The Grand Duchy of Luxembourg – the full official name of a small Western European state bordered by Belgium, Germany, and France. Luxembourg is known for its small size (just over 2.5 thousand square kilometers), small population, and immense financial importance to the world. This jurisdiction is a hub for significant volumes of assets, insurance activities, communications, IT, trade, etc. Registering a company in Luxembourg provides access to numerous advantages, including favorable business conditions and taxation, despite not being considered an offshore jurisdiction.

 

The Lawrange Attorneys Association is familiar with all the intricacies of the registration process in Luxembourg. With our assistance, you will be able to successfully establish your business here, undergo licensing (depending on the type of activity), and effectively develop your business in the future. In this prestigious European jurisdiction, particularly optimal conditions are created for large international enterprises seeking to penetrate even more foreign markets. These and many other nuances, usually of interest to those wishing to open a company in Luxembourg, are thoroughly discussed during individual consultations with our specialists.

 

Why It’s Worth Registering a Luxembourgish Company

Many entrepreneurs choose this Duchy for several reasons:

 

  • Luxembourg’s impeccable reputation benefits the establishment and development of businesses in almost any sphere. Conducting business activities here is exempt from any reputational risks. Serving as a key financial center of the European Union and a concentration of major multinational corporations, the Grand Duchy is an example of how to successfully attract international investors and develop its own economy.
  • A well-established corporate law system – opening a company, restructuring, changing the form of doing business, liquidation, and other important processes does not pose any difficulties for owners. Entrepreneurs have at their disposal all legal instruments ensuring effective company management and the distribution of profits. According to current legislation, even re-domiciliation of business is available, i.e., changing the place of registration of an existing foreign company to Luxembourg, as well as vice versa.
  • The opportunity to avail oneself of all the benefits of tax optimization — although Luxembourg is neither an offshore nor a low-tax jurisdiction, many are attracted by tax savings in this jurisdiction. Various government fees here are relatively high; however, with certain corporate conditions met, it is possible to benefit from a fairly lenient tax regime. Also available is the so-called pass-through taxation, under which tax is levied only on the income of ultimate beneficiaries.
  • Minimal requirements for business owners – registering a company in Luxembourg does not require the business to have an economic presence here. Even if entrepreneurs need to indicate a substance, they can always take advantage of a suitable offer to rent an office in the local real estate market.
  • The compact size of the country significantly facilitates the search for highly educated specialists for business. Thanks to a well-developed infrastructure, it is possible to hire employees not only from Luxembourg but also from neighboring countries. Resident specialists from Germany, Belgium, and France can commute here for work daily.
  • A well-developed property rights protection system — individuals and legal entities can rest assured about the safety of their investments, as Luxembourg has concluded agreements on the protection of international investments with numerous countries.
  • Reliability of the banking system — more than two hundred banks operate in this small state based on high-security standards. On one hand, this leads to a lengthy process of opening a bank account — corporate clients may need several months to convince the bank of their reliability. However, the efforts expended are worth it, as opening a bank account grants entrepreneurs access to a developed, high-quality service.

 

Legislative Framework in Luxembourg

Corporate law in Luxembourg is primarily supported by the Law on Commercial Companies of 1915 (in the consolidated version of 2017). It is this legislative act that provides flexibility in the creation and management of companies. This becomes possible due to the liberal approach to conducting commercial activities and the underlying principle of freedom of action in the absence of direct prohibition. The legislation clearly defines rules regarding various aspects, ranging from the appointment and removal of managers to the execution of shareholder agreements, ending with provisions on arbitration and company liquidation.

 

Additionally, in 2020, Luxembourg passed a law extending the right of companies to hold meetings for directors and shareholders using remote communication. A little earlier, the legalization of electronic document management was carried out, which, together with the law mentioned above, contributed significantly to easing business operations in this country. It is also worth noting that the development of corporate law in Luxembourg has led to the creation of an extensive range of organizational and legal forms for businesses in any field.

 

Luxembourg Business Forms

In this small country, entrepreneurs have over 20 organizational and legal forms to choose from. At the same time, several of the most popular legal forms of organizations can be distinguished, which are often used by non-resident entrepreneurs to establish companies here.

 

Sole Proprietorship

All business decisions are made independently by the entrepreneur, who is not considered a legal entity. The business owner bears all responsibility to third parties for debts and invests their own funds in the business. They must maintain accounting records, as in any other legal form of organization. However, there is no need for Articles of Association or initial capital injection.

