Luxembourg

Luxembourg Sociètè de Participation Financière (SOPARFI)

Synopsis

The Duchy of Luxembourg was originally founded in 963 and was one of the six founding members of what is now called the European Union. Although being one of the smallest EU members it is by far the wealthiest with a per capita GDP of over US$81,100.00 (2012) and within the top five wealthiest countries in the world. Luxembourg's wealth derives from a highly developed and industrialised economy combined with a very powerful banking and financial sector making it a true and long established competitor to Switzerland. From a tax planning perspective, Luxembourg Sociétés de Participation Financière (SOPARFI's) or holding companies are very popular amongst medium to large companies because they are well regulated, benefit from an excellent local tax treaty network and of course key EU Directives such as the Parent Subsidiary Directive 90/435 (which allows dividend payments to be paid between EU member states without any withholding taxes) and Directive 03/49, which basically does the same but for interest rather than dividend payments within the EU. The only major downside is that Luxembourg companies (be they trading or as is more usual holding SOPARFI companies) are, not unexpectedly, expensive to set-up and especially to administer.

Star Ratings

Corporate registration efficiency

5

Cost

3

Confidentiality

4

Local Banking facilities

5

Legal system

5

Political stability

5

Reputation

5

luxembourg

Location

Luxembourg is bordered by Belgium, France and Germany with the Netherlands to its north-west. The country is 2,586 sq km in size and has a population of 514,862 (July 2013).

Tax Planning Credentials

Companies

In Luxembourg there are only two major companies; sociétés à responsibilité limitée (Sàrl's) and sociétés anonyme (SA's). In most cases, clients will choose to register a SA since these types of companies (basically equivalent to British/Irish public limited companies or PLC's), do not require subscriber details to be kept on the public register. However, in the case of Sàrl's, (basically equivalent to a British/Irish private limited company) such information is required to be kept on public record.

A Soparfi (an acronym for "Société de Participation Financière") is not a specific type of company, rather it is a special tax regime for a resident company that holds and manages the shareholdings of subsidiaries. The Sopfari is fully subject to the Luxembourg corporate tax rate presently at 22.88%. This does, however. entitle such a company to the enjpyment and benefit of EU Directives, such as the parent subsidiary directive 90/435, and access to Luxembourg's extensive Double Tax Treaty network. In addition the Soparfi is also entitled to the Luxembourg participation exemption providing full exemption of dividends, capital gains and liquidation proceeds. To qualify for the exemption the holding must be of 10% of the share capital, or an amount of €1.2m or €6m for capital gains, the holding is for a 12 month period and the distributing company pays 11% corporate tax or benefits from EU 90/435(see above).

Benefits

  • Pro-business environment;
  • Highly respectable and credible jurisdiction;
  • Highly educated population;
  • Highly developed corporate and general law;
  • Excellent communications with the rest of Europe including close geographical proximity to Belgium, The Netherlands, Germany and France;
  • Active and positive member of the European Union;
  • Fully benefits from all EU Directives and Regulations;
  • It is one of the initial 11 Euro zone countries;
  • Excellent double taxation treaty network especially with the Netherlands;
  • Few scandals;
  • Luxembourg is the base for Europe's largest international financial services centre (IFSC) with Dublin coming in a close second;
  • Very sophisticated banking and corporate law together with a large 'pool' of highly trained multilingual professionals;
  • SOPARFI's are fully covered by Luxembourg's tax treaties and can also avail of the EU Parent/Subsidiaries' Directive;
  • 'Bearer' shares can be provided for SA companies;
  • Luxembourg's banking community have maintained much of their confidentiality code despite recent attacks on its veracity by Germany. In addition, bank account facilities can be maintained outside of the Luxembourg jurisdiction

Double Taxation Treaty Network

The key benefit is that Luxembourg has an extensive and very favourable tax treaty network with most European countries despite its favourable holding company structures especially with the Netherlands and its NV and BV companies.

Administration & Accountancy Services

Managed Luxembourg SOPARFI Companies

The key service offered by the SCF Accountancy & Law is that of a fully managed Luxembourg SOPARFI company where-by we can register your Company, act as the daily legal and accountancy administrators, liaise on your behalf with the Revenue, Luxembourg Company House, maintain the registered office, company minutes and in fact everything necessary to provide you with a fully functional VAT registered Luxembourg holding company including VAT returns, online banking, management and meeting rooms etc. – In fact, our Luxembourg SOPARFI services are totally bespoke according to your needs.

Set-Up & Annual Maintenance Fees

Please see separate SCF Accountancy & Law Luxembourg SOPARFI Fee Quotation