Solutions

Luxembourg Partnership regime overhaul

Structuring opportunities ahead

Luxembourg Partnership regime currently included in the legislative process in Luxembourg is undergoing some modernization, this will offer a larger spectrum of structuring opportunities for alternative investment fund vehicles.

Your challenges

The proposed legislative changes shall give rise to a flexible and efficient limited partnership (LP) vehicle which meets the alternative investment funds industry’s needs, which are primarily for unregulated funds (with very low time-to-market), but also for lightly regulated funds in a tax neutral way.

The proposed new provisions are laid down in the draft law submitted by the Luxembourg government to parliament on 24 August 2012. They would transpose the EU Alternative Investment Fund Managers Directive (AIFMD) into national law (the draft law), the implementation of which is scheduled for before the end of 2012.
The draft law enhances the Luxembourg partnership regime as follows:

From a legal standpoint

  • It enhances the rules on partnerships limited by shares (Sociétés en Commandite par Actions, SCA) bringing them into line with business structuring needs.
  • It modernises the existing common LP (Société en Commandite Simple, SCS). The regime is available irrespective of whether the fund qualifies as an alternative investment fund under the AIFMD;
  • It creates a new vehicle, the special LP (Société en Commandite Spéciale, SCSp). The SCSp regime is generally similar to the SCS regime except for some minor differences due to the fact that the SCSp does not have legal personality.
  • Both the SCS and the SCSp regimes embed the broad contractual structuring flexibility inherent in the Anglo-Saxon LP model.

    From a tax standpoint
  • Full Luxembourg tax transparency is achieved for SCS and SCSp (to the extent that the GP holds less than 5% of the partnership interest and the SCS/SCSp does not perform actual commercial activity such as active trading)
  • The possibility of setting up a limited partnership, either with legal personality (SCS) or without it (SCSp), offers more flexibility regarding the tax characterization of the vehicle as either opaque or transparent in the jurisdiction of the investors (impacting the tax treatment in their hands); and
  • Management services provided to a SCS, SCSp or SCA qualifying as an alternative investment fund under the draft law would qualify for VAT exemption

Our services

We can assist you in identifying and setting up the optimal fund structure for your business, fully in line with international standards. Our offer can notably entail the following services:

Fund structuring

  • High level review of the different fund vehicles available (unregulated and/or regulated) and highlight of their main legal regulatory and tax features in order to identify the optimal fund structure
  • In depth analysis of the legal, tax and potential regulatory implications of the selected structure
  • Analysis of tax implications at the level of the investors

    Management structuring
  •  Analysis and optimization of tax position for fund managers

    Implementation
  • Assistance with the set up of the structure including drafting of step plan, review of legal documentation liaising with the Luxembourg tax authorities and ongoing assistance throughout the implementation phase

    Investment structuring
  • Tax efficient structuring of the investments of the fund aligned with legal, banking and commercial constraints

    Maintenance
  • Assistance with the set up of maintenance guidelines with respect to operations and substance

    Compliance
  • Assistance throughout the lifespan of the fund with potential compliance and tax reporting requirements
Luxembourg Partnership regime overhaul

Contacts

Benjamin Lam

Benjamin Lam

Partner | Investment Management Leader

Benjamin is a partner within the audit department and has over 20 years of experience in the financial services and commercial industries. He leads Deloitte Luxembourg's private equity and real estate... More

Raymond Krawczykowski

Raymond Krawczykowski

Partner | Tax Business Leader

Raymond is a Tax Partner and head of Tax. He is focusing on Merger and Acquisition transaction as well as Alternative Investment Funds. He has over 20 years of tax experience and leads Deloitte Privat... More