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WWW.IAS­FID.LU INFO@IAS­FID.LU
IAS FIDUCIAIRE S.À R.L.
WWW.IAS­FID.LU INFO@IAS­FID.LU
IAS FIDUCIAIRE S.À R.L.
SOPARFI ­ Financial Holding Company
Financial Engineering
in Luxemb...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
• General information
• Legal framework
• Tax framework...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
General information
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Société de PARticipations Financières – Financial Holdi...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Legal Framework
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
• No legal definition or special legal status
• Legal f...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Société anonyme Société à responsabilité limitée
Incorp...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Société anonyme Société à responsabilité limitée
Capita...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Sociétéanonyme Sociétéà responsabilitélimitée
Managemen...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Société anonyme Société à responsabilité limitée
Audit ...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Société anonyme Société à responsabilité limitée
Annual...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
• Commercial and accounting law:
– Law of 10 August 191...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
• Tax law:
– Council Directive of 23 July 1990 on the c...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Tax framework
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
• Unlimited income tax liability
– Corporate Income Tax...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
– Net Wealth Tax (NWT)
Taxable base: Net asset value at...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Tax exemption on dividend payments
According to Art. 16...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Tax exemption on capital gains
The Grand-Ducal regulati...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Tax exemption on NWT
The net asset value of a participa...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Thin Capitalization Rules
– No statutory role in Luxemb...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Tax exemptions in a nutshell
– Net wealth tax
– Dividen...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Application
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Characteristics
– Unregulated Vehicle
– No investment a...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Characteristics
– Flexible dividend distribution policy...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
SOPARFI
Target
Example 1
Shareholders
Equity
and/or
loa...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
SOPARFI
Target A
Target B
Target C
Target D
•No CIT on ...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
SOPARFI
Target
Example 3
Equity
and
Mezzanine
Capital
•...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
Recapture Rule
Purchase of a participation 100, partly ...
WWW.IAS­FID.LU INFO@IAS­FID.LU
SOPARFI - FINANCIAL HOLDING COMPANY
regulatoryframework
Investment policy
restrictive
flexi...
WWW.IAS­FID.LU INFO@IAS­FID.LU
QUESTIONS & ANSWERS
Q&A
WWW.IAS­FID.LU INFO@IAS­FID.LU
CONTACT US:
www.ias­fid.lu
info@ias­fid.lu
IAS Fiduciaire S.à r.l.
54, route de Mondorf
L-3...
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SOPARFI Financial Holding Company

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General information, legal framework, tax framework, application: SOPARFI Financial Holding Company

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Transcript of "SOPARFI Financial Holding Company"

  1. 1. WWW.IAS­FID.LU INFO@IAS­FID.LU IAS FIDUCIAIRE S.À R.L.
  2. 2. WWW.IAS­FID.LU INFO@IAS­FID.LU IAS FIDUCIAIRE S.À R.L. SOPARFI ­ Financial Holding Company Financial Engineering in Luxembourg
  3. 3. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY • General information • Legal framework • Tax framework • Application
  4. 4. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY General information
  5. 5. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Société de PARticipations Financières – Financial Holding Company • Optimizing the administration of groups of companies • Double tax treaties Luxemburg • Excercise of all administrative activities associated with their investments • With the management of the investment portfolio related activities: e.g. provision of financial advisory services and financing activities • All directly and indirectly related business activities • Business permit for commercial activities
  6. 6. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Legal Framework
  7. 7. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY • No legal definition or special legal status • Legal forms – Public limited company (S.A.) – Private limited company (S.à r.l.) – Partnership limited by shares (S.C.A.)
  8. 8. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Société anonyme Société à responsabilité limitée Incorporation/ Founders The public company may be incorporated by a single or more investors, who may be resident or non­resident, individuals or legal entities. The limited liability company can be incorporated by a single member but no more than 40, who may be resident or non­resident members, individuals or legal entities. Share capital Share capital ≥ EUR 30.986,69 or the equivalent in another non­Euro currency, Minimum subscription 100%, Minimum paid­up : 25%, Shares with or without par (i.e. nominal) value, If the shares have a par value, it may not be lower than EUR 0,01 ­ or the equivalent in another non­Euro currency. The capital ≥ EUR 12.394,68 or the equivalent in another non­Euro currency, Minimum subscription 100%, Minimum paid­up : 100%, Corporate units similar to shares with a par value of at least EUR 0,01 ­ or the equivalent in another non­Euro currency.
