Special limited partnership (SLP or Société en commandite spéciale or SCSp) is a popular structure for investment funds in Luxembourg, offering a simple and flexible investment vehicle for a range of clients. We explore the legal regime of the SLP/SCSp, the relevant laws, the role of the management company and the CSSF, the tax regime of the SCSp, and the possibility to convert it into more sophisticated solutions such as RAIF.
Legal Regime of the SLP/SCSp
The SLP/SCSp is a type of limited partnership that is governed by Luxembourg law, specifically the Société en commandite spéciale law of 23 July 2016. This law outlines the legal framework for the SLP/SCSp, including the rights and obligations of the partners, the management and control of the partnership, and the distribution of profits.
Law about SLP/SCSp
The Luxembourg law allows for the creation of SLP/SCSp with a minimum of one general partner (GP) and one limited partner (LP). The GP has unlimited liability for the debts and obligations of the partnership, while the LP has limited liability up to the amount of their capital contribution. The SLP/SCSp is considered a fiscally transparent entity, meaning that it is not considered a separate tax entity and the partners are taxed on their share of the partnership’s profits.
Management Company as GP and the CSSF
The GP of an SLP/SCSp is typically a management company, which is responsible for the day-to-day management and administration of the partnership. The management company must be authorized by the Commission de Surveillance du Secteur Financier (CSSF) to act as the GP of an SLP/SCSp. The CSSF is the regulatory authority in Luxembourg responsible for supervising the financial sector, including investment funds.
Tax Regime of the SCSp
The SLP/SCSp is considered fiscally transparent and is not subject to corporate income tax because it has no legal entity. Instead, the partners are taxed on their share of the partnership’s profits in accordance with their respective tax laws. In Luxembourg, the standard corporate tax rate is currently 21%, although a reduced rate of 17% applies to investment income.
Possibility to Convert the SCSp into RAIF
An SLP/SCSp can be converted into a more sophisticated solution such as a Reserved Alternative Investment Fund (RAIF) by changing its structure and appointing a new management company. A RAIF is a type of investment fund that is not subject to the CSSF’s authorization requirements, providing a more flexible and cost-effective investment vehicle for clients. The tax regime of the RAIF is similar to that of the SLP/SCSp, with the partners being taxed on their share of the fund’s profits in accordance with their respective tax laws.
The SLP/SCSp is a popular structure for investment funds in Luxembourg, offering a simple and flexible investment vehicle for a range of clients. With its fiscal transparency and favorable tax regime, the SLP/SCSp is an attractive option for investment fund managers and investors. Furthermore, it can be converted into a more sophisticated solution such as a RAIF, providing even greater flexibility and cost savings. If you are looking to launch your first investment fund in Luxembourg, the SLP/SCSp is definitely worth considering.
Damalion experts can assist you to launch your Special Limited Partnership in Luxembourg to make your first investment fund run with success. Contact your Damalion expert now.
