Setting up a business in Luxembourg

This section deals with setting up a business in Luxembourg. For Luxembourg based companies wanting to locate in the UK, information is available from UK Trade & Investment.

British Chamber of Commerce Members providing services relevant to this section can be found in the following business activity categories in the Membership Directory: Accounting/audit, Consultancy, Legal, Tax.

 

Frequently Asked Questions

This section is designed to provide information on setting up a business in Luxembourg. It is structured as a list of Frequently Asked Questions and covers how to get a business permit, the different types of legal entity that can be established and taxation. Links and phone numbers are given for the various organizations that can be contacted for further information. The information is for general guidance only. While we have made every attempt to ensure that it is accurate, the British Chamber of Commerce is not responsible for any errors or omissions, or for the results obtained from the use of this information. The information is up to date at January 2013. Users are advised to check current legislation for changes since that date.

 

  1. How do I set up in business in Luxembourg?
  2. How do I obtain a business permit?
  3. What professional qualification and evidence of it is required?
  4. How do I provide evidence of professional integrity?
  5. How do I get my certificate, degree or diploma recognised in Luxembourg?
  6. What special requirements are there for the financial sector?
  7. What are the basic types of legal entity and how do I establish an incorporated company?
  8. What are the basic types of tax and social security costs?
  9. How do I register for tax?
  10. How do I register for social security?
  11. What financial aid is available?
  12. How do I find out about upcoming legislation affecting businesses?

 

 

1. How do I set up in business in Luxembourg?

The right to set up in commercial activities, skilled craft trades and certain specific professions (professions libérales) is regulated by the Law of 2 September 2011. Commercial activities include, wholesale, retail, intellectual services if carried out in the form of a company, industrial activities/manufacturing, travel agents, real estate, and the hotel, restaurant and catering sector. Skilled craft activities include numerous trades and crafts in the following categories: food; fashion, health and hygiene; mechanics; construction; communication, multimedia and performing arts; art and miscellaneous. The specific professions libérales include architects, interior architects, landscape architects or landscape engineers, construction engineers, independent engineers, surveyors, town and country planners, chartered accountants, accountants, economic advisors, consultants, patent attorneys.

The above activities require a business permit. Other professions, not included here, such as lawyers, doctors, statutory auditors, banking, certain financial services and insurance are covered by different laws. The special requirements for the financial sector are summarised below. For further information on other professions or activities subject to specific permits or registrations see www.business.lu. Other “intellectual services” (such as self-employed journalists) are not specifically regulated and do not require any business permit as long as they are carried out by the person in their own name and not under the form of a commercial company as commercial companies’ managers require a business permit for “commerce”.

Full details are available in plain English on the Luxembourg Government’s Point of Single Contact, www.business.lu, which provides extensive information on the whole process of doing business in Luxembourg and is the best starting point. Follow the links to Starting Up and Development. You will also find electronic forms which can be filled in online and sent directly to different administrations.

Assistance with starting a business is also available from the department Espace Entreprises of the Luxembourg Chamber of Commerce (website in English). Tel: 42 39 39 330. Email: enterprises [at] cc [dot] lu. They publish many relevant brochures in English. They can also advise on developing your business and selling and taking over a business, including matters such as financing and government aid and the appropriate legal form of company. Assistance is also available from the Chamber of Trades (website in French). Tel: 42 67 67 - 1.

If you set up your business as a company or as an individual carrying out commercial activities, you must register it in the business register within one month. Tel: 26 428-1.

Companies and individuals carrying out commercial activities must also become members of the Luxembourg Chamber of Commerce. Companies and individuals carrying out skilled crafts trades must become members of the Chamber of Trades. This is done automatically by the tax authorities notifying the relevant chamber.

You will also need to register for income tax and value added tax. And you will need to register for social security. If you use the electronic “Business permit application” on www.business.lu all these procedures can be completed online and sent automatically to the relevant administrations.

To carry out an activity that requires a business permit you will need to have in Luxembourg a fixed physical establishment.

For more information on government support for innovation see the section on innovation, research and development aid on www.business.lu and Luxembourg Portal for Innovation and Research (in English). Tel: 43 62 63-1.

For more information on the advantages of doing business in Luxembourg see Luxembourg for Business, Luxembourg for Finance and the dedicated PricewaterhouseCoopers website on this subject.

 

2. How do I obtain a business permit?

The business permit is obtainable from the Ministry of Small and Medium Sized Businesses (Ministry of the Middle Classes, Tourism and Housing, Department of Middle Classes). Tel: 247-84715. Among other things, you will need evidence of professional qualification and evidence of professional integrity.

Full details of what you need to supply together with the application for the permit are available on the Luxembourg Government’s Point of Single Contact, www.business.lu. The online business permit application form determines which documents need to be added according to the information provided by the applicant. You can apply either online or by post or you can take advantage of the service offered by the Espace Entreprises of the Luxembourg Chamber of Commerce or the Contact Entreprise service of the Chamber of Trades to coordinate and submit the application for you.

For companies, the Articles of Incorporation (published or draft) must also be supplied.

The documents supporting your application can be in German, French or English. Documents in other EU languages may possibly be accepted but the Ministry may request certified translations of these documents where needed. The documents can be simple copies but the Ministry may request an authenticated copy where needed, for example of certificates, degrees or diplomas issued by a body outside the EU.

