Why Open a Business in Luxembourg
Why Open a Business in Luxembourg?Updated on Monday 06th September 2021
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Luxembourg is an attractive business location. The country has an active economic policy that encourages international businesses. A good geographical location, political and social stability and business incentives are just some of the reasons why more and more investors choose to open a business in Luxembourg.
Our lawyers in Luxembourg can help you make the first step if you want to open a company there.
The company formation process in Luxembourg is straightforward and it resembles the company formation process in Cyprus, for example. Entrepreneurs will discover it is easy to set up a business there and the entire process should last approximately 10 days.
Types of companies in Luxembourg
The following types of companies can be opened in Luxembourg:
- the sole proprietorship which is the simplest business form in Luxembourg;
- the limited liability company which needs a minimum share capital of 12,000 euros;
- the public or joint-stock company which requires a minimum share capital of 30,000 euros;
- the partnership limited by shares which requires a minimum share capital of 30,000 euros;
- the European company which requires a minimum share capital of 12,000 euros.
Foreign companies can establish subsidiaries, branch offices and liaison offices in Luxembourg. Our law firm in Luxembourg can assist with the registration of any type of company.
Our lawyers list the basic steps for opening a business in Luxembourg in this short video:
We have also created an infographic on the reasons to start a business in Luxembourg:
Requirements for starting a business in Luxembourg
Foreign investors who want to open their own businesses in Luxembourg must consider the following aspects:
- they must choose a trade name for their companies, in accordance with the requirements of the Commercial Code;
- they must prepare a set of documents which imply drafting and notarizing the Memorandum and Articles of Association;
- the company must have a legal address in Luxembourg and bank account with a local bank;
- the investor must consider the share capital requirements for each type of company;
- the company must be registered with the Trade Register and the tax authorities in Luxembourg;
- the company must apply for specific business licenses with the authorities in the industry they will operate in.
Our lawyers in Luxembourg can offer detailed information on the requirements related to opening a business in this country. If you want to open a holding company in Luxembourg, we can offer legal advice.
Company registration steps in Luxembourg
Opening a business in Luxembourg implies the following steps:
- choosing and reserving a unique trade name with the Trade Register;
- having the incorporation documents drafted and notarized by a public notary;
- filing the documents with the Luxembourg Companies Registrar;
- registering the company with the tax authorities and obtaining tax and VAT numbers;
- applying for the necessary licenses and permits in order to start operating.
For guidance in the procedure of opening a business, you can rely on our attorneys in Luxembourg.
How long does it take to register a company in Luxembourg?
The registration procedure of a new business in Luxembourg depends on the type of company selected. It usually takes one month to have a limited liability company up and running in the Grand Duchy. These companies can also apply for EORI numbers in Luxembourg.
We also invite you to watch a video on how to open a business in Luxembourg:
An attractive business environment
Luxembourg’s economic policies encourage investments and private initiative. The Luxembourg Government encourages innovation and investments in certain business fields through a series of incentives for activities such as:
- automotive components,
- environmental and health technologies and others.
Financial support in Luxemburg, just like in other countries like for businesses in Singapore, can be granted for special projects and to medium and small-sized companies. The Luxembourg Government also offers capital grants and other long-term loans are available in Luxembourg.
The workforce in Luxembourg is highly educated and skilled and also multilingual. The country’s high productivity is largely due to its people. Citizens from EU and EEA countries, including Switzerland, have free access to the labor market.
Just like our partners in Switzerland, our lawyers in Luxembourg will help you in any legal matter regarding the Labour Law in Luxembourg or other specific details, if you are interested in the Luxembourg labor market.
The tax environment in Luxembourg is also competitive compared to taxation in other European countries. The standard VAT rate is 15%, levied on the supply of goods and services. An intermediate rate of 12% can apply on certain goods and a reduced rate of 6% is also available. The corporate income tax in Luxembourg is 21% for taxable income that exceeds 15,000 EUR and 20% otherwise.
Our Luxembourg lawyers can offer you more information about taxation in Luxembourg and the special legislation for foreign investments.