  9. 9. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Société anonyme Société à responsabilité limitée Capital contributions Contribution in cash or in­kind: In cash: the founders are required to transfer on to the company’s bank account the funds corresponding to the paid­up capital. The bank will issue a blocking certificate required by the notary, In­kind: subject to an opinion by a Luxembourg independent auditor who will issue a valuation report thereon. Contribution in cash or in­kind: In cash: the founders are required to transfer on to the company’s bank account the funds corresponding to the paid­up capital. The bank will issue a blocking certificate required by the notary, In­kind: no legal obligation to issue an audited valuation report but strongly recommended by notaries. Shares Shares in registered or bearer form. However, from the date of incorporation until publication date of the company’s statutes in the Luxembourg official gazette, the shares will remain in registered form, to be recorded in the company’s register of shares. The units of a limited liability company are always in registered form.
  10. 10. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Sociétéanonyme Sociétéà responsabilitélimitée Managementand SupervisoryBoard Monisticform (Board of directors) or dualistic form consisting of a ManagementBoard and a Supervisory Board. The dualistic form must expressly be provided in the statutes of the company. A single member public company can be administeredby a single director. In the case of a dualistic single member company, a single director is also possible as long as the share capital of < EUR 500.000. In the case the company has more than one Shareholder , the BOD/ManagementBoard must consist of at least three members. They are elected for a term which may not exceed six years by the general meeting of shareholders (monisticform) or by the SupervisoryBoard (dualisticform). They can be dismissed at any time by the general meeting of shareholders. They may be resident or non­resident,individualsor legal entities. The BOD/Management Board is authorized to carry out all measures necessary or useful to achieve the Company’s objective with the exception of powers reserved by law or by statutes to the GeneralMeeting of shareholders or the Supervisory Board. The company is managed by one or several managers who need not be members, who are appointed by the general meetingfor a limited or an unlimited period and who can be dismissedat any time by the general meeting of members. The activity may be performed either for remunerationor without such. There are no legal requirements relating to the residence or nationalityof the managers. They may be resident or non­ resident,individualsor legal entities. The BOM is authorized to carry out all measures necessary or useful to achieve the Company’s objective with the exception of powers reserved by law or by statutes to the GeneralMeeting of partners.
  11. 11. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Société anonyme Société à responsabilité limitée Audit Depending on the size of the company, it must be audited either by a statutory auditor (small company) or by an independent auditor (medium and large companies). The statutory auditor may be one or several individuals or legal entities, that may, but do(es) not need to be shareholder(s) and who is/are appointed by the general meeting. The term of the mandate is fixed by the general meeting of shareholders for a period that may not exceed six years. The statutory auditor can be dismissed at any time. An independent auditor is required by law if 2 of the following 3 criteria are fulfilled by the company during two successive years: ­ Total balance sheet sum > EUR 3,125 Mio; ­ Net turnover > EUR 6,25 Mio; ­ average number of employees > 50. The independent auditor must be a member of the Institut des Réviseurs d’Entreprises in Luxembourg. If the number of partners is less than 25, a statutory auditor is not compulsory. For companies with more than 25 partners a statutory auditor is mandatory. The statutory auditor may be one or several individuals or legal entities, that may, but do(es) not need to be partner(s) and who is/are appointed by the general meeting. An independent auditor is required by law if 2 of the following 3 criteria are fulfilled by the company during two successive years: ­ Total balance sheet sum > EUR 3,125 Mio; ­ Net turnover > EUR 6,25 Mio; ­ average number of employees > 50. The independent auditor must be a member of the Institut des Réviseurs d’Entreprises in Luxembourg.
