Starting your own business: why and how?

Are you looking to start or buy a business in Luxembourg? Here we provide you with key information to help you get started and implement your project.

Why have a business in Luxembourg?

A dynamic and diversified economy, open to international trade

The Grand Duchy of Luxembourg offers many advantages for setting up and running a business. The Luxembourg economy is diverse and highly dynamic, encompassing services , finance, industry, high technology, and more.

Thanks to its expertise, Luxembourg exports nearly 65% of its production of goods and services. More than 130 banks from 29 countries are based there and generate 28% of GDP.

Luxembourg is one of the founding countries of Europe. Today, it is home to 12 European institutions.

The country has direct air links to more than 75 destinations. This facilitates business travel, particularly to London, Geneva, and other European cities. Cargolux provides daily international cargo connections.

Luxembourg, a growing country

The country is clearly pursuing a strategy of a third industrial revolution. It supports more than 220 recommendations and projects in this direction. Creative companies employ 8,000 people. They generate €1 billion in revenue. Public funding for R&D has increased tenfold since 2000.

As a result, Luxembourg attracts many talented individuals and job seekers. Every day, more than 200,000 cross-border workers from France (half), Belgium (a quarter), and Germany (a quarter) cross the border to work in Luxembourg.

Finally, it is important to note that Luxembourg ranks 10th out of 125 countries in terms of competitiveness in attracting, retaining, and developing its workforce. The labor market there is very dynamic.

Luxembourg's economic reliability, financial stability, and politics

Luxembourg is a constitutional monarchy. Only nine prime ministers have held the reins of power since 1945. In addition, the government is formed through a system of coalitions. This obligation to create alliances and implement a common program provides additional political stability.

Furthermore, social dialogue is constructive. Only 4.1 working days are lost each year with 1,000 workers on strike. It should be noted that the European average is more than 30 days.

Every year, Luxembourg receives an AAA rating from rating agencies.

Attractive taxation for businesses in Luxembourg

In Luxembourg, taxation appears to be very competitive for businesses compared to other European countries.

Controlled taxation for Luxembourg companies

Luxembourg companies are subject to several types of tax:

• income tax at a rate of 15% of operating profit if taxable income does not exceed €175,000, and 17% above €200,000. A 7% surcharge is applied to the employment fund,
• municipal business tax calculated on operating profit, at a rate of 3% after a deduction of €17,500,
• wealth tax at a rate of 0.5% of equity, reserves, and retained earnings,
• Value Added Tax (VAT) between 3% and 17% depending on the sector of the company
• the annual and mandatory Chamber of Commerce contribution.

Nevertheless, the overall tax burden on companies remains reasonable and allows them to continue investing.

Low social security contributions in Luxembourg

Low payroll costs also make it possible to recruit qualified personnel. These are among the lowest in the European Union.

The employee's share is 12.45% and the employer's share is 12.16%. The employer must also pay an accident insurance contribution of 1% and a mutual insurance contribution of up to 2.92%, depending on the contribution class.

If you choose to work as a self-employed person, you will also pay these contributions, both the employer's and the employee's share. However, you will benefit from social advantages, in particular access to unemployment benefits as a self-employed person.

Luxembourg, start-up nation

Luxembourg defines itself as a "start-up nation." Numerous measures are in place to welcome start-ups and facilitate their launch.

Today, more than 500 start-ups are based in Luxembourg. With its human scale, Luxembourg offers the opportunity to test products or services on a small sample that is representative of an international population.

In addition, it is easy to recruit from a pool of talent in many areas of expertise, with a variety of international and multicultural profiles.

Finally, access to public and private decision-making bodies is relatively straightforward.

Find out more about Luxembourg, startup nation.

How to set up a company in Luxembourg

Setting up a commercial company: LLC and SA

The two most common forms of commercial enterprise in Luxembourg are the SARL and the SA.

Setting up a limited liability company (SàRL) in Luxembourg

A limited liability company (SàRL) requires capital of €12,000 and at least two shareholders. The registered office must be located in the Grand Duchy of Luxembourg. The director does not need to be a Luxembourg national.

To set up your company, you will need to go through a notary, who will draw up the articles of association. You will also need to complete the administrative procedures to register your company in the Trade and Companies Register (RCS).

The company is subject to a number of taxes, including a fixed registration fee, commercial tax, wealth tax, corporate income tax, and VAT.

The advantage is that the company is fiscally "opaque." The partners are not taxed personally, and their liability is limited to their personal assets.

In the case of a simplified limited liability company (SARL), the incorporation can be carried out by private agreement. The capital will be between €1 and €11,999.

Creating a public limited company in Luxembourg

A public limited company requires capital of €30,000. A single shareholder is sufficient. This type of company is generally intended for large companies. However, it can also be chosen by an SME, as bearer shares can be transferred more easily.

Find out more about the different types of companies and their tax advantages here.

Opting for a SOPARFI tax regime in Luxembourg

Financial holding companies (including SA, SARL, etc.) can opt for a SOPARFI tax regime. To do so, they must hold financial interests in other companies (subsidiaries) and manage them.

The advantage of SOPARFI is that it offers exemption from capital gains and dividend taxes under certain conditions. On the other hand, the basic tax rate applied is higher.

Consult an accountant, notary, or lawyer for specific details about this type of company.

More information on entrepreneurship in Luxembourg.

Merkur: Luxembourg business magazine

The monthly Merkur magazine published by the Luxembourg Chamber of Commerce is THE Luxembourg business magazine. It is a valuable source of information on economic activityand political action in Luxembourg.

You can view Merkur and subscribe online on the Chamber of Commerce website www.cc.lu.

Would you like to work as a freelancer in Luxembourg? Find out more here.

To explore the many advantages of living in Luxembourg, its opportunities and challenges, read our article on what you need to know to settle in the Grand Duchy here.