
The SICAR (Société d’Investissement à Capital Risque) is a company which is ruled by the Law of 15th June 2004. It falls in the scope of general law and benefits from the EU Directives or double taxation treaties concluded by Luxembourg. Its activities are restricted to investment in venture capital and it is restricted to “well informed” investors. Venture capital is defined by law as any direct or indirect injection of capital to entities in view of their launch, development, listing,...
The SICAR may benefit from the double taxation treaties concluded by Luxembourg.
The SICAR can be constituted either as a “société anonyme” (public limited company- SA), a “société à responsabilité limitée” (private limited company- SARL), a “société en commandite par action” (limited partnership by shares), a “société en commandite simple” (limited partnership) or a “société coopérative sous forme de société anonyme” (cooperative company).
The minimum subscribed share capital of a SICAR must reach €1 million within 12 months after the authorization by the CSSF. The capital must be fully subscribed but each share must only be paid up for at least 5% (not applicable if incorporated as a limited partnership). Contributions may be in cash or in kind. No legal reserve has to be maintained. The capital may be variable under certain conditions.
The SICAR must be authorised by the “Commission de Surveillance du Secteur Financier” (CSSF), the Luxembourg supervisory authority for the financial sector. The custodian, as well as the directors or the managers must submit to a CSSF clearance.
The assets of the SICAR have to be safeguarded by an appointed custodian. It should be a regulated financial institution established in Luxembourg. His role will be to act independently and exclusively in the interest of the investors.
Nevertheless, the custodian does not verify the conformity of the investment decisions to the investment policy defined in the prospectus of the SICAR.
The SICAR investors can be professional investors (i.e. investment funds, professional investors, pension funds, other commercial companies) or all “informed” investors.
An investor will be classified as “informed” if:
No investment rules are provided by law (i.e. risk spreading or diversification rules).
The SICAR benefits from a special tax regime.
Income from movable assets (sale, contribution or liquidation) is exempt from income tax in the SICAR.
Non-resident investors are not subject to Luxembourg income tax on capital gains on disposal of shares in the SICAR.
Besides the common advantages of a holding company, the SICAR may also enjoy from the following:
Dividends paid by the SICAR are exempt from withholding tax, regardless the place of residence of the shareholder.
Interest and royalties paid to non-residents are not subject top withholding tax.
Double Tax Treaties
2 if conditions are met.
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