Why and how to set up your own business?

Do you want to set up or buy a business in Luxembourg? Here you’ll find the key information you need to get started and put your project into action.

Why have a company in Luxembourg?

A dynamic, stable economy

The Grand Duchy of Luxembourg offers many advantages for setting up and running a business. Luxembourg’s economy is highly diversified and dynamic: services, finance, industry, high-tech,… Thanks to its know-how, Luxembourg exports almost 65% of its production of goods and services. More than 130 banks from 29 countries are based here, generating 28% of GDP. Luxembourg is one of Europe’s founding countries. Today, it is home to 12 European institutions. The country has direct air links to over 75 destinations.

The country is clearly pursuing a third industrial revolution strategy. It supports over 220 recommendations and projects in this area. Creative businesses employ 8,000 people. They generate sales of 1 billion euros. Public funding for R&D has increased tenfold since 2000.

As a result, Luxembourg is a magnet for talent and job seekers. Every day, over 200,000 cross-border commuters from France (half), Belgium (a quarter) and Germany (a quarter) cross the border to work in Luxembourg.

Last but not least, Luxembourg ranks 10th out of 125 countries in terms of competitiveness in attracting, retaining and developing its workforce. The job market is very dynamic.

Economic reliability, financial and political stability

A constitutional monarchy, only 8 prime ministers have held the country’s reins since 1945. Social dialogue is constructive. Only 4.1 working days are lost each year with 1,000 workers on strike. The European average is over 30 days. Every year, the country is rated AAA by the rating agencies.

An attractive tax system for businesses

Luxembourg’s tax system appears to be competitive for companies.

Company taxation

Luxembourg companies must pay several types of tax:

• income tax at 15% of operating profit if taxable income does not exceed 175,000 euros, 17% above 200,000 euros. A surcharge of 7% is applied to the employment fund,
• municipal business tax calculated on operating profit, at a rate of 3% after an allowance of 17,500 euros,
• wealth tax of 0.5% of shareholders’ equity, reserves and retained earnings,
• Value-added tax (VAT) of between 3% and 17%, depending on the company’s sector.
• mandatory annual Chamber of Commerce membership fee.

Social security contributions

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

The employee portion is 12.45% and the employer 12.16%. The employee must also pay an accident insurance contribution of 1% and an employer’s mutuality contribution of up to 2.92%, depending on the contribution class.

More information about working in Luxembourg.

How to set up a company in Luxembourg

Setting up a commercial company: SARL and SA

The 2 most common forms of commercial enterprise in Luxembourg are the SARL and the SA.

The Société à Responsabilité Limitée (SàRL) requires capital of 12,000 euros and a minimum of 2 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. The latter will draw up the articles of association. You’ll also need to take the necessary administrative steps to register your company with the RCS (Registre de Commerce et des Sociétés).

This type of company requires a certain amount of formalism. 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”. Partners are not taxed personally and their liability is limited to their personal assets.

In the case of a simplified limited liability company (SARL simplifiée), the company can be incorporated under private seal. The capital will be between 1 and 11,999 euros.

The Société Anonyme requires a capital of 30,000 euros. One shareholder is enough. Although this type of company is more suited to large corporations, it can also be chosen by SMEs, as bearer shares can be sold more easily.

Opting for a SOPARFI tax regime

Sociétés de Participations Financières (including SAs, SARLs, etc.) may opt for the SOPARFI tax regime provided they hold and manage financial interests in other companies (subsidiaries).

The advantage of the SOPARFI is that, under certain conditions, capital gains and dividends are tax-exempt. However, the basic tax applied is higher. Ask your accountant, notary or lawyer about the precise characteristics of this type of company.