Why Registering a Holding Company in Luxembourg
SOPARFI

Advantages and Tax Benefits

Luxembourg has positioned itself as a leading financial center in Europe and globally, offering an attractive legal and tax framework for holding companies. One of the most commonly used vehicles in Luxembourg for holding and financing activities is the SOPARFI (Société de Participations Financières).

Why registering a SOPARFI holding company in Luxembourg is highly beneficial and outlines all associated tax advantages, legal benefits, and strategic reasons for its use.

What is a SOPARFI?

A SOPARFI is a regular commercial company formed under the Luxembourg Company Law of 1915. It can take several legal forms, but it is commonly established as:

Société Anonyme (SA)
Société à Responsabilité Limitée (SARL)
Société par Actions Simplifiée (SAS)

Unlike specific investment funds, SOPARFIs are not regulated financial entities unless they conduct financial or investment services for third parties. They are primarily used to hold shares in other companies, both in Luxembourg and abroad, and to manage group financing activities.

SOPARFI
Holding Company in Luxembourg
Key Advantages and Favorable Tax Regime

Participation Exemption

SOPARFIs enjoy full exemption from corporate income tax and municipal business tax on:

• Dividends received from qualifying subsidiaries
• Capital gains from the sale of shares in qualifying companies

Conditions for exemption

The SOPARFI must hold at least 10% of the capital of the subsidiary or an acquisition cost of €1.2 million (dividends) / €6 million (capital gains)
Holding period of at least 12 months

No Withholding Tax (WHT) on Outgoing Dividends

Under the EU Parent-Subsidiary Directive, no WHT is levied on dividends paid to qualifying EU shareholders
WHT may be exempt or reduced under Luxembourg’s extensive tax treaty network

No WHT on Interest Payments

Interest payments made at arm’s length are not subject to WHT

No Capital Gains Tax on Sale of Subsidiaries

Capital gains derived from disposal of qualifying shareholdings are fully exempt under the participation exemption regime

Net Wealth Tax (NWT) Relief

SOPARFI holdings in qualifying subsidiaries can be exempt from NWT, provided minimum ownership and holding period conditions are met

Other Tax Benefits

Extensive Double Tax Treaty Network

Luxembourg has over 80 double tax treaties, providing:

• Reduced WHT rates on dividends, royalties, and interest
• Avoidance of double taxation
• Greater legal certainty for cross-border investments

Tax Deductibility of Interest and Expenses

Interest expenses on loans used to finance shareholdings are generally deductible, provided the company does not benefit from participation exemption on related income

Operational and Strategic Benefits

Legal Flexibility

SOPARFI can be incorporated in various legal forms (SA, SARL, SAS), offering flexibility for small to large structures
Only one shareholder and one director are required in SARL form

Asset Protection

Isolates strategic or valuable assets (e.g., IP, real estate, shares)
Minimizes risk by separating operating businesses and assets

Confidentiality

Beneficial ownership must be declared to a central register (REBECO), but public access is restricted and conditional
Directors/shareholders can use nominee services for confidentiality

International Image & Political Stability

Luxembourg has a strong reputation as an international financial hub
Member of the EU, OECD, FATF-compliant
Stable economy and legal system

Regulatory and Administrative Efficiency

SOPARFIs are not subject to CSSF (financial regulator) oversight unless engaging in regulated activities
No specific license is required for passive holding and financing activities
Company formation is straightforward and can be completed in a few days
No minimum capital requirements beyond the statutory threshold (e.g., €12,000 for SARL)

Use Cases for SOPARFI Structures

Group Holding Structure: Centralizes ownership and management of subsidiaries
Real Estate Investment: Holds European or global real estate assets
IP Holding and Licensing: Holds intellectual property and collects royalties
Private Equity / Venture Capital: Serves as holding vehicle for portfolio investments
Family Office: Wealth and succession planning for high-net-worth individuals

SOPARFI Benefits

Luxembourg’s SOPARFI structure is a highly effective vehicle for managing participations, structuring international holdings, and optimizing tax. Its combination of fiscal benefits, legal flexibility, and reputational strength makes it a top-tier jurisdiction for private investors, multinational groups, and family offices.

Whether your goal is tax optimization, asset protection, or cross-border investment planning, a SOPARFI in Luxembourg can deliver strong, strategic advantages.

TBA services

We have 2 decades of experience in the incorporation and management of asset holding companies, whether it be for owning property, or for other reasons such as holding an investment portfolio.

We do not simply incorporate Luxembourg Holding companies – we always take a client’s needs and personal circumstances into consideration before deciding upon which jurisdiction of incorporation will be best and most suitable.

Owning your assets through a company can reduce or eliminate the inheritance tax, capital gains tax and income tax, and afford confidentiality (seen as a major benefit for those clients residing in high-risk countries). Asset holding companies can also circumvent the need for the granting of probate, an often time-consuming and expensive process, and play a vital role for long term family financial planning.

We are happy to examine possibilities with you for as long as it takes, in order to find the best solution for you and your family.

Please do not hesitate to contact us for more information on how we might be able to benefit you in the ownership of your assets.