Luxembourg is universally recognized as one of the most active financial centers in Europe. And under the terms of its constitution of 1868 and the principles underlying it, every citizen of Luxembourg is guaranteed freedom of trade and freedom to create a business with commercial activity.
Right to setup a business in Luxembourg
The right to set up a business in Luxembourg was governed by the amended law of 28 December 1988 regulating access to the professions of craftsman, salesman, and industrial worker. The law of 2 September 2011 approved by the Chamber of Deputies on 13 July 2011 abolished and replaced the law of 28 December 1988, as amended.
To start a professional activity in Luxembourg, a permit has to be obtained. This is a personal procedure and the applicant must provide evidence of professional qualifications and good standing.
With respect to the Luxembourg law of 2 September 2011:
Companies applying for a business license must prove that they have sufficient infrastructure to support the activity. The law indicates that the infrastructures essential to the business activity include facilities and materials adapted to the type and scale of the business activity. The company must also have ethical administrative and technical structures for these activities. In addition, all documents relating to the company’s activities must be made available, and the company manager must be present regularly.
In addition to several other points, the new Luxembourg law explicitly stipulates that the services a company provides to other companies about the same group of companies do not require a business license. And the Minister must rule on granting a business license within 3 months from the receipt of the full request dossier.
So, in essence, all businesses established in Luxembourg must obtain essential governmental permits.
Business license and the applicable company’s legal form in Luxembourg
Luxembourg law recognizes the following types of commercial companies, each of which has a legal personality and must obtain the necessary license to operate:
- société anonyme/sa – public limited company and société par actions simplifiée/ sas – the simplified joint stock company
- société à responsabilité limitée/sàrl – private limited company and société à responsabilité simplifiée/sàrl-s – the simplified private limited liability company
- société en nom collector/snc – general corporate partnership
- société en commandite simple/secs – limited corporate partnership
- société en commandite par Actions/SECA – corporate partnership limited by shares
- société coopérative/sc – cooperative company
- société européenne/se – european company
The business license is mandatory irrespective of the company’s legal form. The business license is in effect a holy grail that enables a Luxembourg company to operate, hire, and issue invoices.
Conditions for granting a business permit in Luxembourg
A business license is granted by the Ministry of Finance based on an application that enables them to evaluate if the business leader is competent for the task.
To be declared competent, the business leader must fulfill the following:
- professional integrity: professional integrity will guarantee the integrity of the profession and protect partners and clients. If the business leader has lived in Luxembourg for more than 10 years, this will take the form of a Declaration of Honour. But if he/she has lived there less time, he/she will require a declaration of non-bankruptcy from a notary and a criminal extract record.
- The business leader must have a professional qualification that is in line with the planned activity
- establishment in Luxembourg: the business permit is only given if there is a physical establishment in Luxembourg that includes an infrastructure suitable for the nature and scale of the intended activity.
- The permit holder must indicate that they will be the permanent manager of the business, and will be personally and regularly responsible for the day-to-day management and direction of the company.
- the business manager must not have evaded tax obligations in their previous or current business activities,
Once given, this license will last for as long as the business is operated. It will expire if it is not used for 2 years if the owner ceases trading or the activity for which the permit was granted and if the company goes into liquidation or is declared bankrupt.
Changes to the Luxembourg law of 2 September 2011
To boost, aid, and promote investments and attract new entrepreneurs in Luxembourg, the administrative procedure of requesting a business license needed to be eased and sped up. So on 30 July 2018, the law of 18 July 2018 (the Revised Law) amending the law of 2 September 2011 legislating access to the craftsman, tradesman, industrialist, and certain liberal professions (the “Law of 2011”) entered into force in Luxembourg.
This was done in order to enable individuals’ access to certain professional activities and to simplify the process with the Luxembourg Ministry of Economy for the acquiring of business licenses to perform commercial activities in the Grand Duchy of Luxembourg.
Getting a license for your business in Luxembourg starts by establishing a company. To get started with your company formation and the formalities attached to it in Luxembourg, let’s go ahead and contact your Damalion expert now.
