Luxembourg Company Formation

Luxembourg company formation is, if properly structured, an excellent way for international investors to conduct business in a respectable jurisdiction with the efficiencies of offshore incorporation. The two most common and most popular forms of Luxembourg company incorporation are Societe Anonyme (SA) and Societe Anonyme a Responsabilite Limitee (SARL). Once incorporated, a Luxembourg company can be efficiently used to i) hold and manage legally tax-exempt investments, and ii) conduct trade in Europe using a stable, well regulated jurisdiction which is part of the European Union (EU). The following information will help you determine whether Luxembourg company formation is the optimum corporate solution to fulfil your international investment and business objectives:

Luxembourg company formation has reasonable minimum capital requirements. The Societe Anonyme (SA) requires minimum capital of EUR31,000 and the Societe Anonyme a Responsibilite Limitee (SARL) requires at least EUR12,500 capital. The main difference between the SA and the SARL is that capital of the SA is split between a minimum of 2 shareholders, and SARL capital is divided into 'certificates' that are not freely transferable, with a maximum of 40 shareholders allowed.

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. A Luxembourg SARL can have no more than 40 shareholders, and does not require an annual meeting if there are under 25 shareholders. The board of directors must have at least 3 managers/directors.

A Luxembourg SA and SARL have limited liability up to the amount of subscribed capital of each shareholder, not paid-up capital.

A Luxembourg SA or SARL can qualify as a Societe de Gestion de Patrimoine Familial (SPF), which replaced the 1929 Holding Company in 2006. The SPF is an excellent, tax-efficient vehicle through which financial assets (e.g. cash and assets on deposit, shares, bonds, depository certificates, trade receivables, monetary market instruments, options and commodities) can be acquired, held and managed.

A Luxembourg SA or SARL that qualifies as a Trading Company can register for EU value added tax (VAT) and access double taxation treaties with more than 40 countries including China, France, Germany, Singapore, the US and the UK. Furthermore, the Luxembourg Trading Company is free to conduct commercial activity both in Luxembourg and internationally, making it a popular entity for entrepreneurs conducting business and trading activity in central Europe.

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 14th-freest economy, and scores at 95% in terms of investment freedom and capital flows according to the Heritage Foundation's 2010 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 12th least corrupt country in the 2009 Corruption Perceptions Index by Transparency International, a global measure of corruption amongst public officials and politicians.

Following Luxembourg company formation, Healy Consultants can open a corporate bank account with one of the world's leading retail banks, including HSBC, Standard Chartered and Citibank

In its 2009 World Competitiveness Yearbook, the Switzerland-based IMD positively ranks Luxembourg as the world’s 12th most competitive economy. The ranking takes into account factors including economic performance, government efficiency, business efficiency and infrastructure.

Despite its reputation as being a developed EU state, Luxembourg ranks a poor 64th in the World Bank's 2010 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$17,000) to be deposited in a Luxembourg bank prior to incorporation. Luxembourg also ranks 21st in the World Economic Forum's Global Competitiveness Report 2009-2010.

A Luxembourg SA or SARL that qualifies as a Trading Company pays 23% corporation tax on global income exceeding 15,000 Euros (US$20,000). Furthermore, 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$23,000), while capital gains are taxed as ordinary income.

A Luxembourg SA or SARL that qualifies as a 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.

Following Luxembourg company formation, all SA and SARL must submit annual accounts to the Registrar of Companies. An annual external audit must be completed if either of the following are valid: (i) balance sheet value is great than EUR3.125 million (ii) sales value is above EUR6.25 million (iii) there are over 50 employees.

Following Luxembourg company formation, shareholders' and directors' details are available on a public register.

A registered office in Luxembourg is required for Luxembourg company formation. However, Healy Consultants can provide Luxembourg Virtual Office services to fulfil this requirement.

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