The Luxembourg SCSp, what keeps the vehicle neutral, and what takes it out.

How to set up an SCSp in Luxembourg: steps and timeline

An SCSp is formed by contract. No notarial deed is required: the limited partnership agreement can be signed privately, which sets the SCSp clearly apart from a SARL or an SA and explains part of its appeal to Anglo-Saxon sponsors used to English-law partnerships.

Three building blocks must exist before signature: at least one general partner, at least one limited partner, and a corporate object consistent with the intended strategy. An extract of the agreement is then filed with the Trade and Companies Register and published in the RESA. Only the extract is public: the economic terms of the LPA, waterfall, hurdle and allocation keys, stay confidential. That is a real competitive advantage over vehicles whose articles are published in full.

In practice an unregulated SCSp is in place within two to four weeks once the LPA is settled. The critical path is almost never registration: it is negotiating the LPA with first-round investors and opening the bank account, whose review timing depends on the bank.

Capital, contributions and liability: what the SCSp actually requires

There is no statutory minimum capital for an SCSp. Partner commitments are set freely in the LPA and called through successive drawdowns following the investment schedule. That absence of a floor is structural: it allows a small co-investment vehicle to launch without tying up equity.

The SCSp admits three kinds of contribution: cash, in kind and in services. Contribution in services, that is know-how or work, is closed to Luxembourg capital companies but open here. It is routinely used to house the management team's contribution in the carried interest vehicle.

The general partner is liable without limit and jointly for the SCSp's commitments. The limited partner is bound only up to its subscription, on one condition: it must not carry out acts of management towards third parties. The law of 12 July 2013 substantially widened the list of acts permitted without losing that protection, notably sitting on advisory committees and voting on structural decisions. Drafting those clauses is your lawyer's work: that is where LP protection is actually decided.

General partner and municipal business tax: the 5 % threshold

An SCSp is in principle outside the scope of corporate income tax and net wealth tax, the charge flowing up to its partners. Municipal business tax follows a different logic, and it is the first of the four events that take the vehicle out of neutrality.

The SCSp falls into it in two cases: where it actually carries on a commercial activity, and where its general partner is a capital company holding at least 5 % of the partnership interests. Circular L.I.R. no. 14/4 of 9 January 2015 adds the decisive nuance: an SCS or SCSp that constitutes an alternative investment fund is deemed never to carry on such an activity, and therefore escapes municipal business tax. The same reading applies to SIFs, SICARs and Part II SICAVs.

The GP is almost always a Luxembourg capital company, most often a SARL, to ring-fence unlimited liability in a dedicated entity. Market practice keeps its interest below the 5 % threshold. The point deserves case-by-case verification with your tax adviser, because it also depends on the vehicle's actual activity: a strictly passive fund and an operating vehicle are not analysed the same way. Financial Services Luxembourg documents the ownership structure and produces the records that allow the position to be sustained over time; the qualification itself is your adviser's call.

Reverse hybrids: what the circular of 12 August 2025 settles

This is the second trigger, and the least known. The SCSp's tax transparency is not unconditional from the standpoint of its foreign investors. Article 168quater of the income tax law, transposing the ATAD 2 directive, makes the partnership subject to corporate income tax where associated non-resident enterprises together holding at least 50 % of the rights treat it, in their own state, as an opaque entity. Tax then bites on the share of income that is taxed nowhere.

A carve-out exists for collective investment vehicles, and circular L.I.R. no. 168quater/2 of 12 August 2025 finally sets its criteria. They are cumulative: wide ownership, with no individual investor above 25 %, a narrow initial circle being accepted where broader participation is foreseeable within thirty-six months; a diversified portfolio, exposure above 30 % to a single issuer being rejected without justification; and subjection to investor-protection regulation, presumed for vehicles authorised by the CSSF or managed by an authorised manager.

The practical consequence is worth stating plainly: an unregulated SCSp held by foreign investors does not automatically benefit from that carve-out. The absence of prudential supervision makes the third condition hard to meet. This belongs on the structuring table with your tax adviser, not at the first year-end.

Carried interest: the regime from the law of 3 February 2026

Third trigger, and the only one that bites on people rather than on the vehicle. The law of 3 February 2026, from bill no. 8590 adopted by the Chamber of Deputies on 22 January 2026, replaces the transitional regime opened by the law of 12 July 2013 and applies from tax year 2026.

