Luxembourg Investment Fund Guide — SOPARFI, UCITS, SICAV, RAIF, AIF & IP Box

SOPARFI — Standard Holding/Operating Company

The SOPARFI (Société de Participations Financières) is the most common Luxembourg corporate vehicle. Key features:

• Purpose: Holding and financing activities, operational business, investment holding. The SOPARFI is a fully taxable company subject to standard CIT (17%), MBT (6.75–11.25%), and NWT.
• Participation exemption: 100% exemption on qualifying dividends and capital gains (≥10% or EUR 1.2 million, ≥12 months). No subject-to-tax test.
• No WHT: 0% WHT on interest and royalties paid by a SOPARFI to residents and non-residents. 15% WHT on dividends (0% under EU parent-subsidiary directive or treaty).
• Treaty benefits: Access to Luxembourg's 85+ DTT network for reduced WHT on inbound dividends, interest, and royalties.

UCITS — Regulated Retail Funds

Undertakings for Collective Investment in Transferable Securities (UCITS) are EU-harmonised retail investment funds:

• EU passport: UCITS funds benefit from an EU-wide marketing passport, allowing distribution to retail investors across all EU member states.
• Regulation: Regulated by the CSSF (Commission de Surveillance du Secteur Financier) under the UCITS Directive.
• Tax treatment: UCITS funds are generally exempt from CIT and NWT. Subject to an annual subscription tax (taxe d'abonnement) of 0.05% of net assets.
• Forms: UCITS may be structured as SICAV (open-ended) or FCP (contractual fund).
• Luxembourg dominance: Luxembourg is the largest UCITS domicile globally, with over EUR 3 trillion in UCITS assets.

SICAV and SICAF — Investment Companies

• SICAV (Société d'Investissement à Capital Variable): Open-ended investment company with variable capital. The most common form for UCITS and alternative funds. Investors can subscribe and redeem shares at NAV.
• SICAF (Société d'Investissement à Capital Fixe): Closed-ended investment company with fixed capital. Used for private equity, real estate, and infrastructure funds. Shares are not redeemable at investor request (traded on secondary markets).
• Tax treatment: Both SICAV and SICAF are generally exempt from CIT on investment income. Subject to subscription tax (0.05% for SICAV, 0.01% for certain SICAF).

RAIF — Reserved Alternative Investment Fund

The Reserved Alternative Investment Fund (RAIF) is a popular unregulated alternative investment vehicle introduced in 2016:

• Unregulated status: RAIFs are not regulated by the CSSF but must be managed by a regulated Alternative Investment Fund Manager (AIFM) — typically a Luxembourg or EU AIFM.
• Speed to market: Faster setup than regulated funds (no CSSF approval required). The AIFM's existing approval covers the RAIF.
• Investment scope: Any asset class — private equity, real estate, private debt, infrastructure, hedge funds, venture capital.
• Tax treatment: RAIFs are generally exempt from CIT and NWT. Subject to subscription tax of 0.01% of net assets.
• Investor base: Reserved to well-informed investors (minimum investment EUR 125,000 or certified investor).

AIF — Alternative Investment Fund (Regulated)

Alternative Investment Funds (AIFs) are regulated by the CSSF under the EU AIFMD framework:

• Regulation: Full CSSF authorisation and ongoing supervision. The AIFM must be authorised under the AIFMD.
• Types: Part II Funds (regulated UCITS-comparable for non-UCITS assets), SIF (Specialised Investment Fund — a regulated AIF for well-informed investors), and SICAR (Investment Company in Risk Capital).
• SIF tax treatment: Exempt from CIT and NWT. Subject to subscription tax of 0.01% of net assets.
• SICAR tax treatment: Exempt from CIT on income from risk capital investments. Subject to NWT. Subscription tax does not apply.

IP Box — 80% Exemption on Net IP Income

Luxembourg's IP Box regime provides a significant tax benefit for IP-rich companies:

• Exemption: 80% of qualifying net IP income is exempt from CIT and MBT
• Effective rate: Qualifying IP income is effectively taxed at approximately 4–5% CIT
• Qualifying IP: Patents, copyright-protected software, trademarks, designs, and models
• Nexus requirement: OECD-compliant nexus approach — the taxpayer must have conducted the qualifying R&D activities

Subscription Tax (Taxe d'Abonnement)

Luxembourg investment funds are generally subject to an annual subscription tax instead of CIT:

• UCITS/SICAV: 0.05% of net assets per year
• RAIF/SIF: 0.01% of net assets per year
• Money market funds: 0.01% of net assets
• Exempt vehicles: SICAR, pension funds, and certain institutional funds are exempt from subscription tax

FAQs

Why is Luxembourg the leading EU fund domicile?

Luxembourg offers a unique combination: a full range of regulated and unregulated fund vehicles (UCITS, RAIF, SIF, SICAR), favourable tax treatment (CIT exemption for most funds, low subscription tax), the EU passport, an extensive DTT network (85+), a sophisticated financial ecosystem (legal, audit, custody, administration), and political stability.

What is the difference between a SOPARFI and a SICAR?

A SOPARFI is a standard corporate entity subject to full CIT (17% + MBT) but benefiting from the participation exemption. A SICAR is a regulated investment company investing in risk capital, exempt from CIT on its investment income but subject to NWT. The SOPARFI is more flexible (any activity), while the SICAR is specifically for risk capital investments.

Is the subscription tax the only tax for Luxembourg funds?

For most Luxembourg funds (UCITS, RAIF, SIF), the subscription tax (0.01%–0.05% of net assets) is the only annual tax. They are generally exempt from CIT and NWT. Withholding tax on fund distributions is 15% for individuals but may be reduced under treaties.

Disclaimer

This guide provides general information about Luxembourg investment fund structures for the 2026 tax year. Fund regulations and tax treatment may change. Always consult with a qualified Luxembourg legal advisor, tax advisor, or fund specialist for advice specific to your investment structure. InvestmentKit does not provide legal or tax advice.