The Luxembourg Special Limited Partnership (SCSp or SLP) has become a leading fund structuring vehicle for private equity, venture capital, real estate, and alternative asset managers. This article examines the SCSp’s core features, legal framework, tax transparency, and practical structuring applications.
What is the Luxembourg SCSp (Special Limited Partnership)?
The Luxembourg SCSp (Société en Commandite Spéciale) is a contractual partnership. This structure offers investors strong flexibility, contractual freedom, and tax transparency. Lawmakers introduced the SCSp under the Law of 12 July 2013, implementing the EU Alternative Investment Fund Managers Directive (AIFMD) into Luxembourg law. Therefore, the SCSp meets institutional investor demands for a modern partnership vehicle with clear legal certainty.
Unlike the SCS (Société en Commandite Simple), the SCSp does not have a separate legal personality. Instead, it operates as a contractual arrangement between partners. As a result, the SCSp closely resembles Anglo-Saxon limited partnerships, such as the English LP or Delaware LP. In practice, international managers and investors refer to the SCSp as the Luxembourg SLP.
Notably, the SCSp can serve as both regulated and unregulated investment funds. For example, managers can use it for Reserved Alternative Investment Funds (RAIF), Specialised Investment Funds (SIF), and Société d’Investissement en Capital à Risque (SICAR) structures. Alternatively, they can operate an unregulated SCSp for club deals or co-investment platforms. Consequently, the SCSp has become the vehicle of choice in Luxembourg for private equity, debt, infrastructure, and real estate fund structuring.
Key structural features of the SCSp
Partners and liability
The SCSp must have at least one general partner (GP) and one limited partner (LP). The GP assumes unlimited liability for the partnership’s obligations. In contrast, the LP’s liability is limited to its committed capital. Meanwhile, the GP typically manages the SCSp, while LPs do not participate in day-to-day management.
This clear separation of roles enables asset managers to consolidate decision-making at the GP level. However, the partnership agreement can grant certain consent or veto rights to LPs for key decisions, such as amendments, disposals, or changes to investment policy. Therefore, sponsors can tailor governance to investor expectations.
Constitution and limited partnership agreement
Partners can create an SCSp by signing a Luxembourg law-governed limited partnership agreement (LPA). The SCSp LPA defines governance, capital commitments, profit allocation, carried interest, and exit provisions. Investors benefit from the ability to customise the LPA to match their needs. In turn, this flexibility attracts international investors accustomed to common law fund documentation.
Managers do not need to notarise the LPA. Instead, they file an extract with the Luxembourg Trade and Companies Register (RCS). As a result, the LPA remains confidential, except for essential details published in the RCS. This confidentiality supports privacy for investors regarding capital and profit-sharing arrangements.
Legal personality and entity type
The Luxembourg SCSp does not have separate legal personality. Instead, the partnership acts through the GP in legal proceedings and contract signings. Although the SCSp is not a company, it has its own registration number and can hold assets, open bank accounts, and enter into agreements. Accordingly, the SCSp can act as a fund vehicle or holding structure for multiple investment strategies.
In contrast, the SCS (simple limited partnership) possesses legal personality. However, most sponsors choose the SCSp for its closer alignment with international LP standards. For this reason, the SCSp has largely replaced the SCS for institutional fund structuring.
Regulatory status and fund regimes
Fund promoters can use the SCSp as a regulated or unregulated vehicle. For regulated funds, the SCSp can adopt the SIF, SICAR, or Part II regime. Alternatively, managers can structure an unregulated SCSp as a club deal or co-investment vehicle. Notably, the RAIF regime employs the SCSp for rapid, AIFMD-compliant fund launches without direct CSSF supervision. As such, the SCSp gives managers freedom to select the most suitable regulatory status for their needs.
You can find further details on SCSp legal structuring in our Luxembourg Special Limited Partnership guide.
Tax transparency and fiscal treatment of the SCSp
Tax treatment at entity level
The Luxembourg SCSp qualifies as a fully tax-transparent entity for income tax and net wealth tax purposes. As a result, the SCSp does not pay Luxembourg corporate income tax, municipal business tax, or net wealth tax. Instead, the partners are directly liable for taxes on their share of the SCSp’s income and gains.
However, if the SCSp carries out a commercial activity in its own right, it could trigger corporate tax status. Therefore, managers must ensure that the SCSp maintains a non-commercial investment activity. For investment funds, this typically means avoiding direct operational activities and limiting the GP’s activities to fund management. In practice, most private equity and venture capital SCSp funds remain tax-transparent and exempt from Luxembourg corporate taxes.
VAT and registration duties
Generally, the SCSp does not pay registration duties on capital contributions, except for a nominal fee. For VAT, management services provided to regulated SIF, SICAR, or RAIF SCSp funds benefit from VAT exemption under Article 44.1.d) of the Luxembourg VAT Law. Therefore, managers can minimise both registration and VAT costs when using the SCSp.
Withholding tax and dividend distributions
Luxembourg does not levy withholding tax on profit distributions by the SCSp to non-resident partners. Consequently, international investors can receive distributions free from Luxembourg withholding tax. This feature enhances the SCSp’s attractiveness as a cross-border fund vehicle.
