Luxembourg is the ideal gateway for foreign private investors and legal entities to expand their portfolio in Europe and beyond. It has proven itself as a premier jurisdiction in servicing alternative assets and regulated investment vehicles. Two of the most popular structures among foreign investors and fund initiators are the Reserved Alternative Investment Fund (RAIF) and the Investment Company in Risk Capital (SICAR).
Let’s look at the main qualities of the Reserved Alternative Investment Fund (RAIF) and the Investment Company in Risk Capital (SICAR), as well as their differences from each other.
Comparison Table Between a RAIF and SICAR in Luxembourg
| RAIF | SICAR | |
| Applicable Legislation | Law of 23 July 2016 (RAIF Law) | Law of 15 June 2004 (SICAR Law) |
| Supervision by the CSSF | No. A RAIF has to be managed by an authorized Alternative Investment Fund Manager (AIFM) which may be established in Luxembourg, in another EU member state, or a third country, as per Directive 2011/61/EU. | Yes |
| Eligible Assets | Unrestricted | Limited to direct and/or indirect investment in securities that represent risk capital, including high risk investments, development, or listing on a stock exchange. Temporary investments in other assets are allowed pending investment in risk capital. |
| European Passport | Yes, as per AIFM Directive | Yes, if subject to AIFM Directive. |
| Risk Diversification Requirements | No risk diversification requirements. | No clearly defined risk diversification requirements but should operate in accordance with risk-spreading concept. No risk diversification if investments are solely in risk capital. |
| Entity Type | Structures may be open or close-ended. Investment company in variable capital (SICAV) Investment company in fixed capital (SICAF) Private limited company (SARL) Public limited company (SA) Partnership limited by shares (SCA) Cooperative in the form of a public limited company (SCoSA) Limited partnership (SCS) Special limited partnership (SCSp) Common fund (SCP) |
Structures may be open or close-ended. Investment company in variable capital (SICAV) Investment company in fixed capital (SICAF) Private limited company (SARL) Public limited company (SA) Partnership limited by shares (SCA) Cooperative in the form of a public limited company (SCoSA) Limited partnership (SCS) Special limited partnership (SCSp) Common fund (SCP) |
| Segregated Sub-Funds | Yes | Yes |
| Custodian Requirements | Yes, if established in Luxembourg. | Yes, if established in Luxembourg. |
| Master-Feeder Fund | Yes | Yes |
| Central Administration | Central administration must be in Luxembourg. | Central administration must be in Luxembourg. |
| Eligible Investors | Restricted to well-informed investors only. | Restricted to well-informed investors only. |
| Issuing Document Requirement | Issuing document | Issuing document |
| Maximum shareholders | No limit | No limit |
| Required Service Provider/Depositary | Yes, depositary as per SICAR Law. | Yes, depositary as per AIFM Law. |
| Minimum Shareholders | No minimum | No minimum |
| Minimum Share Capital | EUR 1.25 million to be achieved within 12 months upon incorporation. | EUR 1 million achieved within 12 months upon incorporation |
| Registration Requirements | If registered as SICAV or SICAF or management of a common fund (FCP) must be in Luxembourg. No nationality or residency requirement for AIFM and directors. At least two officers of the AIFM must be located in Luxembourg. |
Registered office must be in Luxembourg. No nationality or residency requirement for directors. |
| Portfolio Management | Portfolio management functions are regulated by the AIFMD and under Commission Delegated Regulation EU No 231/2013. Portfolio management may be performed by a non-EU AIFM under a specific third-party country regime. |
Portfolio management under regulation of an asset manager’s local regulation. Portfolio management may be performed by a non-EU AIFM under a specific third-party country regime. For SICARs that don’t quality as AIF, portfolio management function is subject to local regulations, while supervisory arrangements can be made between regulatory authorities. |
| Net Asset Value | No | Net asset value required at least for reporting once a year. |
| Borrowing Restrictions | Yes | Yes |
| Listing | Yes, but subject to certain rules when it comes to investor eligibility. | Yes, but subject to certain rules when it comes to investor eligibility. |
| Auditing Requirement | Yes | Yes |
| Dividends Distribution | Dividends distribution must be indicated in the prospectus. For SICAV and FCP, distributions must be made regardless of realized results to the extent that capital share is maintained. SICAF organized as a SA or SCA, final dividend distributions are subject to Commercial Law. SA, SCA, and SARL must have dividends distribution subject to statutory requirements of Commercial Law. |
Dividends distribution must be indicated in the prospectus and article of incorporation. Interim dividend distributions are not final and not subject to specific regulatory restrictions, except for adherence to minimum capital share requirements and other constitutive documents. |
| Corporate Income Tax | By rule, no, unless an RAIF is investing in risk capital. | Fully taxable with risk capital exemption. |
| Double Tax Treaties | Depends on the jurisdiction of target companies. | Depends on the jurisdiction of target companies. |
| Subscription Tax | By rule, yes. | No |
| Capital Gains Tax | No | No |
| Wealth Tax | No | No |
| Withholding Tax on Profit Distribution | No | No |
| Withholding Tax on Interest | No, except for EU saving directive cases. | No, except for EU saving directive cases. |
| VAT | Yes, with certain exemptions. | Yes, with certain exemptions. |
Luxembourg is the Ideal Place for Investment Fund Incorporation
The Reserved Alternative Investment Fund (RAIF) and Investment Company in Risk Capital (SICAR) continue to develop their strong reputation among foreign investors and fund initiators from within and outside the European Union. These fund structures are supported by the country’s excellent legal and regulatory frameworks, constantly evolving to offer the best investment tools for initiators while offering maximum protection to investors.
