DOING BUSINESS IN LUXEMBOURG IN 2023
Since 2003, Healy Consultants Group has been efficiently and effectively assisting our Clients with i) Luxembourg business registration ii) business licensing iii) Luxembourg business banking solutions iv) visa options and staff recruitment strategies and v) workspace rent.
|Compare different Luxembourg entities||Tax resident LLC||Fast setup solutions||Tax exempt holding||Wealth management company||Tax exempt IP holding||PLC||Branch|
|Also known as||SARL||SARL||SOPARFI||SPF||SOPARFI||SA||Branch|
|Best use of company?||Trading company||To invoice Clients now||Holding company||Wealth management||Receive IP income||EU IPO||Consolidated accounts|
|How soon to invoice Clients?||1 month||2 weeks||1 month||Cannot trade||1 month||1 month||1 month|
|How soon can you hire staff?||1 month||2 weeks||1 month||1 month||1 month||1 month||1 month|
|How soon can you sign a lease agreement?||Immediately||Immediately||Immediately||Immediately||Immediately||Immediately||Immediately|
|How long to supply corporate bank a/c?||2 months||1 week||2 months||2 months||2 months||2 months||2 months|
|How long to supply co. reg / tax numbers?||1 month||2 weeks||1 month||1 month||1 month||1 month||1 month|
|Corporate tax rate on annual net profits?||24.94%||24.94%||up to 0%||up to 0%||up to 0%||24.94%||24.94%|
|Limited liability entity?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Res. director/partner/manager required?||No||No||No||No||No||No||Yes|
|Minimum paid up share capital?||€12,500||€12,000||€12,400||€12,400||€12,400||€30,000||€0|
|Corporate bank account location?||ING||Societe Generale||BGL BNP Paribas||Banque Internationale à Luxembourg||Banque du Luxembourg||Raiffasen Bank||VP bank|
|VAT payable on sales to local customers?||17%||17%||17%||Cannot trade||17%||17%||17%|
|Average total engagement costs?||€24,170||€55,170||€24,170||€23,170||€24,170||€22,455||€18,870|
|Average total engagement period?||3 months||3 months||3 months||3 months||3 months||3 months||3 months|
|Accounting and tax considerations||Tax resident LLC||Fast setup solutions||Tax exempt holding||Wealth management company||Tax exempt IP holding||PLC||Branch|
|Statutory corporate tax payable?||24.94%||24.94%||up to 0%||up to 0%||up to 0%||24.94%||24.94%|
|Legally tax exempt if properly structured?||No||No||Yes||Yes||Yes||No||No|
|Group HQ tax incentives?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Must file an annual tax return?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Must file annual financial statements?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Must appoint an auditor?||No||No||No||No||No||Yes||No|
|Access to double taxation treaties?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|WH tax on payments to foreign s/holders?||15%||15%||0%||0%||0%||15%||0%|
|Company Registration||Tax resident LLC||Fast setup solutions||Tax exempt holding||Wealth management company||Tax exempt IP holding||PLC||Branch|
|Min. number of shareholders/partners?||1||1||1||1||1||1||Parent company|
|Min. statutory paid up share capital?||€12,400||€12,400||€12,400||€12,400||€12,400||€31,000||€0|
|Shelf companies available?||Yes||Yes||No||No||No||No||No|
|Time to incorporate a new entity?||3 weeks||2 weeks||3 weeks||3 weeks||3 weeks||4 weeks||4 weeks|
|Can easily convert to a PLC?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Can have preference shareholders?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Business Considerations||Tax resident LLC||Fast setup solutions||Tax exempt holding||Wealth management company||Tax exempt IP holding||PLC||Branch|
|Good entity for trademark registration?||Yes||Yes||No||No||Yes||Yes||Yes|
|Good entity to secure an import and export license?||Yes||Yes||No||No||No||Yes||Yes|
|Min. number of directors/managers?||1||1||1||1||1||3||1|
|The entity will likely be regulated by?||LBR||LBR||CSSF||CSSF||CSSF||LBR||LBR|
|Good business vehicle to secure trade finance?||Yes||Yes||No||No||No||Yes||Yes|
|Good vehicle to bid for government contracts?||Yes||Yes||No||No||No||Yes||Yes|
|Government grants available?||Yes|
|Resident tax representative required?||No|
|Maximum shareholding for foreigners?||100%|
|Sponsorship by local citizen required?||No|
|Our Client must travel to Luxembourg?||No|
|Temp. physical office solutions available?||Yes|
|You need local resident as bank signatory?||No|
|Can be wholly foreign owned?||Yes|
|Monthly VAT reporting to the government?||No|
