Luxembourg: a premier destination for global investment
This leading financial centre in Europe provides both institutional and private investors with unrivalled access to European markets. With €5.1 trillion in regulated investment fund assets as of 2023, its advanced regulatory framework, business-friendly tax regime, and core position within the EU single market have made it a hub for cross-border investments.

Recent years have witnessed heightened interest in private equity exposure, especially across Luxembourg's dominant fund administration and asset management industries. Generating annual revenues of €7.7 billion, the asset management ecosystem accounts for 6% of national GDP and yields 10% of fiscal receipts.

Its competitive edge lies in the structuring flexibility afforded to managers and investors alike, allowing bespoke vehicles to be crafted around specific strategies. Coupled with its lengthy track record of smoothly facilitating even the most complex investor demands, fund sponsors around the globe turn to Luxembourg when bringing products to market.

Underscoring this long-standing success is Europe’s top legal system, ensuring asset safety and earnings stability. Bushy bureaucratic obstacles like capital controls or trade barriers are equally absent thanks to Luxembourg's integral placement within both the EU single market and the Eurozone.

While pan-European legislation provides baseline supervision, fund governance adheres to best-in-class local regulation, earning Luxembourg 6th place globally for financial sector competitiveness. Consequently, industry projections predict private equity coffers will swell by 10% annually until 2025 at least.

Whether pursuing fund launch, holding company formation, or investment-linked immigration, Luxembourg warrants consideration. Grasping applicable legislative nuances, minimum capital requirements, and frequently utilised legal structures constitutes critical starting points before committing capital. Aligning expert counsel early when charting an investment course can illuminate this financially pragmatic but structurally complex jurisdiction.

Luxembourg fund regulation

Owing to its robust regulatory framework and extensive fund structuring expertise, Luxembourg has become the preferred European domicile for international asset managers launching UCITS retail funds and AIF alternative vehicles. Currently representing 58% of the cross-border fund market, Luxembourg regulated €5.1 trillion in net assets as of 2023. Its pioneering 1988 implementation of the EU’s original UCITS Directive built the foundations for this success.

Luxembourg fund governance adheres to overarching European financial services directives as well as national legislation issued by domestic regulators like the CSSF Commission. Tasked with safeguarding financial stability, the CSSF has cultivated an environment of investor protection that still enables product innovation.

For fund sponsors, understanding key regulatory considerations is essential when establishing a Luxembourg-domiciled vehicle. These include:

Financial governance
The CSSF oversees banking, asset management, and insurance, ensuring operational resilience and transparency through manager approvals, reporting obligations, and disclosures.
Fund regulation
Frequently enhanced regulation focuses on streamlining cross-border distribution while upholding rigorous UCITS and AIFMD standards that enable funds to passport across the EU.
Corporate governance
Publicly traded fund entities must enact shareholder protections and governance policies as dictated by Luxembourg company law.
Beneficial tax treatment, especially for fund investment conduits, enables sponsors to maximise investor returns.
In increased global coordination, Luxembourg implements EU anti-money laundering and counter-terrorism financing regulation, including transaction monitoring and suspicious activity reporting.

With investor safeguards at its core yet hungry for financial innovation, Luxembourg fund regulation strikes the optimal balance between oversight and growth.

Luxembourg fund industry: key regulatory updates

Keenly attuned to investors' needs, Luxembourg continually enhances its fund ecosystem through regulation that calibrates oversight with business-friendly flexibility.





REIT framework

Debuting in Luxembourg, granting tax advantages for property and infrastructure allocation, catering to asset diversification demand.


SLP Reform

Conferred tax transparency, addressing private equity and venture capital investor requirements.


RAIF Introduction

Provided externally managed, qualifying investor AIF relieved of CSSF approval obligations. Offering flexible multi-class structuring, passporting across the EU under authorized EU AIFM management.


Key product law and AIFM law updates

Aiming to elevate investor protections, optimize regulatory efficacy, and embed industry best practices.

Fund regulation: 2023 enhancements elevate global appeal

Entering into force on 28 July 2023, Luxembourg’s sweeping fund ecosystem enhancements uphold its preeminence as Europe’s leading cross-border fund domicile. Amending five core statutes governing fund establishment and management, the legislative package fine-tunes regulation to sponsor needs while cementing investor protections.



