Although the private limited liability company is a common way to register a business here, those who want to open a Luxembourg fund or another type of company that operates in the financial industry will generally prefer to incorporate a public limited company (or the joint stock company), as it provides certain advantages, including the possibility of public offerings.  

 

This company type can be used for a SOPARFI in Luxembourg, but in this case, the investors will need a capital of EUR 30,000. The company can be incorporated by minimum one shareholder, whose liability will be limited to the capital contribution as well, just like in the case of a private limited company. However, this company type needs to have its accounts and financial documents audited, unless there is an exemption granted in this case.

 

Another benefit of the public limited company is that the company’s shareholders are allowed to transfer the company’s shares which belong to them without any restrictions, and such shares can also be listed on the Stock Exchange, while the public offering is also possible. As a general rule, the highest ruling body of the company is the board of directors or the management supervisory board. 

 

If the SOPARFI in Luxembourg will be incorporated as a partnership limited by shares, then there must be at least two partners – at least one limited partner and one general partner. The minimum capital is of EUR 30,000 as well, and the limited partner will be liable only to the extent of his or her participation at the company’s capital, while the general partner has a broader liability. 

 

The shares of the limited partner can be easily transferred and listed, but the shares of the unlimited (general) partner can be transferred only in specific conditions. Our team of financial specialists can offer more information on the conditions applicable when opening an investment fund in Luxembourg under this company type. 

 

 

A SOPARFI can be opened in Luxembourg with the purpose of performing investment activities in other companies located in this country or in another jurisdiction. The procedure of company incorporation in Luxembourg states that the SOPARFI can undertake commercial activities as well. However, such activities must follow the provisions established under the company’s statutory documents. The SOPARFI’s statutory documents are the articles of association, which must be signed in front of a public notary in Luxembourg, that should further on be registered with the Trade and Companies Register. 

 

Requirements to open a SOPARFI company in Luxembourg

 

Foreign investors are allowed to set up SOPARFI holding companies as long as they meet the following criteria: they choose a unique company name which bears the AG or SA shortcuts determining the type of structure used and they appoint at least one shareholder for the SOPARFI company.

They must also have a local registered address which will be used as a legal address and they must appoint a director or a board of directors to manage the company – the managing body will be chosen based on the share capital of the company. Apart from the requirements presented here, the investors must also appoint a Luxembourg domiciliation agent to complete the company registration procedure.

 

 

Foreign investors interested in opening an investment fund in Luxembourg may establish a SOPARFI, which designates a financial holding company. A SOPARFI is generally taxed as a company, but it carries out holding or financial activities. As a general rule, companies taxed in Luxembourg are imposed with withholding taxes, which can vary in value depending on the specific category in which the respective company enters.

 

Although the SOPARFI is taxed as a company, it can be exempted from paying the withholding tax on dividends if the beneficiary owns 10% of the company’s capital for a minimum period of 12 months. However, there are other numerous conditions in which the withholding tax on dividends will not apply and our team of financial representatives can provide further advice on this matter. 

 

 

Businessmen interested in wealth management in Luxembourg should know that they can benefit from numerous tax exemptions when investing in this country. In a SOPARFI, the capital gains are not taxable and this regulation takes into consideration all types of related operations. At the same time, it is important to mention that the company’s profits may be exempted from the corporate tax, if specific conditions are met, related to the situation of the parent company, its subsidiary and the ownership aspects.

 

 

What are the general tax principles for a SOPARFI in Luxembourg?

• the overall corporate tax applicable to a SOPARFI in Luxembourg is of 24.94%;
• the corporate income tax is comprised of 2 basic corporate incomes – one refers to a corporate income tax charged at a rate of 17%, to which a solidary surcharge is applied at a rate of 7% (which will lead to an overall tax of 18.19% charged as an effective corporate income tax);
• the other pillar for the calculation of the corporate tax is given by the municipal business tax, which can vary based on the region but in Luxembourg City the tax is charged at 6.75%;
• this type of fund is also liable to the payment of the wealth tax, charged at a rate of 0.5% on the net wealth, but if the net wealth is above EUR 500 million, the excess value will be charged with a reduced rate of 0.05%;
• as a general rule, the SOPARFI in Luxembourg is not liable to the payment of the VAT, but this can depend on the business activities of the company (for instance, when it is not a pure holding company) and in this situation, the company will be liable to the payment of the VAT, charged at a rate of 17%. 

 

Why open a SOPARFI holding in Luxembourg?

 

There are plenty of reasons for which an investor can open an investment fund in Luxembourg as a SOPARFI. Apart from the tax benefits a Luxembourg SOPARFI company offers, foreign investors also take into account the aspects presented below, but more details can be presented at length by our team of specialists:

• privacy – the holding company offers enhanced protection to both the shareholders and the directors of the company;
• the easy registration procedure – Luxembourg is one of the most advanced countries in Europe when it comes to the easiness of incorporating a business;
• the minimum company registration requirements – as mentioned above one shareholder and one director suffice to open a SOPARFI company;
• the SOPARFI company is ideal for issuing financial instruments, for listing shares on the Stock Exchange or for raising capital by investment.

You can rely on our team of consultants if you need legal representation in the process of setting up other types of investment funds, such as the SIF in Luxembourg. 

 

This requires a minimum capital of EUR 1.250.000, but upon the incorporation formalities, the law requires investors to submit only 5% of the necessary capital, as the rest can be deposited in a period of 12 months after the incorporation.