|Must sign an office lease agreement?||No|
|S/holder/director docs attested/translated?||Yes|
|Foreign director needs a tax number?||No|
|Foreign director needs a residence visa?||No|
|Maximum number of staff allowed?||No maximum|
|Expatriate to local staff ratio?||None|
|Residence visa for business owner?||Yes|
|Other useful information|
|Govt approval required for foreign owners?||No|
|Public register of shareholders and directors?||Yes|
|What will be included in my customer sales invoice?||(click link)|
|Luxembourg has signed free trade agreements?||Yes|
|This country is a member of WIPO/TRIPS?||Yes|
|This country is a member of the ICSID?||Yes|
|Average customs duties suffered?||0.60%|
|Govt foreign investment approval required?||No|
|Average monthly office rent? (€/sq m)||€65|
|Min. statutory monthly wage?||€2,387|
|Average monthly € salary for local skilled staff?||€4,810|
|US$ deposit interest rate? (1 year average)||0.25%|
|Overseas remittance currency controls?||No|
|Multi-currency bank accounts available?||Yes|
|Corporate visa debit cards available?||Yes|
|Quality of e-banking platform?||Excellent|
|Crowd funding available in this country?||Yes|
Luxembourg business setup summary
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Advantages and disadvantages of a Luxembourg company
Advantages of Luxembourg company registration
- A Luxembourg holding company (Soparfi) is legally exempt from all local taxes including corporation tax, capital gains tax and withholding tax if the parent company holds at least 10% shares in an EU resident subsidiary for a continuous period of 12 months. Also, these tax advantages will also be extended to other countries with which Luxembourg has signed a DTA if these countries have corporate tax rate of at least 21%;
- A Luxembourg financial assets holding company (SPF) is legally tax exempt from all local taxes including corporation tax, capital gains tax and withholding tax. This vehicle is often used to manage a family privately owned investment portfolio;
- Registering a Luxembourg company to hold patents, trademarks and registered designs has tax advantages, as royalty income on these rights only suffers corporation tax of 6% and enjoys zero withholding tax on distribution payments. As Luxembourg is a member of both the EU and the World Intellectual Property Organization (WIPO), a Luxembourg company is the perfect vehicle through which to hold intellectual property rights that can be enforced internationally;
- Luxembourg is a popular domicile for registering European investment funds, as collective investment fund vehicles like SICAVs are legally exempt from all local taxes including corporation tax, capital gains tax and withholding tax;
- The European Union Parent Subsidiary Directive eliminated withholding taxes on dividends paid between related companies in Europe;
- There are no withholding taxes on interest, royalties or technical service fees paid to non-resident companies;
- A Luxembourg private equity firm (SICAR) is legally tax exempt for all income from bonds and equities. The SICAR law provides a full withholding tax exemption on dividends distributed to its shareholders. A SICAR must be authorized by the CSSF prior to commencing its operations;
- A foreign-owned company can invest in every business sector without restriction;
- Luxembourg boasts highly skilled labour with a literacy rate of 99% and a technologically advanced rate of 90%, making Luxembourg employees efficient and productive;
- Luxembourg is a founding member of the European Union, thus Luxembourg business registration offers virtually unrestricted access to the EU and Schengen area market of 26 developed countries.
- Luxembourg is a globally competitive economy and has been ranked 18th out of a total of 141 countries for its global competitiveness in the 2019 edition of the Global Competitiveness Index by the World Economic Forum. The country’s economy is best in its technological readiness amongst all the 141 nations and has strong goods market efficiency along with a stable macroeconomic environment.
- Access to Funding – Organizations such as LuxInnovation in Luxembourg offer a wide range of funding opportunities for businesses, including government grants and loans, as well as access to private equity and venture capital
- Multilingual Workforce: Luxembourg has a multilingual and highly skilled workforce, with a high level of education and expertise in various fields.