Private limited partnerships and companies

Complement existing public-company structures for SICAV vehicles.

Closed-ended funds

Benefit from additional share pricing flexibility and extended timeframes for meeting minimum capital thresholds.

Tax nuances

Money market funds no longer face subscription tax exceptions linked to 90-day investment periods. ELTIFs secured full subscription tax exemptions.

“Well-informed investor” definition

Updated to mirror EU standards across SICAR, SIF, and RAIF legislation, lowering the qualification threshold to €100K for non-professionals.

AIFM oversight

Enables AIFMs to appoint tied agents, reducing operational friction for cross-border groups and aligning with UCITS frameworks.

Retail investment protocols

Updated rules clarify retail investment protocols for special fund cohorts like ELTIFs and EuVECAs in Luxembourg.

Luxembourg fund structures: tailoring governance to strategy

When opting Luxembourg for fund jurisdiction, global asset managers enjoy unparalleled structural flexibility alongside rigorous regulation. Though many elect an unregulated SOPARFI private equity conduit, or select one of the described modes:

Investment companies in risk capital (SICAR)

Permitted to pursue multi-asset alternatives like venture capital, private equity, and hedge funds, the SICAR delivers ultimate strategy adaptability. Sponsors may establish segregated sub-funds beneath a SICAR umbrella to isolate distinct objectives, assets, and investors within a single, overarching framework.

Free from standard diversification and risk spreading directives, each sub-fund benefits from independent governance and operational autonomy. And with no mandatory dividend reserves or restrictions upon distributions, SICARs optimize investor payout potential.

Tax considerations are equally appealing. SICARs confer look-through transparency along with exemptions on non-resident dividends, exempt from taxes if assets were invested within 12 months.

Sponsors seeking outsized returns, compressed timelines, and elevated risk exposure routinely leverage Luxembourg SICAR capabilities when bringing novel products to market.

Specialized investment funds

Available only to well-informed investors, Luxembourg’s specialized investment fund (SIF) offers qualified participants versatile exposure to sophisticated asset classes beyond the scope of traditional retail funds. As externally managed alternative investment vehicles, SIFs employ heightened operational agility to capture opportunities across diverse markets. Encompassing real estate, venture capital, hedge funds, commodities and more, SIFs constitute regulated EU AIFMD funds while bypassing standard UCITS directives. Streamlined CSSF registration demands merely the approval of designated directors, administrator, depositary, and auditor prior to securing SIF status.

Crucially, sponsors face no constraints upon leverage deployment or investment restrictions. Structuring itself bends to manager preferences, with SIFs constituable as fixed or variable capital investment companies, or contractual fund frameworks tailored around specific partner demands.

Tax obligations are equally light, limited to a 0.01% annual subscription tax levied upon the net asset value.

Undertakings for collective investment (UCIs) & Reserved alternative investment funds (RAIFs)

As leading fund domiciles under EU regulation, Luxembourg UCIs and RAIFs offer global asset managers unmatched structural choice when bringing sophisticated products to market.

Available as open-ended (FCPs) or closed-ended corporate vehicles, UCIs impose few constraints around asset classes, diversification, or leverage — making them ideal turnkey solutions for hedge, real estate, and private equity strategies. Appointing an authorized EU Alternative Investment Fund Manager (AIFM) then unlocks professional investor passporting rights across Europe.

The RAIF functions as an externally managed, qualified-investor AIF specifically targeting institutional capital. Bypassing CSSF registration requirements, RAIFs instead leverage their manager’s existing permission's framework, thereby optimizing time-to-market while upholding full regulatory oversight.

Common legal configurations encompass the FCP structure of contractual rights alongside corporate frameworks like fixed/variable capital investment companies. Minimum capitalization thresholds must still be respected, detailed disclosures submitted, and local service providers appointed to handle custody, administration, and audit functions.

SICAVs & SICAFs as Luxembourg fund solutions

As pillar fund structures within the Luxembourg ecosystem, open-ended SICAV investment companies and closed-ended SICAF counterparts furnish global asset managers unmatched versatility to house sophisticated strategies.

