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Setting up a business in Luxembourg

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Can foreigners set up a business in Luxembourg? What are the conditions and formalities that apply? Find out in this article.

Looking for investment opportunities in Europe? Luxembourg is very conducive for the setting up of businesses thanks to its continuously developing and prosperous economy. In fact, over the years, many foreign companies have managed to set up there. So if you also wish to invest in Luxembourg, this should not be very complicated. Start by inquiring on the market's situation, on the type of company you can set up as an expatriate, and on related formalities.

 Good to know:

In general, you will need a business license for the setting up of a business or industry in the country. Moreover, special authorizations may be required for specific professions or economic activities.

Legal forms of companies

First of all, decide whether you prefer to set up a sole proprietorship or a commercial company. Note, however, that the legal form can be changed against costs.

In the case of a sole proprietorship, the founder (entrepreneur, artisan or merchant) acts as the sole owner and policy maker. Independent businessmen are also considered as directing a sole proprietorship. Therefore, the sole owner or founder is liable for the company's debts on his personal property. No minimum capital and company statutes are required.

In the case of a commercial company, you can choose between a company whereby you will be liable for the company's debts according to your amount of contribution, and the partnership whereby your liability for the company's debts on your personal property will be unlimited.

Stock companies (anonymous, Co Ltd, European Company, etc.), for their part, are impersonal and are sustained mainly by their associates' contributions. Shares are freely accessible and the partners' liabilities are limited to their amount of contribution.

Partnerships (limited and collective partnerships) are similar to individual companies since the partnership agreement is mainly based on the partners who are jointly and severally liable for the company's debts. In fact, the transfer of shares is only possible with their consent.

Finally, hybrid companies are considered as Limited Liability Companies given their partners' limited financial liabilities in proportion to the amount of their contributions to the company's capital. These generally consist of a limited number of partners. Moreover, the sale or disposal of shares is controlled by strict conditions.

Operating costs

The commercial company is the only type of corporation that has to bear establishment costs, since the constitution of the company generally takes the form of a notarial deed. A specific registration tax of € 75 applies upon incorporation, amendment of the company's statutes or head office transfer to Luxembourg,

Entry into operation

Companies having been set up in another European Union or assimilated country can operate freely in Luxembourg, whether occasionally or temporarily in Luxembourg. However, artisans and manufacturers are required to notify their activities to the Direction générale PME et entrepreneuriat, that is the General Directorate of SMEs and Entrepreneurship.

The notification must be accompanied by an EC certificate issued by their home country's Chamber of Commerce, or any other document justifying their authorization to operate in their home country, as well as proof of payment of a chancery tax. The latter's nationality certificate, a copy of his criminal record and evidence that he has performed the same activities for at least two years over the last 10 years, can also be requested.

On the other hand, companies that have been set up outside the European Union have to obtain a business license.

Business license

The application for the business license can either be made at the Direction générale PME et entrepreneuriat or online through the guichet.lu service, or even through the nearest Chamber of Commerce to the company's future head office. You therefore have to produce documents certifying your professional qualification in accordance with the selected activity, your professional integrity, a copy of your identity card, proof of payment of a chancery tax and draft statutes in the case of a company.

Professional integrity

Conditions related to professional integrity apply to the company's manager or director. If the latter is a Luxembourg resident for more than 10 years, the following documents have to be produced during the application for a business license:

  • a sworn statement on possible management positions with different companies during the past three years, including a management position in a Luxembourg company and/or the holding of shares in a Luxembourg company and/or any significant influence over the company
  • his criminal record.

In the case of a non-resident, or a Luxembourg resident for less than 10 years, the following documents have to be produced:

  • a sworn statement on possible management positions with different companies during the past three years,
  • a recent statement of non-bankruptcy before sworn before a notary
  • a criminal record issued in the country where he has resided for the past 10 years, or an affidavit.

