RAIF
Practical useHedge funds, private
equity and venture capital
funds, real estate funds,
infrastructure funds,
distressed debt funds,
Islamic finance funds,
microfinance funds,
socially responsible
investment funds, tangible
assets funds and any other
type of alternative funds.
Applicable legislationLaw of 23 July 2016 ("RAIF Law")
Authorisation and supervision by the CSSFNo
Qualification as an AIFAlways an AIF
Exemption
from AIFMD
full regime
under lighter
regime (AIFMD
registration
regime)
No.
External
authorised
AIFM
requirement
Always required.
Eligible investorsWell-informed investors.
Eligible assetsUnrestricted, unless it invests in a portfolio of risk capital (such as a Sicar).
Risk diversification requirementsUnrestricted, unless it
invests in a portfolio of risk
capital (such as a Sicar).
Legal Form• FCP
• SICAV (SA, Sàrl, SCA,
SCoSA, SCS, SCSp)
• SICAF (SA, Sàrl, SCA,
SCoSA, SCS, SCSp)
The entities may be openended
or closed-ended.
Umbrella structureYes
Capital requirements• FCP:
EUR 1,250,000 to be
reached within 12 months
from the entry into force
of the management
regulations.
• SICAV:
EUR 1,250,000 to be
reached within 12 months
from the incorporation of
the SICAV.
Required Luxembourg service providers• Management company
in case of an FCP.
• Depositary bank
or professional of the
financial sector providing
depositary services, subject
to conditions.
• Administrative agent.
• Registrar and Transfer
Agent.
• Approved statutory
auditor.
Possibility of listingYes
European passportYes
Net asset value (NAV) calculation and redemption policyAt least once a year for reporting purposes.
Corporate income taxNo income tax, unless investing only in risk capital, then SICAR tax regime applicable.
Subscription tax• Rate: 0.01% of the NAV annually.
• Exemptions apply.
Wealth taxNo wealth tax
Withholding tax on dividends / interests and capital gainsNot subject to withholding tax.
Benefit from double tax treaty network• RAIFs investing in a portfolfio of risk capital (such as a SICAR)
Access if set-up as a corporate entity (except if set-up under the form of a SCS/SCSp).

• RAIFs not investing in
a portfolio of risk capital (such as a SICAR), but setup
as:
SICAV / SICAF: Limited to
certain double tax treaties
(see circular L.G. -A n°61 of
the tax administration of 8
December 2017).
FCP: see circular
L.G.-A n°61 of the tax
administration of 8
December 2017.
Benefit from the EU Parent Subsidiary DirectiveNo, unless RAIF that
invests in a portfolio of risk
capital (such as a SICAR).
Thin capitalization rules (debt-to-equity ratio)No debt-to-equity ratio.

On July 23, 2016, Luxembourg adopted legislation creating a new type of fund vehicle, the reserved alternative investment fund (fonds d’investissement alternatif reservé) (RAIF), designed for well-informed investors and offering much greater speed to market than the existing specialised investment fund regime.

  • No direct regulation of fund by CSSF
  • Must have AIFMD-authorised manager
  • Minimum investment of €125,000 for non-professional and non-institutional investors
  • May take any legal form and follow any strategy
  • Benefits from pan-European marketing passport

The reserved alternative investment fund, known for short as RAIF or French acronym, FIAR, is distinguished by the fact that unlike the SIF or risk capital investment company (SICAR), it is not subject to direct regulation by the Luxembourg regulator, the Financial Sector Supervisory Authority (CSSF). However, the RAIF must have an authorised and regulated manager.

The RAIF is designed to benefit from the structuring flexibility of non-UCITS collective investment vehicles, which include SIFs and SICARs. However, it allows sophisticated, institutional and professional investors that do not require dual supervision of managers and funds to dispense with an additional layer of regulation that imposes costs, delays and restrictions on the management and asset allocation of the funds. There is no minimum initial investment in a RAIF for institutional and professional investors, but a minimum of €125,000 for well-informed investors that are neither professional nor institutional.

The RAIF is based on the alternative investment fund regime established by the European Union’s Alternative Investment Fund Managers Directive and its application in Luxembourg through the national legislation of July 12, 2013 on alternative investment fund managers. However, the absence of a requirement for authorisation or ongoing supervision by the CSSF means that future changes to the fund’s constitutional, information or other documents do not require regulatory approval either.

The manager of a RAIF must be authorised under the AIFMD as an alternative investment fund manager and domiciled in a European Economic Area member state in order to benefit from the pan-European marketing passport. Under the legislation, the manager of the RAIF may follow any kind of investment strategy, with no restrictions regarding eligible assets, and funds whose investment policy is restricted to risk capital investments will not be required to adhere to risk-spreading rules.

A RAIF can take a contractual legal form (fonds commun de placement or FCP) or if an open-ended or closed-ended corporate fund (SICAV or SICAF), any corporate form including a public limited company (société anonyme), partnership limited by shares (société en commandite par actions), or common or special limited partnership (société en commandite simple – SCS – or société en commandite spéciale - SCSp). It can be created as an umbrella structure with multiple sub-funds, as well as multiple share classes, making segregated compartment structures available to non-regulated Luxembourg funds for the first time.

Most RAIFs enjoy the same tax treatment as SIFs, paying an annual subscription tax amounting to 0.01% of its net assets but enjoying complete exemption from corporate income tax or withholding tax on the distribution of returns, whether in the form of dividends or interest income. RAIFs limited to risk capital investments will be subject to the tax regime applicable to SICARs.