  12. 12. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Société anonyme Société à responsabilité limitée Annual general meeting Each year, at a date determined in the statutes, the board of directors is required to convene the shareholders to an annual general meeting which will deliberate on the annual accounts. This meeting must be held within a 6 month period after the year­end closing of the financial year. Within a 6 month period after the year­ end closing of the financial year, the member(s) have to approve the annual accounts. No precise date for the members meeting is required by law.
  13. 13. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY • Commercial and accounting law: – Law of 10 August 1915 concerning commercial companies – Accounting Law of 19 December 2002 – Grand Ducal Regulation of 10 June 2009 – Accounting Law of 10 December 2010
  14. 14. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY • Tax law: – 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 (parent­subsidiary­directive) recasted by Council Directive 2011/96/EU of 30 November 2011 – Law of 6 December 1990 and Grand­Ducal regulation released on 24. December 1990 relating to the exemption of dividend payments – Grand­Ducal regulation released on 21 December 2001 related to the exemption of capital gains from disposal of participations (capital gain exemption)
  15. 15. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Tax framework
  16. 16. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY • Unlimited income tax liability – Corporate Income Tax (CIT) Taxable base: Result of the year (NAV closing balance./. NAV opening balance) CIT rate: 21%, Surcharge 5% unemployment contribution Effective tax rate: 22,05% (2013: 22,42%) – Municipal Business Tax (MBT) Taxable base: Result of the year (NAV closing balance./. NAV opening balance) Basic rate = 3%, Municipal rate 140%-300% Municipal rate City of Luxembourg: 225% => Effective tax rate: 6,75%
  17. 17. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY – Net Wealth Tax (NWT) Taxable base: Net asset value at 1 January of FY (Einheitswert) Tax rate 0,5% Tax exemption according to Art 166 L.I.R (Income Tax Law « ITL ») – Incorporation Tax Taxable base: Capital contribution (in cash or in kind) to be paid at Incorporation or capital increase Tax rate: 0,5%, Abolished since 1 January 2009 – Withholding tax (WHT) In principle 15% WHT on dividend payments Decrease possible based on DTAs Tax exemption according to Art 166 L.I.R (ITL)
  18. 18. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Tax exemption on dividend payments According to Art. 166 L.I.R. dividends payed by a Luxemburg or foreign company to a Luxemburg SOPARFI are exempt from CIT and MBT if the following conditions are met: – Participation ≥ 10% or purchase price ≥ EUR 1.200.000 – At date of dividend payment the participation must be hold at least for 12 months – Distributing subsidiary is • A fully taxable corporate entity resident in Luxembourg • A foreign fully taxable corporate entity which is subject to a foreign tax corresponding to Luxembourg CIT (Luxembourg tax authorities generally consider a tax rate ≥ 11% as comparable) • A company residend in an EU country outside Luxembourg applying the Council directive of 23 July 1990
  19. 19. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Tax exemption on capital gains The Grand-Ducal regulation of 21 December 2001 extended the application of Art 166 L.I.R. to capital gains from disposal of participations. Capital gains from disposal of participations are exempt from CIT and MBT if the following conditions are met: – Participation ≥ 10% or purchase price ≥ EUR 6.000.000 – At date of disposal the participation must be hold at least for 12 months – The subsidiary is a fully taxable corporate entity registered in Luxembourg or a foreign fully taxable corporate entity which is subject to a foreign tax corresponding to Luxembourg CIT (Luxembourg tax authorities generally consider a tax rate ≥ 11% as comparable)
  20. 20. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Tax exemption on NWT The net asset value of a participation is exempt from NWT if the following conditions are met: – Participation ≥ 10% or purchase price ≥ EUR 1.200.000 – The subsidiary is • A fully taxable corporate entity resident in Luxembourg • A foreign fully taxable corporate entity which is subject to a foreign tax corresponding to Luxembourg CIT (Luxembourg tax authorities generally consider a tax rate ≥ 11% as comparable) • A company residend in an EU country outside Luxembourg applying the Council directive of 23 July 1990 No holding period of participation is defined by law If the SOPARFI financed the purchase of the participation by a loan this amount is not exempt from NWT => net on disposal of fixed assets approach