Disadvantages of Luxembourg company registration
- Luxembourg is considered a ‘tax neutral jurisdiction’ by EU member states. Its membership of the European Union will continue to force the country to abandon legal tax exemptions on holding companies;
- If registering a Luxembourg subsidiary to operate locally, the company requires a business permit and must be managed by a resident director;
- A Luxembourg commercial trading company suffers company taxation at 24.94%. Consequently, entrepreneurs often choose only to register tax exempt holding companies to receive passive income when investing in Luxembourg;
- There is valid concern about Luxembourg’s banking secrecy laws, agreeing to OECD standards on exchange of customer information since 2009, which could be disadvantageous for business registration in Luxembourg;
- Starting a Luxembourg company takes up to three weeks, making the process lengthy and cumbersome;
- High Costs: Incorporating a company in Luxembourg can be expensive due to high registration fees and ongoing administrative costs.
- Limited Market: Luxembourg is a small country with a relatively small domestic market, which may limit growth opportunities for some businesses.
- Complex Regulatory Environment: Luxembourg has a complex regulatory environment that can be challenging for new businesses to navigate.
- There are a few bottlenecks whilst incorporating a business in Luxembourg:
- Getting credit approvals from banks in Luxembourg can be quite a cumbersome process;
- Procuring an electricity connection can also be time-consuming in Luxembourg since it takes an average of 56 days to receive a connection;
- Luxembourg provides little or no protection to its investors. The World Bank has ranked the nation in the bottom 100 countries in the world for investor’s protection.
Best uses of a Luxembourg company
- The European Union’s (EU) February 2020 decision to add the Cayman Islands, Seychelles, Panama and Palau to its ‘tax neutral jurisdiction’ blacklist is prompting demand for redomiciliation of entities, such as special purpose vehicles and funds, to Luxembourg. Luxembourg-redomiciled entities benefit from the country’s extensive double tax treaty network and simple redomiciliation procedures;
- Luxembourg is a cauldron of international entrepreneurs mainly in the financial industry, where 50% of the population is foreign. There exist in Luxembourg the perfect ingredients for creativity and exchange of skills across industries and cultures, stoked by a liberal, entrepreneurial free market.
- Located in the centre of Europe, Luxembourg is in direct contact with many leading European markets such as Germany, Belgium, France and the UK.
- The lack of income tax on dividends received under the Soparfi scheme also makes Luxembourg an excellent choice for your firm’s European headquarters;
- As part of the EU, Luxembourg can receive payments from subsidiaries within the EEA without suffering withholding taxes on those payments. This is thanks to the EU Parent-Subsidiary Directive.
Luxembourg corporate banking solutions
Luxembourg is a renowned banking centre that is in the heart of Europe. It has a highly advanced infrastructure, making a Luxembourg bank account a secure and a long-term solution for all international entrepreneurs. The following information will help our Clients to determine whether a corporate bank account in Luxembourg is the optimum solution to meet their desired business goals:
- Luxembourg is a reputable, politically-stable European country for opening of a corporate bank account for the Luxembourg non-residents;
- A corporate bank account in Luxembourg portrays an excellent image internationally, that is highly important to our Client’s suppliers and customers;
- The process to open a corporate bank account in Luxembourg is usually complex and time-consuming yet straight-forward and transparent;
- A corporate bank account is the key to setting up a business in Luxembourg;
- Healy Consultants Group can open a corporate bank account on our Client’s behalf without our Client needing to visit Luxembourg. This is because of our close relationship with some of the major European and international financial institutions in Luxembourg including ING, Societe Generale, BGL BNP Paribas, and Banque du Luxembourg;
- Entrepreneurs planning to open a Luxembourg bank account should note that the Grand Duchy is a member of the OECD (Organisation for Economic Cooperation and Development), which supports the exchange of the customer’s information of its banks with its fellow members;
- Luxembourg banks usually offer multicurrency accounts with access to all main hard-currencies;
- A business bank account in Luxembourg is supported by a range of additional banking services, including international trade services (import finance, export services, risk management, and e-commerce) and investment banking services (for international private Clients, international and local companies and trusts, charities, and personal and corporate pension schemes);
- For Healy Consultants Group to open a corporate bank account without our Client needing to visit Luxembourg, we have certain bank due diligence requirements including: notarized copies of passport and driving licence of all directors; and the company’s corporate documents, including certificate of incorporation, memorandum and articles and directors/trustees’ resolutions. All the documents must be certified by the local branch of the Luxembourg bank (or by a notary public) in the Client’s home country and evidence of the company’s nature of business (e.g. sample invoices or purchase orders etc.) must also be provided.