Do not hesitate to contact our Luxembourg law firm for assistance in opening a business in this country.
The sole trader in Luxembourg
One of the simplest ways of opening a company in Luxembourg is to register as a sole trader. This business form is acknowledged by the Company Law and is quite simple to create. The requirements for setting up a sole trader in Luxembourg imply a single business owner who will complete a commercial activity in their own name.
The sole trader must be registered, like any other type of company, with the Trade Register in Luxembourg. The business owner must also register for taxation purposes and obtain specific licenses in accordance with the activities to be completed.
The registration of a sole trader by a foreign investor implies first obtaining a residence permit in Luxembourg and having a legal address here.
Our Luxembourg lawyers can offer more information about the requirements related to opening a sole proprietorship or any other type of company in the Grand Duchy. You can also rely on us if you have any questions related to the provisions of the Corporate Law in Luxembourg.
The Articles of Association of a company in Luxembourg
The most important documents which need to be prepared when opening a company in Luxembourg are the Memorandum and Articles of Association which must be drafted and notarized by a public notary in the Grand Duchy.
The Articles of Association must comprise information about the company to be registered, among which:
- the names of the shareholders and their participation to the company’s share capital;
- the names and personal details of the directors, their duties and responsibilities;
- the object of activity of the company based on the NACE codes applicable in the EU;
- information about the share capital of the company and the minimum value of one share;
- the company’s legal address and other provisions related to the Annual General Meeting.
The Articles of Association can also contain other special provisions, such as specific conditions under which shareholders’ disputes can be resolved. They can also contain provisions on the appointment and dissolution of company managers.
It is important to request the services of a law firm in Luxembourg when opening a company in this country in order to make sure all the requirements imposed by the local legislation are respected. There are several laws which need to be respected when opening a company in Luxembourg, among which the Company Law, the Corporate Law, but also the Civil Code.
Shareholder’s responsibilities in Luxembourg
The limited partnership in Luxembourg is characterized by two types of shareholders: general shareholders and limited shareholders. The main difference between the two consists in their liability and power of decision - the limited partners have limited liability, according to their capital contribution and cannot take management decisions, while the general shareholders have unlimited liability and they can be involved in the company's decisions. A limited partnership does not require a minimum share capital.
Investors willing to open a company in Luxembourg can choose to open a cooperative company, although this type of business is rarely used. A cooperative company is composed of at least seven persons, it has no minimum share capital and the liability of the members is established in the company's articles of association.
Opening a corporate bank account in Luxembourg
An important aspect of opening a company in Luxembourg is the setup of the bank account in which the share capital will be deposited. The opening of a corporate bank account in Luxembourg is not complicated, given the fact that the Grand Duchy is one of the most important financial centers in Europe.
Our attorneys in Luxembourg can help business owners with the opening of the bank accounts for their companies.
Hiring employees for a company in Luxembourg
Once the company is registered with the Trade Register, the owner will also need to hire employees under the conditions imposed by the local legislation. The company directors can also be regarded as employees; therefore, they will also need to sign labor contracts.
The company must register for social security, pension benefits and work insurance with the appropriate authorities. Also, all employment contracts must be registered with the labor authorities in the Grand Duchy.
Luxembourg companies can also hire foreign workers, according to the Employment Law. These will be subject to the local legislation, the only special requirement being to obtain work permits for non-EU citizens.
The conditions for hiring employees in a company in the Grand Duchy can be explained by our lawyers in Luxembourg.
Tax registration when opening a Luxembourg company
Once the company is registered with the Companies Register in Luxembourg it must obtain a tax identification number and a VAT number. These will enable the company to complete financial activities and to purchase and sell goods.
VAT registration can also lead to a company obtaining an EORI number of intra-community trading activities.
We remind foreign investors that the corporate tax in Luxembourg is applied progressively at the rates of 18% and 15%. The standard VAT rate in Luxembourg is established at 17%.
A dynamic economy and a high quality of life make Luxembourg a prime business location. If you want to expand your business to other European countries, like Romania, please contact our lawyers in Bucharest.