The Holding

Introduction

The SOPARFI or SOciety of FInancial PArticipating is also commonly known as Holding. The term Holding referred there is still some time to the Holding 1929, type of society abandoned since 2010. However, the term is now used more in its original sense i.e. detention (the verb to hold in English). At the abandonment of Holding 1929, the Luxembourg legislature has introduced two new forms of structure: The Soparfi and the FHS.

The purpose of a holding is taking participations in Luxembourg or foreign companies. One advantage of this structure is that it can be mixed as follows: hold securities and shares but also conduct business (in contrast of the FHS that is limited to the holding of securities and shares). The holding may also hold intellectual property rights ( Learn More ).

The advantages

Many advantages make the success of this type of structure.

1. The Holding is a fully taxable Luxembourg structure, which means that it is not excluded from tax treaties on double taxation that Luxembourg has signed with many countries around the world.

2. Subject to certain conditions, dividends and capital gains realized by the Holding are excluded from its taxable base. In other words, it does not pay income taxes associated with the holding of securities of other companies (dividends and capital gains).

3. Subject to benefit from the "Mother-Daughter" regime, the Holding suffers no withholding tax on dividends paid shareholders to another company in Europe. It is the same for the reverse, i.e. a shareholding company established in another country will not pay tax in its country of origin for the payment of dividends to the Luxembourg company. Example: A French company that is wholly or partly owned by a Luxembourg holding will pay no tax on dividends payed to its parent company.

4. Holding can hold real estate directly, in Luxembourg or abroad.

If the holding adopted the legal form of a limited company ( Find out more ), it can then be made to the holders of securities guaranteeing a certain anonymity ( Read more ).

Legal form

The Holding is not strictly speaking a legal form. It will therefore be made in the form of a LLC or Ltd. From our perspective, we gladly will favor more form a limited company for its management flexibility via its board of directors.

If the Holding doesn’t perform any activity other than holding shares, no trade permit will be required. Similarly, the company will not need to register for VAT. However, even if it carries out trade operations with its affiliates or subsidiary companies, it will be obliged to register for VAT and make a trade permit request for services would have to be provided.

Conditions for exemption

As we have seen, the Holding may be exempt from withholding tax on the payment of dividends to its shareholders or companies receiving dividends from another shareholder company so far as that all stakeholders, part of a relationship, complies with the directive "Mother-Daughter". To do so, several conditions must be met:

The subsidiary must be a fully taxable capital company in its country of registration, subject to a minimum tax of 10.5%

Mother company must hold at least 10% of the shares of the subsidiary (or a minimum holding of 1.25 Million of € )

Mother company must hold the shares for at least 12 months.