- Luxembourg being a global financial hub has a vast banking network, providing a range of retail banking options for our multinational Clients. Some of the notable commercial banks include BNP Paribas, ING, Post, and BCEE. Moreover, the country has i) 8 retail banks; ii) 14 investment banks; and iii) 17 private banks;
- Some of the top-tier banks in Luxembourg include Societe Generale Bank, Banque de Luxembourg, and BNP Paribas among others. These banks are highly reputable and provide full range of corporate banking facilities including i) internet and telephone banking; ii) checking and savings account; iii) debit and credit cards, and iv) wealth management services. Most of them provide their extensive banking services all over Europe through their branch offices.
Healy Consultants Group’s fees to open a Luxembourg corporate bank account
Our fee to assist our Clients with Luxembourg bank account opening amounts to US$4,950. This fee includes:
- Healy Consultants Group’s international banking team completing the Luxembourg corporate bank account opening application on behalf of our Client, along with obtaining our Client’s signature on the required corporate bank account application documents;
- Preparing a detailed business plan relating to our Client’s company to support the bank account opening application. The business plan provides information on the company’s activities, products and services offered, details of the company’s suppliers, and references to its Clients and intended markets;
- Submitting the complete application form along with the business plan to the bank, together with the corporate, and personal due diligence documents as outlined above;
- Attending an interview with a bank in Luxembourg by a local Healy Consultants Group officer on our Client’s behalf, describing their global business activities and explaining why they require the corporate bank account. As described above, Healy Consultants Group can open a Luxembourg business bank account without the bank signatory and beneficial owners’ presence;
- Paying the initial bank deposit to the Luxembourg bank on our Client’s behalf. A scanned copy of the bank deposit slip is emailed to our Client in support of the same;
- Applying for internet banking facilities to allow our Client to conduct their banking activities remotely;
- Healy Consultants Group’s international banking team receiving approval from Luxembourg bank for opening of the corporate bank account;
- Healy Consultants Group receiving the internet banking login and password information in a sealed envelope, passed directly to our Client;
- Healy Consultants Group receiving a corporate cheque book in a sealed package that is passed directly to our Client;
- Healy Consultants Group receiving credit and ATM cards in a sealed envelope that is forwarded directly to our Client.
Please note that our fee to open the corporate bank account does not include the initial deposit required by the bank.
Main benefits of opening a PSP account over retail banks in Luxembourg:
- Opening a PSP (payment service provider) account can often be faster than opening a traditional retail bank account in Luxembourg. This is because PSPs are designed to provide fast and efficient payment processing services, and their account opening processes are typically streamlined for this purpose.
- In many cases, businesses can open a PSP account online and complete the necessary paperwork digitally, without needing to visit a physical branch or meet with a bank representative in person. This can save time and reduce the administrative burden for business owners.
- Additionally, because PSPs are more specialized in payment processing services, their account opening processes are often more focused and streamlined than those of traditional banks.
- PSPs may also have more modern and automated systems for account opening and verification, which can further reduce the time required to open an account.
- Overall, opening a PSP account can be a faster and more efficient process than opening a traditional retail bank account in Luxembourg, making it an attractive option for businesses looking to quickly establish their payment processing capabilities.
Limitations of using PSP account:
- Deposit Insurance: If a PSP were to fail or become insolvent, there is no guarantee that your funds would be protected. In contrast, retail banks typically offer deposit insurance that protects customer funds up to a certain amount. It’s worth noting that some PSPs may offer additional protection or insurance for their customers’ funds. For example, some PSPs may hold customer funds in segregated accounts, which are separate from the company’s own funds. This can help protect customers’ funds in the event of the PSP’s insolvency. However, it’s important to carefully review the terms and conditions of any PSP business account to understand what protections are in place and what risks may exist.
- Limited services: PSPs usually offer only basic financial services like payment processing and money transfers. They may not offer more complex services like loans, lines of credit, or investment options that retail banks do.
- Fees: PSPs may charge higher transaction fees than retail banks for certain services, such as foreign currency exchange, cross-border transfers, or credit card processing.
- Lack of physical presence: Many PSPs operate solely online, which means there may not be a physical location to visit if you need help or have questions.
- Security concerns: While PSPs have security measures in place to protect against fraud and data breaches, there is always a risk associated with online transactions. Retail banks generally have more robust security protocols in place.
- Regulatory compliance: Retail banks are subject to stringent regulations and oversight by financial authorities which may provide greater trust and stability. PSPs are also subject to regulatory requirements, but they may not have the same level of regulatory scrutiny as banks.
