Investing in Luxembourg is a tax-efficient way to conduct international business from the heart of Europe. Many of our clients choose Luxembourg business formation as an ideal corporate structure to fulfill their international business objectives. The following is an overview of the benefits and disadvantages of Luxembourg business formation.

Luxembourg is an EU member with a stable government, economy and legal system and therefore Luxembourg company formation portrays a positive image to clients, suppliers and venture capitalists. Luxembourg is positively ranked as the world's 15th-freest economy, and scores at 90% in terms of investment freedom and capital flows according to the Heritage Foundation's 2008 Index of Economic Freedom, a measure of freedom enjoyed in  business, trade, monetary, financial, investment and labour markets. Furthermore, Luxembourg is positively ranked as the worlds 11th least corrupt country in the 2008 Corruption Perceptions Index by Transparency International, a global measure of corruption amongst public officials and politicians.

Luxembourg business formation does not require a resident company secretary, although Healy Consultants recommends those investing in Luxembourg to use our secretarial services to receive government correspondence including i) annual tax return ii) notice of changes in Luxembourg company law iii) notice of liquidation of company iv) notification of annual business license fees overdue.

A minimum of one shareholder and one director is required to set up a Luxembourg company. Shareholders and directors may be individuals or corporate entities of any nationality, and need not be resident in Luxembourg

Despite its reputation as being a developed EU state, Luxembourg ranks a poor 50th in the World Bank's 2008 Doing Business Survey, which takes into account factors such as company registration procedures, time, cost and minimum capital required for company formation. To highlight this, Luxembourg company formation is expensive, with high government fees and a requirement for the authorised minimum capital of Euro 12,500 (US$16,000) to be deposited in a Luxembourg bank prior to incorporation. Luxembourg also ranks as the world's 25th most competitive economy in the World Bank's Global Competitiveness Report 2007-2008.

A Luxembourg Trading Company is subject to Luxembourg corporation tax of 22.88% on worldwide income exceeding 15,000 Euros (US$19,000). However, tax relief is available via the double taxation treaties Luxembourg signed with more than 40 countries.

In addition to corporate tax, a Luxembourg Trading Company pays a Municipal Business Tax (ICC) on profits of 6.75%, which is levied on taxable income above 17,500 Euros (US$22,300). Capital gains realised by the Luxembourg Trading Company is treated as ordinary income and is taxed accordingly.

There is a withholding tax of 15% on dividends paid to non-resident shareholders, unless reduced because of the double tax agreements signed by Luxembourg and other states.

Furthermore, a Luxembourg Trading Company pays an annual wealth tax based on the net asset value of the company on the 1st January each year.

For those investing in Luxembourg, there is a public business register in Luxembourg, detailing the registered office, share capital, directors, articles of association and annual accounts.

An SPF is not permitted to carry out any commercial activity, own property, have IP rights or be involved in management, trade or the offer of financial services. Although it pays no corporate tax, an SPF is subject to an annual subscription tax of 0.25% on debts exceeding eight times the paid up capital, up to a maximum of 125,000 Euros (US$160,000) per year.

Opening a Luxembourg corporate bank account is time consuming. However, Healy Consultants can assist you to open an account in any jurisdiction in the world to support Luxembourg business formation.

Back to Luxembourg Company Formation page.