 

Partnerships

Several types of partnerships exist, somewhat resembling sole proprietorships, as the basis of the partnership agreement is the role of participants as individual entrepreneurs. There are three types of partnerships:

 

  • Société en commandite simple (SCS) – can operate with two partners, one of whom is a general partner and therefore bears unlimited liability for debts. The other partner’s liability is limited to the extent of their contributions.
  • Société en nom collectif (SENC) – to establish a company of this type in Luxembourg, there must also be two partners, who, unlike the previous form of partnership, are both general partners to an equal extent.
  • Société en commandite par actions (SCA) – a hybrid option, sharing common features with the previous forms. Suitable for businesses of any size, this legal form allows effective resistance to hostile takeovers.

 

The main requirements for partnerships of any type include:

 

  • Presence of Articles of Association.
  • Contribution of mandatory contributions.
  • Compliance with commercial, corporate, and tax legislation.

 

Companies

Various types of companies are most popular when establishing a large enterprise, although small and medium-sized businesses can also successfully apply variations of this legal form of organization.

 

Companies include:

 

  • Société anonyme (SA) –  analogous to a public limited company. It can be formed with at least one entrepreneur and requires a notarized Articles of Association, as well as a minimum starting capital of 30,000 euros.
  • Société à responsabilité limitée (SARL) – can have up to 100 shareholders and provides for limited liability. The initial capital requirement is 12,000 euros.
  • Société à responsabilité limitée simplifiée (SARL-S) -a simplified form of limited liability company. It can also have between 1 and 100 shareholders, but the Articles of Association are presented as a private document drawn up and signed by the entrepreneur without the involvement of a notary. The mandatory initial capital is a minimum of 1 euro.

 

Important! Business registration in Luxembourg is also possible using other, less common legal forms of organization, such as Société européenne (SE), Société coopérative (SCOP), simplified joint-stock company, temporary partnership, agricultural association, etc. It is necessary to thoroughly understand the specifics of each form and the nuances of registration in order to choose the business structure that best suits your business. The specialists of Lawrange Attorneys Association provide assistance in this matter.

 

Features of the Registration Process

Companies registered in Luxembourg have rights and obligations depending on the chosen legal form of organization (LFO), as well as the purposes specified in the registration agreement. When setting up a business in this jurisdiction, one should:

 

  • Provide translations of corporate documentation in the official languages: French and German.
  • Arrange for the registration of the company’s office premises in Luxembourg.
  • Abandon the desire to register a so-called “shelf company,” which can be found in most offshore jurisdictions. In Luxembourg, this is impossible due to high registration costs and a high minimum capital requirement.
  • Remember the restrictions on naming – using words like “bank,” “investment fund,” “insurance,” and others, including in foreign languages, is only possible with the appropriate license. Also, the name should include the appropriate ending corresponding to the chosen LFO: SA, AG, SARL, etc.
  • Pay the minimum statutory capital in any currency; the main thing is that it is convertible.
  • Remember the signed double taxation avoidance agreements: Luxembourg has concluded 60 such agreements.
  • Maintain accounting records regardless of the field of activity, although the requirements for financial reporting depend on the LFO and the size of the enterprise.

 

Important! Companies registered and operating in Luxembourg must be managed by a director who is a resident of Luxembourg. A resident director is not required if the registered company does not conduct any activity in this country.

 

Stages of Business Registration

The process of directly creating a legal entity in this jurisdiction can take 8 days or more, which is considered quite a good indicator. The relatively high registration speed is the result of minimal intervention by regulatory authorities in this process—government agencies are involved in documenting the establishment of legal entities. The main thing is to secure the services of a lawyer and a notary to ensure that no important details are missed; otherwise, the registration process will take much longer (up to several months).

 

Preparatory Stage

Registering a corporation in Luxembourg will provide access to the advantages described above only in the absence of any shortcomings. Legal assistance from experienced corporate lawyers will allow you to prepare as thoroughly as possible for the registration process. The main nuances of preparation include:

 

  • Choosing the place of registration.
  • Determining the most suitable LFO.
  • Determining the legal entity’s corporate structure, the related appointment of managers, verification of shareholders, etc.
  • Attracting a source of financing and verifying its origin.
  • Selecting a suitable name.

 

Collecting a Document Package

You need to prepare:

 

  • Data on founders and directors—for individuals, passport data must be provided; for legal entities, constitutional documents, as well as a decision to establish a subsidiary.
  • A document confirming the payment of the statutory capital.
  • Corporate documentation, including Articles of Association.
  • Legal address.

 

Before submitting the documents (the exact list depends on the type of activity and LFO), they must be translated into the official language of the country and notarized.

 

Open an Account for the Authorized Capital

This is considered the most time-consuming stage (sometimes, the wait can last up to 6 months). Money must be deposited into the account before the notarial procedure for establishing the company is completed.

 

Important!  Luxembourg banks may refuse to open an account if they consider that verifying the client is not cost-effective in terms of financial expenses. To avoid this risk, you can sign up for Private Banking services or deposit a large sum as an irreducible balance.

