Open Different Types of Investment Funds in Luxembourg

We offer a wide range of services for local and foreign businessmen who want to start a fund in Luxembourg, the leading investment fund centre in Europe.

Quick Facts
Reasons to select Luxembourg for fund registration	– It represents the 2nd most important fund center in the world; – It has favorable regulatory system and tax advantages, – It provides a large pool of fund domiciliation experts, – It has a high investor protection level, – It provides a wide range of investment funds.
Institution that supervises fund activity	The Financial Sector Supervisory Commission
Main categories of funds to register in Luxemboug	– Undertakings for Collective Investments (UCIs), – Undertakings for Collective Investment in Transferable Securities (UCITS), – Alternative Investment Funds (AIFS), – Undertakings for Collective Venture Capital Investments (SICAR)
Legal entities for UCIs	One can start a Luxembourg fund registered as an UCI under any of the following: – the common contractual fund (FCP), – the investment company with variable capital (SICAV), – the investment company with fixed capital (SICAF).
Umbrella funds available (yes/no)	Yes
Advantages of umbrella funds	– umbrella funds can be set up for most of the fund types available in Luxembourg, – they can have different investment strategies, – they can be independent structures, – they can have different administrators and different policies for the issuance of interest/securities.
Other types of funds available in Luxembourg	– the Reserved Alternative Investment Fund (RAIF), – life insurance funds, – specialized investment funds, – unregulated funds, – hedge funds, – securitization vehicles, etc.
Requirements to start a Luxembourg fund as a SICAR	Rules of the Law 15 June 2004, Article 12 are applicable. – It must obtain approval from the CSSF for the fund's activities and its directors, – It needs a capital of EUR 1 million that must be obtained in 12 months since the incorporation, – It can be set up as public limited company, special limited company, private limited company.
Capital requirements for SICAV and SICAF	In order to start a Luxembourg fund as a SICAV/SICAF one needs a capital of EUR 1.25 million.
Maximum period of time to raise capital for funds after incorporation	6-12 months, depending on the fund
Management requirements for FCP	The fund has to be managed by a management company.
RAIF available in Luxembourg (yes/no)	Yes
Laws regulating RAIF	– Luxembourg Law of 23 July 2016 (RAIF Law), – the Luxembourg Law of 12 July 2013 on Alternative Investment Fund Managers (AIFM Law)
Main rules of the Alternative Investment Fund Managers Directive (AIFMD)	– rules for the protection on the investors, for hedge funds, private equity funds, real estate funds and other AIFs, – regulations on risk management, – rules on appointing fund managers, – rules regarding their obligations.
Obligations of AIFMs as per the AIFMD	– to obtain authorization from the CSSF, – to have a minimum level of personal funding, calculated based on the value of the managed portfolio, – to comply with liability risks, internal audit procedure, to reporting procedures, etc.
Types of taxes charged on investment funds	Investors who want to open different types of investment funds in Luxembourg may pay: the subscription tax, the capital duty, the corporate income tax, the withholding tax (charged to entities set up as corporate structures).
Tax rates charged for the subscription tax	Between 0.01% and 0.05% of the fund's net assets (It varies based on the type of fund).
Funds exempted from the payment of the subscription tax	When you open an investment fund in Luxembourg, you can be exempted from paying this tax for: European Long-Term Investment Funds (ELTIFs), Pan-European Personal Pension Products (PEPPs), pension funds, exchange traded funds, etc.
Tax regime for UCITS funds	Tax exemption on the following: income tax, the withholding tax, the net wealth tax, the value added tax (applicable to management services). UCITS are liable to the payment of a 0.05% subscription tax (or 0.01% for specific categories of UCITS). Certain funds benefit from the provisions of double tax treaties.
Tax regime for Part II funds with registered/authorized AIFM	Part II funds benefit from the same tax rules as the ones applicable to UCITS funds.
Tax regime for SIF with registered/authorized AIFM	The same tax rules apply as the ones imposed for UCITS and Part II Funds. However, the subscription tax is charged at a rate of 0.01% (full exemption is granted for SIFs operating as money market funds or pension funds).
Tax regime for SICAR with registered/authorized AIFM	Tax exemption on the following: the income tax (as long as the income is derived from transferable securities), the withholding tax, the subscription tax, the capital duty, the VAT (charged for management services). SICARs must pay a corporate income tax at a rate of 24.94% and those registered as corporate structures benefit from the provisions of double tax treaties.
Tax regime for RAIF (authorized AIFM)	A RAIF is exempted from: the income tax for certain categories of income (investments outside risk capital portfolios, income obtained from transferable securities), the withholding tax, the subscription tax (for investments in risk capital), the VAT on management services. The corporate income tax rate is 24.94% and the subscription tax is 0.01%. It is charged with the wealth tax, and it can benefit from double tax treaties depending on the fund type.
Types of funds available for retail funds	Investors can open different types of investment funds in Luxembourg for retail funds, under the form of: UCITS, Part II UCI, SICAVs, SICAFs, FCP.
Tax regime for retail funds	Subscription tax (0.05%). Tax exemption on corporate income tax, withholding tax. Resident investors are liable to the payment of taxes on dividends.
Types of funds that can operate as AIFs	UCIs Part II, SIFs, SICARs, RAIFs, SOPARFIs
Duration of the fund incorporation process	1-3 months
Legal obligations on pre-marketing activities	Pre-marketing activites must be conducted as per the rules of the Directive EU 2019/1160.
Self-assessment questionnaire obligations	The self-assessment questionaire (SAQ) is regulated under the Circular CSSF 21/789 and Circular 21/790 and it applies to AIFs and retail funds.
Regulations imposed by the Law of July 21, 2023	The Law of July 21, 2023 introduced a tax exemption on the payment of the subscription tax for ELTIFs and PEPPs.