Luxembourg’s implementation of EU regulatory requirements regarding alternative investment funds initially involved a dual system of approval and ongoing supervision of both managers of AIFs and fund vehicles, whether Part II funds, SIFs or SICARs, by the CSSF. Prior to passage of the RAIF law, alternative fund managers seeking to manage and market funds from Luxembourg were obliged to obtain separate authorisation from the regulator in their capacity as an AIFM and for any funds they managed, as well as being subject to ongoing oversight of both manager and fund.

This arises from the grand duchy’s system of product-based regulation, stemming from the original UCITS Directive, which now encompasses a broad range of investment fund regimes under the supervision of the CSSF. These include not only UCITS but non-retail funds including Part II funds, so called after Part II of successive iterations of Luxembourg’s fund legislation, the most recent dating from 2016, specialised investment funds introduced in 2007, and risk capital investment companies established in 2004.

However, the adoption of the AIFMD into Luxembourg law in July 2013 introduced a different type of regulation for alternative investment based on regulation and ongoing supervision of alternative fund managers rather than the fund vehicles themselves. The AIFMD also introduced a change in the application of cross-border distribution through a passport to all funds managed by an authorised AIFM, irrespective of whether the funds themselves were subject to regulation or not.

In Luxembourg the regulation of managers introduced by the AIFMD represented an additional layer of supervision on top of the existing product oversight regime applicable to established vehicles for institutional and sophisticated investors. In certain circumstances, the double application of supervision seemed excessive and over-protective, especially for funds targeting sophisticated investors, entailing extra costs and significant delays before a fund could be approved and marketed. Hence the introduction of the concept of the RAIF as a vehicle for investors who do not need the additional layer of protection.

To maintain the competitiveness of Luxembourg as a fund domicile and servicing and distribution centre, the July 2013 legislation that transposed the AIFMD into national law also incorporated measures to modernise the country’s limited partnership regime, changing the rules applicable to common limited partnerships and creating a new type of vehicle without legal personality, the special limited partnership.

Both types of limited partnership can be used for structuring regulated fund vehicles, as SIFs and SICARs, but also for unregulated investment vehicles. Although common or special limited partnerships are not subject to direct product regulation, they are subject to indirect supervision if they are alternative investment funds that must have an authorised AIFM.

While unregulated limited partnerships are popular with fund promoters and investors, particularly for closed-ended vehicles investing in illiquid assets such as real estate and private equity, they may not be suitable for all circumstances, particularly for investment in securities and other liquid assets.

While SCSs and SCSps are tax-transparent, in some circumstances a tax-opaque vehicle may be preferable because of its ability to benefit from double taxation avoidance treaties. Another restriction is that unregulated limited partnerships cannot adopt umbrella structures and thus cannot create segregated portfolios within legally separate sub-funds.

The introduction of the RAIF was therefore intended to ensure the broadest possible range of options for promoters, managers and investors, under a regime broadly similar to that applicable to SIFs, except that RAIFs are not subject to supervision by the CSSF, offering an option for Luxembourg alternative investment funds to escape the double layer of supervisory requirements. AIFs that are subject to management supervision through their authorised AIFM now have the choice between establishment as regulated products (Part II funds, SIFs or SICARs) and as unregulated products (unregulated SCSs and SCSps or RAIFs).

Under the legislation, a RAIF must be established or incorporated by notarial deed. In the case of a RAIF created as a contractual fund (FCP) or as a common or special limited partnership (SCS or SCSp), the deed is drawn up subsequently to record that the RAIF in question has been established. Within 10 working days of establishment or incorporation, a notice of confirmation, including the identity of the RAIF’s designated alternative investment fund manager, must be deposited with the Luxembourg trade and companies’ register, published in the official gazette, the Mémorial, and recorded on a publicly available list maintained by the register. Details of the list and the information to be published in the Mémorial are set out in a grand-ducal regulation.

The constitutional documents of the RAIF depend on its corporate or contractual structure. They consist of articles of incorporation if the RAIF is incorporated as a public limited company (SA), a partnership limited by shares (SCA) or a private limited liability company (Sàrl); management regulations if the RAIF is established as an FCP; or a limited partnership agreement if it is established as an SCS or SCSp. Articles of incorporation must be established by notarial deed, but management regulations and LPAs may be established under private deed.

Promoters of existing Luxembourg entities may wish to convert them into RAIFs. In the case of regulated entities, this may be to facilitate the speedy launch of new sub-funds, while unregulated limited partnerships may be converted in order to enjoy the benefits of an umbrella structure.

An existing SIF, Part II fund or SICAR may be converted into a RAIF in accordance with applicable legislation and provisions governing its constitutional documents, subject to prior approval from the CSSF of amendments to those documents, and amendment of the fund’s prospectus or issuing documents, unless the fund is a SIF or SICAR that is not open to new investors. The conversion of an existing unregulated limited partnership requires an amendment of the LPA, subject to the applicable requirements of that agreement.

The conversion of a non-Luxembourg entity into a RAIF is also possible as long as re-domiciliation of the entity is authorised under the law of its country of origin, otherwise the transfer may be carried out through a contribution in kind, merger or other mechanism. The entity in question must be brought into compliance with the AIFMD through the appointment of a fully authorised external AIFM by the time of the conversion.

The legislation also makes it possible for a fund established as a RAIF to be converted subsequently into a regulated vehicle as a Part II fund, SIF or SICAR.

The RAIF is an undertaking for collective investment that automatically qualifies as an alternative investment fund, and cannot be structured as a non-AIF. This is in contrast to SIFs or SICARs that are not covered by the definition of an AIF in Luxembourg’s legislation of July 2013 on alternative investment fund managers, if they do not raise any capital from investors, have only one investor, or if access is restricted to a pre-defined group of investors.

