Company Registration in Luxembourg in 2023-24
Luxembourg is a member of the European Union, providing access to the single market and the ability to easily conduct business with other EU member states.
In adopting an open-minded economic policy, Luxembourg’s favorable business climate has attracted a lot of international investors because the country has signed double taxation treaties with 82 countries.
Luxembourg has gained its status as a desirable place to incorporate.
The country is known to be a top destination for offshore and investment funds. However, numerous companies use this method to lower their tax benefits overall. There aren’t any limitations on foreign corporations being able to make investments in Luxembourg.
In this article, we will be going to discuss more briefly the process of company registration in Luxembourg and the various documents that are required for Luxembourg Company Registration.
Procedure for Luxembourg Company Registration
The procedure for company registration in Luxembourg generally involves the following steps:
Choose a company name
The company name must be unique and not already in use by another company. It is even essential to search if the name complies with legal regulations.
Appoint a statutory auditor
The company must appoint a statutory auditor who will be responsible for ensuring that the company’s financial statements are accurate and comply with Luxembourg laws and regulations.
Prepare the articles of incorporation
The articles of incorporation must be prepared and include information such as the company name, registered office, share capital and the names and addresses of the shareholders.
Register the company
The company must be registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés). This requires submitting the articles of incorporation, a copy of the statutory auditor’s appointment, and other required documents.
Obtain a business license
The company must obtain a business license to legally operate in Luxembourg. This requires applying for the license and providing the relevant documents.
Obtain a VAT number
If the company will be providing taxable goods or services, it must obtain a VAT number.
Register for social security
The company must register for social security to comply with Luxembourg’s labor laws.
Open a bank account
The company must open a bank account to receive and make payments.
It’s important to note that the process for company registration in Luxembourg can take several weeks to complete.
Documents Required for Company Registration in Luxembourg
The documents required for company registration in Luxembourg may vary depending on the type of company and the specific circumstances, but typically include the following:
- The articles of incorporation must be prepared following Luxembourg laws and regulations.
- They must include data such as the firm name, registered office, state capital, and the names and addresses of the shareholders.
- The company must appoint a statutory auditor who will be responsible for ensuring that the company’s financial statements
- Proof of identity and address of shareholders & directors, such as a copy of their passport or national ID card.
- The company must obtain a business license to legally operate in Luxembourg.
- If the company will be providing taxable goods or services, it must obtain a VAT number.
- The company must register for social security to comply with Luxembourg’s labor laws.
- A bank certificate is required to prove that the company has deposited the required share capital in a bank account.
Other documents may be required depending on the company’s specific circumstances, such as environmental permits, health, and safety certifications, etc.
Types of Business Entities for Company Registration in Luxembourg
Several types of business entities can be registered when you think to register a company in Luxembourg.
The most common business entities for company registration in Luxembourg are:
Société Anonyme (SA) or Public Limited Company
This most common type of business entity in Luxembourg and is suitable for companies that plan to raise capital from the public through the issuance of shares. It requires a minimum share capital of €30,000 and should possess at most two shareholders and two directors.
Société à responsabilité limitée (SARL) or Limited Liability Company
This is a popular type of business entity in Luxembourg for small and medium-sized businesses. It requires a minimum share capital of €12,000 and must have at least one shareholder and one director.
Société en commandite simple (SCS) or General Partnership
This type of business entity is suitable for companies that are owned and managed by two or more partners. Each partner is together and severely accountable for the firm’s debts.
Société en commandite par actions (SCA) or Limited Partnership
This type of business entity is similar to a general partnership, but one or more partners have limited liability.
Société coopérative (SC) or Cooperative
This type of business entity is a type of company owned and controlled by its members, who share in the profits and losses.
Société d’exercice libéral (SEL) or Professional Corporation
This type of business entity is suitable for professionals such as doctors, lawyers, and accountants.
Branche d’une société étrangère (Branch of a Foreign Company)
This type of business entity is for foreign companies that wish to establish a business presence in Luxembourg without setting up a new legal entity.
It’s important to note that each type of business entity has its specific requirements and regulations.
Eligibility for Luxembourg company registration in detail
To be eligible for company registration in Luxembourg, certain requirements must be met, these include:
- The firm should possess at least one shareholder & one director, who can be a sole person or a legal entity.
- The firm should possess a registered office in Luxembourg, which is where the company’s official documents and correspondence will be sent.
- The minimum paid-up capital to establish a corporation is EUR 12,000. To register a public limited corporation, a minimum of €30,000 needs to be met, and at least twenty-five percent of that money must be paid upfront.
- The firm should nominate a statutory auditor, who is liable for providing that the firm financial statements are accurate and comply with Luxembourg laws and regulations.