Exceptions

Some individual companies, as part of providing certain intellectual services, are exempt from the business license requirement. Professionals can make a tentative application at the Direction générale PME et entrepreneuriat to make sure that they are exempt from this requirement. Subsequently, they will be affiliated to the Social Security as entrepreneurs. In case they wish to hire employees, an operation statement has to be made. Finally, they have to register for value added tax (VAT) if their annual turnover is estimated at more than € 25,000.

Trade name

Before setting up a company, you are required to choose a trade name for your sole proprietorship or company. Registration can be made on the Registre de commerce et des sociétés (RCS) website. Once the application has been made, the free or non-free trade name will be issued within 20 days. You can then download it.

Setting up an individual company

Once you have decided what kind of company you would prefer to set up, you can present the company's statutes or registration document to the RCS. Note that individual entrepreneurs have to register as a natural personal by e-filing, either with the RCS or via its help desk (fees apply). In both cases, the following documents have to be produced:

  • a duly filled registration e-form
  • an existing business license if any
  • your marriage certificate or family book if any
  • your marriage contract if any
  • a business acquisition declaration if any
  • delegation of authority with notarized signatures if necessary
  • your identity card
  • a power of attorney for the person authorized to register the trader if any.

Thereafter, you can register for VAT at the Administration de l’enregistrement et des domaines.

Block and unblock the capital

The minimum capital required for the setting up of a business has to be deposited in a bank account before the signing of the company's constitution. Hence, the deposit is blocked until the company's setting up. This process is supported by a blocking certificate which has to be produced to the notary before the constitution. The release is possible only upon presentation of a release certificate issued by the notary of the final version of the company's articles and of any missing documents required by the bank and information on the company's economic beneficiaries.

Constitution

The constitution aims at defining the company's operations. In the case of Limited Liability Companies, Anonymous Companies and European Companies, etc., statutes must be drafted before a notary. In the case of General Partnerships, Cooperatives, etc., they can draft their own constitutions either by private agreement or before a notary.

Some clauses are prohibited and will be considered as null and void. These include clauses providing all of the profits or losses to a single partner, clauses according to which some partners are liberated from their contributions to losses and that deprive any other partner of their rights to profits, etc.

Newly incorporated companies and companies that are modifying their statutes must file their constitution for publication so as to register with the RCS. Documents established under private agreements must be scanned and e-filed with the RCS, together with a duly filled requisition form. You can also seek the assistance of the help desk. As regards constitutions that have been established before a notary, these will be produced to the RCS by the notary himself.

VAT registration

Value Added Tax (VAT) registration is possible only once you have opened a bank account in the company's name. The initial declaration has to be made to the tax office by the entrepreneur, either online via the guichet.lu service, or by mail after you have downloaded relevant forms. Documents to be produced along with the registration form are a copy of the company's constitution (either in French or in German), a copy of the director or manager, and partners' identity card.

Note that individual companies are not entitled to a separate registration number. Therefore, they can use their Social Security number.

Social Security

Companies wishing to hire staff have to make a request to the Centre commun de la sécurité sociale (CCSS) at least eight days following their first recruitment. An operating certificate is then issued, indicating the registration number and the level of risk in accordance with the company's activities. On hiring each new employee, the company will then make an entry statement to join it to Social Security. Thereafter, each new employee has to be declared to the CCSS for his affiliation to Social Security.

The same applies to individual companies. In case the business license was requested online, same can be done for employees registration on the Direction générale PME et entrepreneuriat website.

 Useful links:

Guichet Public – Setting up and developing a business www.guichet.public.lu
Luxembourg Chamber of Commerce – Setting up a business www.cc.lu
Register of Commerce and Companies – RCS www.rcsl.lu
Ministry of Economy – The Middle Classes Branch www.mcm.public.lu
Chamber of Trade www.cdm.lu
Chamber of Notaries www.notariat.lu
Luxembourg Portal for Innovation and Research www.innovation.public.lu
Businessplan.lu www.businessplan.lu

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