With very limited exceptions, RAIFs must appoint as manager an external AIFM that is fully authorised under the AIFMD, in Luxembourg or another EU member state, and does not seek exemption from full regulation under the directive’s sub-threshold registration regime, applicable to managers of fund assets of less than €100m or of €500m in the case of non-leveraged funds with a lock-up period of at least five years. This means that self-managed AIFs and funds that benefit from an exemption from the AIFMD requirement, for instance under de minimis exemption, are not eligible to become RAIFs.

In line with AIFMD article 2.3(c) and (d), the legislation does provide for exemption from the obligation for RAIFs to appoint an external AIFM for funds that act in the public interest and are managed by a supranational or international institution such as the European Central Bank, European Investment Bank or European Investment Fund, European development finance institutions, bilateral development banks, the World Bank and International Monetary Fund, and funds that are managed by a national central bank.

While the RAIF is not itself directly authorised by the CSSF, it is indirectly regulated under the directive, since the fund’s AIFM must ensure that as an AIF, it complies with the requirements of the AIFMD. An AIFM must notify its home regulator (whether in Luxembourg or another EU state) as soon as it is appointed as manager of a RAIF. A non-EU AIFM may be permitted to manage a RAIF in the future if it is fully authorised in a home jurisdiction to which the third-country passporting regime has been extended, although this provision does not appear likely to be enacted in the foreseeable future.

If the external AIFM ceases to manage the RAIF, whether at its own initiative or that of the fund, a replacement authorised external AIFM must be appointed within a maximum period of two months. If no successor as external AIFM has been appointed within this period, the directors, managers or management company of the RAIF must introduce within one month of the deadline’s expiry a request to the appropriate district court (Tribunal d’arrondissement) in Luxembourg to put the RAIF into liquidation.

A RAIF must draw up an issuing document, a prospectus or placement memorandum, containing all information necessary for investors to be able to make an informed judgement about the proposed investment and its inherent risks. A RAIF’s issuing document should typically include all AIFMD-mandated disclosure requirements, which are designed to provide the information required for an informed judgement, but the interpretative documents accompanying the legislation expressly allow these disclosure requirements to be met by other means. The issuing document must be up to date in all material aspects if additional securities are issued to new investors.

Issuing documents must state prominently on their cover page that the RAIF is not subject to supervision by any Luxembourg regulatory authority. Otherwise the law offers broad flexibility in terms of the content of RAIFs’ constitutional and issuing documents. To avoid having to amend its constitutional documents every time a RAIF establishes new sub-funds, these are likely to be drafted in a generic manner, with the particular features of each sub-fund described in a dedicated issuing document. In such cases, each sub-fund’s issuing document must state that the RAIF is structured as an umbrella fund, as is the case for Luxembourg-domiciled SIFs and SICARs.

RAIFs must issue annual reports, no later than six months following the end of their accounting year and reviewed by a certified Luxembourg auditor, containing at least the minimum information required under Appendix 1 of the RAIF legislation and Article 22 of the AIFMD. Umbrella RAIFs may produce separate annual accounts for each sub-fund, provided that in addition to specific financial information for each compartment, they incorporate consolidated financial information regarding the structure’s other sub-funds, again a practice accepted by the CSSF for umbrella SIFs and SICARs.

RAIFs are not be subject to any kind of supervision or oversight by the CSSF or any other Luxembourg regulatory authority, and can be launched without obtaining regulatory approval beforehand or afterwards, but they are indirectly subject to AIFMD requirements applicable to authorised AIFMs. Notably, the appointed AIFM must hold authorisation for the investment strategy to be followed by the fund – in Luxembourg some AIFMD authorisations are valid for certain strategies only.

If established outside the grand duchy, the AIFM must have obtained authorisation to provide management services in Luxembourg under the terms of article 33 of the AIFMD regarding passporting of management services, in which case the RAIF’s constitutional and issuing documents must be filed with the CSSF. Where a RAIF has a Luxembourg-based AIFM, there is no systematic review of the fund documents by the regulator. However, the CSSF may refuse management services passporting for an AIF if the documents submitted by the foreign AIFM regarding its authorisation as an AIFM do not cover management of the type of AIF in question.

Once a RAIF has been established, no further regulatory approval is required for subsequent actions in the course of the fund’s existence, such as amendments to documentation, the launch of new sub-funds, changes of service provider or liquidation.

A RAIF may invest in any type of asset and follow any type of investment strategy, subject to the requirement that its portfolio must be managed according to the principle of risk spreading, except where the RAIF makes exclusively risk capital investments and opts for the associated special tax regime. The concept of risk capital in the legislation comes from the SICAR law, under which investment in risk capital means the direct or indirect contribution of assets to entities in the expectation of their launch, development or listing on a regulated market.

The governing body of the RAIF is responsible for determining the level of risk spreading appropriate for its portfolio, or alternatively for assessing whether the investments qualify as risk capital. There are currently no guidelines on the minimum level of diversification required for a RAIF portfolio, but government commentaries on the bill preceding its enactment have indicated that the CSSF guidelines on risk spreading for SIFs in circular 07/309 should be followed. As a general rule, this would mean that a RAIF or an individual sub-fund should not invest more than 30% of its gross assets or aggregate investor commitments in any single asset, subject to certain exemptions.

The 30% restriction does not apply to securities issued or guaranteed by an OECD member state or its local authorities, or EU or other regional or global bodies, nor to collective investment schemes that are subject to risk diversification requirements equivalent to those applicable to RAIFs.

RAIFs or their sub-funds investing in infrastructure assets will be deemed sufficiently diversified if they have at least two investments and no single investment represents more than 75% of their gross assets or commitments. Funds also benefit from an initial ramp-up period to move into compliance with the minimum risk diversification requirements.

