Holding & SOPARFI

Luxembourg is one of Europe's leading centres for holding and managing shareholdings. At Ease Advisory, we support the set-up and monitoring of your financial holding company (SOPARFI) or holding, from incorporation through to consolidated reporting, with the rigour these structures require.

Incorporation and set-up

We support you in choosing the legal form best suited to your project (SA, SARL, SCA) and in the incorporation process:

• Drafting the articles of association, together with the notary
• Registration with the Trade and Companies Register
• Opening bank accounts
• Setting up the holding structure

We make sure your company meets the applicable substance requirements.

Tax regime for shareholdings

Subject to conditions, the SOPARFI benefits from the exemption regime for dividends and capital gains on qualifying shareholdings provided for under Luxembourg law. We analyse the eligibility of your shareholdings for this regime and secure its application, taking into account international tax treaties and the anti-abuse rules in force.

Conditions for exempting dividends and capital gains

The parent-subsidiary regime exempts:

• Dividends received;
• Capital gains on disposal;
• Subject to conditions, the participations held, for net wealth tax purposes.

Both the parent and the subsidiary must nevertheless be capital companies subject to corporate income tax or to a comparable foreign tax, and the participation must cross one of the thresholds set by law.

Two alternative tests exist, and it is the second that is often overlooked: where 10% of the capital is not reached, a sufficiently high acquisition price gives the same entitlement. That value threshold is not the same for dividends and for capital gains, however.

Once exempt, this income escapes both corporate income tax and municipal business tax. We check that the thresholds are met at each closing and document the undertaking to hold where the 12 months have not yet elapsed.

Withholding tax on dividends paid out

A Luxembourg company distributing a dividend in principle withholds tax at 15%, unless a reduced rate applies under a double tax treaty. Where the conditions of the parent-subsidiary regime are met on the date the income is made available, no withholding is due.

The exemption does not remove the formality:

• The distributing company must state the amount of the exempt income in the withholding tax return on investment income;
• That return must be sent to the Direct Tax Administration within 8 days from the date the income is made available.

This is a frequent oversight in holding companies without dedicated staff.

The limits of the regime: non-deductible expenses and recapture

The exemption comes with a trade-off: expenses relating to an exempt participation are in principle no longer deductible. This notably covers:

• Financing interest
• Management fees
• Value adjustments

Tracking these expenses, year by year, determines the treatment of the future disposal.

Two situations make the capital gain taxable despite the regime:

• Expenses already deducted: where expenses relating to the participation have been deducted, the capital gain becomes taxable up to the amount of those expenses.
• Reinvestment: where the participation sold had been acquired by reinvesting a rolled-over capital gain, the previously exempt gain becomes taxable again on disposal.

These items are reported in the annex on participations covered by article 166 LIR, attached to the form 500 return. We keep that record from the first year of ownership rather than at the time of sale, when the information is often lost.

The minimum tax on a holding company with no activity

A SOPARFI remains a fully taxable company: even without profit, it bears minimum net wealth tax, determined on the basis of its last closing balance sheet total. Since tax year 2025, only three bands remain:

• EUR 535 up to a balance sheet total of EUR 350,000;
• EUR 1,605 up to EUR 2,000,000;
• EUR 4,815 above that.

Three practical consequences:

• The band that specifically targeted companies whose financial assets exceeded 90% of the balance sheet has disappeared: a participation holding company is therefore no longer treated differently from an operating company of the same size.
• This minimum is credited against corporate income tax, increased by the employment fund contribution, due in respect of the previous financial year.
• For a company established in the municipality of Luxembourg, the nominal charge on non-exempt profits reaches 23.87%.

Accounting management and consolidation

We handle the bookkeeping of your holding, the preparation of its annual accounts and, where the legal thresholds require it or your group wishes it, the preparation of consolidated accounts. We monitor intragroup flows, financing and distribution transactions.

Ongoing monitoring and company life

A holding company moves at the pace of its group's decisions:

• Acquisitions and disposals of participations
• Capital increases
• Distributions
• Restructurings

We handle the administrative and accounting follow-up of these transactions and coordinate, where necessary, the external parties involved: notary, lawyer, bank.

Who is it for?

We support entrepreneurs, family groups and international investors that hold or wish to structure shareholdings in Luxembourg, whatever the size of their portfolio.

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