As defined by Luxembourg’s Company Law, a special limited partnership (SCSp) is a form of partnership entered by two or more partners for a limited or unlimited period. In a special limited partnership, partners share several liabilities for all obligations or contribute a specific amount, which may consist of partnership interests as stipulated in a partnership agreement. 

What is the Legal Basis of a Luxembourg Special Limited Partnership (SCSp)? 

The special limited partnership (SCSp) structure is governed by the Law of 12 July 2013 on Alternative Investment Fund Managers Law (AIFM Law).

What are the Objectives of a Special Limited Partnership  (SCSp)?

The main aim in developing the special limited partnership structure is to make Luxembourg a highly competitive market for foreign investors looking to build alternative investment vehicles in the European Union. With the addition of special limited partnership and other alternative investment vehicles, Luxembourg has succeeded in building an attractive common law legal structure. 

A special limited partnership (SCSp) was designed to be very appealing to investors and fund initiators in the realm of private equity, hedge funds, and real estate funding. This legal form combines the high contractual freedom in private equity placement and favorable tax treatment for EU and non-EU managers alike. 

How Can You Form a Special Limited Partnership  (SCSp) in Luxembourg?

A special limited partnership (SCSp) may be created with at least two partners; one of whom will assume the role of general partner and at least one limited partner, for a limited or unlimited period. 

There is no minimum legal capital required in the formation of a special limited partnership in Luxembourg. Contributions from partnerships can be made in either cash or kind. Valuations by an external auditor is not a requirement for contributions in kind. 

A special limited partnership (SCSp) must be registered before the Luxembourg Trade and Companies Registry. Privacy and confidentiality are afforded to partners and shareholders in a special limited partnership, therefore, there is no need for publishing names, financial statements, and share capital to be published altogether. 

What is the Scope of Management of a Special Limited Partnership (SCSp) in Luxembourg? 

A special limited partnership (SCSp) has no legal personality. The liability of general partnerships is unlimited. On the other hand, the liability of limited partnerships is limited to their contributions. 

The flexibility of a special limited partnership (SCSp) lies in its ability to be used for both regulated and unregulated investments. Unregulated special limited partnerships (SCSps) will be governed by the rules and conditions of the Companies Act. In case an investment vehicle falls under the Alternative Investment Fund Managers Law (AIFM Law), partners are deemed to comply with its provisions. 

On the other hand, regulated special limited partnerships (SCSps) are subject to specific rules applicable to regular regulated investment vehicles. For instance, an investment company in risk capital (SICAR) or a specialized investment fund (SIF) in the form of a special limited partnership (SCSp) will be regulated and supervised by the Commission for the Supervision of the Financial Sector (CSSF). 

How Flexible is the Luxembourg Special Limited Partnership (SCSp) Structure?

• Special limited partnerships (SCSps) do not have separate legal entities for their respective partners. This allows the investment vehicle greater flexibility when developing the partnership agreement. 
• There are no prohibitions when it comes to the return of capital. 
• Capital returned to partners by way of dividends distribution or reimbursement of equity interests cannot be recalled, such as is the case with limited partners. 
• Except for certain cases, everything is freely governed by the partnership agreement, including distribution of profits and clawbacks without restrictions. 

Who Manages a Luxembourg Special Limited Partnership (SCSp)?

The management of a special limited partnership is delegated to one or more general partnership, who may also delegate management to third parties.

In case a limited partner engages in the management of a special limited partnership (SCSp), they automatically forfeit their limited liability. It is therefore crucial to define and distinguish between internal and external management. 

What is the Taxation Regime for a Luxembourg Special Limited Partnership?

As per Circular L.I.R no. 14/4 of 9 January 2015, special limited partnerships (SCSps) in Luxembourg enjoys full tax transparency and tax neutrality. 

A Luxembourg special limited partnership is similar to those established in other premier investment vehicle jurisdictions, including Guernsey, England, Jersey, and the Cayman Islands. 