Damalion provides expert consulting solutions in matters of investment funds and alternative investments funds to foreign investors looking to grow their wealth in Luxembourg and beyond. Our extensive global service network allows us to extend our expertise to initiators worldwide. Our qualified professionals and connections offer legal entities and private investors the best strategies in company formation, fund establishment, investment optimization, and advice on tax matters. To learn more, reach out to a Damalion expert today.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Luxembourg RAIF vs Luxembourg SICAR — supervision, eligible assets, investor base, formation speed, and tax treatment at a glance.
For GPs, entrepreneurs, family offices, private equity and venture capital sponsors • Damalion facilitates structuring, service-provider selection and documentation. Authorisations and approvals remain at the competent authorities’ and providers’ discretion.
Last updated:Executive snapshot
RAIF is a lightly regulated product relying on an authorised AIFM, enabling fast time-to-market and broad strategies. SICAR is a fully supervised product geared to risk capital (private equity/venture) with a long-established regime. Your choice hinges on timing, strategy scope, investor expectations, and governance preferences.
Side-by-side comparison
| Topic | RAIF (Reserved Alternative Investment Fund) | SICAR (Investment Company in Risk Capital) |
|---|---|---|
| Supervision | No direct CSSF approval of the fund; must appoint an authorised AIFM which is supervised. | Directly supervised by the CSSF; prior authorisation required. |
| Eligible assets/strategy | Broad alternative strategies permissible under AIFMD; a RAIF may also be set up for risk capital only. | Exclusive focus on risk capital (private equity/venture-style investments). |
| Investors | Well-informed investors (including professional and institutional). | Well-informed investors (including professional and institutional). |
| Time-to-market | Typically faster once AIFM and service providers are in place. | Longer due to CSSF authorisation and review. |
| Governance | AIFM handles portfolio and risk management (may delegate within rules); depositary and auditor required. | Board-led governance under CSSF oversight; depositary and auditor required. |
| Forms | Multiple corporate/partnership forms (e.g., SCA, SA, Sàrl, SCS/SCSp). | Multiple corporate/partnership forms (e.g., SCA, SA, Sàrl, SCS/SCSp). |
| Tax features (high level) | Regime depends on structure and policy; market practices include subscription tax and exemptions depending on setup. | Regime tailored to risk capital; market practice targets tax efficiency for qualifying investments. |
| Distribution | Leverages AIFMD passport via the appointed authorised AIFM. | Leverages AIFMD passport when managed by an authorised AIFM. |
| Umbrella capability | Commonly used with multiple sub-funds and share classes. | Can also be structured with sub-funds depending on form. |
Facilitated setup — practical sequence
- Scoping. Strategy, investor profile, leverage, target jurisdictions.
- Wrapper & providers. Choose legal form; line up AIFM (for RAIF), depositary, admin, auditor, legal.
- Docs. LPA/statutes, PPM/Issuing Doc, depositary and AIFM agreements, side letters.
- Regulatory path. RAIF: register with the RAIF list via notary after AIFM onboard. SICAR: CSSF application.
- Launch. First close, bank account(s), capital calls, reporting cadence.
Related reading
Frequently asked questions
1) Is a RAIF directly supervised by the CSSF?
No. A RAIF relies on an authorised AIFM that is supervised; the fund itself is not authorised by the CSSF.
2) Can a SICAR invest outside risk capital?
No. A SICAR must invest in risk capital as defined by its regime and constitutive documents.
3) Which structure launches faster?
A RAIF typically launches faster once the AIFM and providers are aligned; a SICAR follows CSSF authorisation timelines.
4) Do both require an AIFM?
RAIFs must appoint an authorised AIFM. SICARs may appoint an AIFM; when they do, they can leverage the AIFMD passport.
5) Do both require a depositary and auditor?
Yes. Both appoint a depositary and a statutory auditor under Luxembourg law.
6) Who can invest in a RAIF or SICAR?
Both target well-informed investors (including professional and institutional) subject to categorisation and minimums.
7) Are diversification rules different?
RAIFs can apply SIF-like diversification or risk-capital focus depending on strategy; SICARs focus on risk capital and follow that regime’s parameters.
8) What legal forms are available?
Both can use company or partnership forms (e.g., SA, Sàrl, SCA, SCS/SCSp). Choice depends on GP/LP dynamics and tax objectives.
9) How are they taxed at a high level?
Market practice targets tax-efficient setups: RAIF taxation depends on chosen form and policy (often subscription tax scenarios); SICARs are tailored to qualifying risk-capital investments.
10) Can I use an umbrella with sub-funds?
Yes. RAIFs commonly use umbrella structures with multiple sub-funds and share classes; SICARs can also be set up with compartments depending on the form.
11) Can an existing vehicle migrate to a RAIF or SICAR?
Reorganisations or migrations are possible case-by-case, subject to legal, tax and provider confirmations.
12) How does EU passporting work?
When managed by an authorised AIFM, both can leverage the AIFMD marketing passport subject to notifications.
13) What are typical timelines to first close?
RAIF: weeks once providers are aligned and documents finalised. SICAR: add CSSF review time before launch.
14) What documentation is needed to launch?
Constitutive docs (LPA/statutes), issuing document/PPM, depositary and (if RAIF) AIFM agreements, administration and audit appointments, plus operational policies.
15) When is each wrapper preferable?
Choose RAIF for broader strategies and speed to market under an AIFM. Choose SICAR for a CSSF-supervised, risk-capital-only product aligned with PE/VC investors’ expectations.
