The SOPARFIs and the Cayman Tax regime
The SOPARFIs (Sociétés de participations financières) is a holding company under Luxembourg law. This type of instrument is very popular amongst the wealthy Belgian citizens. According to the recently conducted LuxFiles survey, the 100 wealthiest Belgian families have accumulated approximately 48 billion euros in SOPARFIs.
With the Cayman Tax dispositions, the holders of "legal constructions" abroad (outside Belgium) are required to mention certain information concerning their legal structure. They also must declare the benefits or income produced or collected by their legal construction, which will then be taxed transparently in Belgium (through the Cayman Tax regime) at a rate of the personal income tax.
In view of their popularity, it is important to comprehend to what extent and under what conditions SOPARFIs are considered to be legal constructions within the scope of the Cayman Tax.
For the purposes of the Cayman Tax, there are three categories of legal constructions:
Entities liable to lower tax
Certain insurance contracts
The legal constructions of the second category (entities liable to lower tax) established outside the European Economic Area (EEA) fall under the scope of the Cayman Tax when they are subject in their country of origin to a tax of less than 15% of the taxable income determined in accordance with Belgian rules. The threshold for legal constructions established within the EEA (including for SOPARFIs since Luxembourg is located in the EEA) is lowered to less than 1%.
The SOPARFIs are subject to the ordinary corporate tax regime in Luxembourg, which applies an overall tax rate of around 25%. In this sense, SOPARFIs are generally not considered to be legal constructions within the meaning of the Cayman Tax. In certain exceptional cases, the SOPRAFI will fall below the 1% threshold when it receives income that is not subject to tax in Luxembourg, but which would be subject to tax under Belgian rules.
At Vanbelle Law, we are at your disposal for more specific information on the application of the Cayman Tax or for any international tax issues, so feel free to contact us.
Source: Denis-Emmanuel Philippe, “Les détenteurs des holdings luxembourgeoises sont-ils visés par la taxe Caïman ? », L’écho, 10/07/2019, www.lecho.be