Luxembourg is the EU’s fund powerhouse, combining CSSF-regulated products (UCITS, SIF, SICAR, ELTIF) and lighter-touch options (RAIF, SCSp/SCS partnerships) with strong service providers and deep banking access. In short: clear legal frameworks, pragmatic tax rules, and fast time-to-market make Luxembourg a preferred base for global investors and managers.
Luxembourg sits at the heart of Europe with excellent connectivity to Paris, Frankfurt, and Brussels. The country counts roughly 660,000 residents, a diversified workforce, and one of the world’s highest GDP per capita. In Luxembourg City, business clusters are concentrated around Boulevard Royal, Avenue John F. Kennedy (Kirchberg), Grand-Rue, Rue du Curé, Cloche d’Or, and Route d’Arlon. Esch-sur-Alzette, Differdange, and Dudelange also host growing corporate activity. For fund sponsors, this ecosystem delivers cross-border distribution, experienced administrators, depositaries, and audit firms.
What makes Luxembourg funds attractive for investors and managers?
To start, sponsors can pick between fully regulated vehicles under the Commission de Surveillance du Secteur Financier (CSSF) and unregulated or less-regulated options that still benefit from EU frameworks via an authorised AIFM. This flexibility helps tailor costs, timelines, and strategies—from plain-vanilla UCITS to private equity, private credit, infrastructure, real estate, and venture capital.
Which fund structures are available and who regulates them?
Regulated structures include UCITS (retail funds), SIF (Specialised Investment Fund), SICAR (risk capital), and ELTIF (long-term investment). Unregulated or less-regulated options include the RAIF (Reserved Alternative Investment Fund) and partnership wrappers such as SCS (common limited partnership) and SCSp (special limited partnership). Regulated funds are authorised and supervised by the CSSF, while RAIFs rely on an external AIFM and do not require prior CSSF approval at fund level.
How are Luxembourg funds taxed in practice?
Tax depends on the vehicle. UCITS typically pay an annual subscription tax (commonly 0.05% on net assets, with reductions for specific assets). SIFs and RAIFs investing broadly usually pay a 0.01% subscription tax. SICARs investing in risk capital are generally subject to corporate income tax but benefit from a broad exemption on qualifying risk-capital income and gains. Most funds face no Luxembourg withholding tax on fund distributions. At the investor level, tax depends on residence and applicable treaties or EU directives. Substance, AIFM oversight, and proper documentation remain essential.
Quick comparison: regulated vs. unregulated fund routes
| Feature | Regulated (UCITS, SIF, SICAR, ELTIF) | Unregulated/Less-regulated (RAIF, SCS, SCSp) |
|---|---|---|
| Authorisation | CSSF approval and ongoing supervision | No CSSF approval at fund level for RAIF; must appoint an authorised AIFM |
| Time-to-market | Longer | Faster |
| Target investors | UCITS for retail; SIF/SICAR/ELTIF for well-informed | Well-informed (RAIF) and professional/PN entities via partnerships |
| Asset scope | From transferable securities to private assets | Private equity, private debt, real estate, infrastructure, funds-of-funds |
| Typical taxes | Subscription tax (0.05% UCITS, 0.01% SIF/ELTIF classes), SICAR exemption on qualifying risk-capital | RAIF subscription tax 0.01% (broad strategies) or SICAR-like regime if risk-capital |
| Distribution | No Luxembourg withholding tax on fund distributions in most cases | Same principle; check strategy and documentation |
Where do investors set up in the country and what is the market like?
Most managers and service providers cluster in Luxembourg City’s center and Kirchberg. You will also find activity in the Gare district and the new Cloche d’Or development. The economy is driven by financial services, professional services, ICT, and logistics. Real estate demand centers on modern offices in Kirchberg and Cloche d’Or, and well-located logistics hubs. Developers continue to watch energy-efficient refurbishments and mixed-use schemes, while investors track stable core assets near Boulevard Royal and Avenue J.F. Kennedy.
How does governance and substance work for funds and partnerships?
Governance must match the strategy and investor base. Regulated funds maintain CSSF-approved governance, a depositary, and central administration. RAIFs and partnerships rely on the appointed AIFM, depositary, and auditor, with clear delegation maps. SCSp partnerships are widely used for private equity and private credit thanks to contractual flexibility and limited partner protection. Sponsors should keep local substance aligned with risk management, portfolio decision-making, and investor communications.
