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Setting up a company in Luxembourg: everything you need to know to get started
Luxembourg is a hotspot for entrepreneurs thanks to its particularly attractive tax situation and financial stability. However, what criteria must be met to ensure that your new company takes off successfully? Find out more in this article.
1. Define your project
The first step in making your business viable is, of course, to decide on its legal form. Put your concept to the test and choose a legal form.
The majority of Luxembourg companies are limited liability companies (legal form S.AR.L.) or public limited companies (legal form S.A.). For the first option, you will have to have a base capital of €12,000 and at least two partners, while the second requires €30,000 and at least one shareholder.
There is also a simplified classification of a companies legal form a S.AR.L.-S for which the minimum capital requirement is €1, but you will first need to obtain an establishment authorisation (see point 2).
You can also set up an individual company, but be aware that in this case there is no distinction between your personal assets and those of the company.
Good to know: if you intend to perform commercial and financial activities, you can subscribe under certain conditions to the SOPARFI scheme in order to be exempt from tax for the collection of dividends and the realisation of capital gains.
2. Obtain the necessary authorisations
Commercial companies, craftspeople and certain liberal professions (architects, accountants, freelance engineers) will need to obtain an establishment authorisation from the Ministry of the Economy. Count on approximately three months to complete this step.
To obtain your authorisation, you will need to prove that your company has a physical establishment in Luxembourg and have certain professional qualifications that will vary depending on your area of activity. In certain specific cases, you will also need a classified facility operating permit (commodo/incommodo).
3. Register your company
Once these first administrative procedures have been completed, you will need to register with the Trade Register (approximately 24 hours), the Joint Social Security Centre (you should receive confirmation one week later) if you plan to hire staff, and the Administration of Registration and Domains.
4. Find out more about the regulations in force
If you hire employees, you must be aware of certain basic information, as regards working arrangements, minimum wages and statutory holidays, for example.
A full-time job entails 40 hours per week – i.e. 8 hours a day, and employees benefit from at least 26 days of paid leave per year.
For example, in 2019, the average annual salary amounted to €99,912 in the finance and insurance sector, €64,679 in services and €48,939 in construction. Social security contributions, meanwhile, are equivalent to 25% of your employees’ gross salary (of which you cover half). (source: STATEC)
Like all Luxembourg companies, your newly created company will have to pay several types of tax.
- Corporate tax, which accounts for between 15 and 17% of your company’s profits
- Wealth tax, which is based on your total assets and your balance sheet (except for individual companies)
- Municipal business tax (between 6 and 12% depending on the municipality) and municipal commercial tax (calculated on the basis of your operating income)
- Income tax (minimum 15%, variable depending on taxable income if you exceed €175,000)
- The Annual Contribution of the Chamber of Commerce
Remember that VAT is between 3 and 17% in Luxembourg depending on the sector of your company.
Are you ready to get started? Insure your buildings and property accordingly!
This article is for informational purposes only and is non-contractual in nature. It does not constitute a legal opinion and provides general and non-exhaustive information on how to set up a company in Luxembourg. The author cannot be held liable for any error, omission, alteration, inaccuracy or failure to update. Users acknowledge that they may use this information at their own risk.