Most permits are granted within a week provided that the application file is complete. The Ministry must however make its decision within three months. Failing this, the permit is granted by default. Once you have the permit, the nature of your business and the permit number must appear on your business stationery and website.

 

3.What professional qualification and evidence of it is required?

The qualification depends on the occupation.

For “traders” (commerçants), i.e. wholesale, retail, intellectual services as a commercial company, and industrial activities/manufacturing, this is either a vocational diploma (or higher), or professional experience of at least three years in an EU member state, or a certificate of having passed the course for access to the profession of trader organised by the Luxembourg School for Commerce (LSC) (see website in French) or similar course in another EU member state, or a previously held business permit.

For travel agents, real estate, and the hotel, restaurant and catering sector (Horeca) additional qualifications are required: for travel agents professional insurance; for real estate professional insurance and a certificate of having passed the course for access to a profession in real estate organised by the LSC; for the Horeca sector a certificate of having passed the course for access to a profession in the Horeca sector organised by the LSC.

Skilled crafts trades are divided in to A and B lists. For those in the A list qualification requires either a relevant Master Craftsman’s Certificate, or a relevant Bachelor’s degree, or a partially relevant Bachelor’s degree or vocational diploma or business permit for another craft activity on the A list combined with various levels of professional experience. For those in the B list either a relevant vocational diploma or professional experience of three years.

For ”liberal professions” (professions libérales) requiring a business permit, the qualification is, depending on the profession, either a Master’s or a Bachelor’s degree or equivalent in the planned activity plus for most professions two to three years professional experience.

You will need to supply a copy of your degree, certificate or diploma. If it was obtained abroad, you may also need to have your certificate, degree or diploma recognised in Luxembourg.

If you have to justify previous work experience in another EU Member State, you will need to supply an EU certificate (No. 82, from the Official Journal of the European Community) issued by a chamber of commerce, chamber of skilled craft trades or government department. For experience in the UK, this is obtainable from the National Contact Point for Professional Qualifications. Tel: +44 1242 258 608. For work experience in Luxembourg, evidence of membership of a Luxembourg social security scheme constitutes a certificate of work experience.

 

4. How do I provide evidence of professional integrity?

If you have been resident in Luxembourg for an uninterrupted period of 10 years you will need to supply a sworn declaration concerning your management position and/or shareholdings in or control of a Luxembourg company in the last three years to satisfy the conditions of professional integrity. The Ministry will also obtain a copy of your police record extract.

If you are non-resident or have been resident in Luxembourg less than 10 years you will need to supply a sworn declaration as above, a declaration of non-bankruptcy made before a notary, and a police record extract or equivalent (certificate of good character) or (in English law countries) an affidavit. For companies these requirements relate to the legal representative (business manager or director) and majority shareholder and any person having significant influence on the management of the business.

 

5. How do I get my certificate, degree or diploma recognised in Luxembourg?

If this is required, the Ministry of Middle Classes (Tel: 247-84715) will tell you who to apply to. For example, if a vocational or secondary school graduation diploma obtained abroad needs to be recognised, as is required for some jobs, it will need to be recognised by the Ministry of National Education and Vocational Training (Ministère de l'Education nationale et de la Formation professionnelle - MENFP). Further information can be found on www.business.lu under Approval of foreign higher education diplomas, Registration of higher education diplomas in the register of certificates and Recognition of qualifications.

 

6. What special requirements are there for the financial sector?

Banks and other professionals of the financial sector (PFS) need to obtain a license from the Minister of Finance. The CSSF (Financial Sector Supervisory Commission) is responsible for the preliminary analysis of applications for approval. Tel: 26 25 1-334 or 26 25 1-653.

The main conditions for banks are:

  • The legal form of the establishment
  • The central administration and infrastructure (administrative and accounting organisation, internal control procedures)
  • The quality and structure of the shareholders
  • The repute of the members of the management and supervisory boards, administration bodies and shareholders
  • The professional experience of those in charge of day-to-day management
  • The financial resources
  • Adequate creditworthiness
  • Membership of a deposit guarantee scheme or an investor protection scheme

 

PFS are divided into:

 

  • Investment firms
  • Special PFS, e.g. registrar agents and corporate domiciliation agents
  • Support PFS

The conditions for PFS are almost the same as for banks, the main difference being that the minimum capital requirements are lower. For full details of the requirements for PFS see document on CSSF website page PFS/ Procedure Forms. To qualify for a license, banks and PFS must normally be a legal entity.

A bank or investment firm approved and supervised by the authorities of another EU Member State may set up a branch office or offer services in Luxembourg without the approval of the Luxembourg authorities provided that the services are covered by its own home-country approval.

For further information (in English) on setting up a business in the financial sector see Luxembourg for Finance.

 

7. What are the basic types of legal entity and how do I establish an incorporated company?

Information kindly supplied by Ernst & Young

In Luxembourg the main legislation governing companies is the law of 10 August 1915 as subsequently amended.

Below is a summary of the types of legal entities and how to establish a company. See also www.business.lu.

a. General characteristics
b. Registered seat
c. Costs
d. Other types of companies
e. Specific tax efficient vehicles
f.  Branches

 

  • General characteristics

    Luxembourg law recognises seven different types of commercial company, six of which are detailed in the table; a seventh recently introduced.