 

Usually, opening a bank account occurs after providing:

 

  • Company registration data.
  • Constituent documents.
  • Information about management and beneficiaries.
  • Description of the main business (in free form).
  • Officially confirmed sources of company funds.
  • Forecasted annual turnover on the account.
  • Completed bank questionnaire.

 

Order a consultation

If the application is approved, the bank opens an account, which remains blocked for any operation until your company is formed, except for depositing the statutory capital. The freeze on funds lasts until the company is finally formed.

 

Submitting an Application for Company Registration in Luxembourg

The applicant submits an application with a pre-prepared document package to the Trade and Companies Register (RCS). If applying in person, the corresponding fee is paid, or it’s done for free online. When using notarized documents, the application for company formation is submitted through a notary. This specialist carries out the company’s registration directly and submits the founding document electronically for publication within the legal deadlines. Successful registration is considered when the applicant receives an electronic receipt. Additionally, the company’s founding document is published in the Electronic Register (within 15 days of submitting the application).

 

Registration for VAT Payment

An officially registered company should apply for registration in the Registry of Fees, Real Estate, and VAT to pay the value-added tax. If the company’s Articles of Association change, corresponding information is provided, and the approved articles are submitted to the Luxembourg Trade Register and the Companies Register.

 

Additional Procedures

Business in Luxembourg can often be carried out without special permits and licenses. However, if your company’s activities are considered commercial, craft, or freelance intellectual, you will need to obtain a business permit. Special licenses must also be obtained by representatives of liberal professions (lawyers, doctors, dentists, veterinarians, statutory auditors, etc.).

 

Corporate Taxation Features

The responsibility for business taxation depends on the presence or absence of tax residency. According to local tax legislation, companies are considered residents of Luxembourg if their registered address or central office (administration) is in the Grand Duchy of Luxembourg. The administration of the company is understood as the place where:

 

  • Central accounting is conducted.
  • Archives are kept.
  • Shareholders’ meetings and board of directors meetings are held.

 

Companies that are tax residents of Luxembourg are taxed on their worldwide income. If the company does not have local residency, tax is paid on local profits.

 

Corporate tax rates:

 

  • On profits — determined by the company’s annual income. For example, if the amount is less than 175,000 euros, a rate of 15% applies, while for income above 200,000 euros, a rate of 17% applies. In addition to the general tax rate, municipal income tax is added. Tax liability is calculated on an individual basis.
  • On dividends — a non-resident pays this tax at a rate of 15%, which can be reduced if a double taxation avoidance agreement is applied.
  • VAT — a rate of 17% is applied to most goods and services, but in some areas, it can be reduced to 0% (for example, in the financial and insurance sectors).

 

Companies are required to submit annual financial statements. Although the reporting period coincides with the calendar year in Luxembourg, a company can take advantage of the opportunity to change the first reporting period (this need often arises for companies registered shortly before the end of the calendar year).

 

Why Choose Lawrange

Registering a company in Luxembourg can be a serious challenge for an unprepared individual. By turning to our AA, which has been successfully solving various tasks related to the registration process in Luxembourg for several years, you will be able to save time and money. This is because we offer only those services that are really necessary for a specific business, while eliminating the risk of making a mistake. This means that the process will not be prolonged and will not require additional financial expenses.

 

If you want to register a company in Luxembourg to quickly enter the promising European market, find new partners, and gain access to all the advantages of doing business in this country, then confidently contact our Attorneys Association, Lawrange. We will help you:

 

  • Choose the most suitable legal form of organization.
  • Compile the documents necessary for the company’s registration and opening a bank account.
  • Submit the documentation to the registering authority.
  • Prepare a package of statutory documents.
  • Open a corporate account, etc.

 

Our experts are ready to provide detailed information on any questions related to setting up a company in Luxembourg. Just contact us at any time that is convenient for you.

 

FAQ

Is there a Controlled Foreign Corporation (CFC) regime or its equivalent in Luxembourg?

CFC rules were introduced into Luxembourg law in January 2019. Enterprises may qualify as CFCs if they are permanent establishments or companies not subject to Luxembourg taxes or if their income is not taxable. Enterprises that qualify as CFCs but report annual profits below 750,000 euros or 10% of their operating expenses in their commercial balance sheet are exempt from CFC rules. For more detailed information, this issue can be discussed with our specialists.

 

Is a company in Luxembourg required to have an office?

Yes, companies operating in this country are required to have a registered office.

 

Can a Luxembourg company be registered with a single shareholder and director?

Yes, the process of creating a limited liability company in Luxembourg allows for the appointment of a sole director and shareholder.

 

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