Luxembourg Business Formation

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.

When investing into Luxembourg for Luxembourg business formation, there are two popular forms of business that investors must consider. The Societe Anonyme (SA) and the Societe Anonyme a Responsabilite Limitee (SARL), each of which have reasonable minimum capital requirements of EUR31,000 and EUR12,500 respectively. The key difference is that a SA has capital split between 2 shareholders, whereas a SARL has capital split into certificates that are not freely transferable. The SARL also has a limit of 40 shareholders, however, when there are under 25 shareholders, there is no annual meeting requirement.

Luxembourg is a 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. Luxembourg is also positively ranked as the world’s 11th-least corrupt country in Transparency International’s Corruption Perceptions Index 2011.

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 a) annual tax return b) notice of changes in Luxembourg company law c) notice of liquidation of company d) notification of annual business license fees overdue.

A minimum of two shareholders and one director is required to set up a Luxembourg SA or SARL 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 45th in the World Bank's 2011 Doing Business Survey, which takes into account factors such as company registration procedures, time, cost and minimum capital required for company formation. Luxembourg also ranks as the world's 20th most competitive economy in the World Bank's Global Competitiveness Report 2010-2011.

A Luxembourg SA or SARL that qualifies as a Trading Company pays 21% corporation tax on global income exceeding 15,000 Euros (US$21,700) and 20% corporation tax on global income below that amount. 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) ranging between 6% to 12% percent depending on location, which is levied on taxable income above 17,500 Euros (US$25,300). 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.

A SA or SARL 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$175,000) 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.

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