Why Choose Luxembourg for Your IT Business?
IT Entrepreneurs tend to choose Luxembourg to stabilize, grow or start their business in Luxembourg. Luxembourg has become one of Europe’s top destinations for IT businesses, thanks to its strategic location, business-friendly regulations, and strong financial sector. The country offers an excellent environment for startups, particularly in technology and innovation. With access to a highly skilled workforce, government incentives, and a stable economy, Luxembourg provides a strong foundation for IT entrepreneurs. (To know more, read our guide)
Legal Structure: Limited Liability Company (SARL)
One of the most common business structures in Luxembourg is the Société à Responsabilité Limitée (SARL), or a private limited liability company. This structure is particularly attractive for IT entrepreneurs due to its limited liability feature, protecting the personal assets of the business owner.
Key Features of a SARL:
- Minimum Share Capital: The minimum required share capital is €12,000, fully subscribed and paid at the time of incorporation.
- Number of Shareholders: A Luxembourg LLC (Limited Liability Company) SARL can be established with a minimum of one shareholder and a maximum of 100 shareholders.
- Liability Protection: Shareholders’ liability is limited to their contributions.
- Flexible Governance: A SARL does not require a board of directors, making it simpler to manage compared to other legal structures.
Share Capital Requirements
As mentioned, the minimum share capital for a SARL is €12,000. This capital must be fully paid up at the time of registration. The shares of the company cannot be freely transferred unless all shareholders agree, which ensures better control over ownership.
For IT startups, it is essential to have sufficient working capital beyond the legal requirement. Many startups opt for a higher share capital to demonstrate financial stability to investors and potential business partners.
Corporate Income Tax in 2025: What’s New?
With the 2025 corporate tax reform, Luxembourg continues to refine its tax policies to maintain its competitive business environment. The new corporate income tax rates are as follows:
- Companies with taxable income below €175,000: 14% corporate income tax.
- Companies with taxable income between €175,000 and €200,000: progressive tax rate up to 14%.
- Companies with taxable income above €200,000: 14% corporate income tax, plus the 7% solidarity surcharge, bringing the effective tax rate to approximately 14.98%.
- Municipal Business Tax: Varies based on the municipality where the company is located (for Luxembourg City, it is 6.75%).
For IT businesses, taxation plays a significant role in financial planning. Fortunately, Luxembourg offers various tax incentives, including IP tax benefits (tax reductions on income derived from intellectual property) and R&D grants for innovative technology companies.
Opening a Business Bank Account with Damalion’s Assistance
A crucial step in establishing your IT business in Luxembourg is opening a corporate bank account. Many Luxembourg banks have strict compliance policies, and entrepreneurs often face challenges in getting their account approved.
Damalion simplifies this process by assisting entrepreneurs in choosing the right banking partner and handling the necessary documentation. Our expertise ensures a smooth account opening process, which includes:
- Verifying company documents
- Preparing compliance reports
- Assisting in communication with banks
Steps to Register Your IT Business in Luxembourg
- Choose a Company Name: Ensure that the name is unique and available for registration.
- Draft and Notarize Articles of Association: The company’s statutes must be prepared and notarized.
- Deposit Share Capital: Transfer the minimum share capital to a Luxembourg bank account.
- Register with the Luxembourg Trade and Companies Register (RCSL): Submit all required documents for incorporation.
- Obtain Business Licenses (if required): IT businesses may need specific permits, depending on their activities.
- Tax and VAT Registration: Register with the Luxembourg tax authorities for corporate tax, VAT, and other compliance needs.
- Hire Employees and Comply with Social Security: If you plan to hire staff, ensure proper registration with the social security administration.
Why Work with Damalion?
Setting up an IT business in Luxembourg involves navigating through complex legal and financial requirements. Damalion provides expert guidance in:
- Company formation and registration
- local resident (co-) director.s. to represent your company nearby the authorities (you decide whether you want the director to access the company’s bank account or no access to make operations)
- Corporate bank account opening
- Tax optimization strategies
- Compliance with local regulations
With our experience in supporting IT entrepreneurs, we ensure a smooth business setup process, allowing you to focus on innovation and growth.
Luxembourg presents an outstanding opportunity for IT entrepreneurs, with its business-friendly environment, advantageous tax regime, and strong financial sector. By setting up a SARL, you benefit from limited liability protection, straightforward management, and an attractive corporate tax structure.
With Damalion’s support, you can confidently establish your IT company in Luxembourg, open a bank account seamlessly, and take advantage of the country’s pro-business policies. Contact your Damalion expert today to get started on your IT venture in Luxembourg!