    These are as follows, together with their approximate equivalents in English or US law.

    • Société anonyme (S.A.) - public limited company. (There is also a public limted company with a sole shareholder, which is subject to the same rules.)
    • Société à responsabilité limitée (S.à r.l.) - private limited company. There is also a single-member S.à r.l., which is subject mainly to the same rules.
    • Société en commandité par actions (S.C.A.) - a partnership limited by shares
    • Société en nom collectif (S.N.C.) - general partnership
    • Société en commandité simple (S.C.) - limited partnership
    • Société co-opérative (S.C.). Note - A new kind of co-opérative, 'a co-opérative organised as a public company', was introduced by the law of 10 June 1999. It is governed by legal provisions relating to co-opératives and to public companies, to the extent of the provisions of the above mentioned law.
    • Société européenne (S.E.) - A new kind of commercial company which was introduced by the law of 25 August 2006. It is a société anonyme incorporated in conformity with article 2 of European Council regulation (CE) no. 2157/2001 dated 8 October 2001 on the articles of incorporation for a European company.

    The first three types of company and the last listed above ('capital companies') are required to be incorporated with a minimum share capital fixed at the equivalent of EUR 30,986.69 for a S.A. and a S.C.A, of which at least a quarter must be fully paid up at the date the company is formed. The minimum share capital for an S.E. is set at the equivalent of EUR 120,000.

    The minimum share capital for a S.à r. l. is fixed at the equivalent of EUR 12,394.68 and has to be fully paid up.

    The capital may be expressed in any currency. A S.à r.l. may not raise capital from the public.

    The other types of companies can be implemented with no specific requirement regarding the minimum share capital to be subscribed. The founders are free to arrange their contribution to the company.

    'Capital companies', as opposed to the entities defined as 'person companies', are separate entities for tax purposes and subject to taxation in their own right.

    'Person companies' are transparent for tax purposes and the members are taxed on their share of income.

    Other considerations include the extent of the members' liabilities, the transferability of shares and accounting requirements.

    All these types of companies require Articles of Incorporation (or Association if a person's company), similar to the Articles and Memorandum of Association of a UK company.

    The incorporation of a S.A., a S.à r.l., a S.C.A. or a S.E. requires the signature of a notarial deed. Companies of the other types can be incorporated either by a notarial deed by a Luxembourg notary or under private seal.

    The deed must be registered with the Administration de l'Enregistrement et des Domaines (Tel: 44 905-1). The Articles of Incorporation and the names, date and place of birth, professional occupation and address of the directors or managers must be registered with the Luxembourg Business Register (Tel: 26 428-1) and published in the official journal of Luxembourg (Mémorial du Grand-Duché, Recueil Spécial des Sociétés et des Associations).

    The company acquires its legal status and existence at the date of the signature of the incorporation deed and not at the date of the publication of the Articles of Incorporation in the Mémorial, except for the S.E., which acquires legal personality once registered with the Luxembourg Business Register.

    These documents must be in French or German. However, any document can also be prepared in English, but in this case a translation into French or German of the English text is required. In case of any divergence between the English and the French or German text, the French or German version will prevail, except if the parties agree that the English version will prevail.

     

  • Registered seat

    The company must have a registered seat in Luxembourg.

    For those companies which do not own or rent offices the registered office can be with a domiciliation agent in Luxembourg.

    Under the law of 31 May 1999 regulating the domiciliation activity only a member of one of the following regulated professions, established in Luxembourg, may act as a domiciliation agent: credit institution or other professional of the financial sector or insurance sector, lawyer, independent auditor, qualified accountant.

    Article 28-1 of the law of May 31, 1999 lays down the conditions for being a domiciliation agent. This article has to be combined with the article 1 of the same law. Consequently anyone who exercises the above functions must obtain qualification as an 'other professional of the financial sector'. This will require regulatory approval and proof that the individual holds or the company is managed by an individual holding a university degree in law, economics or management and that there is capital of a minimum equivalent to EUR 371,840.29.

    Article 28-1 is only an amendment to the law of April 5, 1993 concerning the financial sector in Luxembourg, which gives an additional definition of the domiciliation activity.

     

  • Costs

    The main costs of establishing a company are:

    • Notary's fees according to a scale laid down by law. 
    • Registration duty (fixed rate of EUR 75;  capital duty no longer applies).
    • The registrar's fee for registration in the trade register and the costs of publication in the Mémorial.
    • Other legal and consultancy fees.

     

  • Other types of associations

    Other forms of association recognised by Luxembourg law are:

    • Economic Interest Group and European Economic Interest Group (GIE and EEIG). Formed with the exclusive aim of facilitating or developing the economic activity of its members, and improving or enhancing the results of that activity.
    • Civil (non-commercial) company (Société civile). Particularly suited to joint practices in the independent professions and to the management of real estate.
    • Joint venture (Association momentanée). Formed for the specific purpose of carrying out specified commercial operations.
    • Silent partnership (Association en participation), a contract between two or more persons for combining their money, goods, labour, and skill, or any or all of them, under an understanding that there shall be a communion of profit between them, and for the purpose of carrying on a business.
    • Non-profit making association (A.S.B.L.)
    • Branch

     

  • Specific tax efficient vehicles

    Luxembourg provides a number of tax efficient vehicles for holding investments and/or organizing financing activities.

