Open a SOPARFI in Luxembourg
Updated on Saturday 05th November 2022
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One of the ways to start an investment fund in Luxembourg is by registering a financial holding company (SOPARFI). Businessmen who are interested in how to start a fund in Luxembourg or an investment company can set up a SOPARFI for specific business purposes, such as performing investments in other companies, which can be registered in this country or elsewhere. At the same time, the SOPARFI company can perform acquisition or management activities in other companies, but it can also enter commercial activities following the regulations prescribed in the articles of association of this business form.
If you are interested in a hedge fund startup and want to use a SOPARFI in Luxembourg, our affiliates there can advise you.
| Quick Facts | |
|---|---|
| Applicable legislation | Commercial Company Act |
Legal forms for registration | Corporate forms: private and public limited liability company, non-corpotate form: limited partnership |
Minimum share capital | EUR 12,000 for private companies, EUR 30,000 for public companies |
| Shareholding structure | A SOPARFI in Luxembourg may have at least one shareholder and a maximum of 100 |
| Minimum number of directors | One |
| Local manager required (YES/NO) | NO, there is no need for a local manager for a SOPARFI in Luxembourg |
| Types of activities permitted | Financial, holding activities
|
| Best uses | Holding and investment purposes |
| Registration authority | Luxembourg Trade Register |
| Special licensing requirements | YES, when used as an investment vehicle |
| Possibility to use for investment fund creation (YES/NO) | YES, the SOPARFI can be used for starting a fund |
| Registration timeframe (approx.) | Approx. 4 weeks |
| Taxation of a SOPARFI in Luxembourg | The SOPARFI in Luxembourg can be subject to the following taxes: corporate (29.22% rate), net worth tax (0.5% rate) |
| Why open a SOPARFI company | High degree of privacy, easy registration procedure, possibility to operate in the European Union |
| Why choose Luxembourg to create a SOPARFI | Stable economy, friendly foreign investment regime, advantageous taxation system with access to double tax agreements |
The SOPARFI company in Luxembourg and its uses
The SOPARFI in Luxembourg is the same as the holding company in other country and it can be registered in accordance with the Company Law of the Grand Duchy. However, here, this legal form has some unique features, even if its main purpose is to own or hold assets in subsidiary companies. It can also be used to start an investment fund. As a matter of fact, it is one of the preferred enterprises for a hedge fund startup in the European Union.
If you have questions on how to start a fund, our affiliates in Luxembourg can explain the requirements and the benefits of using the SOPARFI as an investment vehicle.
If you have questions on how to start a fund, our affiliates in Luxembourg can explain the requirements and the benefits of using the SOPARFI as an investment vehicle.
Non-corporate forms a SOPARFI can take
Luxembourg was the first country to host an investment fund in 1959, and today there are nearly 4,000 investment vehicles operating here, and with the help of the Association of the Fund Industry, the sector benefits from promotion at the highest levels.
SOPARFIs are business entities that are governed by Commercial Companies Law. A SOPARFI in Luxembourg can take various forms, including non-corporate ones, such as:
- a limited liability partnership
- a cooperative (SC);
An important aspect to consider when setting up such a legal entity in Luxembourg, including when being used as an investment fund vehicle is for the SOPARFI to be registered in the Grand Duchy. In other words, it must have its legal seat in Luxembourg.
Registration requirements for the SOPARFI in Luxembourg
Investors interested in how to start an investment fund in Luxembourg or another type of vehicle are required to register the legal entity following the provisions applicable for the respective structure. In the case of a SOPARFI, it is necessary to draw the company’s articles of association with a public notary in Luxembourg. Further on, the company’s statutory documents will be submitted to the Trade and Companies Register.
The SOPARFI can be registered both by natural persons or legal entities, who may reside in Luxembourg or in another country. For creating an investment fund, a SOPARFI in Luxembourg may be a good structure for those interested in operating in the Grand Duchy.
Although the legal entity acts as a holding company, it will be taxed following the regulations provided by Luxembourg’s Law on Commercial Companies. Investors should also know that a SOPARFI in Luxembourg benefits from the Parent-Subsidiary Directive established by the European Union, thus being able to reduce the level of taxation.
Legal entities for SOPARFI in Luxembourg
Any company or investment fund opened here is registered through a legal entity prescribed by the country’s legislation, a procedure that is also applicable for those interested in opening a hedge fund startup.
In the case of a SOPARFI, the legal entities under which the company can be registered are the following:
- public limited company;
- limited liability company;
- an European company;
- partnership limited by shares.
As mentioned above, the SOPARFI may also enter into commercial activities. If this is the case, the investors are required to obtain consent on the respective activities prior to starting the business operations. The consent will be provided by the Ministry of Small and Medium-Sized Businesses.
