The Luxembourg Reserved Alternative Investment fund (RAIF) is a type of fund that invests in risk capital. It is open for well-informed investors only. It is attractive because it can be formed in a very short time. RAIFs enjoy neutral taxation.
Luxembourg Reserved Alternative Investment Fund
The RAIF is required to have minimum net assets amounting to EUR 1,250,000 which has to be fulfilled in twelve months from launch. It is supervised solely by an alternative investment fund manager.
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Quick facts: Luxembourg Reserved Alternative Investment Fund (RAIF) — setup, governance, investors, investment scope, risk-spreading, AIFM, depositary, audit, and tax.
For asset managers, private equity, venture capital, real estate, infrastructure, private debt, and family offices. This material is for information only. It is not legal or tax advice.
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RAIF in one view
| Legal basis | Law of 23 July 2016 on RAIFs, as amended. |
| Investor base | Well-informed investors (institutional, professional, or other investors meeting knowledge confirmation and minimum investment rules). |
| Supervision | No product-level authorization. The RAIF must be managed by an authorized AIFM. |
| Forms | FCP (common fund) or investment company (SICAV/SICAF) under company forms such as SA, Sàrl, SCA, SCS, SCSp. |
| Umbrella option | Yes. Multiple sub-funds with ring-fenced assets and liabilities. |
| Minimum assets | EUR 1,250,000 within 12 months from launch. |
| Investment scope | All asset classes under the general regime with risk-spreading, or a “risk capital” regime comparable to SICAR. |
| Depositary | Depositary in Luxembourg. Possibility to appoint a professional depositary for assets other than financial instruments where eligible. |
| Audit | Annual audited accounts within six months of period end. |
| Key tax | General RAIF: tax neutral (subscription tax 0.01% NAV, possible exemptions). Risk-capital RAIF: subject to corporate taxes with exemptions on risk-capital income. |
| EU marketing | AIFM marketing passport to professional investors in the EU/EEA. |
RAIF — legal and tax FAQs
1) Who may invest in a RAIF?
Only well-informed investors: (i) institutional investors, (ii) professional investors under MiFID rules, or (iii) other investors who confirm their expertise and meet the minimum subscription requirement (unless advised by a regulated entity as permitted by law).
2) Is a RAIF authorized by the CSSF?
No. A RAIF is not authorized at product level. It must be managed by an authorized AIFM which is supervised. This design enables faster time-to-market with AIFM oversight.
3) Which laws apply?
The RAIF Law of 23 July 2016 applies together with the AIFM Law of 2013, company law where relevant, and applicable EU regulations and delegated acts.
4) What legal forms are available?
FCP (contractual) or an investment company with variable or fixed capital (SICAV/SICAF) using SA, Sàrl, SCA, SCS, or SCSp forms. Choice affects governance, liability, and partner/shareholder mechanics.
5) Can a RAIF be set up as an umbrella?
Yes. Sub-funds may have different policies, currencies, and fee structures. Assets and liabilities are segregated by law if the constitutive documents provide for segregation.
6) What is the minimum asset threshold?
EUR 1,250,000 within twelve months from launch. Paid-in amounts and asset values count toward this threshold.
7) What is the investment scope under the general regime?
Broad scope across asset classes, subject to risk-spreading. Diversification must be appropriate to the strategy and disclosed in the issuing document.
8) What is a “risk capital” RAIF?
A RAIF may opt for a regime comparable to SICAR to invest mainly in risk capital. In this case, diversification constraints do not apply in the same way, and the tax treatment follows a corporate tax model with exemptions on risk-capital income.
9) How is a general-regime RAIF taxed?
It is not subject to corporate income tax, municipal business tax, or net wealth tax. It is generally subject to a 0.01% subscription tax on net assets, with exemptions for specific assets or segments defined by law.
10) Are there exemptions from the subscription tax?
Yes. Exemptions may apply, for example, to certain money market sub-funds, microfinance vehicles, and other cases defined by regulation. The issuing document should state any claim to exemptions.