    There are both taxable (SoParFi) and non-taxable regimes, with respect to income and capital gains taxation.

    I. Non-taxable entities

    I.1. The Private Wealth Management Company, Société de Gestion de Patrimoine Familial (SPF) is a new passive private wealth investment vehicle.

    The SPF, introduced by the law of April 26, 2007, takes one of the existing forms of a S.A., S.à r.l., S.C.A. or S.C. organized as a S.A., and is goverened by the same rules, but benefits from a special tax regime, subject to restrictions mainly on its activities and on who may be its shareholders.

    The SPF’s activities are restricted to acquiring, holding, managing and disposing of “financial assets”. All commercial activities, the granting of interest bearing loans and the provision of any kind of remunerated services are forbidden and the SPF may not have a role in the management of companies in which it holds shares.

    The SPF’s shareholders must be individuals, private wealth vehicles or intermediaries acting on behalf of individuals or private wealth vehicles.

    The major advantage of the SPF is that these companies are exempt from income tax, net worth tax and withholding tax on dividends distributed, and are only subject to the following:

    • Registration duty at the fixed rate of EUR 75 (capital duty no longer applies).
    • Annual subscription tax (taxe d’abonnement”) at an annual rate of 0.25% levied on the amount of paid-up capital increased by the amount of share premium and the amount of debts exceeding eight times the paid-up capital and share premium. The subscription tax is capped to a maximum annual amount of EUR 125,000 (minimum of EUR 100) .

    The SPF is not entitled to benefit from double tax treaties signed by Luxembourg or EU directives.

    I.2. The Specialised Investment Fund (SIF, Fonds d’Investissement Spécialisé, FIS) is a tax-exempt lightly regulated investment fund reserved for “informed investors”.

    The SIF can either be set up as a contractual fund (fonds commun de placement, otherwise known as an FCP), or as a variable capital or fixed capital company (SICAV or SICAF). A SICAV may haveing the legal form of a S.A., S.à r.l., S.C.A. or S.C. organized as a S.A. A SICAF may take those forms as well as the S.N.C. or Société civile forms. It is however more lightly regulated, for example in terms of reporting requirements and restrictions on its investments and leverage than UCITS and Part II UCIs. It must apply risk diversification and can be divided into sub-funds. The SIF must have net assets of at least EUR 1,250,000.

    A major advantage of the SIF is that it is exempt from income tax, net worth tax and dividend withholding tax on dividends distributed, and is only subject to the following:

    • Registration duty at the fixed rate of EUR 75 (capital duty no longer applies). Contribution of movable property (e.g. shares, receivables, cash) to a Luxembourg company for a consideration other than shares should be subject to proportional registration duties.
    • Annual subscription tax of 0.01% of net asset value (payable on a quarterly basis).

    A SIF may be in the scope of the Luxembourg law implementing the EU Savings Directive, but only if it is a FCP, and this will then depend on its investment policy.

    A SIF is eligible for benefits under certain tax treaties signed by Luxembourg but excluded from others.

    One limitation on the use of SIFs is that they do not qualify under the EU Parent Subsidiary Directive as normally taxable companies.

    Dividends distributed by the SPF are not subject to withholding tax.

    There is no withholding tax on interest paid by the SPF except where the EU Savings Directive or Luxembourg domestic withholding tax apply.

    II. Taxable holding companies are known as SoParFi (Sociétés de Participations Financières)

    The SoParFi, which is fully taxable like any other entity, takes advantage of tax legislation available to all companies (principally double tax treaties and benefits under the EU Parent Subsidiary Directive) and does not have any restrictions on the scope of its activities.

     

  • Branches

    A non-resident company can establish a branch in Luxembourg.

    The branch does not have separate legal personality from the company's registered office (or head office). It is, however, subject to the same registration and publication requirements as a company incorporated in Luxembourg.

    This means that the following acts and documents must be registered with the Trade Register and published in the Mémorial:

    • Address of the branch
    • Activity of the branch
    • Name and form of the parent company
    • Name and occupation of the persons authorised to act on behalf of the company, either as member of the management board or as permanent representative of the Company for the activity of the branch.

    Prior to the deposit all these documents must be authenticated in the country of origin and in Luxembourg.

    Special rules may, however, apply to branches of the business registered elsewhere in the EU. For example, additional information must be registered and published, such as:

    • Indication of the law of the state by which the company is governed
    • The articles of association of the company
    • The legal form of the company, its registered office, its object, and at least annually the amount of subscribed capital

    Registration duty at the fixed rate of EUR 75 (capital duty no longer applies) is payable except where the company's registered office is elsewhere in the EU, in which case no duty is payable.

 

8. What are the basic types of tax and social security costs?

Information supplied by the BCC Tax Group, prepared by Romain Tiffon and Nicolas Devillers of ATOZ

 

 

 

  • Individuals

    Income tax (impôt sur le revenu des personnes physiques) Residents are taxable on their worldwide income up to a marginal rate of 43,6 % from EUR 150,000 (for a single person) and EUR 300,000 for a married couple. An allowance of EUR 922.50 per child is either paid by the Caisse Nationale des Prestations Familiales or through a tax credit claimed with the submission of the tax declaration. Personal allowances vary from EUR 1,317 for a single person to EUR 7,134 for a married couple who both work (as from January 1, 2013, the EUR 396 minimum deductibility of commuting costs is cancelled). Non-residents are taxable on their Luxembourg income only with a minimum tax rate of 15 % on income other than salaries and pensions or, if lower, the amount of tax calculated on income increased by EUR 11,265.

