The Luxembourg Special Limited Partnership (Société en Commandite Spéciale, SCSp), also referred to as the SLP in English, has established itself as a key structuring vehicle for private equity, venture capital, real estate, and alternative investment funds. Since its introduction under the Law of 12 July 2013, practitioners have adopted the Luxembourg SCSp for its contractual flexibility and tax transparency. Consequently, leading asset managers, institutional investors, and family offices regularly select the SCSp for both regulated and unregulated fund structures.
What is the Luxembourg SCSp (Special Limited Partnership)?
The Luxembourg SCSp is a partnership without legal personality inspired by the Anglo-Saxon limited partnership model. Unlike the traditional SCS (Société en Commandite Simple), the SCSp does not constitute a separate legal entity distinct from its partners. However, the SCSp still offers contractual certainty through a binding limited partnership agreement (LPA). The Law of 12 July 2013, which modernised Luxembourg’s fund industry, governs the SCSp and aligns its features with international investors’ preferences. In practice, the market refers to the SCSp as both “SLP” and “SCSp.” These terms are interchangeable and both denote the Special Limited Partnership Luxembourg structure.
Institutional investors value the SCSp for its flexibility. For example, the partners can freely determine profit-sharing, governance, and capital commitments in the LPA. In addition, the SCSp does not require minimum capital or a Luxembourg resident general partner. As a result, cross-border managers often use the SCSp for efficient, multi-jurisdictional fund platforms. You can learn more about the legislative framework and practical structuring at the Luxembourg Special Limited Partnership resource page.
Key structural features of the SCSp
General partner and limited partners
The SCSp consists of at least one general partner (GP) with unlimited liability and one or more limited partners (LPs) whose liability does not exceed their capital commitment. The GP manages the partnership and represents it externally. Meanwhile, LPs act as passive investors. However, the SCSp LPA can grant LPs certain veto or control rights without jeopardising their limited liability. Therefore, sponsors can fine-tune investor protections and governance as required by institutional investors.
Contractual freedom and LPA structuring
The Law of 12 July 2013 grants the partners wide discretion to organise the SCSp’s internal affairs. Specifically, the partners can define voting thresholds, transfer restrictions, and clawback arrangements in the LPA. Moreover, the SCSp can issue multiple classes of partnership interests with distinct economic or voting rights. For this reason, fund sponsors can align economic incentives through carried interest and management fee provisions. In turn, general partners often receive carried interest from portfolio realisations, with the LPA specifying the waterfall mechanics.
No legal personality and practical implications
The SCSp does not have separate legal personality. Nevertheless, the partnership can hold assets, enter contracts, and sue or be sued in its own name. The GP acts on behalf of the SCSp in dealings with third parties. This feature mirrors Anglo-Saxon limited partnerships and appeals to international sponsors familiar with UK, US, or Cayman structures. Notably, the absence of legal personality does not hinder the SCSp’s ability to own assets or maintain bank accounts.
Regulatory status and use in regulated funds
The SCSp may serve as a standalone unregulated vehicle, or as the legal form for regulated fund structures such as the Reserved Alternative Investment Fund (RAIF), Specialised Investment Fund (SIF), or investment company in risk capital (SICAR). When the SCSp is used as the legal form for a RAIF, for example, the structure combines contractual flexibility with eligibility for the AIFMD passport. In these cases, an authorised AIFM manages the SCSp fund and ensures compliance with CSSF requirements. Consequently, sponsors can offer pan-European products to professional investors via the SCSp.
Tax transparency and fiscal treatment of the SCSp
SCSp tax transparency
The Luxembourg SCSp enjoys full tax transparency for Luxembourg direct tax purposes. Luxembourg does not treat the SCSp as a taxable entity. Instead, tax authorities look through the partnership and tax the partners individually. Non-resident limited partners do not pay Luxembourg income tax on foreign-source income or capital gains, provided they do not conduct commercial activity in Luxembourg. As a result, the SCSp is highly attractive for cross-border alternative funds aiming for fiscal neutrality at the fund level.
VAT and other fiscal considerations
The SCSp itself does not pay net wealth tax or municipal business tax. However, the GP may trigger such taxes if it is a Luxembourg-resident corporate entity. Management services provided to the SCSp enjoy VAT exemption under Article 44.1.d) of the Luxembourg VAT Law when the SCSp qualifies as an investment fund. For this reason, most SCSp fund structures benefit from VAT efficiency. Nevertheless, sponsors should review the VAT status of ancillary services, especially for complex investment strategies.