11) Are distributions subject to withholding tax?
Distributions by a general-regime RAIF are not subject to Luxembourg withholding tax under current law. Local investor taxation in the investor’s jurisdiction may apply.
12) Does a RAIF benefit from tax treaties?
As a general rule, a typical general-regime RAIF does not access Luxembourg double tax treaties. Treaty access depends on legal form, tax status, and foreign rules. Underlying holding companies may access treaties where conditions are met.
13) What are the VAT considerations?
Management of special investment funds by an AIFM or delegated manager is typically VAT-exempt in Luxembourg. Other services (e.g., administration) may have different VAT treatment. Case-by-case analysis is required.
14) Which documents are mandatory at launch?
Constitutive documents (LPA/Articles or Management Regulations), issuing document (prospectus-like disclosure), AIFM appointment, depositary agreement, central administration appointment, auditor appointment, and where applicable, registrar/transfer agent arrangements.
15) Who must be appointed as AIFM?
An authorized external AIFM established in the EU/EEA, or an internally managed investment company where permitted. The AIFM assumes risk management, portfolio management (if not delegated), reporting, and disclosure duties under the AIFM framework.
16) What are the depositary rules?
A Luxembourg depositary must be appointed. For non-custodiable assets, a professional depositary of assets other than financial instruments can be used where eligible. Safekeeping and oversight duties apply.
17) Are audited accounts required?
Yes. A RAIF must produce annual audited financial statements within six months after the period end. The auditor must be a Luxembourg-approved réviseur d’entreprises agréé.
18) How fast can a RAIF be launched?
There is no CSSF product authorization. Launch timing mainly depends on document readiness, AIFM and depositary onboarding, and investor closing mechanics.
19) What disclosures must the issuing document include?
Investment policy and risks, fees and costs, valuation rules, subscription and redemption terms, governance, conflicts of interest policy, depositary and AIFM details, and investor rights.
20) How is risk-spreading assessed?
By reference to the strategy and market practice comparable to SIF standards under the general regime. Quantitative limits are often disclosed. The board/manager and AIFM must monitor and document compliance.
21) Can a RAIF list units or shares?
Yes, subject to the chosen legal form, market rules, and listing authority requirements. Listing does not change investor eligibility rules.
22) How are conflicts of interest handled?
Policies must identify, prevent, manage, and disclose conflicts. Where conflicts cannot be avoided, fair treatment and clear disclosure to investors are required.
23) What are the valuation rules?
Valuation must be consistent, documented, and compliant with the issuing document and AIFM policies. Independent valuation or valuation by the AIFM with proper functional independence is required under AIFMD standards.
24) Are side letters permitted?
Yes, where allowed by the constitutive documents and applicable law, and where investor treatment remains fair. Material terms should be disclosed as required.
25) What reporting applies to investors?
Periodic reports under AIFMD (annual report, disclosures on leverage, risk profile, fees) and any additional reporting agreed with investors or required by law.
26) How is marketing conducted in the EU?
Through the AIFM passport to professional investors. National rules on notifications, fees, and pre-marketing must be followed.
27) What substance is expected in Luxembourg?
Appropriate substance at the fund and service-provider level. Board composition, decision-making, registered office, central administration, and AIFM presence must align with regulatory expectations.
28) Can the RAIF migrate or convert?
Conversions between regimes (general ↔ risk capital), changes of legal form, or migrations may be possible subject to legal steps, investor approvals, and tax review.
29) What is the typical timeline to reach EUR 1,250,000?
Fundraising plans should detail closings to reach the statutory threshold within 12 months. The board/manager must monitor compliance and disclose shortfalls promptly if risks arise.
30) What legal notices are advisable to include?
Investor eligibility, risks, limitations on transfers, valuation and liquidity warnings, tax disclaimers, and governing law/jurisdiction clauses. Always obtain independent legal and tax advice before commitments.
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