Business entities types
Healy Consultants Group will design the optimum corporate structure to support our Clients’ business needs. There are several business entities available for Luxembourg company setup, the most common being the limited liability company, locally known as the SARL. Luxembourg is also a great place to incorporate a holding company, which will allow our Clients to legally minimize tax over earnings sourced from other European countries.
The Luxembourg limited liability company (Société à responsabilité limitée)
- The LLC, locally known as Société à responsabilité limitée (SARL), constitutes a popular vehicle for international businesses to set up a subsidiary in Luxembourg. The LLC can also be structured as a tax-efficient investment vehicle;
- An LLC can be setup in Luxembourg by i) a sole shareholder with ii) a minimum share capital of €12,000. Our Clients will also need to appoint one director who can be provided by Healy Consultants Group on request. A sole investor can set up an SARL with a minimum share capital of €12,000;
- An SARL is required to file financial statements annually. However, the appointment of an external auditor and audit obligations only apply if the company exceeds two of the three following thresholds: i) annual sales over €8.8 million ii) over 50 employees and iii) assets over €4.4 million;
- A Limited Liability Company (LLC., Ltd./SARL) in Luxembourg is required to keep a register containing the founding documents as well as the names, occupations and places of residence of the shareholders as well as details on the transfer of shares;
- All companies wishing to operate and make sales within Luxembourg must have a business permit, which requires i) a manager resident in Luxembourg and ii) actual business premises. Pure investment vehicles and holding companies have no such requirement;
- Insurance companies as well as financial sector companies are not permitted to be formed in the form of a Limited Liability Company;
- Healy Consultants offers administrative services to mail collection, processing and mail forwarding services. This professional service amounts to €1,940 for 12 months of service, assuming the number of mail received is below 5 per month;
- Best uses: The legal structure of a Limited Liability Company (LLC., Ltd./SARL) is ideal for venturing into e-commerce in Luxembourg.
The Luxembourg SOPARFI - financial holding company
- A Luxembourg financial holding company is beneficial to our Clients in need for an EU-based holding company. Such a business entity will indeed benefit from legal tax exemption on capital gains, dividends and interest remitted by subsidiaries, provided they are domiciled in i) an EU member state or ii) a country which has signed DTA with Luxembourg and has corporate income tax rate of at least 21%;
- The Luxembourg holding company can be setup by a sole shareholder. It is usually established through the setup of an LLC, with holding company objects clause in its Memorandum and Articles of Incorporation. It can also be set up through the legal structure of a public limited company (PLC., corp./SA);
- Healy Consultants Group can advise on the suitability of a Luxembourg holding company for your business and establish one on your behalf.
- Best uses: The SOPARFI – Financial Holding Company in Luxembourg is best advised for mid-sized businesses and financial investments.
The Luxembourg public limited company (Société anonyme)
- The minimum share capital of a Luxembourg public limited company is €31,000. The company may have an unlimited number of shareholders. The company can also issue bearer shares;
- Such an entity is required to i) appoint one auditor and ii) submit audited financial statements.
- Best uses: This entity can be used to access the financial markets through public or private issuance of bonds and equities.
The Luxembourg branch
- A foreign company can set up a business in Luxembourg by establishing a local branch. A branch does not enjoy a legal personality separate from its head office, which means the parent company is responsible for the branch’s liabilities. The branch must be registered with the Luxembourg trade register and requires a business permit;
- Registering a branch in Luxembourg is a simple process if certain steps are followed and the documents are properly submitted. The whole Luxembourg business setup process takes 3 weeks including obtaining a business permit and registration at the Trade and Companies Register;
- Best uses: The Luxembourg branch office gives a foreign company the opportunity to penetrate the EU market with minimal legal obligations.
The Luxembourg representative office
- While a Luxembourg representative office can be set up by a business based in any country, the office is not permitted to make direct sales in the country. Representative offices may only engage in non-profit-making activities, for example market research;
- Best uses: Establishing a representative office gives the parent company time and space to understand the market before making a full-fledged investment in the form of a subsidiary in Luxembourg.