    Art. 153 LIR requires all Luxembourg residents and non-residents to submit an annual income tax return if their taxable revenue exceeds EUR 100,000. The threshold is lowered to EUR 1,500 for investment income and EUR 600 in case of income not subject to tax at source. The tax return filling is also required if the household receives two or more salary or pension. Finally, a tax return must be filled if:

    • the taxpayer and his/her spouse falling under tax class 1 or 2 receives a pension and if their taxable revenue exceeds EUR 36,000
    • the taxpayer and his/her spouse falling under class 1a receives a pension and if their taxable revenue exceeds EUR 30,000

    Finally, a taxpayer must submit a tax return if he/she has made a loss in any of the business income, professional income or rental income (i.e. mortgage interest deduction) category. If the taxpayer does not exceed any of the limits and is not entitled or required to make a personal income tax return then he can still submit a tax equalisation return to claim deductible expenses not previously deducted on his tax card.

    Social security (sécurité sociale) The following social security rates apply to employees and employers and are calculated on employees' gross salary including benefits in kind up to a ceiling of EUR 112,451,28 per annum (EUR 9,370,94 per month). Social security contributions are tax deductible for both employees and employers.

    'Assurance-Dépendance' is due by Luxembourg residents and non-residents who earn a salary or independent remuneration in Luxembourg and is calculated at the rate of 1.4% on gross salary in excess of 25% of the minimum social salary (on total income for independents) with no ceiling and is not tax deductible. The monthly contribution for 'Assurance Dépendance' is calculated on professional income earned by individuals. In addition, an annual contribution is calculated on the net taxable income declared on the annual tax return that includes: investment, rental and other income after deduction of related expenses.

    The monthly minimum social salary is indexed and amounts to approximately EUR 1,800 gross per month..

    Rates valid as at 01.01.2013Employee paysEmployer pays

    Sickness

    3.05 %

    3.05 %

    'Surprime' (only 'Blue Collar')

    0.50 %

    n/a

    Pension

    8.0 %

    8.0 %

    Safety & Health at Work

     

    0.11 %

    Accident

     

    1.15%

    ‘Assurance Dépendance’

    1.4 %

    n/a

    'Mutualité Employeurs' 

    0.42 % to 2.64 %

    TOTAL

    12.95 %

    12.73 % to 14.95 %

    TOTAL ‘Self Employed’

    25.93 %
    including Mutualité des Employeurs

    n/a

     

    This contribution 'Mutualité des Employeurs' is collected in order to reimburse the employer 80% of the salary including charges in case of illness. (in specific cases reimbursement of 100%). A self-employed has the choice to contribute to this or not.

    Investment income EUR 1,500 of investment income for a single person and EUR 3,000 for a married couple is tax free, including dividends and interest. 50% of the dividends received from companies within the EU are exempted. In accordance with the law of 23 December 2005, any Luxembourg paying agent that pays interest to a Luxembourg resident beneficial owner acting within the context of his/her private wealth must apply a final withholding tax of 10%. The withholding is final in the sense that:

    • no further tax is payable on the income;
    • the income is not required to be reported in the tax payer's tax return;
    • the income is not taken into account when calculating the average rates of tax on the income.

    No withholding tax will applies up to an amount of EUR 250 of interest on savings accounts.

    Capital gains are taxable at the marginal rate. Exceptions are:

    • Capital gains tax exemption applies for gain up to EUR 50,000 for a single person and up to EUR 100,000 for married couple. Capital gains on one's main private residence and on shares held for more than six months in companies in which one held less than 10 % of the share capital are tax exempt.
    • Capital gains on real estate (non-main residence) owned for more than two years and on shares in which one held more than 10% of the share capital are taxed at half global tax rate (i.e. 21.8% given the current rates). A capital gain allowance of EUR 50,000 for a single person (or EUR 100,000 for married couples or partners) is granted to these latter capital gains.

    Wealth tax (impôt sur la fortune) was abolished from 1 January 2006.

  • Companies

    Corporate tax (impôt sur le revenu des collectivités) Corporate income tax (CIT) is charged at 21 % plus the solidarity contribution in income tax, increased as from January 1, 2013 from 5% to 7%, on worldwide income exceeding EUR 15,000, subject to foreign tax relief, in accordance with applicable double tax agreements. Non-resident companies are taxed on Luxembourg source income only. Losses may be carried forward indefinitely. Fiscal integration is also possible if the parent company owns at least 95% of the subsidiary (75 % with a special agreement). Participation exemption dividends received are tax exempt.

    Since January 1, 2011, SoParFis are liable to a minimum tax of EUR 1,575 if the total of their financial assets, transferable securities and cash amount to more than 90% of the entity’s balance sheet. This minimum tax does not apply to companies which are subject to an authorisation by a minister or a supervisory authority.

    As of 2013, this minimum CIT of EUR 3,210 was extended to regulated companies (i.e. companies subject to the authorisation and supervision of the CSSF, supervisory authority of the financial sector) which are subject to CIT, i.e. SICARs and Securitisation Companies.