Available as private limited partnerships or public companies, SICAVs issue redeemable shares tied to net asset value, thereby furnishing investors daily liquidity. SICAFs instead offer fixed capitalization, requiring amendments to increase equity. Both models enable self-managed or third-party operated vehicles.

For SICAVs, adherence to UCITS retail directives enables promotion to ordinary investors. Yet, configuring under SIF legislation alternatively restricts participation to informed participants in return for widened investment powers.

Irrespective of form, appointed custodians safeguard fund assets as administrative and audit functions connect to local service providers. And with board oversight mandated from Luxembourg, sponsors retain full control while harnessing the jurisdiction’s regulatory rigour.

Min. capitalization sits at €1.25 million, with timeframes of 6–12 months to fully vest, depending upon Registered or Specialized status. Ongoing fees include a capped annual tax levy calculated against net assets.

Registering a fund in Luxembourg: structuring private equity and venture capital investments

For international private equity and venture capital managers, Luxembourg furnishes bespoke structural solutions to house sophisticated investment strategies. Alongside flexibility and tax efficiency, fund governance adapts to sponsor preferences through:

SARL or private limited liability company
SARLs limit partner risk while conferring shareholder control over capital actions. Prior approval from 75% of shareholders is mandatory for investor entry/exit, but embedded call options can compel repurchase subject to constitutional clauses.
SA or public limited company
This form constitutes the framework of choice for managers planning public listings or targeting significant institutional allocations. By issuing shares or bonds openly, SAs can harness capital markets to scale AuM rapidly.
Limited partnerships
Three distinct limited partnership regimes exist, each calibrating legal personhood, tax transparency, and participant liability uniquely. The unregulated SCS and SCSp furnish ultimate contractual freedom. Meanwhile, the SCA blends general partner control with third-party shareholder rights.

Irrespective of the model, LP frameworks dissolve fund-level taxation. For SCS/SCSp vehicles, VAT registration attaches only when eschewing regulated fund status. Umbrella structures also enable segregated asset pooling.

In melding overseas investor access with onshore regulation, these structures cement Luxembourg’s reputation as a premier private capital hub. Global managers continually pinpoint the jurisdiction’s creative latitude as instrumental when bringing novel strategies to market.

Marketing and governance rules

Understanding Luxembourg’s investment fund nuanced governance protocols is essential when aiming for pan-EU scale. Though common standards govern EU AIFMs, additional obligations attach depending upon strategy, investor type, and registered status.

Regulatory notification requirements:
Any dissemination of information or communications pertaining to investment strategies to EU-based managers or potential professional investors domiciled in Luxembourg regarding AIFs requires prior notification to the CSSF Commission. Management companies or third parties must notify the CSSF if intending to offer or place units/shares of a fund under their management to investors residing in Luxembourg.
AIF notification cancellation:
Recent legal frameworks in Luxembourg regulate the termination of marketing of shares or interests in an AIF. After notification cancellation, the AIFM is prohibited from selling shares in an AIF with a comparable investment strategy for 36 months.
Investment fund leverage:
Whilst unregulated SOPARFIs, SICARs, SIFs, and RAIFs are not beholden to statutory leverage limitations, provisions within the AIFM Act may apply to those deemed AIFs. Credit leverage amplifies investment risk, achieved through methods like capital borrowing, securities borrowing, credit derivatives, and other financial instruments. While leverage can enhance returns, it also magnifies downside risks, necessitating prudent governance and oversight.

Private equity and venture capital funds typically avoid leverage to mitigate investor risks. Leverage at the portfolio company level remains isolated from these funds' financial structures. Luxembourg funds may employ NAV or asset-backed financing programs, with loan proceeds leveraging the fund’s asset portfolio. Limited exceptions allow borrowing for UCITS funds on a temporary basis or for real estate acquisition, subject to regulatory caps.

Establishing holding structures in Luxembourg

A holding company constitutes a legal entity formulated to retain control or ownership interests in other companies' equity or assets. For assistance with establishing a Luxembourg holding company, our business consultants welcome your inquiry.

