How to start a business in Luxembourg – company formation, business banking & tax

One of the world’s wealthiest countries despite being one of the smallest in size, Luxembourg provides a unique low-tax environment for international investors. The country is widely used in corporate structuring for cross border transactions and due to its place in Europe’s political environment, it is constantly adapting its tax legislation. Thanks to its progressive approach and status as a tax haven, Luxembourg is, and will remain, a beneficial country for international business. But expert help is needed by entrepreneurs to capitalize fully on the many advantages of company incorporation in Luxembourg. We can help with everything from company formation, bank accounts and chartered accountants to steer you safely through Luxembourg’s complex tax regulations.

Is Luxembourg a low-tax environment for everyone?

The tax benefits in Luxembourg are carefully structured to ensure minimal disruption with other EU countries. On the face of it, the corporate structure in Luxembourg is similar to that of most other EU states, with most companies adopting the usual joint stock or limited liability formats. However within this standard structure is a strictly-defined class of holding company. Qualify for this, and your corporate income tax can sink to below 1%. For expert advice, we can put you in touch with one of our local specialists in tax planning.

How can I set up a low-tax company in Luxembourg?

There is one main kind of low-tax business entity – the Soparfi which uses a business structure called a SARL (limited liability company) or SA (joint-stock) as a base. In fact, it would be more accurate to define a Soparfi as tax-efficient rather than low-tax. The rules governing low-tax holding companies are strict and it is essential that you comply with them at all times, otherwise your company will lose its low-tax status.

What are the requirements for a standard corporate structure Soparfi?

  • Only one director / shareholder is required, unless the company is an SA (joint-stock) and has more than one shareholder, in which case the minimum is three.
  • Share capital can be used as normal company funds after incorporation - 12500€ for a SARL (limited liability company) and 31000€ for a SA. The SA can be constituted with ¼ paid up share capital, i.e. 7750€. The share capital can also be held in equivalent in another currency.
  • A registered address is sufficient.
  • Use of nominee shareholders is common practice - we can provide this service
  • Provision of managers

How easy is it to recruit staff in Luxembourg?

Businesses have little trouble recruiting staff as the employment pool is bolstered by workers commuting into Luxembourg from neighbouring countries. The workforce is well educated and is particularly attuned to the financial services sector. Contact us for help and advice on recruitment.

What is the regulatory environment like?

Luxembourg is regarded as rather more bureaucratic than some other EU member states. It complies with EU directives on employment, health and safety and indeed on most taxation issues, apart from the particular circumstances of low-tax holding companies. Domestic and foreign investors alike have the right to establish businesses in Luxembourg.

Are there financial incentives available?

In addition to being a tax haven, which is a considerable financial incentive in itself, Luxembourg has a number of schemes designed to promote investment. It has established a framework for investment incentives to counter the country’s historic reliance on the steel sector, and grants are available to encourage investment in other manufacturing and high-tech industries. The government also provides equity funding for certain kinds of investment, particularly in development areas.

What about banking facilities?

Luxembourg is a major centre for financial services, and there are more than 200 banks in a country whose population is below half a million. No surprise then, that Luxembourg offers world-class banking facilities. Most international banks are represented here. You will need to open a bank account in Luxembourg and we can advise you on this as well as issues regarding offshore banking.

For further information on company formation, including business banking and tax advice in Luxembourg please contact us on 0033 (0)1 53 57 49 10 or email us from our contact page and we’ll be happy to help.