    Also, a minimum CIT was introduced as from 2013 for non-SoParFis which varies between EUR 500 and 20,000 EUR depending on the level of the total balance sheet (as reflected below). Taking into account the solidarity surcharge which is increased to 7% as of 2013, the minimum CIT may amount up to EUR 21,400.

    The minimum CIT is an advance creditable against any future CIT liability. However, should the company never become taxable, it will not be able to get a reimbursement of the minimum CIT paid and thus the minimum CIT can become a de facto final liability.

     Total Balance Sheet  Minimum CIT Due         
     Up to EUR 350,000EUR 500
     Up to EUR 2,000,000EUR 1,500
     Up to EUR 10,000,000EUR 5,000
     Up to EUR 15,000,000EUR10,000
     Up to EUR 20,000,000EUR15,000
     Above EUR 20,000,000EUR 20,000

     

    Municipal Business tax Companies are also charged a municipal business tax on profits (impôt commercial communal) depending on the commune where their registered office is located. In Luxembourg city, the rate amounts to 6.75 % on taxable income. Therefore, the maximum effective rate, including the solidarity contribution in income tax, for Luxembourg city is 29.22 %.The taxable income is reduced by an allowance of EUR 17,500.

    Capital gains for corporations These are treated as ordinary income and taxed accordingly.

    Participation exemption on dividends (le régime mère-fille: Parent Subsidiary Directive) Dividends income realised by resident taxable companies are fully exempt from corporate income taxes if the following conditions are fulfilled:

    1. The distributing company is:
      • a fully taxable Luxembourg resident company, or
      • a non-resident company (with a share capital) that is fully liable to a tax similar to Luxembourg corporation tax, or
      • a company that is resident in another member state of the European Union and is covered by Article 2 of the EU Council Directive of 23 July 1990 (the “EU Parent-Subsidiary Directive”).
    2. The recipient company is:
      • a fully taxable Luxembourg resident company, or
      • a permanent establishment of a company that is resident in another member state of the European Union that is covered by Article 2 of the EU Parent-Subsidiary Directive, or
      • a permanent establishment of a limited company that is resident in a state with which     Luxembourg has concluded a double tax treaty (DTT), or
      • a permanent establishment of a limited company that is resident in another member state of the     European Economic Area other than an EU member state.
    3. At the date on which the income is made available, the beneficiary company has held, or commits to hold, the shares in question for an uninterrupted period of at least twelve months and that during this period the holding rate does not fall below the threshold of 10% of the share capital of the distributing company, or the acquisition price of such shareholding is at least EUR 1,200,000.

    The exemption for dividends also applies to dividends on participations held through qualifying fiscally transparent entities. Provided the above conditions are met, the dividend should be exempt from Luxembourg CIT. However, any expenses in direct economic relation with the shareholding, such as interest expense or a write-down in the value of the shareholding that reduced the tax base in the year of the dividend distribution are disallowed to the extent of the exempt dividend income.

    Participation exemption on capital gains (le régime mère-fille: Parent Subsidiary Directive) Capital gains are fully exempt from CIT if the same conditions as for dividends are met, and that at the date on which the disposal takes place, the holding company has held, or commits to hold, the shares in question for an uninterrupted period of at least twelve months and that during this period the holding rate does not fall below the threshold of 10% of the disposed company’s share capital, or the acquisition price of such shareholding is at least EUR 6,000,000 (i.e., higher than the acquisition price of EUR 1,200,000 required for dividends).

    Provided the above conditions are fulfilled, capital gains realized upon the disposal of the qualifying shareholding are exempt from Luxembourg CIT.

    However, a system was introduced to recapture this benefit, under which the exempt amount of the gain is reduced by the total of economically related expenses (e.g., interest paid on debt related to the acquisition of the shareholdings) and capital losses deducted over previous years and during the year of disposal.

    Net wealth tax (impôt sur la fortune) Net wealth tax (NWT) is charged on the net asset value of a company as at 1 January of each year. Ordinary wealth tax is charged at the rate of 0.5 %, with a minimum of EUR 25 for an S.à r.l. and EUR 62 for an S.A. if the company existed on 1 January of the fiscal year. However, shareholding held by Luxembourg fully taxable companies can benefit from an exemption from the NWT base provided the following conditions are met:

    1. The shares are held in a company that is:
      • an undertaking resident of the EU whose legal form falls within the scope of article 2 of the     Parent-Subsidiary Directive (90/435/CEE); or
      • a Luxembourg resident capital company fully liable to Luxembourg tax; or
      • a non-resident company liable to a tax corresponding to Luxembourg corporate income tax.
    2. The shareholding amounts to at least 10% in the share capital of the subsidiary or the acquisition price of which amounted to at least EUR 1,200,000 and is held as at 31st of December.

    Withholding tax (Retenue d'impôt à la source) The standard rates of withholding tax are 15 % on dividends; 0 % on royalties; and 0% on interest (unless the EU Savings Directive as implemented under Luxembourg laws applies). Double Tax Treaties may reduce these. Also, a withholding tax of 20 % is levied on directors' and statutory auditors' fees.