The most important features of a SOPARFI in Luxembourg
When setting up investment funds in Luxembourg, both private and public companies can be employed. The private limited liability company benefits from more advantageous conditions when it comes to incorporation.
Some of the main features of a Luxembourg private limited liability company used to create a SOPARFI are:
- it can have a minimum of 1 and a maximum of 100 shareholders;
- it can be established with a minimum share capital of EUR 12,000, and the shareholders' liability will be limited to their participation in the company's capital.
Although registering a private limited liability company (or a joint stock company) is a common way to register a business in Luxembourg, those who want to open a Luxembourg fund will choose to incorporate a public limited company (or a joint stock company), as it offers certain advantages, such as the ability to make public offerings.
In Luxembourg, this business form can be utilized for a SOPARFI, however, the investors will need a capital of EUR 30,000. The firm can be formed with as few as one shareholder, whose liability is restricted to the capital contribution, such is the case of a private limited company. Unless an exemption is granted in this situation, it must have its accounts and financial papers audited.
Another advantage of a SOPARFI registered as a public limited company in Luxembourg is that its shareholders are free to transfer shares without limitation. Such shares can also be listed on the Stock Exchange, as well as a public offering, which is essential when using it for creating an investment fund.
Our affiliates in Luxembourg are at the service of both professional and non-professional investors who want to enter Grand Duchy’s competitive investment fund market.
SOPARFI as an investment vehicle
Luxembourg provides a diverse range of investing options, among these investments funds are some of the most prolific. Among these corporate, non-corporate, SOPARFIs, securitization vehicles, and partnerships can be used to create various types of funds, including cryptocurrency ones.
SOPARFIs are unregulated, fully taxable commercial enterprises whose main business operation is holding and related finance. Depending on the unique needs of the shareholder, SOPARFIs are often formed as private limited companies (S.à r.l. ), public limited companies (société anonyme, S.A. ), or partnerships limited by shares (société en commandite par actions, S.C.A.). This is why they are excellent tools for opening investment funds in Luxembourg.
They can be used to create the following types of funds:
- undertakings for collective investments (UCIs);
- retail funds, further divided into open-ended or closed-ended;
- hedge funds;
- alternative investment funds (AIFs).
Out of them, UCIS are the most employed as they can further be categorized into:
- companies with fixed capital (SICAVs);
- companies with variable capital (SICAFs);
- specialized investment funds (SIFs);
- common investment funds (FCPs);
- companies with risk capital investments (SICARs).
However, these are available for professional investors only. These are also the majority of investors with activities in Luxembourg.
If you decide to create a fund in Luxembourg and decide on the SOPARFI as an investment vehicle, our partners can help you.
It is also possible to set up real estate investment funds (REITs) and the SOPARFI can be used as a vehicle, considering as a holding company it can own such properties.
It should also be noted that apart from registering the SOPAFRI as a legal entity with the Trade Register, it must then obtain its investment license from the Luxembourg Financial Regulator (CSSF).
Creating a hedge fund startup with the help of a SOPARFI in Luxembourg
Hedge funds are among the preferred types of funds of professional investors. Even if they imply higher risks, the return possibilities are exceptional.
Hedge fund startups can be created in Luxembourg with the help of a SOPARFI which is an excellent tool from a taxation point of view. Among the advantages of creating such funds are:
- the fact that they can be used outside Luxembourg as well;
- they target professional investors, and Luxembourg is home to some of the most important investment companies;
- they are subject to less stringent supervision however, they still need to respect laws applicable at national and international levels.
Hedge fund startups are also easier to create compared to other types of investment vehicles. The Luxembourg SOPARFI can be registered in approximately 3 weeks with the help of our affiliates. Here is also a video on this subject:
Taxation of a Luxembourg SOPARFI
The SOPARFI in Luxembourg is a corporate organization that operates under the same corporate tax structure as local enterprises. It must also be registered with the tax authorities in Luxembourg. Even if it is set up in the financial sector, it will not fall under the regulations addressed to those who want to open a Luxembourg fund. This happens because different rules of law apply in that case and other tax principles. The taxes that apply to this structure have changed throughout time as it follows:
- the entire corporate tax applicable to a SOPARFI in Luxembourg is 24.94%;
- the levy is composed of two types of corporate incomes – the standards corporate income tax of 17% and solidarity surcharge of 7% is applied;
- such entities must also pay the wealth tax, which is imposed at a rate of 0.5% on net wealth;
- any amount exceeding 500 million EUR is levied with a reduced rate of 0.05%.
Investors are invited to contact our team of affiliates in Luxembourg for more details on the SOPARFI company. Our partners can offer in-depth advice on the tax regulations applicable to this business structure.