The tax exempt IP holding company
- In 2007, the Luxembourg government passed a law concerning the taxation of royalties earned from intellectual property from unrelated parties. This law encourages investing in Luxembourg via research and development and adds incentives to set up a company in Luxembourg and/or register intellectual property there. This makes Luxembourg an excellent jurisdiction to set up a business in research-intensive industries such as i) pharmaceuticals and ii) software development;
- For such companies, a mere 6% corporation tax is payable on i) royalty income and ii) capital gains on the disposal of such intellectual property. In addition, the following tax benefits are also available: i) zero withholding tax on dividends to beneficial owners ii) zero withholding tax on interest paid to non-EU residents iii) zero withholding tax on royalties paid to all counterparties iv) access to Luxembourg’s extensive double taxation treaty network with over 60 countries and v) access to the EU Parent-Subsidiary Directive;
- Royalty income derived from intellectual property from non-group companies includes consideration for the use of any i) copyright on standard software ii) trade mark iii) registered design or model and iv) patents. Copyright in works other than software is not eligible for the reduced rate of tax on intellectual property in Luxembourg. The IP holding company is a fully tax resident company limited by shares and can be set up as a Luxembourg LLC or PLC;
- Best uses: Intellectual Property Rights (IP-Box) in Luxembourg provide a safe and solid platform for businesses to grow while maintaining their proprietary factors.
The Luxembourg partnership
- This Luxembourg business structure is popular with accountants, architects, consulting engineers and lawyers;
- There are three types of partnerships including i) a general corporate partnership (SENC) ii) a limited corporate partnership (SECS) and iii) a corporate partnership limited by shares (SCA);
- At least one of the partners in each of these structures must be a general partner with unlimited liability;
- Best uses: Limited Partnership (LP. /SCS) in Luxembourg is the most suitable business vehicle to provide professional services to local and international clients.
Different types of business entities in Luxembourg
LLC PLC Holding Branch Rep. office Also known as: SARL SA SOPARFI Succursale Can trade in Luxembourg and issue invoices? Yes Yes Yes Yes No Can open a bank account in Luxembourg? Yes Yes Yes Yes Yes Enjoys limited liability in Luxembourg? Yes Yes Yes No No Minimum number of shareholders required? 1 1 1 Parent company Parent company Minimum number of directors required? 1 1 1 0 0 Corporate directors allowed Yes Yes Yes N/A N/A Luxembourg resident director required? No No No No No Luxembourg company secretary required? No No No No No Resident manager/representative required? Yes Yes No Yes Yes Annual company return required? Yes Yes Yes Yes No Annual tax return required? Yes Yes Yes Yes No Audit always required? No Yes Yes No No Luxembourg tax payable? 21% 21% 21% 21% 0% Legal tax exemption if properly structured? Yes Yes Yes No N/A Office premises mandatory? No No No No No Allowed to hire staff? Yes Yes Yes Yes Yes Minimum capital? €12,400 €31,000 €12,400 €1 €1 Total Luxembourg business setup costs in year 1 €24,170 €22,455 €23,170 €18,870 Contact us Sample engagement fee invoice View invoice PDF View invoice PDF View invoice PDF View invoice PDF Contact us
Luxembourg financial companies
Luxembourg is an attractive place for our Clients to provide financial services, thanks to well-designed and prudential financial regulations and low taxation.
The Luxembourg securitization company
- Our Clients holding i) real estate ii) private equity and iii) other fixed assets will find it advantageous to setup a Luxembourg securitization company. Such a company enables them to convert these assets into structured financial products which are easier to sell to investors;
- Because the earnings generated by the securitization company are distributed to its investors, the securitization company’s generated income is tax exempt. However, the securitization company is still liable to standard corporate tax in Luxembourg and as a result must pay a minimum corporate tax of up to €21,400. It is also required to submit audited annual financial statements;
- Best uses: The securitization vehicle (SPV) in Luxembourg allows businesspersons to liquify a large variety of their assets, risks, revenues and activities. This facilitates both corporate financing and wealth management.
The Luxembourg Specialized Investment Fund (SIF)
- Our Clients willing to setup an investment fund in the European Union often choose to establish a Specialized Investment Fund in Luxembourg;
- This type of business entity must have a capital of at least €1.25 million;
- The SIF is exempt from corporate income tax and net wealth tax, but must pay subscription tax of 0.01% representing 0.01% of its net asset value;
- Best uses: The Luxembourg SIF is recognized and regulated at the EU level, and offers investors a wide range of assets, while being supervised by the CSSF.
The Luxembourg Investment Company in Risk Capital (SICAF)
- An Investment Company in Risk Capital can be established to invest into venture capital and other risky securities. It must be setup with a capital of at least €1 million;
- While only qualified investors approved by the CSSF can invest in the company’s financial products, its management and financial strategies can benefit from flexible regulations;
- Best uses: SICAF Investment Fund in Luxembourg is based on the principle of diversification of investment as it is often formed as an umbrella fund with several sub-funds.
