SOCIETE DE PARTICIPATION FINANCIERE
(Soparfi)

A "société de participation financière" or "Soparfi" is a fully taxable company at a global rate of approximately 30% (30.38%), calculated on its profits.

It may benefit from the double taxation treaties ratified by Luxembourg and the Parent company-subsidiary privilege as it results from the European Directive 90/435/CEE of 23 July 1990.

If such company restricts itself to holding exclusively (or at least mainly) participations, it is often referred to by the term "SOPARPI" (holding company).

The Soparfi may benefit from the following tax exemptions under certain conditions:

1. Tax exemption on the dividends received;
2. Tax exemption on the capital gain realised by the Soparfi;
3. No withholding tax on the dividends paid by the Soparfi.

The conditions are the following:

1. EXEMPTION OF CORPORATE TAX ON DIVIDENDS RECEIVED (ART. 166 LIR):

The dividends received by the Soparfi are tax exempted if the following conditions are fulfilled:

1. The mother company must be a company fully taxable residing in Luxembourg;
2. The Soparfi must hold at least 10% of the capital of the subsidiary (or a participating interest of an purchase price of at least EUR 1,200,000 );
3. The subsidiary must be a company fully taxable resident in Luxembourg or a non resident company fully taxable in its country of residence at a rate corresponding to the Luxembourg IRC (at least 11%), or a company resident in a EU member state and mentioned by article 2 of the Counsel Directive of 23 July 1990 (90/435/CEE)
4. The shares must have been held by the soparfi during 12 months at least. This condition may be fulfilled after the payment of the dividend.

2. EXEMPTION OF WITHHOLDING TAX ON THE DIVIDEND PAID BY THE SOPARFI (ART 147 LIR):

There is no withholding tax on the dividends paid by the Soparfi when the following conditions are met:

1. The mother company must hold a direct participation of at least 10% or of a purchase price of at least EUR 1,200,000;
2. The shares must have been held by the mother company during 12 months at least. This condition may be fulfilled after the payment of the dividend;
3. The dividends must be paid by a company resident in Luxembourg and fully taxable;
4. The Parent company must be a resident fully taxable company or a company mentioned by art. 2 of the EU Directive 90/435/CEE or a permanent establishment of a company mentioned by art. 2 of the EU Directive or a permanent establishment of a joint stock company which is resident in a country which has signed a double taxation treaty with Luxembourg.

If the above conditions are not met, a withholding tax of 20% will be levied in Luxembourg on the payment of dividends. This rate can be decreased according to a tax treaty.

3. EXEMPTION OF CAPITAL GAIN TAX (GRAND-DUCAL REGULATION OF 21 DECEMBER 2001)

The capital gain realised by the Soparfi upon the sale of a participating interest in a subsidiary are tax exempt in Luxembourg when the following conditions are fulfilled:

1. The Soparfi must be a company fully taxable and resident in Luxembourg;
2. The subsidiary must be a company resident and fully taxable or a company non resident taxed at a rate corresponding to the IRC (at least 15%) or a company resident in a EU member state and mentioned by article 2 of the Counsel Directive of 23 July 1990 (90/435/CEE);
3. The participation is at least 10% of the capital of the subsidiary (or the purchase priee is at least EUR 6,000,000);
4. The shares must have been held by the soparfi during 12 months at least. This condition may be fulfilled after a partial sale of the shares (if the Soparfi purchases 50% of a subsidiary, it can immediately sell 40% without taxation of the capital gain, under the condition that the remaining 10% be held by the Soparfi during 12 months. After the expiration of the 12 months period, the 10% can be sold without taxation of the capital gain).

4. NET WEALTH TAX

A Soparfi is in principle taxed at a rate of 0.5% calculated on its net wealth. However, participation exceeding 10% in fully taxable limited companies are exempted.