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      In 1990, Luxembourg adopted into law the EU Parent-Subsidiary Directive which applies to fully taxable resident companies. Since then, a new type of company has appeared, known as the société de participations financières, or Soparfi for short.

      A Soparfi is not a special type of company but an ordinary commercial entity governed by common law, specifically the 1915 Law on commercial companies. It does not enjoy any special tax regime and is fully taxable. There are no restraints on its field of activity.

      A Soparfi can, however, significantly reduce its tax burden by limiting its activity to holding investments and structuring these so that it can benefit from the rules in the EU Directive on the tax regime applicable to Parent-Subsidiary companies. This regime notably allows, under well-defined conditions, a tax exemption on dividends paid by companies in which the parent company has a holding and on capital gains on the sale of its holdings.

      By contrast, all commercial activity undertaken by a Soparfi is subject to corporation income tax and VAT. Since the Soparfi is liable to tax like any other commercial company, it benefits from double tax treaties agreed by Luxembourg.

      The Soparfi is not regulated or supervised by the CSSF.

      These characteristics make the Soparfi an interesting vehicle for managing holdings in a group of businesses. It is also the preferred vehicle for financing and holding venture capital and private equity investments.