How can your representatives assist in setting up a Luxembourg investment fund?

Our experts in Luxembourg can help entrepreneurs in the following ways:

• assistance in setting up an investment company or most types of funds;
• our consultants in Luxembourg can provide assistance for fund administration and fund management;
• we also offer legal compliance for any chosen investment vehicle;
• our consultants have extensive knowledge not only of the financial regulations, but also of other aspects of civil, commercial and company law in Luxembourg;
• investors can also rely on us for tax compliance.

What are the main types of funds I open as an investor in Luxembourg?

Foreign investors who want to open a Luxembourg fund can set up any of the following:

1. the specialized investment fund (SIF);
2. the investment company in risk capital (SICAR);
3. the SOPARFI in Luxembourg;
4. the SICAV and the SICAF (investment company with variable capital/fixed capital);
5. the common investment fund (FCP);
6. the UCITS in Luxembourg;
7. the RAIF in Luxembourg, etc.

What are the main categories of law regulating local funds?

The legislation on this matter is divided into several pillars, which regulate each category of funds, as follows:

• legislation on undertakings for collective investments in transferable securities (UCITS);
• legislation concerning the registration of alternative investment funds, which can be set up as hedge funds, real estate funds and others;
• the country also applies the Alternative Investment Fund Manager (AIFM) Directive, which directly regulates the activities developed by the managers of the local investment funds and which also ensures a high level of investor protection;
• legislation on specialized investment funds (SIFs), which is divided into two main categories – for SIF in Luxembourg, set up as AIFs, or SIFs operating under the AIFMD. 

What are the main provisions of the AIFMD law in Luxembourg? 

The AIFMD law is applicable to all AIFMs managing AIFs registered in Luxembourg or in another state (regardless if the domicile country is a member state of the European Union or not). AIFMs in Luxembourg have a set of legal obligations, as presented below: 

• register with the CSSF;
• offer in-depth information regarding the investment strategies that they will apply;
• provide constant information to the CSSF regarding the instruments they trade, as well as the exposures they face;
• inform CSSF in the situation in which they no longer meet the threshold stipulated for the assets under management they hold. 

What are the main legal forms for undertakings for collective investments in Luxembourg? 

Foreign investors in Luxembourg can set up their funds in the form of three legal structures with various characteristics when registering a vehicle as undertakings for collective investments. In this case, the investors may choose from the following types of investments funds in Luxembourg, as presented below:   

• the common investment fund (FCP), a type of fund that does not have a legal personality;
• the investment company with variable capital (SICAV), where investors control the capital;
• the investment company with fixed capital (SICAF), which can be registered under three business forms, including the public limited company.

What is an umbrella fund?

The umbrella fund defines that, under a single legal entity set up for a fund, the investors will be able to register more compartments that can act as independent structures, with different investment strategies and different distribution markets. 

For what types of investment vehicles can I set up umbrella funds?

The umbrella fund (or multiple compartments fund) is available for a wide range of vehicles that can be registered in Luxembourg, such as RAIFs, FCPs, SICAVs or SICARs.

Are there any capital requirements when opening a Luxembourg fund?

Yes, in most cases, opening an investment fund in Luxembourg implies preparing a minimum share capital.

What capital should I prepare for various types of funds in Luxembourg?

The capital requirements vary greatly based on the type of fund investors want to set up in this country. In the list below, our consultants present some of the minimum thresholds imposed in this sense:

• EUR 100,000 for investments made in SIFs, SICARs and RAIFs, as long as the investors are well-informed investors;
• EUR 1,250,000 for funds such as SICAV, SICAF, FCP, SIF, Part II UCI funds;
• EUR 1,000,000 for SICAR, etc.

Do I need to subscribe the entire capital during the incorporation formalities?

No, according to the law applicable in Luxembourg, investors do not need to subscribe the total sum of money required as a minimum share capital. They need to subscribe only a part of it (usually, a percentage from the total) and they can raise the remaining sum after the fund has been incorporated.

Which is the deadline to subscribe the minimum share capital?

After the incorporation, the investors can raise the minimum share capital in a certain period of time. The timeframe can vary from one type of fund to another. In the list below, we highlight some of these timeframes:

• 12 months since the incorporation – this applies to funds registered as FCPs, SICAVs or SICAFs operating under the Part II UCI Law;
• 24 months – applicable to funds such as RAIFs, SIFs, SICARs, etc.

Are there any funds for which I don’t need to subscribe a minimum share capital?

Yes, this is possible for investment vehicles such as unregulated funds which are incorporated as special limited partnerships or common limited partnerships.

Do I need to obtain authorization for my fund in Luxembourg?

Yes, for the majority of the funds that can be incorporated here, investors are required to apply for an authorization (by submitting the required paperwork) issued by the Luxembourg Financial Market Authority (CSSF). 

Contact us for more information about starting an investment fund in Luxembourg.