As a regulated vehicle, a special limited partnership (SCSp) is not subject to the following:

• corporate income tax
• municipal business tax
• wealth tax

When used as an unregulated vehicle, a special limited partnership (SCSp) must be fully tax transparent while ensuring confidentiality of its foreign partnerships. In some cases, an unregulated special limited partnership (SCSp) may be subject to municipal business tax. 

Under the Companies Act, it is relatively easy for a Luxembourg special limited partnership (SCSp) to get exempted from income tax assessments. Additionally, a special limited partnership (SCSp) is allowed to obtain special advance tax clearances from the tax authority on a case-to-case basis. 

Special limited partnerships (SCSps) in Luxembourg are also granted favorable tax treatment to the carried interest regime. This means that profits paid to employees of a company managing an alternative investment fund, as well as gains realized on the sale of equity interests are assessed with a reduced rate of up to 10% under certain instances. 

Management fees provided to a regulated or unregulated special limited partnership (SCSp) will be exempt from paying value added tax (VAT).

As a premier, independent consulting firm, Damalion provides expert advice on Luxembourg special limited partnership formation with the help of our global service network spanning across European, Asian, and Atlantic timezones. We offer practical and sound advice in the company set up process and ongoing structuring, governance, and operational advice for clients looking to establish an unregulated or regulated special limited partnership (SCSp) and other forms of alternative investment funds in Luxembourg. To learn more, reach out to a Damalion expert today.  

Luxembourg Special Limited Partnership (SCSp) as an Alternative Investment Fund — legal framework, formation, AIFMD considerations, governance, investor protections, and tax treatment.

For professional and well-informed investors • Damalion facilitates scoping, formation workflow and provider coordination (AIFM, depositary, auditor, registrar) so counterparties can review efficiently. Authorisations remain at each institution’s discretion.

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Why use an SCSp for alternative assets?

The SCSp offers contractual flexibility, tax transparency, and compatibility with the AIFMD regime when managed by an authorised or registered AIFM. It suits private equity, private debt, real assets, infrastructure and venture strategies seeking rapid time-to-market with bespoke terms in a limited partnership agreement (LPA).

Legal snapshot

Topic	Position
Legal personality	No separate legal personality; acts via the General Partner (GP).
Partners & liability	GP has unlimited joint and several liability; Limited Partners (LPs) limited to commitments, subject to safe-harbour conduct.
Constitution	By LPA (private deed) + RCS registration of key particulars.
Regulatory perimeter	SCSp may qualify as an AIF. If so, AIFMD applies via authorised/registered AIFM; supervision depends on product wrapper and manager status.
Eligible wrappers	Standalone SCSp AIF (unregulated product) or used by RAIF/SIF/SICAR structures.
Tax	Typically tax-transparent for Luxembourg corporate income taxes; subscription tax may apply for certain wrappers; investors taxed per their own regimes.

Formation & launch — sequence

1. Term sheet & structuring. Define GP/LPs, commitments, strategy, AIF status, AIFM, depositary and service lines.
2. LPA drafting. Capital commitments, drawdowns, distributions, key person, conflicts, transfers, valuation, governance.
3. Ancillary docs. GP constitutional docs, side letters, subscription booklet, AML/KYC, PPM/IM, depositary and AIFM agreements.
4. RCS filings. Register the SCSp particulars; obtain identifiers (RCS, LEI as needed).
5. Operational readiness. Bank/PSP, registrar/transfer agent, fund accounting, auditor, reporting channels.
6. First close & capital calls. Admit investors per LPA, issue drawdowns, start investment activity in line with strategy.

Governance & controls

• GP fiduciary duties and decision-making rules defined in the LPA.
• Advisory committee for conflicts, valuations, key person and consents.
• Policies under AIFMD: risk, valuation, liquidity (as applicable), conflicts, remuneration (AIFM-level).
• Annual audit, investor reporting, and regulatory filings where required.