  21. 21. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Thin Capitalization Rules – No statutory role in Luxembourg tax law regarding an debt-equity ratio – Practice: 85/15 debt-equity ratio accepted by Luxmbourg tax authorities – Within this limit, interest on debt paid or accrued tax is exempt from withholding tax – Should this ratio be exceeded, tax autorties may qualify a part of the shareholder’s loan as equity. Related interest payments would then be recast as hidden dividend payment. – No restriction of debt-equity ratio relating to liabilities to external parties
  22. 22. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Tax exemptions in a nutshell – Net wealth tax – Dividend payments – Capital gains from disposal of participation – Witholding tax – Liquidation proceeds
  23. 23. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Application
  24. 24. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Characteristics – Unregulated Vehicle – No investment and investors restrictions – No risk spreading requirements – Vehicle quickly set-up, designed for pure participation taking in qualifying subsidiaries – Flexible financing policy (however: thin capitalization rules) – Frequently used by PE Funds because of limited incorporation expenses and operating costs – Application of double tax treaties
  25. 25. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Characteristics – Flexible dividend distribution policy realizable by flexible financing structuring or by implementing hybride financial instruments/mezzanine capital – Flexible dividend distribution by (interim) dividend payments within the limits of Art 72-2 of Law of 10 August 1915 concerning commercial companies
  26. 26. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY SOPARFI Target Example 1 Shareholders Equity and/or loan Equity and/or loan •No CIT on dividends received by SOPARFI •No WHT on interests paid by SOPARFI •CIT on interests received but limited fiscal impact due to financing or no impact (see example 3) •No CIT on capital­gains •No WHT on liquidation proceeds •No WHT on dividends, interests and royalties by target company registered in the EU •Outside EU WHT depending on DTA
  27. 27. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY SOPARFI Target A Target B Target C Target D •No CIT on dividends received by SOPARFI •No WHT on interest paid by SOPARFI •CIT on interest received but limited fiscal impact due to financing or no impact (see example 3) •No CIT on capital­gains •No WHT on any class liquidation proceeds Example 2 shareholders categories Equity a/o A B C D loan Equity a/o loan •No WHT on dividends, interests and royalties by target company registered in the EU •Outside EU WHT depending on DTA
  28. 28. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY SOPARFI Target Example 3 Equity and Mezzanine Capital •No CIT on dividends received by SOPARFI •No WHT on interest paid by SOPARFI • No CIT on interests received •No CIT on capital­gains •No WHT on liquidation proceeds •No WHT on dividends, interests and royalties by target company registered in the EU •Outside EU WHT depending on DTA
  29. 29. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY Recapture Rule Purchase of a participation 100, partly funded by interest­bearing loan Write­off of participation in FY 2010 amounting to 20 Sale of participation in FY 2011 for 130 Div Interest/write­off. tax deductable non tax deductable 2007 5 8 3 5 2008 0 6 6 0 2009 10 4 0 4 2010 BW: 80 20 20 0 2011 VP: 130 Summe 38 29 9 Commercial balance sheet result: 130 ./. 80 = 50 Taxable result: 29 (Sum of all tax tax deductable amounts) Tax exempt: 50 ./. 29 = 21
  30. 30. WWW.IAS­FID.LU INFO@IAS­FID.LU SOPARFI - FINANCIAL HOLDING COMPANY regulatoryframework Investment policy restrictive flexible restrictive flexible SICAV SIF SICAR Securitization SOPARFI/SPF
  31. 31. WWW.IAS­FID.LU INFO@IAS­FID.LU QUESTIONS & ANSWERS Q&A
  32. 32. WWW.IAS­FID.LU INFO@IAS­FID.LU CONTACT US: www.ias­fid.lu info@ias­fid.lu IAS Fiduciaire S.à r.l. 54, route de Mondorf L-3260 Bettembourg Tel.: + 352 275 101 40 Fax: + 352 275 101 41
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