Starting a Business in Luxembourg: Comprehensive Registration Guide

Starting a business in Luxembourg offers business owners many opportunities for success due to the country’s stable economic and political environment. The country is known to have one of the world’s strongest economies. Luxembourg has a steady GDP per capita growth of 2% in 2022, and a competitive and resilient economy. Additionally, any business in the country will benefit from its skilled population, excellent transportation arrangements, open Schengen and EU markets, and more. Business in these few sectors can bloom in Luxembourg –

Automotive

Luxembourg is a hub for automotive innovation and advancements. More than 300 automotive companies around the country are shaping up a vast international network. These include several original equipment manufacturing companies, research and technology organizations, and production, research, and development facilities.

Finance

Luxembourg is renowned for having great cross-border expertise. It has attracted several payment institutions, wealth managers, insurance companies, private equity firms, international banks, and other financial service providers. 

Cleantech

All sorts of cleantech products and services are growing throughout the business community in Luxembourg. The country has a strong research and development base for wastewater treatment, sustainable energy construction, and eco-friendly transition. 

Others

People can choose several more sectors to open their businesses successfully without much hindrance. Some of these are fashion technology, food-related business, software and computer technology, and travel-related business. 

Benefits of Starting a Business in Luxembourg

There are many advantages of doing business in Luxembourg, and here are a few of them – 

Geographical location, social and political stability

The country provides an excellent geographical advantage by being at the center of Europe. It not only borders Germany and France, but around 60% of the EU’s GDP can also be reached easily. The country’s parliamentary monarchy provides social and political stability as well. These provide good logistics and a corporate environment for the business. 

Founding member of EU & member of Schengen Area

Luxembourg was a founding member of the EU. Hence, the headquarters of 12 European institutions can be found here. The nation is also a member of the Schengen Area, so any business gets easy access to 26 markets. This helps people with easy import, export, and expansion of businesses.

Strong economy

With a AAA rating, Luxembourg has one of the strongest economies in the world. As of 2022, Luxembourg has the world’s highest GDP per capita (PPP) rate of USD 141,587. This means increased employment and product demand for businesses.

Skilled labor force

The official languages of Luxembourg are German, French, and Luxembourgish. Additionally, many people speak English, and a large part of the population consists of foreign nationals. This means businesses get diverse, multilingual, specialized experts and a skilled labor force.

Requirements for Starting a Business in Luxembourg

There are some minimum requirements to do business in Luxembourg –

Shareholders and directors

• A private limited company can have any number of shareholders between 1-100, and there should be at least one director with no maximum limit to that number.
• Public limited companies have no limit on the maximum number of shareholders and must have three directors at minimum. 
• Any partnership company must have at least one general partner.

Fixed address

Having a fixed location for the company is imperative for easier company registration and opening a business bank account. Besides buying a piece of land, people can rent private places or ‘coworking’ spaces in the country.

Bank account details

A local bank account is required to deposit the capital, which helps register the company. However, to open a business account in Luxembourg, the bank will ask for the following-

• Personal details
• Legal documents of the company
• Previous account statement (for existing businesses)
• Business plan
• Proof of address
• A letter indicating the source of business capital, the purpose of the bank account, expected income sources, and projected turnover

Other documents

Some other documents are required as follows:

• Legal documents of company formation, its legal structure, and constitution
• Documents stipulating the regulations and purpose of the business
• Memorandum of Association
• Partnership deeds
• Proof of deposited capital and related bank details
• Personal information of company directors and shareholders

Types of Business Structures in Luxembourg

One of the most critical procedures for incorporation of a company in Luxembourg is choosing the right type of business structure. The business structures in Luxembourg are as follows-

Limited liability companies (SARL)

• Limited liability companies or Societe a responsabilite limitee (SARL) are among the popular formations foreign investors choose. 
• Shareholders of these formations are considered separate from the business and are subject to limited liability.

Public limited companies (SA) 

• Company shares in public limited companies or Societe anonyme (SA) can be publicly traded. 
• Shareholders here are protected from debts and obligations. They only lose their contributed shares and capital.

Not-for-profit (ASBL) & social impact companies (SIS) 

• Not-for-profit companies or Association sans but lucrative (ASBL) must have a minimum of three co-founders. 
• According to law, they can’t produce profits, but under some rules, they can employ people and pay salaries. 
• Social impact companies or Societe d’impact societal (SIS) is another form of ASBL, but they are allowed to make a profit within given restrictions. 
• They first have to register as a public or private limited company. 

Sole proprietorship

• A sole proprietorship is for individuals, like artisans, craftsmen, or entrepreneurs, who want to open businesses. 
• It has unlimited liability, and the businessperson must file an annual report if their turnover surpasses €100,000.

General partnership (SENC) 

• General partnerships or Societe en nom collectif (SENC) are formed by two or more partners. 
• They have unlimited liabilities, no minimum capital requirements, and similar to sole proprietorships, the businessperson would need to file a report at the end of the year if their turnover is more than €100,000.