Related reading

• Luxembourg SCSp as an Alternative Investment Fund
• Reserved Alternative Investment Fund (RAIF) in Luxembourg
• Luxembourg investment funds — setup overview
• More articles on investment funds

Frequently asked questions

Does an SCSp have legal personality?

No. The SCSp does not have legal personality; it is a contractual partnership. The General Partner represents the SCSp and binds it towards third parties in accordance with the LPA.

Who bears liability in an SCSp?

The General Partner bears unlimited joint and several liability for the obligations of the SCSp. Limited Partners are liable up to their agreed commitments, provided they do not perform acts of management vis-à-vis third parties beyond safe-harbour activities stipulated by law.

Can an SCSp qualify as an AIF?

Yes. If the SCSp raises capital from multiple investors with a defined investment policy for their benefit, it generally constitutes an AIF. In that case, AIFMD applies through an authorised or registered AIFM depending on assets under management and exemptions.

Is CSSF product authorisation required?

Not for a standalone unregulated SCSp AIF. However, regulatory oversight arises at the AIFM level. If the SCSp is used within a RAIF, SIF or SICAR, the relevant product-level regime applies (e.g., RAIF is not authorised but must be managed by an authorised AIFM).

What are the minimum capital and investor eligibility requirements?

There is no statutory minimum capital at formation for an SCSp. Investor eligibility depends on the chosen wrapper and offering terms; RAIF/SIF/SICAR frameworks restrict offers to professional or well-informed investors and may impose diversification or risk-spreading rules.

Which documents are mandatory at formation?

The LPA (private deed) setting out governance and economics; registration of key particulars with the Luxembourg Trade and Companies Register (RCS); GP constitutional documents. Offering documents (PPM/IM), subscription forms and side letters are customary for fund offerings.

How are management and advisory functions organised?

Management lies with the GP, which may delegate portfolio and risk management to an AIFM. Investment advisers may be appointed pursuant to advisory agreements. The LPA typically establishes an advisory committee for conflict resolutions and consent matters.

Is a depositary required?

If the SCSp is an AIF managed by an authorised AIFM (or a registered AIFM above thresholds), a Luxembourg depositary must be appointed in accordance with AIFMD and local rules. Private equity/real asset strategies generally appoint a depositary of assets other than financial instruments.

How are valuations and audits handled?

Valuation policies must comply with AIFMD where applicable and be implemented by the AIFM (or delegated). Annual financial statements are typically subject to external audit. The LPA sets valuation frequency, methodology and investor reporting cadence.

What AML/CFT obligations apply?

Luxembourg AML/CFT laws apply to the GP, AIFM, depositary and other professionals. KYC on investors and beneficial owners is required, along with ongoing monitoring, sanctions screening and record-keeping consistent with statutory retention periods.

What is the tax treatment of an SCSp?

The SCSp is generally tax-transparent for Luxembourg corporate income taxes; taxation occurs at investor level according to their status and jurisdiction. Indirect taxes and subscription tax depend on the chosen regulatory wrapper and strategy. Specific advice is required.

How are commitments, drawdowns and distributions structured?

They are governed by the LPA: capital commitments, notice mechanics, default remedies, distribution waterfalls, carried interest and clawback provisions. Waterfall terms must be internally consistent and enforceable under Luxembourg law.

Can LP interests be transferred?

Transfers require compliance with LPA restrictions (e.g., GP consent, right of first refusal, eligible transferees). Transfers must ensure continued compliance with AIFMD marketing restrictions and any investor eligibility criteria.

How is the SCSp marketed across the EU?

Marketing of AIF interests follows AIFMD rules. An authorised EU AIFM may use passporting to professional investors. Pre-marketing and reverse-solicitation must be assessed case-by-case under local transpositions.

How are termination and liquidation managed?

The LPA sets the term, early termination events and liquidation mechanics. On expiry or dissolution, a liquidator (often the GP or an appointed professional) realises assets, settles liabilities and distributes proceeds to partners per the waterfall.