Starting your business in Luxembourg provides an extraordinary low-tax environment for global investors. The country is generally used in corporate structuring for cross-border transactions, but due to its place in Europe’s political environment, it is continually adapting its legal legislation to avoid negative conflict with the tax authorities of other EU countries.
Opening your business in Luxembourg is a simple process both for national and foreign investors with the help of your Damaliom experts. The procedure is simple and quick once you have all the necessary documents.
Why to register your company in Luxembourg
- Luxembourg has managed to retain its economic stability throughout the global economic and financial crisis. The country’s economy is based on many types of business activities that demonstrate to be a successful blend for the well-being of the Duchy.
- Luxembourg’s ideal legal and tax regime are the primary interests for companies that want to base their headquarters in a highly accessible and connected European business hot spot. Foreign companies in Luxembourg benefit from even more advantages because of a vast number of double tax treaties concluded by the Grand Duchy of Luxembourg with several countries worldwide.
- Investors in Luxembourg are also pleased to find that the country has a skilled and multilingual workforce. Also, a huge percentage of the employees in Luxembourg are cross-border commuters, another indication that the small country is open to global investments and collaboration.
- The quality of life in Luxembourg is another major factor that attracts business owners and employees alike. Luxembourg is one of the world’s smallest countries and also one of the wealthiest.
- A Luxembourg Société à Responsabilité Limitée (Sàrl) is the most prominent form of company in Luxembourg and it gains from a high level of confidentiality as the directors of the company do not appear on public records.
What types of companies are available in Luxembourg?
There are various types of companies that can be registered in Luxembourg and the most convenient type depends on the investor’s business purposes. While some types of companies are more eligible for small and medium-sized businesses, others will favor large businesses that want to expand their activities in Luxembourg.
The following types of companies are for those enthusiastic about Luxembourg company formation:
- Simplified limited liability company (sarl-s)
- public limited liability company (S.A.),
- private limited liability company (S.á.r.l.),
- general partnership (S.e.N.C.),
- limited partnership (S.e.C.S.),
- partnership limited by shares (S.e.C.A.),
- co-operative company (S.C.).
The private limited liability company and public limited liability company are two of the most prominent business structures in Luxembourg. They impose a specific minimum share capital and there are requirements respecting the managing and supervisory bodies of a public limited liability company.
A branch in Luxembourg is an ideal business option for a foreign company that wants to solidify its presence on the market. The newly incorporated company will not be a legal entity in Luxembourg as it will depend entirely on the mother company abroad.
Subsidiaries in Luxembourg are another type of company chosen by foreign legal entities. Unlike the branch, these companies have legal personality and the foreign company is not responsible for their actions.
Basic steps to register your company in Luxembourg
The formation of a Luxembourg Company generally takes place with the following steps:
- Company Name Selection,
- Open a bank account,
- Choose the right type of company to set up: There are several types of companies to pick from in Luxembourg but the most popular ones are the Limited Liability Company (SARL) and the Public Limited Company (SA).,
- Preparation of the Articles of Association,
- Due Diligence,
- Proxy for the Notary: a proxy is signed by the shareholder to be represented at the notary act.
- Notary & Registration and Publication of the Articles of Association: the notary act is signed by the notary. The articles of association must be registered and entered into the commercial registry.
- Apply for a VAT number, and
- Trade Licence: A potentially necessary trading certificate is attainable from the Ministry for Mid-Sized Businesses following the registration of the company.
Taxation of your Luxembourg company
Luxembourg has some of the lowest tax rates, which is the reason why registering a company offers various benefits, particularly for those businesses who want to extend their activity in the EU market or to set up their European headquarters in Luxembourg.
The standard VAT rate in Luxembourg is 17%, but reduced rates apply to specific products. Global transportation and transportation in the Community countries are exempted from VAT.
The VAT is a popular type of tax that can be found in all European countries. This type of tax was initiated for the purpose of collecting financial resources at the state budget from the exchange of goods and services on a local market.
The corporate tax rate in Luxembourg is 24.94% and it constitutes a 7% employment fund contribution. An extra municipal business tax also applies depending on the city the company is in. The profit tax in Luxembourg is generally 15% unless it is reduced by tax treaties.
Depending on the taxation and the legal necessities for each business structure, it is crucial to choose the best type of company that suits the business purposes of a legal entity.
When you are ready to incorporate your company in this economically stable European country, please contact your Damalion experts now.
