Choosing a Luxembourg structure, SOPARFI, SPF, SCSp, SARL, RAIF or SICAR.

When is the SOPARFI the right vehicle?

The SOPARFI is called for as soon as a company sits in the ownership chain, or when treaty access conditions the structure. It is not a company form but a regime applied to an ordinary SARL or SA.

It remains fully taxable, and that is precisely its value. A fully taxable company has access to tax treaties and to the parent-subsidiary directive, where an exempt entity does not. That difference between being taxable and being exempt is what makes the structure defensible before a foreign tax authority.

Article 166 L.I.R. exempts dividends received where the participation reaches 10% of capital or an acquisition price of EUR 1,200,000, held for at least twelve months. Capital gains follow the same mechanism with the acquisition-price threshold raised to EUR 6,000,000. Since the 2025 financial year, a company may waive the exemption annually where it rests on the acquisition-price threshold, which matters for groups within scope of Pillar Two.

When is the SPF genuinely relevant?

The SPF suits passive financial wealth held by individuals, with no dividend flow under a tax treaty. Its exemption from corporate income tax, municipal business tax and net wealth tax is paid for by a narrow perimeter and by the complete absence of treaty access.

The regime fits a portfolio of listed securities or purely passive minority holdings. It becomes a trap as soon as the wealth becomes active. Interference in management is assessed on the facts: a shareholder who sits and decides in the subsidiary exposes the regime, whatever the articles say.

Why does the SCSp dominate multi-investor structures?

The SCSp combines tax transparency, no minimum capital and complete contractual freedom over how rights are allocated. It has no separate legal personality, is formed by private deed, and lets economic rights, voting rights and distribution rules be written without the constraints of corporate law.

The 5% general partner threshold is the first parameter to check when structuring, and the first cause of recharacterisation found on files taken over from another provider. A general partner interest set at 5% out of convenience, with no deliberate decision, is enough to lose the neutrality that justified the vehicle.

When does the structure become an investment fund?

The test is neither the number of investors nor the amount raised, but the combination of a capital raising, an investment policy for the benefit of the holders and the absence of a commercial strategy of its own. That threshold is often crossed unintentionally, on a co-investment structure presented as a family arrangement.

The consequence is heavy: an authorised manager must be appointed under the law of 12 July 2013, and the vehicle moves into a full regulatory framework. The choice between RAIF, SIF and SICAR is then a separate decision.

What must you be able to produce during an audit?

What is demonstrated during an audit is neither premises nor headcount, but a documented decision chain located in Luxembourg. Board minutes dated and signed in Luxembourg, agendas carrying real decisions rather than ratifications, bank accounts operated from Luxembourg, contracts signed locally, and accounts kept and filed within the statutory deadlines.

A structure whose decisions are plainly taken elsewhere remains open to challenge, whatever the number of resident directors. The point is settled at the design stage, not at the first audit.

What are the four costliest decision errors?

Choosing the SPF for its exemption, then using it as an active holding. An interest-bearing loan to a group company, a management fee invoice or effective participation in a subsidiary's decisions all take the company out of the regime. Recharacterisation brings ordinary taxation on the open financial years, with no retroactive access to the SOPARFI regime.

Incorporating before the bank is secured. The bank account is the real critical path, not the notarial deed. A structure incorporated without an accepted banking solution carries fixed costs, a minimum net wealth tax and filing obligations, without being able to operate.

Overlooking the 5% general partner threshold in an SCSp, which brings the vehicle into municipal business tax and destroys the neutrality sought.

Confusing a tax structure with defensibility. A scheme can comply with the letter of the texts and still be indefensible for lack of traceability. Producing minutes, bank statements and accounts filed on time weighs more, during an audit, than the elegance of the structure.

What this comparison does not cover

Three decisive topics sit outside this page and require individual scoping: the consequences in the shareholder's state of residence, in particular controlled foreign company rules and reporting obligations; the treatment of existing structures to be reorganised, where the exit cost often exceeds the expected gain; and the interaction with Pillar Two rules for groups above EUR 750,000,000 of consolidated turnover.