The RAIF can be structured as a common contractual fund (FCP), which is without legal personality, an open-ended or closed-ended investment company (SICAV or SICAF).

A RAIF constituted as an FCP must have a Luxembourg management company, which may be its AIFM if it is authorised as such by the CSSF. Otherwise the FCP must appoint a separate AIFM that is authorised in the grand duchy or another EU member state.

A RAIF in the form of a SICAV or SICAF can be established as a public limited company, private limited liability company, corporate partnership limited by shares, common or special limited partnership, or a co-operative public limited company (société cooperative sous forme de société anonyme or SCoSA).

A RAIF can be structured as an umbrella fund with one or more compartments or sub-funds, with the assets and liabilities of each sub-fund legally ring-fenced from each other, unless otherwise provided for in the constitutional documents of the RAIF. Cross-investment between sub-funds is permitted, subject to the same conditions applicable to SIFs. The liquidation of a sub-fund does not entail the liquidation of other sub-funds or of the RAIF as a whole, as long as there are other active sub-funds.

If stipulated in the RAIF’s issuing document, each sub-fund can have its own distinct investment policy, and rules on the issue and redemption of securities or ownership interests can be tailored to each the requirements of individual sub-funds. A single umbrella structure may combine open-ended and closed-ended sub-funds; fully funded sub-funds and compartments with a drawdown capital structure; and in the case of limited partnerships, sub-funds issuing partnership interests in the form of securities as well as those using partnership accounts.

Each sub-fund may have its own investment manager or investment adviser, investment committee or advisory board, but the RAIF must have a single managing body – for instance, the board of directors for a fund established as an limited company, the general partner for a limited partnership, or the management company for an FCP – as well as a single depositary, administrator, auditor and AIFM.

In addition, a RAIF or sub-fund may have multiple classes of securities subject to different fee structures, distribution or carried interest structure, or currency hedging policies, and they may be denominated in different currencies. Sub-funds may be reserved for one or more investors or categories of investor.

SICAV-RAIFs established as an SA, SCA or Sàrl benefit from corporate rules that are more flexible than those applicable to trading companies or other kinds of corporate entity established under Luxembourg’s legislation of August 10, 1915 on commercial companies. There are no constraints regarding the issue and redemption of shares, including rules applicable to the issue price, which should be set out in the articles of association, except that at least 5% of each share must be paid up on issue.

Corporate RAIFs are subject to a minimum capital requirement of €1.25m, which must be reached within 12 months of their incorporation, but which can include subscribed capital and share premium; they do not have to create a statutory reserve. The payment of interim or annual dividends is subject only to minimum capital requirements.

RAIFs that are FCPs are not subject to legal constraints on the issue and redemption of units, including rules applicable to the issue price, which should be set out in the management regulations. As with corporate vehicles, the payment of dividends is subject only to minimum capital requirements.

SICAV-RAIFs that are limited partnerships benefit from additional structuring flexibility. They may issue partnership interests in the form of securities or partner accounts (comptes d’associés), and they have the freedom to stipulate in the limited partnership agreement voting rights, the entitlements of partners to profits and losses and to distributions, and to set out rules governing the transfers of partnership interests.

A RAIF must entrust the safekeeping of its assets to a Luxembourg depositary, either a bank established in the grand duchy or the Luxembourg branch of an institution established elsewhere in the EEA. If the RAIF invests mainly in non-financial instruments and has a lock-up period of at least five years following initial investment, a licensed professional depositary that is not a bank may be appointed.

As a collective investment scheme, the administration of the RAIF must be carried out in Luxembourg, and fund administration and transfer agency must be carried out by an administrator and registrar authorised by the CSSF. RAIFs must appoint an authorised AIFM, a depositary subject to the AIFMD liability regime, and an external auditor, which must have appropriate qualifications and experience and be approved by the CSSF as auditor of a Luxembourg UCITS, Part II fund, SIF or SICAR.

While administration may in theory be carried out by the RAIF itself or its AIFM, if established in Luxembourg, as a rule a specialised Luxembourg fund administrator will be appointed, either by the AIFM, subject to AIFMD delegation rules, or directly by the RAIF’s management body.

The AIFM may appoint one or more investment managers or advisers to manage the assets of the RAIF or of its sub-funds, subject to article 20 of the AIFMD and article 78 of the European Commission’s Level 2 regulation of December 2012. A non-regulated entity may only be appointed as an investment manager or as sub-investment manager of a RAIF subject to prior approval by the AIFM’s regulator.

A RAIF may accept investments only from qualified or ‘well-informed’ investors, as defined by the SIF and SICAR legislation. These consist of institutional investors (as defined by the CSSF according to established practice), professional investors and other investors that do not qualify as either an institutional or professional investor, but that invest or commit at least €125,000 to the RAIF and confirm in writing their status as a well-informed investor.

Investments of less than €125,000 may be made by such investors subject to certification by a bank, investment firm or management company as to their expertise, experience and capacity to understand and assess an investment in the RAIF. In addition, directors and officers and all other persons involved in its management are authorised to invest in a RAIF even if they do not fit any of the other categories.

By complying with the AIFMD notification process for passporting, a RAIF may be marketed to professional investors in other EU jurisdictions since it is an EU-domiciled fund with an authorised AIFM. A RAIF’s offering document must contain all information necessary for investors to evaluate an investment in the RAIF.

As a reminder, the cover page of the RAIF’s offering document must clearly indicate that it is not subject to the supervision of the CSSF, unlike SIFs or SICARs. The offering document must be kept up to date if new investors are accepted. Sub-funds may have their own offering documents, so long as they make clear that the RAIF contains other sub-funds.