    Dividends distributed from resident taxable companies are however fully exempt from withholding tax if the following conditions are fulfilled:

    1. The shares are held in a company that is: a fully taxable Luxembourg resident company,
    2. The holding company is:
      • a fully taxable Luxembourg resident company, or
      • a company resident of the EU that is covered by Article 2 of the Parent-Subsidiary directive, or
      • a Luxembourg permanent establishment of a company that is resident in another member state of the European Union that is covered by Article 2 of the EU Parent-Subsidiary Directive, or
      • a Luxembourg permanent establishment of a company that is resident in a state with which Luxembourg has concluded a DTT, or
      • a collective undertaking that is (i) subject to a CIT comparable to the Luxembourg one and (ii) is resident in a state with which Luxembourg has concluded a DTT, or
      • a Swiss resident capital company which is subject to corporate income tax without benefiting from a tax exemption,or
      • a fully taxable company resident of the European Economic Area (EEA) other than within the  European Union, or
      • a Luxembourg permanent establishment of a company that is resident of the EEA other than within the European Union.
    3. At the date on which the income is made available, the beneficiary company has held, or commits to hold, the shares in question for an uninterrupted period of at least twelve months and that during this period the holding rate does not fall below the threshold of 10% of the share capital of the distributing company, or the acquisition price of such shareholding is at least EUR 1,200,000.

    The exemption of withholding also applies if the beneficiary holds its participation through qualifying fiscally transparent entities. Provided the above conditions are met, the distributing company will not be required to apply withholding in Luxembourg.

    Capital registration duty ('droit d'apport') The capital registration duty has been abolished from January 1st, 2009. Now a fixed registration duty of EUR 75 is due upon incorporation of a company and for any subsequent amendment to its articles of association. This fixed registration duty is applicable to SoParFi, but also to SICAR, SIF, Securitization Vehicules and Investment vehicule for private individual (“SPF”).

    Contribution in kind consisting of the transfer of real estate into a company is subject to specific registration tax.

    • Contribution of real estate, located in the Grand Duchy of Luxembourg, to a civil or commercial company remunerated by shares are subject to a 0,6% registration duty + a 0,5% transcription tax;
    • Contribution of real estate, located in the Grand Duchy of Luxembourg, to a civil or commercial company remunerated by other means than shares are subject to a 6% registration duty + a 1% transcription tax (4% for Luxembourg City).

    However, transfers made in the context of a corporate restructuring (i.e. contributions of all assets and liabilities, contributions of one or more branches of activities as well as contributions of all assets and liabilities of the 100% held subsidiary) are exempt from proportional duties under the conditions that the transfers have been mainly remunerated (i.e. with more than 50%) with securities that represent share capital of the companies involved.

    The abolishment of capital registration duty leads to the abolishment of the clawback rule which requested to maintain at least 65% of the shares transferred during 5 years to benefit of the exemption of capital registration duty.

    Investment tax credit (bonification d'impôt pour investissement) Investment in depreciable fixed assets (including software but excluding cars and land and buildings) carries a tax credit of 12 %, against corporate income tax. Additional credits between 2 % and 7 % are available on investments in tangible assets depreciable over a minimum of 3 years. There are 'anti-abuse' provisions relating to certain types of leasing arrangements. Unused credits can be carried forward for 10 years.

    Value added tax (TVA) Everyone carrying on an activity with a view to profit, having an annual turnover exceeding EUR 25,000 must in principle register for VAT. The option for VAT can be exercised under this threshold.

    VAT is a general consumption tax applying to the sale of goods and the provision of services. VAT is meant to be neutral through the supply chain and to be borne by the end customer. Although VAT is generally invoiced by the supplier of goods or services, exception rules may however apply and can lead to another way of VAT taxation. In particular the recipient of goods/services may be the person liable for the payment of VAT, notably in case of cross border transactions.

    Luxembourg offers the lowest standard VAT rate in Europe (i.e. 15%). In addition, reduced rates (3%, 6% and 12%) apply to specific services and goods. Certain sectors (in particular the financial sector) benefit from specific VAT exemptions.

    Most of the services provided to a business established in Luxembourg are taxable/exempt based on Luxembourg rules. Where VAT cannot be recovered, the cost of VAT is therefore lower in Luxembourg due to application of the lowest VAT rate in the EU. This is particularly attractive for the financial sector since such businesses usually have no/partial right to deduct input VAT.

    Luxembourg offers opportunities for e-commerce companies. Thanks to the application of the lowest VAT rate, Luxembourg companies providing e-services benefit from a more competitive pricing or from a higher margin when charging EU private customers. The VAT advantage for e-commerce companies to be established in Luxembourg will remain until December 31, 2014. A taxation based on the country of residence of the customer should apply afterwards but would not imply any disadvantage for Luxembourg businesses.

    Luxembourg businesses carrying out activities within the scope of VAT are liable to register for VAT within 15 days following the beginning of their activities. Further to VAT registration, Luxembourg businesses are usually obliged to file VAT returns on a monthly/quarterly basis as well as an annual recapitulative VAT return. In addition, businesses performing intra-community supplies of services or goods must file EC sales listings (on a monthly or quarterly basis).

    Businesses carrying VAT exempt activities must register under certain circumstances, sometimes under a simplified procedure limiting the administrative burden to one single VAT return per calendar year.

    The deadline for filing monthly / quarterly VAT returns is the 15th day of the month following the end of the period. An automatic two month extension is in principle granted by the Authorities. The use of the extension may lead to the payment of a VAT advance. Monthly / quarterly VAT returns must be filed electronically.

