The SOPARFI

 

The Soparfi is a company incorporated under common law, the main objective of which is the management and holding of financial participations. It is subject in principle to all taxes, but dividends and income derived from the transfer of holdings are exempt, subject to compliance with certain conditions. These conditions are contained within the Luxembourg Tax Code (Article 166 LIR).

Article 166 is the transposition to Luxembourg law of European Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States.

This directive was transposed in 1990 and the text of Article 166 was subsequently completed and amended in 2001.

 

The income, therefore, from a holding held by:

 

1. a fully taxable resident company,
2. the State, communes, associations of communes, public institutions and other Luxembourg legal persons governed by public law,
3. the fixed establishment in Luxembourg of a company that is resident in a Member State of the European Union and referred to under Article 2 of the Council Directive of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (90/435/EEC),
4. the fixed establishment in Luxembourg of a company resident in a State with which the Grand Duchy of Luxembourg has concluded an agreement with a view to avoiding double taxation.

is exempt where, on the date on which the income is available, the beneficiary has held or undertakes to hold such holding for an uninterrupted period of at least twelve months and that throughout this period the level of the holding shall not fall below a threshold of 10% or the acquisition price of the holding shall increase to an amount of €1,200,000.

 

Exemption applies to the income derived from a holding held directly in the share capital of:

 

1. a fully taxable resident company,
2. a fully taxable non-resident company subject to a tax which corresponds to corporate income tax,
3. a company that is resident in a Member State of the European Union and referred to under Article 2 of the Council Directive of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (90/435/EEC).

 

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