A FCP in Luxembourg is the acronym from Fonds Commun du Placement, which represents a common investment fund that is registered as an open-ended mutual fund. Foreign investors who want to open a investment fund in Luxembourg should be aware that the FCP does not have a legal personality, which means that there aren’t any legal distinctions between the fund and its owners. If you need legal assistance on the registration steps applicable to a FCP in Luxembourg, we invite you to request advice from our team of financial specialists, who can also provide consultancy services on the tax regulations and tax compliance imposed by the local legislation for this type of fund.
| Quick Facts | |
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| FCP – definition |
The FCP stands for fonds commun de placement (common investment fund). It refers to a type of fund in which investors are known as unitholders. The assets of the fund are transferable securities pooled together by the collective investments of the investors, who are entitled to receive equal profits obtained from the assets invested. |
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Appointing a management company |
In order to open a FCP in Luxembourg, it is necessary to appoint a management company. |
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Residency of the management company |
It must have its place of business in Luxembourg. |
| Legal personality | The FCP does not have a legal personality. |
| Capital – minimum threshold requirement |
EUR 1,250,000 |
| Deadline to raise the minimum capital |
6 months or 12 months, depending on the law under which the FCP was incorporated |
| Capital requirement upon incorporation |
Investors can open a FCP in Luxembourg by depositing at least 5% of the minimum capital required. |
| Umbrella fund availability |
A FCP can be set up as an umbrella fund (multiple compartments). |
| VAT liability |
The FCP is liable to the payment of the VAT. |
| VAT obligations for the FCP and the management company | From a tax perspective, the FCP and the management company are treated as a single structure when paying the VAT. |
| Access to double tax treaties |
The structure can have access to double tax treaties in certain circumstances (Circular L.G.-A. No. 61 of 8 December 2017). |
| Founding document |
One can open a FCP in Luxembourg by drawing the management regulations. |
| Legislation applicable to FCPs |
Part I Fund Law, Part II Fund Law, SIF Law |
| Open-ended fund/ closed-ended fund requirement |
The FCP can be registered as an open-ended or closed-ended structure (it depends on the law regulating the fund). |
| Minimum number of investors | 1 |
What are the characteristics of a FCP in Luxembourg?
Each of the funds investors can register in this country has a different set of characteristics. The basic characteristic of a FCP in Luxembourg are given by its founding regime – it represents a contractual agreement that is set up between the investors of the fund and the management company which is appointed to manage the fund. The management company must always have its place of business in Luxembourg.
In an FCP, the investors hold units, not shares, and any asset belonging to the fund are legally separated by the management company which is appointed to manage the fund. Given that the FCP in Luxembourg can be incorporated under the regulations of various investment laws, different regulations may appear.
In all cases, the management company is necessary for the activity of any FCP and, if the FCP is incorporated as an alternative investment fund (AIF), then the fund can be represented by an alternative investment fund manager (AIFM).
The control of an FCP is generally done by the board of directors of the management company and investors must also know that they are not required to hold shareholders’ meetings (which, in this case, are referred to as unitholders’ meetings). In most of the cases, this entity is considered a tax transparent entity, but exemptions can appear and for this, you can refer to our team of financial consultants.
In certain cases, the FCP in Luxembourg may be entitled to benefit from the provisions of the double tax treaties that are currently available in this country. From a tax point of view, the FCP is liable to the payment of the value added tax (VAT).
The FCP in Luxembourg operating under the Part I of the 2002 Law
It must also be observed that the management regulations of the FCP in Luxembourg have to be drawn and executed by the appointed management company. FCPs which are incorporated under the Part I Law (Undertakings for Collective Investments in Transferable Securities – UCITS) operate in accordance with the European Directives with regards to UCITS.
The Part I funds can take the form of an FCP or of an SICAV, therefore those who want to open a SICAV in Luxembourg will need to comply with the same requirements. For instance, these funds need the approval of the CSSF and they can also benefit from the European passport.
They can invest in a variety of assets, such as transferable securities, bank deposits, financial derivates, etc., and there aren’t any restrictions when we refer to the types of investors that can be eligible to incorporate these funds.
Investment funds in Luxembourg may have certain restrictions for the categories of investors allowed, and this can vary based on their type, therefore, we invite you to address our team of financial advisors to check the eligibility criteria.
FCPs under the Part II Law
FCPs incorporated under the Part II Law (Alternative Investment Funds – AIFs) can take the form of various types of vehicles and they can also be set up under the Specialized Investment Funds Law of February 13, 2007. Since 2016, FCPs may also be incorporated under the Law of July 23, 2016 on Reserved Alternative Investment Funds (RAIFs).
Investors interested in opening an investment fund in Luxembourgoperating as a FCP have to know that the fund can be incorporated by a single investor, and that there aren’t any limitations with regards to the maximum number of investors, if the fund is registered under the SIF law.
Under the Part II law, those who want to open a SIF in Luxembourg can incorporate the fund as an FCP. The same applies to investors interested in RAIF in Luxembourg. In order to incorporate these structures, investors have to draw up a simple contract and to set up the management regulations.
Those who want to register a contractual form of the SIF in Luxembourg may set the fund up as a common contractual fund or they may register it as an FCP, these 2 being the sole options for contractual SIFs. For corporate forms, SIFs may take the form of SICAV or SICAF. The Part II Law regulates other types of funds, such as the SICAR in Luxembourg.
Below, we invite you to watch a short video presenting how to register a common investment fund in Luxembourg:
Why select a FCP in Luxembourg?
An investment fund in Luxembourgcan have many benefits, only when we refer to the place of the incorporation, which is the most reliable financial market in Europe. When referring to the FCP, the structure can have a variety of benefits, that can be suitable for some investors.
Although the FCP is not a separate legal entity and usually investors prefer to separate their liability from the one of their investments/businesses, the FCP provides tax transparency, marketing and operational advantages.
Investors can open a Luxembourg fund as an FCP if they want to benefit from top professional management services provided by management companies, along with the services provided by specialists such as custodians or tax professionals.
Tax professionals, such as our team, can offer advice on the types of taxes applied to this type of fund, which can vary based on the law which regulates the activity of the FCP. Tax rules vary based on the structure as well, for instance, the SOPARFI in Luxembourg has different rules compared to the FCP.
How many FCPs are registered in Luxembourg?
Businessmen who want to open a fund in Luxembourgas an FCP have to know that this type of vehicle represents a popular way to develop investment activities in this country. An advantage of the FCP in Luxembourg is given by the fact that it can be incorporated under three basic laws which regulate the activities of investment funds in this country (Part I Law, Part II Law, the SIF in Luxembourg Law).
With regards to the FCP in Luxembourg, a survey carried out by the Association of the Luxembourg Fund Industry (ALFI) in 2022, on 172 RAIFs and 109 non-regulated funds, revealed the following:
- FCP registration slightly declined after the beginning of the pandemic, but in 2021 FCPs marked a rebound, of 86 registrations (compared to 76, in 2020);
- the increasing trend was maintained in 2022 as well, when there were 98 registrations;
- in 2022, the FCP represented 15.8% of all registrations in the surveyed category of funds;
- Part II funds incorporated as FCP accounted for 0.9%.
If you need additional details on how to register a FCP in Luxembourg, we invite you to contact our team of financial experts, who can offer additional information.