Limited partnership (SCS) 

• Limited partnerships or Societe en commandite simple (SCS) require at least two or more partners. 
• One of them is a general partner who holds unlimited liabilities, and the other is a limited partner who holds limited liabilities. 

Company Registration Process

The steps to incorporate a company in Luxembourg are as follows –

Apply for a business permit

The first step when starting a business in the country is to apply for a business permit. For the application, the businessperson needs –

• Residency proof in Luxembourg or any country near Luxembourg
• A location for the business where the operations of the company will take place
• Proof of clean professional honorability and reputation can be acquired by visiting a notary, paying a small fee, and signing a statement
• Qualifications to open the company which depend on the nature of the business. Luxembourg Chamber of Commerce and Chamber of Crafts provides courses, certification, and permits for many trades and crafts, which can help gain business permits.

Choose a legal form

• There are six types of business structures in Luxembourg. 
• According to the capital amount, type of product or service the business will provide, number of shareholders, directors, and investment type. Knowing them in detail is essential before carefully choosing a proper business structure.

Register with the trade and companies register

• The next step is to choose a name for the company. It’s always advisable to choose at least three names, so if the first choice is not available, they can go for the others. 
• If someone opts for a not-for-profit company or single proprietorship, they must register with the country’s trade and companies register. 
• The name can be registered through Luxtrust, an authority that digitally issues certificates. They can also opt to personally go and register at the trade, and companies register office in Diekirch. It’s important to remember to include constitutional documents along with the application. 

Register for social security

• Registering for social security includes benefits like health insurance, disability insurance, unemployment insurance, parental leave, pension for retirement, and more. 
• Social security registration can be done at Centre Commun de la Securité Sociale (CCSS). 
• For registration, an estimated projected income will be asked. From that projected taxable income, 25% must be paid. 
• There are a few exceptions that also entail changes to the benefits in accordance with the exceptions. 

Register for VAT and income tax

• To register for Value Added Tax, it is vital to first submit a declaration to the Administration de l’enregistrement et des domaines or Land Registration and Estates Department. 
• As of 2023, the VAT rate is 17%-16%, the refund of which can take around 3-9 months. The Luxembourg Administration des contributions directes will contact you for the registration of income tax themselves. 

How Much Does it Cost to Incorporate a Company in Luxembourg?

For the basic company registration process in Luxembourg, the most important thing is a minimum amount of capital. It varies according to the type of company formation. Any form of limited liability company needs €12,000. Public limited companies need €30,000 and at least 25% of it, meaning €7,500 at the time of incorporation.

Apart from the required capital, the cost of incorporating a company in Luxembourg includes government fees, a deposit to open a bank account, and registration fees. Considering all these, the cost in the first year amounts to around €18,430-€38,130, depending upon the business structure.

Are Foreigners in Luxembourg on Certain Passes Allowed to Start a Business in Luxembourg? 

There are two conditions under which people don’t need a visa to enter Luxembourg –

• If they are from any EU-member country
• If they are from one of the remaining 26 countries that fall in the Schengen Area

People who don’t fall into these categories must apply for business visas. Usual business visas have a six-month validity with no extensions. If one requires to stay in the country longer, the businessperson must apply for a type D visa. A type D visa allows an individual to stay from 90 days to up to 1-year maximum. 

Applying for this type of visa requires a person to have temporary authorization to stay. This can be applied at the Immigration Directorate of the Luxembourg Ministry of Foreign and European Affairs. Once you get the receipt of stay allowance, you must submit a type D visa application within 90 days. You must submit this application at the Luxembourg diplomatic in person or at the consular mission in the applicant’s respective country. For further assistance, anyone opting for a stay of over three months must contact the country’s Department for Foreigners at the Immigration Directorate.

Government Assistance for Foreign-owned Businesses

The Luxembourg government encourages people to invest in the country and open businesses. The aids one can gain are – 

• Luxembourg is an EU member, so people are eligible for SME funds that help small and medium-sized businesses. 
• The government provides personal financial aid to businesses related to tourism, agriculture, and electric vehicle charging infrastructures. 
• As of 2023, the government helps businesses by offering them funds for the extra cost they have suffered owing to the rise in energy prices the previous year. 
• The government provides special aid to businesses that invest in environment-friendly processes or eco-technology. They give monetary help to invest in these sectors and also reimburse the amount spent using renewable energy for the company. 
• Luxembourg Business Angel Network and Chamber of Commerce have schemes, like ‘The Business Mentoring Scheme,’ that help business owners establish and develop their businesses in the country. 

How Can Multiplier Help?

Opening a business in a foreign country requires detailed knowledge of that country’s laws and regulations. Working with an EOR firm can speed up this complex process while ensuring all legal compliances. Multiplier is a popular EOR platform with a presence in more than 150 countries. As you take your business to new heights, we help you hire employees and manage local compliance complexities. This includes drafting labor contracts, helping with employee taxes, managing wage processing, and more. 

Our in-house experts have a keen knowledge of local rules, laws, and regulations. We help you grow without hindrance and without setting up a subsidiary. This way, you can explore new markets, test them and attract talent affordably.