Here’s a structured note for comparing Luxembourg’s Reserved Alternative Investment Fund (RAIF) and the Special Limited Partnership (SCSp), focusing on aspects like legal regime, supervision, diversification, and tax matters. Each fund structure has distinct features that cater to different investor needs. You may also check our comparison tables: Luxembourg investment vehicles part 1, Luxembourg investment vehicles part 2
1. Legal Regime: RAIF Vs SLP
The RAIF and SCSp each have unique legal frameworks. The RAIF, established in 2016, is governed by the RAIF Law and must be managed by an authorized Alternative Investment Fund Manager (AIFM) as per the AIFM Directive. This fund can be structured as an SCS (Société en Commandite Simple) or SCSp (Société en Commandite Spéciale), allowing for flexible corporate setups.
On the other hand, the SCSp is a flexible partnership model governed by the amended 1915 Luxembourg Company Law. Unlike RAIFs, SCSp entities do not possess a legal personality but are structured to support private equity, real estate, and private debt investments. An SCSp’s general partner has unlimited liability, while limited partners’ liability is restricted to their investment, and management powers are primarily granted to the general partner.
2. Supervision and Regulatory Compliance: RAIF Vs SLP
RAIFs operate outside the scope of direct supervision by the CSSF (Commission de Surveillance du Secteur Financier). However, the fund manager (AIFM) remains under CSSF’s indirect oversight, making RAIFs relatively easy to establish compared to regulated alternatives. RAIFs benefit from the efficiency of rapid setup while still aligning with EU-regulated AIFM standards. They are also required to produce annual reports and other regulatory disclosures.
In contrast, SCSp partnerships have minimal regulatory requirements as long as they operate unregulated. SCSp’s lack of mandatory CSSF oversight makes them particularly attractive for private and institutional investors preferring a streamlined approach. Compliance obligations are primarily set out in the Limited Partnership Agreement (LPA), allowing for broad customization in governance and administration.
3. Investment Diversification and Asset Requirements: RAIF Vs SLP
RAIFs mandate asset diversification, typically aiming to mitigate investment risk in line with AIFM directives. RAIFs provide a streamlined option for multi-asset investments, making them popular in private equity and hedge fund sectors.
Conversely, SCSps are highly customizable, with no diversification requirements, making them ideal for targeted investments or single-asset structures. SCSp’s adaptability is beneficial for investors focused on niche assets, such as private debt or real estate.
4. Tax Aspects: RAIF Vs SLP
The RAIF tax regime offers significant benefits. RAIFs are only subject to a 0.01% annual subscription tax on net assets, with certain exemptions. Profit distributions are exempt from Luxembourg withholding tax, making RAIFs tax-efficient for cross-border investment structures. RAIFs also benefit from Luxembourg’s extensive tax treaties, aiding in tax optimization, especially for investors in jurisdictions with favorable tax agreements.
SCSps also enjoy tax neutrality. They are typically exempt from corporate income taxes, municipal business taxes, and net wealth tax, provided they are unregulated and do not perform commercial activities. This setup creates an efficient structure for partnerships seeking tax neutrality, especially for limited partners in cross-border settings.
RAIFs and SCSps each serve different investor needs, with RAIFs aligning well with diversified, regulated funds, and SCSps offering flexibility and minimal regulation for specialized, single-asset investments.
Damalion helps international investors to structure their investments thanks to the Luxembourg investment vehicles which offer strong stability and advantages. Contact your Damalion expert now.
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.
Choosing between Luxembourg RAIF and the Special Limited Partnership (SCSp) — legal setup, supervision, formation steps, governance, investor eligibility, diversification, reporting, and tax points.
For investors, entrepreneurs, family offices, private equity and venture capital teams • This guide explains when to use a RAIF versus an SCSp and what each option requires in practice. Acceptance by authorities and providers follows their own rules.
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Quick view
Pick a RAIF when you want an alternative investment fund managed by an AIFM with EU marketing options and a light product setup. Pick an SCSp when you want a contract-based partnership with high flexibility, including single-asset or club deals. Both are widely used for private equity, venture capital, real assets and private credit.
Use clear language in all documents. Keep terms consistent across the limited partnership agreement, offering documents and service contracts.
RAIF vs SCSp — at a glance
| Topic | RAIF (Reserved Alternative Investment Fund) | SCSp (Special Limited Partnership) |
|---|---|---|
| Legal basis | Law of 23 July 2016 (RAIF Law). Can be set up as a company or as a partnership (incl. SCSp). | Law of 10 August 1915 (as amended). Partnership by contract, no separate legal personality. |
| Supervision | Product not authorised by CSSF. Must appoint an authorised AIFM. AIFM is supervised. | Unregulated by default. Can qualify as an AIF depending on structure and management. |
| Manager | External authorised AIFM required (EU). | Manager defined in the LPA. If an AIF, AIFM rules apply (authorised or registered as relevant). |
| Depositary | Depositary required under AIFMD rules. | If an AIF with an AIFM, a depositary is required. Pure partnership outside AIF scope does not. |
| Eligible investors | Well-informed investors (incl. professional and institutional; certain high-net-worth with conditions). | Defined by the LPA/offering docs. If marketed as an AIF, follow AIFMD rules. |
| Diversification | Risk-spreading required at fund level (documented in the constitutive docs). | No statutory diversification. Common for single-asset or concentrated strategies. |
| Reporting | Annual report; AIFMD reporting via the AIFM; auditor. | As agreed in LPA. If an AIF, apply AIFMD reporting rules. |
| Tax | Generally exempt from income and net wealth taxes. 0.01% subscription tax on NAV (with exemptions). Distributions: no Luxembourg withholding tax. | Typically tax-transparent for partners. No corporate income, municipal business or net wealth taxes if not carrying commercial activities. |
| Speed to market | Fast launch once AIFM and providers are in place. No product authorisation step. | Very fast. Formed by LPA and registration formalities. |
| Use cases | Multi-asset PE/VC, real assets, private credit with EU marketing via AIFM passport. | Club deals, single-asset SPVs, co-investments, carried interest and feeder sleeves. |
How to choose
- Confirm investor type and marketing route. Professional only or wider well-informed base? EU marketing planned?
- Decide governance. External AIFM with depositary, or partnership governance in an LPA?
- Match assets and diversification. Single-asset or concentrated → often SCSp. Broad portfolio → often RAIF.
- Set reporting and audit. RAIF follows AIFMD via the AIFM. SCSp follows the LPA; add an auditor if investors expect it.
- Confirm tax profile. RAIF: subscription tax with exemptions. SCSp: tax transparency for partners in most cases.
Timelines and costs
- RAIF: timing depends on AIFM, depositary, administrator and auditor onboarding. Launch can be quick when documents are ready.
- SCSp: very fast once the LPA and registrations are final.
- Both: provider fees apply. RAIF also carries AIFM and depositary fees and AIFMD reporting costs.