The Luxembourg Private Asset Management Company (SPF)
- The Luxembourg Private Asset Management Company can be setup by our Clients with a minimum share capital of €12,400;
- Prohibited activity – SPF in Luxembourg is a passive investment vehicle, only allowed to acquire, hold, and sell financial assets, without partaking in any commercial activity. The company cannot get involved even with the management of companies in which it holds capital;
- A Luxembourg Private Asset Management Company is exempt from corporate income tax. It must however pay a subscription tax of 0.01% representing 0.01% of its net asset value;
- Best uses: Along with the Liechtenstein Stiftung, the Luxembourg SPF is one of the best ways to manage your family’s wealth. Compare these two options with other wealth management structures on our Family wealth management vehicles page.
10 steps to register a company
- Prior to Healy Consultants starting the incorporation process, our Client i) settles Healy Consultants’ fees, ii) signs and returns our Client Engagement Letter and iii) provides us all the required due diligence documents;
- Healy Consultants drafts a detailed engagement plan, mapping out by week each step to i) company incorporation ii) corporate bank account opening and iii) license grants, thereby optimizing transparency and setting Client expectations;
- Healy Consultants reserves the company name with the Luxembourg Commercial Register and prepares the company’s deeds of establishment and articles of association. The exact corporate structure is agreed with our Client;
- Healy Consultants assists our Client open a Luxembourg corporate bank account with a local or an international bank. Our Client deposits the paid up share capital of €12,000 and sends Healy Consultants a certificate of deposit and bank statement;
- Healy Consultants submits a detailed business application to the Ministry of the Economy and Foreign Trade including i) a copy of the shareholders’ and directors’ diplomas and resumés ii) a certificate of non-bankruptcy or a sworn statement of solvency iii) documentary evidence of the applicant’s respectability, e.g., a police report and iv) the draft articles of association;
- The Ministry of Middle Classes issues business licenses for all Luxembourg companies. If required, Healy Consultants will approach this Ministry of behalf of our Client;
- If required, the commercial license is issued by the Luxembourg Ministry of the Economy and Foreign Trade. If required, Healy Consultants applies for a financial services license from the “Commission de Surveillance du Secteur Financier” (CSSF);
- Subsequently, Healy Consultants assists our Client register for VAT and a corporate tax ID at the Administration de l’Enregistrement et des Domaines;
- Healy Consultants submits an application to the Company Registry Office and receives a Company Incorporation Certificate from the Ministry of Commerce. The Trade and Companies Register then arranges for the publication of the incorporation deed in the Official Gazette within 2 months of the company’s incorporation;
- Following engagement completion, Healy Consultants couriers a full company kit to our Client, including original Luxembourg corporate documents, unopened bank correspondence and a Client feedback survey.
Interesting facts about Luxembourg
- In March 2010, the Sunday Telegraph reported that most of Kim Jong-Il’s US$4 billion in secret accounts was in Luxembourg banks;
- The country is widely used in corporate structuring for cross-border investments, but due to its place in Europe’s political environment it must constantly adapt its tax legislation to avoid conflict with the tax authorities of other EU countries. For example, the classic tax exempt Luxembourg 1929 Holding Company was outlawed on 31st December 2010. The regime was held to be an illegal state aid by the European Commission. The European Commission is now investigating further allegations of Luxembourg state aid in the form of private tax deals with international companies;
- The government of Luxembourg has successfully attracted many start up companies; eBay, Amazon and Skype are just three technology companies to have moved their European headquarters to Luxembourg;
- The most significant part of the Grand Duchy’s economy is its flourishing financial sector, which comprises more than 200 banks, 1,900 investment funds and 20,000 holding companies;
- The population of the Grand Duchy is of approximately 449,000. The Luxembourgers are generally fluent in French, German and English in addition to their mother tongue, Luxembourgish;
- In 1867 Luxembourg gained independence from Germany and organized itself as a constitutional monarchy with the legislative power vested in a democratically elected parliament. The legal system is based on the Napoleonic code and is therefore similar to the Belgian and French legal systems;
- Luxembourg is an EU member with a stable government, economy and legal system and therefore portrays a positive image to Clients, suppliers and investors;
- Foreign employees working full time in Luxembourg often feel “bored” because of the lack of intellectual entertainment in the country.
- Can I register a Luxembourg company with a sole shareholder and director?
