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.). To establish a Private Limited Liability Company (SARL), a minimum share capital of €12,000 is required. This legal structure can be set up by a single shareholder (single-member SARL) or by several shareholders, up to a maximum of 100. The liability of shareholders is limited to their contribution to the company’s capital. A public limited company requires €30,000 and at least one shareholder (source: * Luxembourg SARL: Capital, Formation and Governance) .
Entrepreneurs may also opt for a Simplified Private Limited Liability Company (SARL-S), which can be established with a share capital ranging from €1 to €12,000. This structure is primarily intended for natural persons wishing to launch a business with limited start-up capital. However, a business permit is still required for activities that fall within the scope of the relevant regulations. (source: Simplified limited liability company (SARL-S) – Guichet.lu – Luxembourg)
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: under certain conditions, a SOPARFI (Financial Holding Company) may benefit from the participation exemption regime, which can provide exemptions on certain dividend income and capital gains realised on the disposal of qualifying shareholdings. Professional tax advice is recommended to assess eligibility for this regime. (Corporate income tax – Guichet.lu – Luxembourg)
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.
Luxembourg has one of the highest labour costs in Europe. Before hiring employees, it is advisable to assess not only the planned salary levels but also the associated employer contributions and statutory obligations. As salary data evolves regularly, businesses should consult the latest statistics published by STATEC and the relevant public authorities.
Taxation
Like all Luxembourg companies, your newly created company will have to pay several types of tax.
- Corporate income tax (IRC) is levied at a rate of 14% for companies whose taxable income does not exceed €175,000 and 16% for companies with taxable income exceeding €200,000. Additional charges, such as the employment fund contribution and municipal business tax, may also apply. (source:Key changes in the Luxembourg tax landscape for 2025 | BSP)
- 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) - Depending on the legal structure chosen, a business may be subject either to corporate income tax or, in the case of sole proprietorships, to personal income tax. Taxation rules vary according to the legal status of the business and the level of income generated.
- The Annual Contribution of the Chamber of Commerce
In Luxembourg, several VAT rates apply depending on the goods or services concerned: 3%, 8%, 14% and 17% (the standard rate). It is important to verify the rate applicable to your business activity before commencing operations.
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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.
