Soparfi : The Luxembourg Holding And Finance Company - Update May 2017
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WHY LUXEMBOURG?
Fully developed infrastructure of financial services and support functions Multilingual and skilled workforce Founding member of the European Union Political and financial stability (AAA rating) Effective tax system within the European Union and fully compliant with OECD standards Extensive double tax treaty network Attractive tax framework for holding and finance companies: Luxembourg is a traditional platform and hub for cross- border investments made by large corporates, sovereign wealth funds and private equity funds Attractive tax and legal framework for structured finance transactions and securitisations Attractive tax environment for high-net-worth Individuals Lowest standard VAT rate in the European Union Largest cross-border investment fund industry, including UCITS, alternative, hedge, venture capital and private equity funds 2. WHAT IS A SOPARFI?
A Soparfi is a fully taxable ordinary commercial company, whose corporate purpose is limited to the holding of participations and related activities. A Soparfi has full treaty access and benefits from all EU directives. The key benefits of a Soparfi are the participation exemption on dividends, capital gains and wealth tax (subject to inter alia, certain holding and threshold conditions), a withholding tax exemption on dividends paid to qualifying shareholders (subject to minimum holding and threshold conditions), no withholding tax on interest payments or on payments of a liquidation bonus.
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TAXATION OF A SOPARFI: GENERAL PRINCIPLES CORPORATION TAXES
The overall combined rate of corporation taxes is 27.08% in Luxembourg-City1. Corporation taxes include (i) a 19% corporate income tax (impôt sur le revenu des collectivités) on which a 7% solidarity surcharge (contribution au fonds pour l'emploi) is added, leading to an effective corporate income tax rate of 20.33%, plus (ii) a municipal business tax (impôt commercial communal). The municipal business tax rate varies from one municipality to another. In Luxembourg-City, the municipal business tax is 6.75%.
WEALTH TAX
Corporations are liable to an annual 0.5% net wealth tax in Luxembourg (impôt sur la fortune) on their unitary value (i.e. taxable assets minus liabilities financing such taxable assets) as at 1 January of each year2. A reduced tax rate of 0.05% is due for the...
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