How fast can I launch and what are the key steps?
Timelines vary. A RAIF or SCSp can often launch faster than a fully regulated product, assuming the term sheet, AIFM appointment, depositary, and administrator are coordinated. Expect a clear project plan covering structure selection, offering documents, service providers, governance, tax notes, and distribution strategy. Once the core team is aligned, onboarding banks and KYC/AML processes move efficiently.
Key features & benefits (step-by-step)
- Choose your vehicle: UCITS, SIF, SICAR, ELTIF, RAIF, SCS, or SCSp.
- Define your investor base: retail, professional, or well-informed.
- Appoint the AIFM and depositary for AIF strategies.
- Prepare the LPA or fund prospectus with clear strategy and fees.
- Confirm tax profile: subscription tax or risk-capital regime.
- Complete onboarding: KYC/AML, bank, administrator, auditor.
- Launch and report: NAV cycle, investor communications, filings.
What links help me start now?
To move quickly, explore our focused guides and speak with our team:
- Insights on company structures and funds
- Luxembourg SOPARFI FAQs
- How to incorporate a Luxembourg SPF
- Guichet.lu — Luxembourg government portal
Frequently Asked Questions
1) What is a RAIF in Luxembourg?
A RAIF is a Reserved Alternative Investment Fund that does not require prior CSSF approval at fund level and must appoint an authorised AIFM.
2) Who can invest in a RAIF?
A RAIF targets well-informed investors, including professionals and institutions meeting minimum eligibility rules.
3) What is an SCSp?
The SCSp is a special limited partnership without legal personality, widely used for private equity, private credit, and real assets.
4) How are UCITS taxed?
UCITS generally pay an annual subscription tax, commonly 0.05% on net assets with reductions for specific categories.
5) Do SIFs pay corporate income tax?
SIFs are generally exempt from corporate income tax and pay a 0.01% subscription tax on net assets.
6) Is there Luxembourg withholding tax on fund distributions?
Luxembourg funds typically face no Luxembourg withholding tax on distributions; investors should confirm local tax treatment.
7) What is a SICAR?
A SICAR is an investment company in risk capital; qualifying risk-capital income and gains are broadly exempt from corporate taxes.
8) What assets can a RAIF hold?
A RAIF can hold private equity, private debt, infrastructure, real estate, and funds-of-funds, subject to its documents and AIFM.
9) Do partnerships have depositary requirements?
AIF partnerships appoint a depositary when managed by an authorised AIFM and marketed under AIFMD rules.
10) How fast can a RAIF launch?
A RAIF can launch faster than a regulated fund once the AIFM, depositary, and documents are aligned.
11) What is an ELTIF?
An ELTIF is a European Long-Term Investment Fund intended to finance long-term assets under specific EU rules.
12) Where are Luxembourg fund hubs located?
Key hubs include Boulevard Royal, Avenue John F. Kennedy in Kirchberg, the city center, the Gare district, and Cloche d’Or.
13) Can a SICAR hold non-risk-capital assets?
A SICAR focuses on risk capital; non-qualifying assets may jeopardise its specific regime and should be assessed carefully.
14) Do RAIFs access tax treaties?
Treaty access depends on the structure and investor level; investors should rely on substance and applicable directives or treaties.
15) What documents are essential at launch?
Core items include the prospectus or LPA, AIFM and depositary appointments, administrator agreement, auditor engagement, and bank onboarding.
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 | External links are ownership of their respective owners and do not imply any economic link or interest with Damalion corporation.
10 best things to do in Luxembourg during 24 hours business trip!
- Walk the UNESCO-listed Old Town
- Meet across Avenue J.F. Kennedy in Kirchberg
- Visit the Bock Casemates
- Stop by MUDAM Contemporary Art Museum
- Pass by the Government quarter
- Fly via Luxembourg Airport for quick connections
- Catch an evening at the Philharmonie
- Enjoy Grund’s riverside paths
- Take the Panoramic Elevator of the Pfaffenthal
- Sip coffee on Grand-Rue before meetings
