Luxembourg RAIF: A Practical Setup Guide

For fund sponsors, asset managers and HNWI investors who want to launch an alternative investment fund quickly and with maximum structuring freedom, Luxembourg offers a dedicated vehicle: the RAIF (Reserved Alternative Investment Fund).

What is a RAIF?

The RAIF is a Luxembourg alternative investment fund created by the law of 23 July 2016. It is reserved for well-informed investors and is not authorised or supervised by the CSSF as a product. Instead, it must be managed by an authorised alternative investment fund manager (AIFM), which carries the regulatory oversight. This is why the RAIF is often described as a semi-regulated fund.

Its main appeal is speed to market. Because there is no CSSF approval of the vehicle itself, a RAIF can be set up and launched much faster than a regulated fund, while still offering a recognised legal and tax framework.

Why sponsors choose the RAIF

• Speed to market: No CSSF approval of the vehicle means a shorter launch timeline.

• Structuring flexibility: Corporate, partnership and contractual forms are available, and the fund can be an umbrella with several compartments.

• Wide investment scope: Private equity, real estate, private debt, infrastructure and other strategies can be held in one framework.

• Light taxation: The RAIF is generally exempt from corporate income tax, municipal business tax and net wealth tax, with an annual subscription tax on net assets as the main charge.

• Recognised regime: The RAIF benefits from the AIFM framework and, through an authorised AIFM, EU marketing rules for professional investors.

  
  

The RAIF is not unregulated. The AIFM, depositary and other service providers are regulated, and investors, regulators and banks expect high standards.

Legal forms, investors and key requirements

A RAIF can be set up as a corporate entity (such as an S.A., S.à r.l. or SICAV), a partnership (such as an SCSp) or a contractual fund (FCP). The constitutive documents must state that the vehicle is subject to the RAIF law.

Eligible investors: institutional and professional investors, and other well-informed investors who confirm their status in writing and either invest at least EUR 100,000 or are assessed as suitable by a credit institution, investment firm or management company.

Core requirements:

• An authorised AIFM must be appointed.

• A depositary and an external auditor are required.

• The fund must follow the principle of risk spreading, unless it invests exclusively in risk capital.

• RAIF is suited for a volume of investment in excess of 50m given the very high operating costs of around EUR 150,000 to EUR 200,000 per annum it triggers

Taxation at a glance

Default regime: The RAIF pays an annual subscription tax of 0.01% of its net asset value, calculated and paid quarterly. It is generally exempt from corporate income tax, municipal business tax and net wealth tax (corporate forms may still owe the minimum net wealth tax), and Luxembourg levies no withholding tax on distributions. Certain assets, such as money market and microfinance investments, can qualify for subscription tax exemptions.

Risk capital option: A RAIF that invests exclusively in risk capital can opt for a SICAR-like regime. It then pays no subscription tax. A corporate-form RAIF is taxable but benefits from an exemption on income from risk capital securities, while a partnership-form RAIF is generally tax transparent.

The tax position of each investor depends on its own country of residence, and treaty access depends on the legal form. This should be reviewed before launch.

RAIF, SIF or SOPARFI?

	RAIF	SIF	SOPARFI
Purpose	Alternative investment fund for several investors	Alternative investment fund for several investors	Holding and investment platform
Supervision	No CSSF approval of the vehicle; authorised AIFM required	Authorised and supervised by the CSSF	None for holding activities
Investors	Well-informed investors	Well-informed investors	Unrestricted
Time to market	Fast	Longer, due to CSSF approval	Standard incorporation
Taxation	0.01% subscription tax, or risk capital regime	0.01% subscription tax	Fully taxable, with participation exemption
Legal forms	Corporate, partnership and contractual	Corporate, partnership and contractual	S.à r.l. or S.A.

Setting up in steps

1. Define the strategy and investors: investment policy, target investors, size, and whether the risk capital option fits.

2. Choose the legal form and AIFM: corporate, partnership or contractual form, umbrella or stand-alone, and an authorised AIFM.

3. Appoint service providers: depositary, auditor, administrator and, where relevant, legal and tax advisers.

4. Draft the documents and incorporate: constitutive documents stating that the RAIF law applies, the offering document and the notarial deed where required.

5. Register and launch

   
   

Staying compliant

A RAIF must keep within its investor and risk-spreading rules, publish an offering document and an audited annual report, and pay its subscription tax each quarter. Its AIFM, depositary and administrator carry out valuation, safekeeping, AML and reporting duties under AIFM rules. The vehicle must also maintain accurate beneficial ownership data and proper corporate records. Where the RAIF is marketed to investors across the EU, marketing and transparency rules also apply.

Is a RAIF right for you?

A RAIF suits sponsors and managers launching private equity, real estate, private debt, infrastructure or multi-strategy funds for professional and well-informed investors, particularly where speed and flexibility matter. If you want a vehicle directly supervised by the CSSF, a SIF may be preferable. If you are holding participations rather than pooling investors, a SOPARFI is usually simpler, and a securitisation vehicle suits structured finance transactions.

How we can help

We advise fund sponsors, asset managers, family offices and institutional investors on Luxembourg fund structuring. Our services cover vehicle and legal form selection, regulatory analysis, incorporation, constitutive and offering documents, shareholder and investor arrangements, coordination with AIFMs, depositaries and tax advisers, and ongoing corporate support.

Considering a Luxembourg RAIF? Contact our team to discuss the structure that fits your fund.

Disclaimer: This article is provided for general information purposes only and does not constitute legal, tax or investment advice. The examples are illustrative and simplified. Luxembourg laws, tax rates and regulatory requirements are subject to change, and their application depends on individual circumstances. You should obtain specific professional advice before taking any decision or action based on its content. No lawyer-client relationship is created by reading this article.