Holding company models in Luxembourg

A passive holding company is mandated solely to administer a securities' portfolio, chiefly comprising other companies' equity stakes, with aims to profit through capital appreciation and dividends over the long term. These vehicles facilitate investment diversification and capital preservation.

An active holding company not only stewards investments but exerts control over subsidiaries by establishing strategic objectives, operational processes, governance protocols, and furnishing financial and operational support. This oversight can encompass joint ventures, resource sharing, collaboration initiatives, and general synergy creation across the holding structure.

The preferred holding vehicle in Luxemburg is a SOPARFI, chiefly purposed to own and manage equity interests in other companies. SOPARFIs can incorporate under different legal constructs per stakeholder needs like limited partnership, private limited company, and public limited company.

SOPARFI tax considerations
  • Fully taxable Luxembourg company eligible for participation exemption
  • Exempted from tax on dividends, sale proceeds and liquidation distributions
  • Dividend distributions to shareholders are tax-exempt
  • Property tax exemptions on ownership interests apply
  • The EU parent-subsidiary directive abolishes dividend withholding taxes between affiliated entities and removes double taxation of subsidiary profits at the parent level.
Headline corporate tax rates
  • 15% on income below €175K
  • 17% rate over €200K
  • 6.75% municipal business tax
  • Extensive double tax treaties can significantly reduce effective tax rates.
Governance requirements

Holding companies mandate both a Management Board and Supervisory Board with at least three directors, even for single shareholder entities.

Investment scope

SOPARFIs can hold various securities including bonds, listed/unlisted equity, property globally, cash, commodities, and intellectual property. Investors might include institutional investors, investment funds, individuals, trusts, or other SOPARFIs.

Audit & reporting requirements

Smaller holding companies mandate an appointed auditor. Medium and large entities require certified independent auditors. Qualifying criteria include exceeding two of the three following thresholds:

  • €6.25 million turnover
  • €3.125 million balance sheet totals
  • 50 employees
  • Annual tax returns and annual general meetings to review accounts are mandated within 6 months of the financial year ends.

Luxembourg residence by investment programme

In late 2017, Luxembourg instituted its Residence by Investment Programme, tendering affluent international investors residency rights spanning 3–5 years in exchange for prescribed investment thresholds. Upon completing the 5-year tenure, participants become eligible for permanent residency and prospective naturalisation.

The programme confers flexibility to deploy either passive or operational investments across a range of approved investment routes. One such pathway permits a €3 million investment into permissible fund structures, including private equity, venture capital and real estate funds.

Process for obtaining residence

Stage 1:


Specialist advisers provide guidance around eligible investment options, conducing due diligence surrounding fund transparency and provenance.

Stage 2:

Application submission

Legal counsel assists in collating the requisite documentation in adherence to prevailing immigration formalities across the selected investment scheme. Concurrently, dialogue would be coordinated with immigration authorities regarding the pending application.

Stage 3:

Due Diligence

With all paperwork submitted, the authorities initiate intensive verification of applicant data and credentials provided thus far. Additional supporting documents may be requested as needed over the course of due diligence activities.

Stage 4:


Upon authorities signing off, qualifying candidates must remit all associated fees and select an approved investment vehicle to deploy capital into. Upon demonstrating compliance, formal residency rights shall be conferred.

Investment vehicles

Assignment of investment capital into Luxemburg's fund may transpire directly into permissible domiciled funds or via intermediary offshore vehicles constituted to invest into said funds thereafter. Irrespective of approach, all underlying funds must evidence robust governance, controls, and accounting procedures.

In terms of qualifying funds, participants may elect across a spectrum covering equities, fixed income, real estate and more, aligning with personal risk tolerances and investment objectives accordingly. Luxembourg funds proffer access to global, well-regulated asset classes.


Luxembourg evidences compelling credentials as a jurisdiction for residence, as well as a platform for international investment and asset diversification more broadly. Determining the optimal approach requires reconciling one's specific aims, resources, and circumstances against prevailing policy frameworks. YB Case legal and tax advisers would be best placed to elaborate on the possibilities and particulars involved through a confidential consultation. Please fill out the form below to explore how we may serve as a trusted partner.

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