Qualifying as the second largest fund center in the world, following the United States, Luxembourg has become essential when it comes to the alternative investment fund industry.
Luxembourg provides a platform of services and structuring opportunities to the private equity as well as the venture capital industry. Luxembourg also provides investment vehicles such as the RAIF, SICAR, and SIF. Besides those vehicles, Luxembourg provides other types of commercial companies, such as the SCS (simple Limited Partnership) and the SCSp (special Limited Partnership), which are not subject to any specific regulatory framework but qualify as AIF.
The société en commandite simple (SCS) or société en commandite spéciale (SCSp), known as ‘Lux LPs’ (the Luxembourg Partnerships) are formed under the law of 10 August 1915 as onshore fund vehicles or co-investment vehicles and can qualify as an alternative investment fund (AIF).
Features of the Luxembourg SCS and SCSp
| Practical use of the SCS and SCSp | They may be used for master-feeder structures, as an acquisition vehicle, or for joint ventures, but their most regular use is for private equity, venture capital and real estate investments. |
| Applicable legislation | Company Law dated 10.08.1915, as amended |
| Eligible investors | Unrestricted. |
| Eligible assets | Unrestricted. Any kind of asset class. |
| Legal Form | simple partnership (société en commandite simple – SCS) or a special limited partnership (société en commandite spéciale – SCSp) |
| Risk diversification requirements | No risk diversifation requirements. |
| Capital | No minimum capital requirement. Contribution in kind and/or in cash is permitted. |
| Compartments/Subfunds | No |
| Tax Regime | SCS and SCSp are tax transparent entities and are not subject to corporate income tax (CIT) in Luxembourg, their business may be regarded as commercial and thus subject to Luxembourg municipal business tax (at a rate of 6.75% in Luxembourg) if they effectively enact a commercial activity or if their activity is commercially contaminated. They are excempt from subscription tax, wealth tax, and aren’t subject to withholding tax |
| Benefit from double tax treaty network | No. Due to its tax transparent status, SCSs and SCSps cannot utilise Luxembourg’s vast double taxation treaty network |
| Benefit from the EU Parent Subsidiary Directive | As tax-transparent entities, the SCS and SCSp cannot benefit from the EU’s Parent-Subsidiary Directive |
| Authorisation and supervision by the CSSF | No (No regulatory approval or supervision is required from the CSSF) |
| Possibility of listing | Yes, (but no public offering) |
| European passport | Non-AIF, except activities fall within the scop of article 1 (39) of the AIFM Law |
| Management | By the general partner or an external manager (i.e., AIFM) |
| Required Luxembourg service providers | AIFM (Alternative Investment Fund Manager ) Depositary not needed unless the relevant entity qualifies as an AIF, which is not a de-minimis AIF. |
Luxembourg Partnerships have been the “go-to” vehicle for private fund structures for years now as they offer investor understanding, freedom from corporate law overrides, limited liability, and a generally more satisfactory tax regime.
Ready to set up your investment fund in Luxembourg?, we can help you establish and administrate your operations from this jurisdiction, so go ahead and contact your Damalion expert now.