Two treatments coexist depending on the form of the interest. Contractual carried interest, neither attached to nor represented by a participation, is taxed as extraordinary income at one quarter of the taxpayer's global rate, an effective ceiling of 11.45 % at the top marginal rate. Carried interest embedded in units of the vehicle follows the capital gains regime: it stays exempt where the holding does not exceed 10 % and is held for more than six months, and falls into the ordinary scale otherwise.

The scope of beneficiaries was narrowed by the Council of State before the vote. It covers individuals performing management functions within a manager, a management company or an alternative investment fund, as well as those managing a fund under a services agreement. Purely administrative functions are excluded, and the assessment is individual. Beneficiaries of the 2013 regime move automatically into the new framework on equivalent or more favourable terms.

When the SCSp crosses into authorised manager territory

Fourth trigger. An SCSp is not regulated by nature, it becomes regulated by what it does. Once it raises capital from several investors to invest it under a defined policy in their interest, it meets the definition of an alternative investment fund and enters the scope of the law of 12 July 2013.

Two regimes then coexist, separated by the de minimis thresholds of article 3(2): below them the manager only registers with the CSSF; above them full authorisation applies, with a depositary, an approved statutory auditor and an annual report. Both amounts, what registration covers and what authorisation triggers are set out on the AIFM and management company support page.

Many structures are caught by that shift at the second or third closing. Anticipating it costs little; absorbing it costs a lot, because it forces a governance and valuation chain to be rebuilt mid-life.

What must an SCSp actually keep, produce and file?

This is where the market most often gets it wrong, by analogy with the common limited partnership. An SCSp must keep accounts appropriate to the nature and extent of its activities: it is named in article 8 of the Commercial Code, at point 3 added by the law of 12 July 2013, and article 9 imposes proper bookkeeping. Article 13 of the same code, however, allows it to disapply the standard chart of accounts whatever its turnover, where SENCs and SCSs enjoy that option only below EUR 100,000.

It draws up no annual accounts: article 25 of the amended law of 19 December 2002 expressly excludes the special limited partnership from the chapter that imposes them. And it files nothing with the Trade and Companies Register, for want of the Grand Ducal regulation provided for in article 76(2). The Accounting Standards Commission states this in terms, and the Luxembourg Business Registers expressly excludes the SCSp from the late-filing surcharge scale, which confirms the absence of any obligation.

The rule subjecting to full obligations those limited partnerships whose unlimited partners are all capital companies does exist: it is article 77, second paragraph, points 2 and 3 of the 2002 law, transposing directive 2013/34/EU. Its scope is confined to SENCs and SCSs. An SCSp whose general partner is a SARL, by far the most common configuration, does not fall into it on that ground alone.

The absence of a filing obligation does not remove the real workload, it moves it. It sits in per-partner capital accounts, drawdown and distribution tracking, the waterfall, and the reporting investors expect in the format set out in the partnership agreement. Nor does it remove filing obligations towards the direct tax administration, or those flowing from a product law. That is the scope Financial Services Luxembourg operates, alongside fund accounting and annual accounts.

One forward-looking point: bill no. 8286 reforming accounting law, tabled on 28 July 2023, would keep the exemption from annual financial statements for the SCSp but introduce filing of the standard chart of accounts balances with the register. No vote was recorded in the consolidated parliamentary file of 16 February 2026. It is a prospect, not a rule in force.

SCSp, RAIF or SICAR: arbitrating on actual use

The most frequent confusion sets the SCSp against the RAIF or the SICAR. These are different in kind. The SCSp is a corporate form; the RAIF, the SIF and the SICAR are product regimes. A RAIF can take the form of an SCSp, and that is in fact the most widespread combination in European private equity.

The useful question is therefore not SCSp or RAIF, but: do I need a product regime? A bare SCSp is enough for a club deal, a closed co-investment vehicle or a carried interest structure. The RAIF regime becomes relevant when an institutional investor requires a recognised framework, a depositary and supervised valuation. The RAIF, SIF and SICAR comparison sets out that arbitration line by line, and private equity structuring places it in a two-tier architecture.