SCSp carried interest and tax treatment
Carried interest income derived by individuals who play an active role in alternative funds often benefits from favourable taxation. Specifically, Article 17(2a) of the Luxembourg Income Tax Law provides for a reduced effective tax rate on qualifying carried interest. Therefore, fund sponsors can structure carried interest through the SCSp to optimise after-tax returns for key individuals.
SCSp in private equity and venture capital structuring
Alignment with international LP standards
International private equity and venture capital managers increasingly choose the Luxembourg SCSp for fund launches. The SCSp’s contractual flexibility, tax transparency, and investor privacy closely match established Anglo-Saxon LP models. As a result, investors can rely on well-known fund structures without facing unfamiliar legal concepts.
Customisable carried interest and waterfall provisions
The SCSp limited partnership agreement enables sponsors to tailor profit allocation, carried interest, and distribution waterfalls. For example, fund promoters can introduce European or American-style waterfall mechanisms, hurdle rates, catch-ups, and preferred return structures. In turn, investors can negotiate bespoke terms for performance incentives and governance.
SCSp AIFMD compliance and fund passporting
When managed by an authorised AIFM, the SCSp qualifies as an Alternative Investment Fund (AIF) under the AIFMD. Therefore, the SCSp can benefit from the AIFMD marketing passport for cross-border distribution within the European Economic Area. Moreover, managers can choose to structure the SCSp as a SIF, SICAR, or RAIF, thereby combining regulatory oversight with structuring flexibility.
Practical structuring applications
- Private equity buyout funds
- Venture capital funds
- Real estate and infrastructure funds
- Debt and credit funds
- Co-investment and joint venture vehicles
- Fund-of-funds platforms
- Luxembourg RAIF: Reserved Alternative Investment Fund Structuring Guide
- Luxembourg depositary bank: fund depositary services, obligations, and selection
- Luxembourg SICAV-RAIF Structure: Flexible Variable Capital Fund Platforms Explained
- Luxembourg SOPARFI Structure: Tax Benefits, Setup, and Participation Exemption Explained
- Luxembourg SPF Structure: Private Wealth Holding, Tax Exemption, and Structuring Insights
- Luxembourg SCSp (SLP): Special Limited Partnership Structuring for Funds
Accordingly, the SCSp serves as a versatile platform for a wide range of alternative asset strategies.
Setting up a Luxembourg SCSp: requirements and process
Formation steps
Partners must sign a limited partnership agreement under Luxembourg law. The GP files an extract of the agreement with the Luxembourg Trade and Companies Register (RCS). The SCSp then receives its registration number and legal existence. Notably, partners do not need to contribute minimum share capital. Instead, they can agree on any form of capital commitment in the LPA.
The SCSp must appoint a registered office in Luxembourg. Meanwhile, the GP must be a Luxembourg resident entity or individual. For regulated funds (SIF, SICAR, RAIF), the CSSF or a licensed AIFM must oversee compliance and regulatory filings. Conversely, unregulated SCSp funds face no such requirements, except for anti-money laundering (AML) and beneficial ownership filings.
Key documentation and ongoing obligations
- Limited partnership agreement (LPA)
- RCS registration extract
- Appointment of GP and LPs
- Registered office address
- AML/KYC documentation
- Beneficial ownership register filings
- For regulated funds: AIFM appointment, CSSF filings, fund documents
- Luxembourg RAIF: Reserved Alternative Investment Fund Structuring Guide
- Luxembourg depositary bank: fund depositary services, obligations, and selection
- Luxembourg SICAV-RAIF Structure: Flexible Variable Capital Fund Platforms Explained
- Luxembourg SOPARFI Structure: Tax Benefits, Setup, and Participation Exemption Explained
- Luxembourg SPF Structure: Private Wealth Holding, Tax Exemption, and Structuring Insights
- Luxembourg SCSp (SLP): Special Limited Partnership Structuring for Funds
Additionally, the SCSp must maintain financial records and prepare annual accounts. For regulated funds, the CSSF or the appointed AIFM will require annual reporting and compliance confirmations. Therefore, sponsors should engage experienced Luxembourg advisors to ensure full compliance with local laws and fund structuring best practices.
Damalion supports institutional investors, fund managers, and family offices with compliant Luxembourg structuring solutions. Contact your Damalion experts now.
Related Luxembourg structuring insights
- Luxembourg Special Limited Partnership (SCSp): Key Features
- Luxembourg RAIF: Reserved Alternative Investment Fund Structuring Guide
- Luxembourg depositary bank: fund depositary services, obligations, and selection
- Luxembourg SICAV-RAIF Structure: Flexible Variable Capital Fund Platforms Explained
- Luxembourg SOPARFI Structure: Tax Benefits, Setup, and Participation Exemption Explained
- Luxembourg SPF Structure: Private Wealth Holding, Tax Exemption, and Structuring Insights
- Luxembourg SCSp (SLP): Special Limited Partnership Structuring for Funds
