Bill of Law n°6471 regarding, most notably, the implementation of the so-called AIFMD (Directive 2011/61/EU) would largely amend the legal and tax provisions regarding limited partnerships (société en commandite simple or S.C.S.) and would also introduce the new special limited partnership (société en commandite speciale or S.C.Sp.).
From a corporate perspective, the S.C.S. and the S.C.Sp. are anticipated to be largely subject to the same regime. This regime would be a modernization of the current regime applicable to S.C.S. in order to make such vehicles more attractive for investors and create a viable alternative to the Anglo-saxon concept of limited partnerships. In a nutshell, the salient common characteristics of these vehicles would include:
- a large freedom granted to the parties as to the organization and functioning of the vehicle through the limited partnership agreement, since most of the draft legal provisions would be of a suppletive nature;
- a limited responsibility of the limited partners, provided that they do not perform acts of management towards third parties (the bill introduces a "white list" of acts which would not be considered as acts of management, such as inter alia advice to and supervision of the partnership and its affiliates);
- an excellent level of discretion, as the identity of the limited partners and the limited partnership agreement must not be fully published in the official gazette.
The main differences between the S.C.S. and the S.C.Sp. would derive from the fact that the S.C.S. will continue to enjoy a separate legal personality, while the S.C.Sp. will not have a separate legal personality. This characteristic may also be relevant, notably from a foreign (tax) perspective, when considering the adequate holding structure.
Furthermore, the Luxembourg tax provisions implementing the so-called Geprägetheorie would be amended. Under current tax law, the S.C.S. is transparent for corporate income tax purposes, but subject to municipal business tax in certain cases, most especially if at least one unlimited partner is a Luxembourg capital company. This current rule is potentially problematic for the structuring of investments holding using a S.C.S., as the use of a (limited liability) Luxembourg capital company is a convenient way to circumvent the unlimited liability of the unlimited partner.
Under the bill of law, the S.C.S. (as well as the S.C.Sp.) would be so impacted by the unlimited partner - and subject to municipal business tax - if the unlimited partner has at least a 5% interest in the partnership. It should, therefore, be easy to achieve S.C.S. / S.C.Sp. structures exempt from any Luxembourg income taxes under the proposed provisions.
It is worth noting that under the bill of law, the S.C.S. / S.C.Sp. could be used as an AIF, a SIF, a SICAR, and as well as for unregulated structures.
Finally, the bill of law also contains provisions in relation to the taxation of carried interest. Although the AIFMD must only be implemented by July 2013, it is expected that the final text will be approved by the Luxembourg Parliament before year's-end.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