In principle, RAIFs, including limited partnerships, are subject to the same tax regime as SIFs. They are exempt from corporate income or other taxes in Luxembourg, apart from an annual subscription tax (taxe d’abonnement) of 0.01% of net assets – unless they make exclusively risk capital investments. No subscription tax is due on investments in other Luxembourg funds that are themselves liable to subscription tax, as well as RAIFs that invest in money market instruments and bank deposits or microfinance, or whose investors are exclusively pension funds or similar institutions.

Corporate RAIFs – FCPs are not eligible – whose constitutional documents restrict them to risk capital investments may opt for the same tax regime as SICARs. The concept of risk capital is not defined in the bill, but appended commentary says reference should be made to the guidelines in CSSF Circular 06/241 of April 5, 2006 on the concept of risk capital as applicable to SICARs.

Risk capital RAIFs are fully taxable, which enables them to enjoy double taxation treaty benefits. However, all income or capital gains generated from securities are exempt from the fund’s taxable base, and there is no subscription tax liability. Income from risk capital investments is exempted, and RAIFs opting for the special tax regime will also be exempt from net worth tax, apart for the minimum net worth tax applicable to all fully taxable Luxembourg companies (amounting to €4,815 per year for RAIFs largely holding fixed financial assets, securities and cash). RAIFs established as limited partnerships and opting for the special tax regime will be fully tax-transparent and therefore not subject to any Luxembourg direct taxes.

To benefit from the regime, the RAIF’s constitutional documents must demonstrate that its exclusive purpose consists of risk capital investment. The special tax regime must apply to the RAIF as a whole; a RAIF sub-fund may not opt to be subject to the subscription tax when another is subject to the SICAR regime. The auditors of a RAIF opting for the special tax regime must certify to the Luxembourg direct tax administration that the fund has indeed made risk capital investments at the end of each financial year.

Our investment management team:

  • Helps you find the most suitable investment vehicle to meet your requirements and your goals from a marketing, regulatory, legal and tax perspective.
  • Introduces you to suitable service providers to meet your requirements, namely custodian bank, AIFM, administration agent, registrar and transfer agent, and auditor.
  • Provides assistance with the establishment of the fund, including drafting of the private placement memorandum and assistance with the incorporation of the fund and its general partner.
  • Assists with the conversion of offshore funds into RAIFs.
  • Provides corporate support services throughout the lifetime of the fund, including amendment of fund documentation, restructuring, or launching and closing of sub-funds.
  • Provides help with changes of service providers including the custodian bank, fund administrator, auditor or registrar and transfer agent.
  • Assists with the listing of the fund’s shares or units on the Luxembourg Stock Exchange’s regulated or EURO MTF.
  • Provides support with the registration of the fund in other jurisdictions, in co-operation with local service providers.
  • Provides advice on AIFMD-related issues.
  • Provides advice to fund promoters on local private placement rules for marketing their funds in Luxembourg.
  • Keeps you up to date on the latest legal and regulatory developments.

For further information, please contact Olivier Sciales at oliviersciales@cs-avocats.lu.

Compare two vehicles:


 UCITSUCISIFSICARRAIFSPFSecuritization vehicleUnregulated SCS/SCSpSOPARFI
Practical useHighly regulated vehicle which can
be sold to all types of investors and
cross-border into any other EU
Member State.
Investment funds which do not meet
the criteria set by the EU Directives.
Hedge funds, private equity fund, venture capital fund, real estate fund,
infrastructure fund,
distressed debt fund, microfinance fund,
socially responsible
investment fund,
tangible assets fund
and any other type of
alternative funds.
Private equity and
venture capital
transactions.
Hedge funds, private
equity and venture capital
funds, real estate funds,
infrastructure funds,
distressed debt funds,
Islamic finance funds,
microfinance funds,
socially responsible
investment funds, tangible
assets funds and any other
type of alternative funds.
Individuals wishing
to optimise their
personal tax
planning (private
wealth management
purposes).
• True sale
and synthetic
securitisations.
• Securitisation
of a portfolio of
securities.
• Securitisation
as structure for intra
group financing
activities.
• Securitisation of
non-performing loans.
• Securitisation of
leasing receivables.
• Real estate securitisations (project financing and real estate financing)
Private equity fund, venture capital fund,
real estate fund, private debt fund, crypto fund , ESG fund / Impact investing fund, infrastructure fund,
pledge fund, micro finance fund, socially responsible fund, tangible assets fund, dedicated family office structure
Holding and financing
activity, commercial
activity, holding of
IP, etc.
Applicable legislationLaw of 17 December 2010
Part I (“UCITS Law”)
Law of 17 December 2010
Part II (“UCI Law”)
Law of 13 February 2007 (“SIF Law”)Law of 15 June 2004 (“SICAR Law”)Law of 23 July 2016 ("RAIF Law")Law of 11 May 2007 (“SPF Law”)Law of 22 March 2004 (“Securitization Law”)Law of 10 August 1915 ("Company Law")Law of 10 August 1915 (“1915 Law”)
Authorisation and supervision by the CSSFYesYesYesYesNoNoNo (unless continuous issues of
securities to the public)
NoNo
Qualification as an AIFNoAlways an AIF.Yes, unless exempt.
It is exempt if it does not raise capital from a number of
investors, with a
view to investing it
in accordance with a
defined investment
policy for the benefit
of those investors.
Yes, unless exempt.
It is exempt if it does
not raise capital
from a number of
investors, with a
view to investing it
in accordance with a
defined investment
policy for the benefit
of those investors.
Always an AIFIn principle, no
(as it would not
be considered as
“raising” capital from
a number of investors
as the structure
generally serves for
the investment of the
private wealth of a
“pre-existing group”
(as defined in the
Esma guidelines on
key concepts of the
AIFMD)).
No, in case
• such vehicle
meets the definition of
“securitisation special
purpose vehicle or
securitisation SPV”
under the AIFM Law;
• it issues
collateralised debt
obligations;
• it only issues debt
instruments;
• such entity is not
managed according to
an investment policy
within the meaning of
the AIFM Law.
Non-AIF, unless
activities fall within
the scope of article 1
(39) of the AIFM Law.
Non-AIF, unless
activities fall within
the scope of article 1
(39) of the AIFM Law.
Exemption
from AIFMD
full regime
under lighter
regime (AIFMD
registration
regime)
Not applicable.Possible.Possible.Possible.No.Not applicable.Possible.Possible.Possible.
External
authorised
AIFM
requirement
Not applicable.Required in case the
entity is an AIF that
is not self-managed
and above the AIFMD
threshold.
Required in case the
entity is an AIF that
is not self-managed
and above the AIFMD
threshold.
Required in case the
entity is an AIF that
is not self-managed
and above the AIFMD
threshold.
Always required.Not applicable.Required in case the
entity is an AIF that
is not self-managed
and above the AIFMD
threshold.
Required in case the
entity is an AIF that
is not self-managed
and above the AIFMD
threshold.
Required in case the
entity is an AIF that
is not self-managed
and above the AIFMD
threshold.
Eligible investorsUnrestricted.Unrestricted.Well-informed investorsWell-informed investorsWell-informed investors.Restricted to:
• natural persons
acting in the context
of the management of
their personal wealth;
• management
entities acting solely
in the interest of
the private wealth
(e.g. trusts, private
foundations); and
• intermediaries
acting for the
account of the above
mentioned eligible
investors (e.g. bank
acting under a
fiduciary agreement).
Unrestricted.Unrestricted.Unrestricted.
Eligible assetsRestricted to
transferable securities
admitted or dealt on
a regulated market,
investment funds,
financial derivative
instruments, cash
and money market
instruments that are
in compliance with
article 41 of the Ucits
law and the relevant
EU directives and
regulations.
Please note that the
eligibility of the asset
must be ascertained
on a case-by-case
basis in view of the
applicable laws and
regulatory practice.
Unrestricted.
The investment
objective and strategy
of the fund is subject
to the prior approval
of the CSSF.
Unrestricted.Restricted to investments in securities representing risk capital.
According to the CSSF Circular 06/241, investment in risk capital is to be understood as the direct or indirect contribution of assets to entities in view of their launch, their development or their listing on a stock exchange.
The SICAR is not allowed to invest directly in real estate (except for its own use or through its participations).
Unrestricted, unless it invests in a portfolio of risk capital (such as a Sicar).Restricted to acquisition, detention, management and realization of financial assets.
The SPF is not allowed to carry out commercial activities or to hold directly real estate (except for its own use or through its participations).
Unrestricted.
Securitization of any kind of risks relating to claims, other assets, or obligations assumed by third parties or inherent to all or part of the activities of third parties.
Unrestricted.Unrestricted.
Risk diversification requirementsRisk diversification requirements are provided by articles 42 et seq. of the UCITS Law, e.g. (not exhaustive):
- a UCITS may invest no more than 10% of its assets in transferable securities or money market instruments issued by the same body;
- a UCITS may not invest more than 20% of its net assets in deposits made with the same body;
- the global exposure relating to derivative instruments does not exceed the total net value of the UCITS portfolio.
Risk diversification requirements are defined by IML Circular 91/75 (as amended by CSSF Circular 05/177). Such requirements are less stringent than the ones applicable to UCITS.
In particular, a UCI is not allowed to invest more than 20% of its net assets in securities issued by any one issuer.
Specific restrictions concerning funds adopting an alternative investment strategy are contained in CSSF Circular n° 02/80.
Risk diversification requirements are
defined by CSSF Circular n° 07/309.
Such requirements are less stringent