    The deadline for filing annual VAT returns is end of February/end of April of the following year. An automatic eight month extension is in principle granted by the Authorities. Again, the use of the extension may lead to the payment of a VAT advance and no further extension can be applied for. Where a business is required to file Monthly / quarterly VAT returns, the annual VAT returns must be filed electronically.

    Businesses which carry out intracommunity supplies of goods and services have to submit EC Sales Listings. EC Sales Listings must be filed electronically. The deadline for filing EC Sales Listings is the 25th day of the month following the end of the period.

 

9. How do I register for tax?

Generally speaking, the Luxembourg tax authority, Administration des Contributions Directes (ACD), directly notifies the individual business or company by post of the dossier number and the competent tax office. If the business is not contacted directly by the competent tax office, it must contact the ACD itself to make an initial declaration.

For personal income tax you make an annual tax declaration to the relevant tax office responsible for the area in which you live. Contact the ACD. Tel: 40 800-1. To check your area, go to their website and click on Profil de l'Administration/ Compétences et adresses/ Bureaux d'imposition des Personnes Physiques (individuals). See also their summary of direct taxes English version.

For corporate income tax you also apply to the ACD. To check your area, go to their website and click on Profil de l'Administration/ Compétences et adresses / Bureaux d'imposition des Sociétés (companies).

For VAT and other duties you apply to the Administration de l'Enregistrement et des Domaines. Tel: 44 905-1. For salary withholding tax you register your company at Centre Commun de la Sécurité Sociale. Tel: 40 141-1.

Details, in English, on how to proceed are on www.business.lu.

 

10. How do I register for social security?

You apply to the Centre Commun de la Sécurité Sociale. Tel : 40 141-1. The Luxembourg Government’s Point of Single Contact, www.business.lu provides details for registration as a self-employed person and/or as an employer.

 

11. What financial aid is available?

There are a number of sources of state aid available for setting up a business.

The Ministry of Middle Classes provides SMEs (small and medium-sized businesses) with grants or reduced interest rates for investment in tangible or intangible fixed assets, external consultants’ services, participation in exhibitions, investments relating to the protection of the environment and the efficient use of natural resources, the relocation of businesses, the renovation of polluted sites, investments in innovation and R & D and in food quality and hygiene. A guiding principle governing this aid is the strengthening of competitiveness of Luxembourg’s SMEs. Full details including how to apply for aid are available in English on the Ministry’s website in the section State aid.

The SNCI (Société Nationale de Crédit et d’Investissement) is a bank specialising in medium and long term financing of investments made by Luxembourg companies. Its financing instruments are investments in fixed assets, innovations and exports. It also grants start-up loans to newly incorporated SME’s. It may also finance investments of Luxembourg companies abroad. It may take equity positions, either directly or through its subsidiary CD-PME S.A., or by affiliated financing companies. CD-PME was set up together with five Luxembourgish commercial banks to reinforce the equity base and financial strength of SMEs. Full details are available in English on the SNCI website.

The Ministry of Tourism grants financial aid for investments in Luxembourg’s tourist infrastructure. The Ministry of the Economy and Foreign Trade provides aid for investment and R & D by industrial and service companies which promote the economic development of Luxembourg. It also provides aid for regional development and, through the Office du Ducroire (see below), aid for foreign trade.

Full details of all the above sources of aid and how to apply are also available in English on the Luxembourg Portal for Innovation and Research.

The Luxembourg Chamber of Commerce operates a mutual company for loan guarantees – the MCAC (Mutualité de Cautionnement et d’Aide aux Commerçants) – which guarantees loans from authorised lenders in Luxembourg to SME members of the Chamber of Commerce. Details on the Chamber’s website under Services/ Mutualité de Cautionnement.

Other sources of aid that may be relevant to setting up a business include the following: The Office du Ducroire helps Luxembourgish companies enter export markets by means of partial reimbursement of certain costs and credit guarantees. The Ministry of National Education and Vocational Training provides co-funding of continuing vocational training. Details in English on the website of the INFPC (National Institute for the Development of Continuous Vocational training). The Ministry of Labour and Employment provides aid for training, especially for work placements, and for the employment of the elderly and long term unemployed. The Ministry of Finance provides tax credits for the employment of unemployed job seekers. The Ministry of the Environment provides grants to incentivise the generation of electricity in Luxembourg by means of wind power.

Start-up capital can be sought via the Luxembourg Business Angels Network (LBAN) (site in English). Its main objective is to create a forum to bring together capital-seeking entrepreneurs and the Business Angels within Luxembourg and the Greater Region. A Business Angel Network is an organisation that aims to bring together new or growing small and medium sized companies (entrepreneurs) with Business Angels. The aim is to increase the efficiency of the informal segment of venture capital and bridge the gap between the entrepreneur's own funds and those available from formal venture capitalists.

 

12. How do I find out about upcoming legislation affecting businesses?

One of the main missions of The Luxembourg Chamber of Commerce is to defend the interests of business by commenting on proposed legislation. Details of proposed legislation and the Luxembourg Chamber of Commerce's comments are available on their website in the section Official Opinions & Legislation, where it is also possible for you to submit your own comments. Tel. +352 42 39 39-354. The introduction to this section of the website is in English but the rest is in French. See also Opinions (Avis) of the Chamber of Trades.