SCSp in Luxembourg: formation, tax and accounting

When should you use an SCSp in Luxembourg?

An SCSp may be considered when several partners need to agree on economic rights, commitments and distribution rules tailored to their project. Uses include joint investments, funds and certain team incentive arrangements. The intended use does not, by itself, determine the legal or tax framework.

Before choosing, define the requirements: who will invest, in which assets, with what powers and under which exit arrangements? Contractual flexibility also requires precise documentation and regular monitoring. For a straightforward asset-holding structure, compare the total costs and obligations of other legal forms before choosing an SCSp.

Our fund structuring page addresses the project's overall structure. This page explains the SCSp legal form and the information needed to prepare its operations.

Who makes decisions: the general partner, limited partner, manager or AIFM?

The general partner and the manager hold distinct roles, even when the same person performs both. The general partner has unlimited joint and several liability for the partnership's obligations. The limited partner generally benefits from limited liability, subject to the statutory conditions. The agreement defines powers and decisions reserved to the partners.

The manager represents the partnership within the scope of their powers and may or may not be a general partner. A limited partner's information and voting rights must be distinguished from acts of management towards third parties. These rules are described in Guichet.lu's official SCSp guide.

The AIFM, or alternative investment fund manager, performs a separate regulatory function where required. Identify who authorises an investment, signs a capital call, validates an expense and approves a distribution. Our AIFM page explains the manager's status and the parties involved.

What is a GP (general partner) in an SCSp?

The GP, or general partner, is the managing partner of the SCSp: it manages the partnership, binds it towards third parties and has unlimited joint and several liability for its debts. As the SCSp has no legal personality, it acts through the GP to sign contracts, open its bank account, issue capital calls and make distributions. Limited partners, or LPs, contribute the capital and are liable only up to their commitment.

The GP is not necessarily the manager, and it is not the AIFM. Management may be entrusted to a manager (gérant), whether or not a general partner. Where the SCSp is an AIF, portfolio and risk management sit with the appointed AIFM; the GP keeps management in the company-law sense. In practice, the GP is a dedicated Luxembourg SARL owned by the sponsor, which ring-fences unlimited liability in an entity with limited capital. Its substance is built in Luxembourg: local managers, board meetings held locally, documented decisions and a remuneration set in the LPA that reflects the functions performed and the risks assumed.

A GP involves several providers: a notary to incorporate the SARL, a lawyer for the LPA, a domiciliation agent, a bank, an AIFM and a depositary where the regime requires them, and an approved statutory auditor. Financial Services Luxembourg can take on the coordination of all of them, with a single point of contact in Luxembourg: incorporation timeline, document collection, compliance deadlines and the flow of decisions.

The firm performs the accounting of the GP and the SCSp within the scope of the licensed accountant profession. Management of the GP can be covered by a mandate accepted by Mickaël LOC in his own name, described on the fund director page. Reserved acts remain with authorised professionals, and domiciliation with our partner Cerno Law Firm, avocat à la Cour.

Is every SCSp an alternative investment fund?

No. The SCSp legal form alone does not make a vehicle an AIF. The assessment considers, among other factors, the raising of capital from investors, a defined investment policy and management in their interests. The project's actual characteristics and any applicable exclusions must be examined.

A single investment or a single actual investor does not automatically rule out AIF classification. The ESMA guidelines on key concepts of the AIFMD address, in particular, single-investor situations.

The absence of CSSF product authorisation does not mean that no obligations apply. The manager's status, administration arrangements and other applicable requirements must be determined. See our page on AIF obligations outside a fund product regime for this assessment.

Do you have to choose between an SCSp and a RAIF?

An SCSp and a RAIF are not competing legal forms. The SCSp is a partnership form; the RAIF, known as FIAR in French, is a fund regime. A RAIF can be established as an SCSp. The vehicle's legal form and its regime therefore require separate decisions.

The RAIF Law, particularly Articles 4 and 23, provides for an authorised external manager and permits the SCSp form. The absence of minimum capital for the SCSp legal form does not remove the requirements of the selected regime.

Define the target investors, strategy, capital-raising arrangements and necessary service providers before finalising the structure. Our RAIF page explains this regime; the RAIF, SIF and SICAR comparison addresses the choice between regimes.

How do you set up an SCSp in Luxembourg?

Setting up an SCSp starts with defining the project, identifying the partners and preparing the partnership agreement. Registration, required publications and declarations follow, together with operational preparation. The selected regime may require additional formalities and service providers.

Prepare the strategy, countries involved, investor profiles, planned commitments, management arrangements and timetable. Legal counsel prepares the LPA, including provisions governing powers, admissions, expenses and distributions.

Operational preparation must also cover banking authorisations, the flow of supporting documents, approvals and the format of information required by the partners. Signing the agreement and being ready to receive the first payments are two separate milestones to plan.

How long does it take for an SCSp to become operational?

There is no single timetable that applies to every SCSp project. Timing depends, in particular, on agreement on the LPA, checks on the parties, formalities, banking arrangements and the required service providers. The formation date does not guarantee that the bank account will be immediately available.

Ask for a timetable with three milestones: the agreement finalised and signed, formalities completed, and arrangements ready for payments and investments. For each milestone, specify the documents needed, the responsible party and any dependencies. This approach helps identify what is actually holding up the launch.