than the ones applicable to UCITS
and UCI.
In particular, a SIF is not allowed to
invest more than 30% of its net
assets in securities of the same type
of issuer.
Restricted to
investments
in securities
representing risk
capital.
According to the
CSSF Circular
06/241, investment
in risk capital is to
be understood as
the direct or indirect
contribution of assets
to entities in view
of their launch, their
development or their
listing on a stock
exchange.
The SICAR is not
allowed to invest
directly in real estate
(except for its own
use or through its
participations).
Unrestricted, unless it
invests in a portfolio of risk
capital (such as a Sicar).
Restricted to
acquisition, detention,
management and
realisation of financial
assets.
The SPF is not
allowed to carry out
commercial activities
or to hold directly real
estate (except for its
own use or through its
participations).
Unrestricted.
Securitisation of any
kind of risks relating
to claims, other
assets, or obligations
assumed by third
parties or inherent
to all or part of the
activities of third
parties.
Unrestricted.Unrestricted.
Legal FormForm • FCP
• SICAV (SA)
• SICAF (SA,SCA)
All of these entities
must be open-ended.
• FCP
• SICAV (SA)
• SICAF (SA, Sàrl,
SCA, SCS, SCSp)
The entities may be
open-ended or closed-ended.
• FCP
• SICAV (SA, Sàrl,
SCA, SCoSA, SCS,
SCSp)
• SICAF (SA, Sàrl,
SCA, SCoSA, SCS,
SCSp)
The entities may be
open-ended or closed-ended.
• SA
• Sàrl
• SCA
• SCS
• SCSp
• SCoSA
The entities may be
open-ended or closed-ended.
• FCP
• SICAV (SA, Sàrl, SCA,
SCoSA, SCS, SCSp)
• SICAF (SA, Sàrl, SCA,
SCoSA, SCS, SCSp)
The entities may be openended
or closed-ended.
• SA
• Sàrl
• SCA
• SCoSA
A securitisation
vehicle may be set
up in the form of a
company (SA, Sàrl,
SCA, SCoSA) or a
fund consisting of
one or several coownerships
or one
or several fiduciary
estates and managed
by a management
company.
• SCS
• SCSp
• SA, Sàrl, SCA
• SAS
• SCoSA
• SCS
• SCSp
Umbrella structureYesYesYesYesYesNoYesNoNo
Capital requirements• FCP:
EUR 1,250,000 to be
reached no later than
6 months following
the authorisation by
the CSSF.
• Self managed
SICAV / SICAF:
EUR 300,000 at the
date of authorisation
and EUR 1,250,000
within 6 months
following its
authorisation.
• FCP:
EUR 1,250,000 to be
reached no later than
6 months following
the authorisation by
the CSSF.
• Self managed
SICAV / SICAF:
EUR 300,000 at the
date of authorisation
and EUR 1,250,000
within 6 months
following its
authorisation.
EUR 1,250,000 to be
reached no later than
12 months following
the authorisation by
the CSSF.
EUR 1,000,000 to be
reached no later than
12 months following
the auhorisation by
the CSSF.
• FCP:
EUR 1,250,000 to be
reached within 12 months
from the entry into force
of the management
regulations.
• SICAV:
EUR 1,250,000 to be
reached within 12 months
from the incorporation of
the SICAV.
Depends on the form:
• SA / SCA: EUR
30,000
• Sàrl: EUR 12,000
• SCoSA: no
minimum capital
If the securitisation
vehicle is set up as a
company, it depends
on the form:
• SA / SCA: EUR
30,000
• Sàrl: EUR 12,000
If the securitisation
vehicle is set up as
a fund, there is no
minimum capital
requirement.
No minimum capital requirement.Depends on the form:
• SA / SCA: EUR
30,000
• Sàrl: EUR 12,000
No minimum capital
requirement for other
legal forms.
Required Luxembourg service providers• Management
company in case of
an FCP.
• Depositary
institution.
• Administrative
agent.
• Registrar and
Transfer Agent.
• Approved
statutory auditor.
• Management
company in case of
an FCP.
• Depositary
institution.
• Administrative
agent.
• Registrar and
Transfer Agent.
• Approved
statutory auditor.
Management
company in case of
an FCP.
• Depositary bank
or professional of
the financial sector
providing depositary
services, subject to
conditions.
• Administrative
agent.
• Registrar and
Transfer Agent.
• Approved
statutory auditor.
• Depositary bank
or professional of
the financial sector
providing depositary
services, subject to
conditions.
• Administrative
agent.
• Registrar and
Transfer Agent.
• Approved
statutory auditor.
• Management company
in case of an FCP.
• Depositary bank
or professional of the
financial sector providing
depositary services, subject
to conditions.
• Administrative agent.
• Registrar and Transfer
Agent.
• Approved statutory
auditor.
Registered auditor in
principle not required
unless two of the
following criteria are
met: (i) net turnover
above EUR 8.8 million,
(ii) balance sheet
above EUR 4.4 million
and (iii) average
number of employees
above 50.
However, depending
on the legal form
of the company,
there may be an
obligation to appoint
a commissaire aux
comptes.
• Alternative
Investment Fund
Manager (if the
securitisation vehicle
qualifies as an AIF).
• Management
company (if the
securitisation vehicle
is set up in the form
of a fund).
• Independent
auditor.
• No depository
institution (unless for
regulated securisation
vehicles).
• No administrative
agent.
For SCS:
• Alternative
Investment Fund
Manager (if the SCS
qualifies as an AIF).
• No requirement
to appoint a
depositary (except
if the SCS qualifies
as an AIF and is
managed by a duly
authorised AIFM).
For SCSp:
• Alternative
Investment Fund
Manager (if the SCSp
qualifies as an AIF).
• No requirement
to appoint a
depositary (except
if the SCSp qualifies
as an AIF and is
managed by a duly
authorised AIFM).
Registered auditor in
principle not required
unless the company
is an AIF managed
by an AIFM with AUM
above the threshold
or two of the
following criteria are
met: (i) net turnover
above EUR 8.8 million,
(ii) balance sheet
above EUR 4.4 million
and (iii) average
number of employees
above 50.
However, depending
on the legal form
of the company,
there may be an
obligation to appoint
a commissaire aux
comptes.
Possibility of listingYesYesYesYes, but difficult in practice.YesNoNo. In principle no. The
SCS/SCSp may
however issue debt
securities that are
eligible to be listed on
the stock exchange.
Yes
European passportYes.No, unless it falls under the scope of the full AIFMD regimeNo unless it falls under the scope of the full AIFMD regimeNo, unless it falls under the scope of the full AIFMD regime.YesNo
No, unless it falls under the scope of the full AIFMD regime.Non-AIF, unless activities fall within the scop of article 1 (39) of the AIFM Law. No, unless it falls under the scope of the full AIFMD regime.
Net asset value (NAV) calculation and redemption policyTThe UCITS must make
public the issue, sale
and repurchase price
of their units each
time they issue, sell
and repurchase their
units, and at least
twice a month.
The UCIs must make
public the issue, sale
and repurchase price
of their units each
time they issue, sell
and repurchase their
units, and at least
once a month.
At least once a year for reporting
purposes.
Not required. At least once a year for reporting purposes.Not required. Not required. Not required.Not required.
Corporate income taxNo corporate income taxNo corporate income taxNo corporate income taxGeneral aggregate ate: 24.94%