International tax aspects
Many jurisdictions grant look-through treatment to SCSp vehicles. However, recognition depends on local law and relevant double tax treaties. Therefore, sponsors should consult local tax counsel when marketing the SCSp to non-Luxembourg investors. The SCSp’s tax transparency often enables efficient treaty access, subject to partner-level eligibility. In practice, the SCSp’s transparent status facilitates smooth repatriation of proceeds and optimises after-tax returns for investors.
SCSp in private equity and venture capital structuring
Private equity and venture capital applications
Fund managers routinely select the SCSp as the preferred vehicle for private equity Luxembourg and SLP venture capital Luxembourg platforms. The SCSp mirrors the Anglo-Saxon limited partnership, which is the global standard for closed-end funds. As a result, international institutional investors and family offices feel comfortable investing through the SCSp. The contractual freedom of the LPA allows sponsors to implement sophisticated distribution waterfalls, carried interest provisions, and governance mechanisms. These features support alignment of interests between general partners and limited partners.
Carried interest and profit allocation
Carried interest Luxembourg structures benefit from the SCSp’s flexible profit allocation rules. The LPA can specify the calculation and distribution of carried interest, hurdle rates, and catch-up mechanisms. In addition, Luxembourg offers favourable tax treatment for carried interest earned by qualifying individuals under the Law of 23 July 2016. As such, fund managers can attract and retain talent through effective incentive arrangements.
Regulated SCSp fund options
Sponsors can establish the SCSp as a regulated SIF, SICAR, or RAIF. In these cases, the SCSp combines contractual flexibility with regulatory oversight and investor protection. An authorised AIFM manages the fund, ensuring compliance with AIFMD requirements and CSSF circulars. This structure enables pan-European distribution to eligible professional investors. Meanwhile, the SCSp’s tax transparency remains intact, preserving fiscal efficiency for investors.
Comparison: SCSp vs SLP
In market practice, “SCSp” and “SLP” both refer to the Special Limited Partnership Luxembourg. The use of “SLP” is common among English-speaking sponsors and investors, while “SCSp” is the legal abbreviation. There is no legal or structural distinction between the two terms. Both designations denote the same partnership vehicle and legal framework.
Setting up a Luxembourg SCSp: requirements and process
Formation steps
Creating a Luxembourg SCSp involves several key steps:
- Draft the limited partnership agreement. This document governs all aspects of the partnership and is not publicly disclosed except for certain extracts.
- Appoint at least one general partner and one limited partner. Both individuals and legal entities may act as partners. There is no residency requirement for partners.
- File a registration with the Luxembourg Trade and Companies Register (RCS). The SCSp acquires legal existence upon registration.
- Arrange for a Luxembourg registered office. This address serves as the official domicile for the SCSp.
- Comply with anti-money laundering (AML) and know-your-client (KYC) obligations. The GP is responsible for ensuring compliance with Luxembourg AML laws.
There is no minimum capital requirement for the SCSp, which enhances structuring flexibility. In contrast, companies such as the S.A. or S.à r.l. require minimum share capital. The SCSp formation process does not require a notarial deed, unless the GP is a Luxembourg S.A. or S.à r.l.
Ongoing obligations and reporting
The SCSp faces limited ongoing obligations. For example, the partnership does not need to publish annual accounts or appoint a statutory auditor unless it qualifies as a regulated fund. In regulated structures, the SCSp must meet CSSF reporting and audit requirements. Meanwhile, the GP must maintain a list of partners at the registered office. The SCSp must also keep proper accounting records available for inspection by authorities.
Practical structuring tips
Sponsors can tailor the SCSp LPA to investor preferences. For instance, they can implement bespoke voting and transfer restrictions, class-based profit allocation, and tailored capital call mechanics. In particular, SCSp AIFMD funds can access the marketing passport across the EU. When using the SCSp as a feeder or co-investment vehicle, sponsors should align the LPA with the master fund’s terms to ensure smooth operation. In turn, tax advisors should review the investor base and anticipated flows to optimise for SCSp tax transparency.
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