Is an SCSp tax-transparent or tax-exempt?

An SCSp is generally transparent for corporate income tax purposes: income is attributed to its partners under the applicable rules. Transparency does not mean a general tax exemption. Its activities, general partner, selected regime and the tax treatment of its investors must be assessed.

For municipal business tax, commercial activity and commercial taint are separate assessments. AIF classification does not, by itself, disapply the rule concerning a general partner that is a capital company holding at least 5 % of the partnership interests. Provisions specific to certain regimes must be checked separately: ACD Circular 14/4, page 6.

Article 168quater LIR also provides rules for reverse hybrids. It covers certain situations where non-resident associated enterprises together hold at least 50 % of voting rights, capital or rights to profits, directly or indirectly, and a difference in tax classification leaves income untaxed. The threshold alone is not sufficient; the other conditions and exclusions must be checked in the consolidated Income Tax Law, Article 168quater.

Tax transparency does not remove filing obligations. The ACD includes SCSps in the return for the joint assessment of income of collective undertakings. Prepare the ownership structure, investors' tax residence and the nature of the income to document the project's treatment.

Must an SCSp prepare and file annual accounts?

An SCSp must prepare annual accounts. Under ordinary law, it does not fall within the standard regime for filing annual accounts with the RCS and publishing them through the RESA. Obligations specific to the vehicle's regime, and any statistical or regulatory information requirements, must be assessed separately.

The obligation to prepare accounts follows from article 15 of the Commercial Code, as confirmed in CNC Q&A 26/037, page 2, footnote 1. Exclusion from the standard filing and publication regime follows from the law of 19 December 2002, articles 25, 75 and 79. A filing exemption is therefore not an exemption from preparing accounts.

The fund regime and the agreement may impose additional information and audit requirements. The need for an approved statutory auditor must be determined under the applicable framework; it cannot be inferred solely from the SCSp designation or an exemption from ordinary filing. Our page on fund accounting and capital account records explains the accounting work for eligible entities.

What should the LPA cover before the first payments?

The LPA must set out the partners' rights and obligations. To prepare operations, each agreed financial rule must be linked to information, a calculation method and a person responsible for approval. Legal interpretation is the responsibility of the competent legal adviser.

For commitments and calls: the amount for each partner, the trigger, the due date and payment tracking. For expenses: permitted expenditure, supporting documents and allocation keys. For distributions: the order of payments, calculations, approvals and records to retain.

Also address the admission of new partners, any equalisation arrangements, transfers and periodic reporting. An expense clause with an unclear allocation key should be clarified before the first accounting entry. Accounting work applies the agreed rules and reconciles the figures with their supporting documents.

What budget should you plan for SCSp formation and ongoing accounting?

An SCSp's budget depends on the project and the services required. Separate launch expenses from annual costs: legal documentation, formalities, any general partner entity, management arrangements, accounting and required service providers. The absence of minimum capital for the SCSp legal form does not mean there are no costs.

The overall budget should identify who invoices each service. The accounting proposal should specify the agreed work, deliverables, frequency, number of investors, transaction volumes, currencies and third-party costs included or excluded. Accounting fees should be considered together with their scope on our fund accounting page.

Financial Services Luxembourg assesses the vehicle's eligibility and the professional scope before accepting an engagement. Work may cover reconciliations, accounting records for commitments and cash flows, capital accounts and closing information. Administration of undertakings for collective investment, fund management, depositary services, official NAV calculation and statutory audit are performed by appropriately authorised providers.

For the initial discussion, send a project summary: strategy, investors, timetable, the status of the LPA and identified service providers. Detailed documents will be requested according to the engagement's requirements.

What is the difference between a commitment, a capital call and a payment received?

A commitment is the amount a partner has contractually agreed to contribute. A capital call requests payment of part of that commitment. A receipt is the payment actually received. Uncalled commitments and amounts called but not yet received must be tracked separately.

Illustrative example, without client data: a partner commits 500 000 EUR. The vehicle calls 125 000 EUR and receives 110 000 EUR. With no other movements, 375 000 EUR remains uncalled and 15 000 EUR has been called but not received. Whether the latter amount is due depends on the notice's payment deadline.

The reconciliation links the agreement and commitment register to the call notice, bank receipt and accounting entries. The capital account balance also reflects allocations, expenses and distributions under the selected rules. It cannot be derived mechanically from the capital call and does not, by itself, represent a net asset value.

Technical definitions and responsibilities

Does an SCSp need bookkeeping when statutory annual accounts are not required?

Yes. An SCSp must keep accounting records appropriate to its activities. Exemption from statutory annual accounts and RCS filing concerns ordinary accounting rules; contractual and fund-regime duties still need assessment. Registration, required publications, partner capital accounts, capital calls and distributions must be tracked in accordance with applicable obligations and the partnership agreement.

What to check

1. Documented commitments : Reconcile the signed agreement, subscription documents, partner identities and the amount of each commitment.
2. First call prepared : Identify the amount, payment date, receiving account, authorised signatories and supporting records to retain.
3. Accounting records ready : Keep uncalled commitments, unpaid calls, cash received, expenses and distributions separate in each partner’s records.

Expected output: an opening position for each partner and a documented process for approving and reconciling transactions.

SCSp legal framework: Guichet.lu