In certain cases,
reduced corporate
income tax rates may apply. Income derived from transferable
securities (e.g.
dividends received
and capital gains
realised on the sale of shares) is exempt. Income on cash held for the purpose of a future investment is also exempt (for one year).
No income tax, unless investing only in risk capital, then SICAR tax regime applicable.No corporate income tax• General
aggregate rate
for securitisation
companies: 24.94%.

Securitisation
vehicles should be
able to deduct from their gross profits their operational costs
and the dividends or interests distributed to the shareholders / creditors. Therefore securitisation
companies should not generate significant taxable profits and should therefore to a large extent be tax neutral.
No corporate income tax applicable. Municipal business tax of 6.75% applicable in very limited circumstances,
namely in case the
SCS/SCSp (i) carries out a commercial
activity or (ii) is
deemed to carry out a commercial activity.

A SCS/ SCSp is
deemed to carry out a commercial activity if its general partner is a
Luxembourg public or private limited liability company holding at least 5% of the partnership interests.

With a proper
structuring of the
GPs partnership
interest it should be possible to avoid the deemed commercial characterisation of
the SCS/SCSp.
General aggregate
rate: 24.94%, but
100% exemption for
dividends, liquidation
proceeds and capital
gains from qualifying
participations.
Subscription tax• Rate: 0.05% of
the NAV annually.
• Reduction: 0.01%
of the NAV annually in
certain specific cases.
• Tax exemptions:
special institutional
money market cash
funds, special pension
funds (including
pension pooling
vehicles) and funds
investing in other
funds which are
already subject to
subscription tax.
• Rate: 0.05% of
the NAV annually.
• Reduction: 0.01%
of the NAV annually in
certain specific cases.
• Tax exemptions:
special institutional
money market cash
funds, special pension
funds (including
pension pooling
vehicles) and funds
investing in other
funds which are
already subject to
subscription tax.
• Rate: 0.01% of
the NAV annually.
• Tax exemptions:
certain money market and pension funds
or SIFs investing in
other funds which
are already subject to subscription tax.
No subscription tax.• Rate: 0.01% of the NAV annually.
• Exemptions apply.
Annual subscription
tax of 0.25% on the
amount of paid up
capital and issue
premium (if any).
No subscription tax.No subscription tax.No subscription tax.
Wealth taxNo wealth tax.No wealth tax.No wealth tax.No wealth tax.No wealth taxNo wealth tax.No wealth tax.No wealth tax.0.5% on the NAV on 1 January.

Since 2017, this
minimum net wealth tax for holding and
finance companies
(known as the
Soparfis)—the fixed financial assets, intercompany loans,
transferable securities
and cash at bank of which exceed both 90% of their gross assets and EUR 350,000—is fixed at EUR 4,815 per year.

The minimum net
wealth tax for all other corporations has not changed; in other words, it is EUR 535 for companies with a
total balance sheet up to EUR 350,000.
Withholding tax on dividends / interests and capital gainsNot subject to withholding tax except
if EU Savings Directive applies.
Not subject to withholding tax except
if EU Savings Directive applies.
Not subject to withholding tax except
if EU Savings Directive applies.
Not subject to withholding tax except
if EU Savings Directive applies.
Not subject to withholding tax.Not subject to withholding tax except
if EU Savings Directive applies.
Not subject to withholding tax except
if EU Savings Directive applies.
Not subject to withholding tax. Dividends distributed
by a Luxembourg
company are in
principle subject to
withholding tax at a rate of 15%, unless a domestic law exemption or a lower tax treaty rate applies.
Benefit from double tax treaty network• SICAV/SICAF:
Limited to certain
double tax treaties
(see circular L.G.
-A n°61 of the tax
administration of 8
December 2017).
• FCP: see circular
L.G.-A n°61 of the tax administration of 8 December 2017.
• SICAV/SICAF:
Limited to certain
double tax treaties
(see circular L.G.
-A n°61 of the tax
administration of 8
December 2017).
• FCP: see circular
L.G.-A n°61 of the tax administration of 8 December 2017.
• SICAV/SICAF:
Limited to certain
double tax treaties
(see circular L.G.
-A n°61 of the tax
administration of 8
December 2017).
• FCP: see circular
L.G.-A n°61 of the tax administration of 8 December 2017.
Yes in case the
SICAR is set-up as
a corporate entity
(except if set-up
under the form of a SCS/SCSp).
• RAIFs investing in a portfolfio of risk capital (such as a SICAR)
Access if set-up as a corporate entity (except if set-up under the form of a SCS/SCSp).

• RAIFs not investing in
a portfolio of risk capital (such as a SICAR), but setup
as:
SICAV / SICAF: Limited to
certain double tax treaties
(see circular L.G. -A n°61 of
the tax administration of 8
December 2017).
FCP: see circular
L.G.-A n°61 of the tax
administration of 8
December 2017.
NoYes for securitisation
companies.
NoYes
Benefit from the EU Parent Subsidiary DirectiveNoNoNoIn principle yes, but
certain jurisdictions
where the target
companies are
located may
challenge the
application of the
directive.
No, unless RAIF that
invests in a portfolio of risk
capital (such as a SICAR).
NoYesNoYes
Thin capitalization rules (debt-to-equity ratio)Borrowings of up to 10% of net assets to finance redemptions (it should be a short
term borrowing
and cannot be for
investment purposes) or to buy real estate
for its business.
The total borrowing
under the above may not exceed 15% of net assets.
Borrowings of
up to 25% of net
assets without any
restrictions are
allowed.
No debt-to-equity ratio.No debt-to-equity ratio.No debt-to-equity ratio.Tax of 0.25% on the debt that exceeds 8 times the paid-up capital increased by the issue premium.No debt-to-equity ratio.No debt-to-equity ratio.No provision in Luxembourg law.
However, there is a specific administrative practice.