SOPARFI: Complete Tax Guide 2025

The SOPARFI (Société de Participations Financières) is the reference holding vehicle in Luxembourg. This guide details the advantageous tax regime and the conditions to benefit from it.

What is a SOPARFI?

SOPARFI is not a legal form but a tax regime applicable to Luxembourg companies holding participations in other businesses. A SOPARFI is generally incorporated as an SARL or SA.

The main advantage is the 100% tax exemption on dividends received and capital gains realized on the disposal of qualifying participations.

The Participation Exemption Regime

Dividend Exemption

Dividends received by a SOPARFI are exempt from tax if the following conditions are met:

Capital Gains Exemption

Capital gains on disposal of qualifying participations are also 100% exempt under the same conditions as for dividends.

Substance Requirements

To benefit from the SOPARFI regime and avoid reclassification risks, sufficient economic substance is required:

Required Substance Elements

• Real headquarters: Physical office in Luxembourg (not just a mailbox)
• Qualified directors: Resident directors or regularly present
• Local decision-making: Board meetings held in Luxembourg
• Personnel: Employees or dedicated service providers depending on activity
• Bank account: Main account in Luxembourg

Substance requirements vary according to the size and activity of the holding. A passive holding with few transactions will have lower requirements than an active holding.

Detailed Tax Benefits

Comparative Table

No Withholding Tax

Luxembourg applies no withholding tax on dividends paid to:

• EU parent companies (Parent-Subsidiary Directive)
• Companies in treaty countries
• Certain investment funds

Structuring a SOPARFI

Typical Structure

┌─────────────────────────────┐
│   Ultimate Shareholders     │
│   (Individuals or           │
│    foreign companies)       │
└─────────────┬───────────────┘
              │
              ▼
┌─────────────────────────────┐
│   SOPARFI Luxembourg        │
│   (SARL or SA)              │
│   • Dividend exemption      │
│   • Capital gains exemption │
│   • No withholding tax      │
└─────────────┬───────────────┘
              │
    ┌─────────┼─────────┐
    │         │         │
    ▼         ▼         ▼
┌───────┐ ┌───────┐ ┌───────┐
│Subsid.│ │Subsid.│ │Subsid.│
│France │ │Germany│ │Spain  │
└───────┘ └───────┘ └───────┘
  

Recommended Legal Forms

Annual Costs and Taxation

Taxes and Duties

• Minimum tax: €4,815 per year for financial holdings
• Net wealth tax: 0.5% of net assets (minimum €4,815, same base as minimum tax)
• IRC/ICC: Only on non-exempt income

Operating Costs

ATAD Directive and Anti-Abuse

Luxembourg has transposed the European anti-avoidance directives (ATAD). The following rules apply:

• General anti-abuse clause: Artificial arrangements without economic substance may be reclassified
• CFC Rules: Income from subsidiaries in tax havens may be taxed at holding level
• Interest limitation: Deductibility limited to 30% of EBITDA (with exceptions)
• Exit taxation: Taxation of unrealized gains upon transfer of headquarters

SOPARFI vs SPF

Frequently Asked Questions

Can a SOPARFI have commercial activities?

Yes, a SOPARFI can carry out ancillary commercial activities (consulting, management, intra-group financing). However, this income does not benefit from the exemption and is taxed normally.

Is approval required to create a SOPARFI?

No, no approval is required. A SOPARFI is an ordinary commercial company (SARL or SA) that benefits from Luxembourg's standard tax regime.

How to optimize SOPARFI substance?

Optimal substance depends on the activity. At minimum: qualified directors, meetings in Luxembourg, equipped office, and documented decisions. For active holdings, dedicated staff is recommended.