Taxation of SCS and SCSp qualifying as AIFs - newsflash - 09.01.2015

The Luxembourg tax authorities today issued Circular Letter L.I.R. n° 14/4 with respect to the taxation of income realised by a Luxembourg SCS or SCSp.

09/01/2015

The Luxembourg tax authorities today issued Circular Letter L.I.R. n° 14/4 (the “Circular”) with respect to the taxation of income realised by a Luxembourg common limited partnership (société en commandite simple - “SCS”) or a special limited partnership (société en commandite spéciale - “SCSp”). An SCS/SCSp is a tax transparent entity for Luxembourg tax purposes and is thus not subject to Luxembourg corporate income tax or net worth tax. However, the profits of an SCS/SCSp may be subject to municipal business tax (impôt commercial communal) (i) if the SCS/SCSp carries out a business activity or (ii) if, by virtue of the business-taint theory (Geprägetheorie), the SCS/SCSp’s general partner owns 5% or more of the interests in the SCS/SCSp. The main purpose of the Circular is to confirm the position that an SCS/SCSp which qualifies as an alternative investment fund (“AIF”) within the meaning of the Luxembourg law on alternative investment fund managers dated 12 July 2013 (the “AIFM Law”) is deemed not to be conducting a business activity. This is justified by the fact that an SCS/SCSp which qualifies as an AIF has an investment rather than a commercial purpose and follows an investment policy compliant with the AIFM Law and with the guidelines issued by the European Securities and Markets Authority (ESMA). Accordingly, the Circular Letter confirms that an SCS/SCSp which qualifies as an AIF will never be subject to municipal business tax, unless its general partner holds 5% or more of the interests in the SCS/SCSp.

Contacts

Alain Goebel

Partner

Tax, Tax advisory, Transfer Pricing

Thierry Lesage

Partner

Tax, Tax advisory, Tax Litigation

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