Yes, the process of setting up a limited company in Luxembourg allows the appointment of a sole director and shareholder. If you are interested in registering a single-person company in Luxembourg, refer to this dedicated proposal breakdown section.
- What are the steps required to register a company in Luxembourg?
Without personal travel, Healy Consultants Group will be happy to prepare a detailed project plan during the initial engagement phases for our Clients, outlining the steps required to incorporate a business in Luxembourg. For a preliminary step-by-step guide to setting up a business in Luxembourg, visit our dedicated guide
- Can you assist with intellectual property vehicle registration in Luxembourg?
Yes, our dedicated team will be happy to guide our Clients on how to set up a business in Luxembourg structured to hold intellectual property. To contrast how Luxembourg measures to other prime destinations for IP business registration, refer to this detailed comparison table.
- How much do I need to invest to register a company in Luxembourg?
The minimum share capital required to register a Luxembourg SARL is €12,395, divided into shares of at least €25. To register a societé anonyme in Luxembourg, the minimum capital contribution is €31,987. The shares of an SA may be split into shares of no par value, or shares with a par value of at least €1.24.
- Is a resident director required in order to do business through a company registered in Luxembourg?
Yes. Companies registered and operating in Luxembourg require a business permit must be managed by a director resident in Luxembourg. If our Clients register a company in Luxembourg but make no sales, then no resident director is required.
- Is the Luxembourg company registry searchable?
Yes, the public may freely search the commercial register in Luxembourg after signing up for an account online. However, the website is available only in French and German.
- Can I set up a SARL in Luxembourg with a corporate director?
Yes, a company or other legal entity may be appointed as the director of a Luxembourg company, whether a SARL or an SA.
- Is a Soparfi or an IP holding company different from a SARL or an SA?
No. The Soparfi and IP holding company regimes are tax rules, rather than a different form of legal entity. Both SAs and SARLs may be used as a Soparfi or IP holding company.
- Where can I find more information about how to set up a company in Luxembourg?
Kindly refer to Healy Consultants’ page on how to set up a Luxembourg company.
- What other options are there for holding companies in Europe?
Healy Consultants has compared different low-tax holding companies in Europe here.
- If I want to incorporate a company in Luxembourg, do I need to visit the country?
No. Healy Consultants can legally incorporate your Luxembourg company without you needing to travel.
- What is the minimum number of directors required for a Luxembourg company?
A Luxembourg company requires a minimum of one director and corporate directors are allowed.
- Is a resident director required?
Only companies carrying on business in Luxembourg require a resident director. Holding companies, which do not require a business permit, do not need a resident director.
- What is the minimum number of shareholders required for a Luxembourg company?
A minimum of one shareholder is required.
- Are shareholder/director details available for public viewing?
- Is a Luxembourg company required to submit an annual tax return and/or financial statements?
A Luxembourg company is obliged to submit an annual tax return and/or financial statements. It is also required to have its accounts audited.
- How much tax does a Luxembourg Company pay?
- Luxembourg trading company
A Luxembourg SA or SARL that qualifies as a trading company pays 17% corporation tax on global income exceeding €200,000 and 15% corporation tax on global income below €175,000. However, tax relief is available via the double taxation treaties Luxembourg signed with more than 60 countries.
In addition to corporate tax, a Luxembourg trading company pays a Municipal Business Tax (ICC) ranging between 6.75% to 10.5% percent depending on location. Capital gains realised by the Luxembourg trading company is treated as ordinary income and is taxed accordingly.
- Societe de Gestion de Patrimoine Familial (SPF)
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 (US$166,000) per year.
An SPF is subject to Luxembourg corporate tax and wealth tax if in a year it derives (for more than 5% of its total dividend income) dividends coming from non-listed foreign companies which are not subject to an income tax comparable to the standard Luxembourg corporate income tax rate.
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.
- Luxembourg trading company
- Does a Luxembourg company benefit from Double Taxation Treaties?
Yes. Luxembourg has signed Double Taxation Treaties with more than 60 countries including China, France, Germany, Italy, Japan, the Netherlands, Singapore, Spain, the UK, and USA.
- Can I register a Luxembourg company with a sole shareholder and director?
Useful links for Luxembourg
Government and public authority websites:
- Luxembourg Tax Authority
- Luxembourg Company Registrar
- Central Bank of Luxembourg
- Luxembourg Stock Exchange
- Investment Authority
- Chamber of Commerce
- Luxembourg airports
- Visiting Luxembourg
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