Want to know how to establish a Luxembourg company? If you are eyeing expansion abroad or a new beginning, Luxembourg provides a combination of the most desirable tax benefits, political and commercial stability, and being an easy gateway into the world. So, shall we go through all that you should know, including the legal aspects as well as the benefits of doing business in such a small yet strong country?
Why Set Up a Luxembourg Company?
As to why we should consider setting up a Luxembourg company, the answer is in the firm justifications related to setting up a Luxembourg Company, and only some of them have been mentioned.
To say the least, when consumers hear the word Luxembourg, they may think of a small nation in Europe, but in business,they are huge. The home to entrepreneurs, holding businesses, private equity players and fintech companies, Luxembourg attracts the brightest minds and businesses. Here’s why:
- Favorable location in the middle of Europe
- Attractive tax policy towards business (yes, even low company taxes!)
- Vibrant financial system that has more than 130 foreign banks
- Highly competent workforce that is multilingual
- Political and economical stability
- Excellent infrastructure and entry to EU single market
No wonder such corporations as Amazon, Skype, and PayPal established their European branches here.
Types of Luxembourg Companies
Before you dive in, you need to select a business structure. Here are the main ones you can choose.
Société à Responsabilité Limitée (SARL) – Private Limited Liability Company
It is also generally called “SARL” and it is the second most common type of business in France.
- Perfect for small to medium businesses
- Must have between 1 and 100 shareholders
- Minimum share capital: €12,000
- Shares are not freely transferable (a plus for maximum control)
Société Anonyme (SA) – Public Limited Company
- Very flexible for larger companies and holding entities
- Must have at least 1 shareholder
- Minimum
Societte en Commandite Spéciale (SCSp) Special Limited Partnership
- Popular among structures of private equity and venture capital
- There is no minimum capital
- Governance that is very flexible
Who has to Register in Luxembourg?
Luxembourg suits:
- Investors establishing holding contracts
- Startups seeking access to the EU market
- Financial technology and financial services corporations that require a regulated environment
- Entrepreneurs in pursuit of a stable and transparent territory of taxation
How to Register a Luxembourg Company Step-by-Step
Founding your Luxembourg company involves a couple of administrative stages–and you can do it perfectly well.
Step 1: Pick Your Type of Company and Name
Ensure the name is unique and it also adheres to Trade and Companies Register (RCS) naming regulations.
Step 2: Draw up the Articles of Association
These specify the way your company is to be run and ought to be notarized by Luxembourg notary.
Step 3: The Share Capital is deposited
A local bank account in which the minimum capital is deposited will be required.
Step 4: Registration at the Notary
The notary submits the formation documents of your company to the RCS.
Step 5: Business License (In Case of Need)
Certain business endeavours ( such as business activities that are commercial or crafts) must have an authorization by the Ministry of the Economy.
6. VAT and Tax Registration
The Luxembourg Inland Revenue will require a VAT number and registration to corporate tax.
Taxes & Compliance Luxembourg
What is one of the biggest advantages in settling down here? Taxes! But, let us simplify it:
Corporate Tax review:
- Corporate Income Tax (CIT): 17 % (standard rate)
- Municipal Business Tax: approximately 6.75 percent (depending on the location)
- Solidarity surtax is 7 percent of CIT
- Effective rate: ~24.94% (Luxembourg City)
Other Taxes:
Value Added Tax: 16 percent (The lowest standard rate in the EU)
Withholding tax:
- 15 dividends
- 0% on interest and royalties (provided that….)
There are also more than 80 countries with which Luxembourg has signed double taxation treaties.
Bank Account Set Up
You will require a Luxembourg bank account in which you will deposit your share capital and also in which we shall operate the company.
However, to be accepted, the most commonly required documents include:
- Articles of association
- Business address proof
- Shareholders/directors’ passport copies
- Registration certificate of the company (post-incorporation)
Some of the big banks are:
- BGL BNP Paribas
- Banque Internationale à Luxembourg (BIL)
- Raiffeisen
Business Environment & Support
Luxembourg company is more than tax benefits: it is chockablock full of business-friendly services:
- Luxinnovation Governmental agency that provides start-up support and capital funding of R&D
- House of Entrepreneurship is the one-stop shop of entrepreneurs
- Luxembourg trade & invest – https://www.luxembourgtradeandinvest.lu
Documents Needed
The common requirement to qualify for the paralegal position when employed with a law firm such as Imperial Legal is:
- Valid passport copies of shareholders/directors
- Proof of address
- Business plan or description
- KYC/AML documentation
- Draft Articles of Association
In case of shareholder is a corporation, more company certificates will be required.
Pro Tips
- Consult local professionals: An accountant, a legal advisor or an incorporation service in Luxembourg (such as Imperial Legal) will be able to help you proceed faster and remain compliant.
- Think of a virtual office: And a virtual one indeed, especially so, in the case of holding firms or the business where physical operation is not imperative.
- Remain tax compliant: Pay corporate tax and file annual corporate accounts and tax returns and have a registered address in Luxembourg.
Who has to register in Luxembourg?
Luxembourg suits:
- Investors establishing holding contracts
- Startups seeking the access to the EU market
- Financial technology and financial services corporations which require a regulated environment
- Entrepreneurs in pursuit of a stable and transparent territory of taxation
Tax Benefits and Obligations
There is significant tax efficiency in the holding and operating companies in Luxembourg.
For SOPARFI/Holding Companies:
- No dividend withholding tax (some EU rules and tax treaties)
- No capital gains tax in some
Overview of Taxation
Luxembourg is famous as a fiscally effective set-up. That is what you should know:
- Corporate income: 24.94% (it can then be minimised by means of a deduction)
- VAT Rate: 17 percent (standard)
- Municipal Business Tax: Differential depending on location (~6.75% in Luxembourg City)
- Dividend Withholding Tax: 15% (concessional or exempted through tax treaties)
How long does it?
Registration of a company: The incorporation of a company in Luxembourg is executed within 2-4 weeks depending on the perfection of the documentation.
Frequently asked questions
Is Luxembourg a good place to start a holding company?
Absolutely! Luxembourg has a participatory exemption and a double tax treaty regime, which turns it into an excellent holding.
Is it possible to start a firm in Luxembourg by foreigners?
Yes! The foreigners are free to carry out full ownership and operation of the companies here.
How many days is it to incorporate?
Usually, 2-3 weeks in case all papers are completed correctly; it can be quicker.
Is it necessary to be in Luxembourg to start a company?
Nope. It is something that you can configure remotely and have done by a representative or service provider.
Is company formation a way of securing residency?
Not expressly–though in a few circumstances you can apply to have a business visa or residence permit in case you are an active shareholder/director.
Final Thoughts
Establishing a business in Luxembourg would present the long-term strategic benefit to international businessmen and women, as well as multinational companies. Luxembourg has an excellent legal system, favorable taxes on investors, and a supportive business population; it is not surprising that this country is a favorite in the EU expansion of business.
Businesses can grow and achieve success in Luxembourg, whether it involves launching a new startup, managing investments, or expanding into the market.