- The firm should get a business license to lawfully function in Luxembourg.
- If the business will be offering taxable goods or services, it is expected to have a VAT number.
- The firm should be registered for social security to comply with Luxembourg’s labor laws.
It’s crucial to remark that the above requirements may vary depending on the type of company being registered and certain conditions.
Various Taxes on Luxembourg Company Registration
When you think to register a company in Luxembourg, the following taxes will typically apply:
- Corporate Income Tax: Companies are liable to CIT at a rate of 15% if their taxable revenue is less than 175,000 euros.
- Value-Added Tax (VAT): Firms that offer taxable goods or services in Luxembourg must pay a 17% tax. Reduced rates of 14%, 8%, and 3% are also applicable on certain goods and services.
- Payroll Tax: Companies are subject to the payroll tax, which is calculated on the employee’s salary and is paid by the employer. Employers are required to withhold payroll taxes. The highest withholding rate for payroll taxes is 42%. Additionally, a solidarity charge of up to 9% of tax has to be imposed.
- Other taxes: Depending on the nature of the business, there might be other taxes that the company might have to pay such as taxes on goods, services, and activities.
Cost to Register a Company in Luxembourg
The cost to register a company in Luxembourg can vary depending on the type of company and the specific circumstances, but typically includes the following:
- Trade Register Fees: The fees to register the company with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés) typically range from €75 to €150.
- VAT registration fee: The fee for registering for VAT is generally €50.
- Social security registration fee: The fee for registering for social security is generally €150.
- Notary fees: The fees charged by the notary for preparing and registering the articles of incorporation, the statutory auditor’s appointment, and other required documents can range from a few hundred to several thousand euros.
It’s important to note that the above costs are general and may vary depending on the specifics of the company registration.
Why register a company in Luxembourg?
There are several reasons why someone might choose to register a company in Luxembourg, some of these include:
Luxembourg has a pro-business environment with low corporate taxes and a stable political and economic climate.
Luxembourg is located at the heart of Europe and is a hub for international trade and commerce.
Luxembourg has a highly educated and multilingual workforce, making it easy for companies to do business with other countries in Europe.
Strong legal framework
Luxembourg has a strong legal framework that protects investors and shareholders.
Access to the EU market
As a member of the European Union, companies registered in Luxembourg have access to the EU market, which includes more than 500 million consumers.
Attractive Tax Regime
Luxembourg offers an attractive tax regime with a corporate income tax rate of 21%, and it also has several double tax treaties in place with other countries to mitigate the burden of international taxes.
Advantages of Luxembourg Company Registration
There are several benefits to Luxembourg company registration, including:
- Luxembourg has a favorable regime for holding companies, making it a popular choice for holding assets such as intellectual property and participating in cross-border transactions.
- Luxembourg is a member of the European Union, providing access to the single market and the ability to easily conduct business with other EU member states.
- Luxembourg has a multilingual workforce, with many people speaking French, German, and English, making it easy for businesses to communicate with employees and customers.
- Luxembourg has a strong reputation as a stable and business-friendly country, which can enhance the credibility of a company registered there.
- Luxembourg is politically and socially stable which attracts foreign investors who are looking for a haven to establish and grow their businesses.
- Luxembourg has a well-developed banking system which makes it easy for businesses to access the financing they need.
- Being a member of the EU, Luxembourg provides a gateway to the large EU market.
Luxembourg has a strong reputation as a stable and business-friendly country, which allows foreign investors to experiment and update according to the ecosystem which implies it can enhance the credibility of a company registered there. With AAA ratings from various business institutions the country of Luxembourg makes it a suitable environment to set up any form of business. The country is a multilingual workforce, with many people speaking French, German, and English, making it easy for businesses to communicate with employees and customers.
Eventually, registering a company in Luxembourg could be a time taking and costly procedure. It’s recommended to hire a professional from Odint Consultancy to guide you through the process of company registration in Luxembourg.
Luxembourg taxes corporations on its worldwide earnings, while non-residents are only taxed on income from Luxembourg. Companies with taxable earnings of less than 175,000 euros (EUR) are subject to CIT at 15%.
Costs for incorporation in Year 1 are EUR13,600 and the annual costs for the company after Year 2 are EUR0.
Yes, businesses from outside are welcome to set up subsidiaries in Luxembourg to comply following Company Law and the Commercial Code.
Taxes are not withheld on dividends that are paid to EU and double tax treaty-resident companies, otherwise 15%.
Individual income tax is assessed on the global income of those who reside in Luxembourg as well as on the income from Luxembourg that is earned by non-residents.
A limited company can be established with a director and sole shareholder.