Guide for entrepreneurs in Luxembourg
Are you interested in starting a business in Luxembourg and looking for practical information to help you get started?
Luxembourg offers numerous opportunities for entrepreneurs. More and more people are choosing the Grand Duchy as the place to launch their business. In addition, spouses of expatriates are choosing to become self-employed to find professional fulfillment.
Indeed, the stability of the Luxembourg economy, its favorable regulatory framework, its high standard of living, and its central location within the European market are all key advantages for starting a business.
This practical guide outlines the available business structures, the administrative procedures, and the key information you need to know to launch your business.
Self-employed or corporation: which legal structure should you choose?
In Luxembourg, you can operate as a self-employed individual or form a company.
Working as a self-employed individual
If you are starting your business on your own, you can operate as a self-employed individual. It is important to note that, unlike in other countries, sole proprietors in Luxembourg enjoy a number of benefits. In particular, they are also eligible for unemployment benefits.
While you can work as a self-employed individual, it is also possible to establish a more complex business entity.
Working as a self-employed individual offers several advantages. This status is particularly ideal for starting out on your own, and the formalities for registering as self-employed are simplified.
Forming a company
Forming a company allows you to operate within a more structured framework. This structure will be tailored to your growth plans. Depending on the type of company you choose, your liability will be more or less limited.
This choice depends on your business, your level of risk, and your goals.
Choosing the Right Legal Structure for Your Business
Each business structure has its own advantages and disadvantages in terms of liability, required capital, and regulations. Don’t hesitate to consult a consulting firm to make the best choice.
Here we outline the most common types of businesses, including commercial companies and Soparfi.
Each legal structure entails specific obligations regarding management, taxation, and liability.
Commercial companies: SARL and SA
The SARL and the SA are the two most common forms of commercial companies in Luxembourg.
Forming a Limited Liability Company (SàRL) in Luxembourg
A Limited Liability Company (SàRL) requires a minimum capital of 12,000 euros and at least two shareholders. The registered office must be located in the Grand Duchy of Luxembourg. The managing director does not need to be a Luxembourg national.
To incorporate your company, you must go through a notary. The notary will draft the articles of incorporation. You will also need to complete the administrative procedures to register your company with the Trade and Companies Register (RCS).
The company is subject to a number of taxes, including a fixed registration fee, a business tax, a wealth tax, a corporate income tax, and a VAT return.
The advantage is that the company is fiscally “opaque.” The partners are not personally taxed, and their liability is limited with respect to their personal assets.
In the case of a simplified limited liability company (SARL), the incorporation can be carried out by private agreement. The capital must be between 1 and 11,999 euros.
Forming a Public Limited Company in Luxembourg
A public limited company requires a capital of 30,000 euros. A single shareholder is sufficient. This type of company is generally intended for large enterprises. However, it may be chosen by an SME, as bearer shares can be transferred more easily.
Find out more about the different types of businesses and their tax advantages here.
Opting for the SOPARFI tax regime in Luxembourg
Financial Holding Companies (including SA, SARL, etc.) may opt for the SOPARFI tax regime. To do so, they must hold financial interests in other companies (subsidiaries) and manage them.
The advantage of the SOPARFI regime is the exemption from taxes on capital gains and dividends under certain conditions. However, the basic tax rate applied is higher.
Consult an accountant, notary, or attorney regarding the specific characteristics of this type of company.
More information on entrepreneurship in Luxembourg.
Find all possible business structures here, along with their advantages and disadvantages.
Corporate Taxation in Luxembourg
Luxembourg is renowned for its business-friendly tax environment. Corporate tax rates are competitive. In addition, Luxembourg has signed numerous bilateral agreements to prevent double taxation of income.
However, it is essential to plan your taxes effectively to maximize tax benefits while remaining compliant with regulations.
Businesses are subject to several taxes:
- local income tax
- local business tax
- VAT
Luxembourg also has double taxation agreements in place, which can be an advantage for international entrepreneurs.
Financing your project
Luxembourg offers various forms of support for entrepreneurs and startups. In fact, Luxembourg defines itself as a “startup nation,” and various organizations are active in the startup and innovation sectors.
There are several options available to finance your project.
- Bank financing
- public grants
- Private investors
- incubators and support programs
You can explore funding sources from government agencies, banks, private investors, and incubator programs. A solid business plan is often essential to convince potential investors. You will need to present your business idea, business model, and financial projections to them.
Growing your business in Luxembourg
Luxembourg has a dynamic entrepreneurial community, with numerous business support organizations and networking opportunities. Participating in networks, events, discussion groups, and incubators can help you establish valuable contacts and gain valuable advice.
These environments help you feel less isolated, create business opportunities, and accelerate the growth of your business.
Languages and work environment
Luxembourg is a multilingual country: Luxembourgish, French, and German are the official languages. English is widely used, but proficiency in a local language remains an asset.
Learn more about learning new languages or improving your language skills.
Key points
Starting a business in Luxembourg requires planning ahead for the administrative procedures, choosing the right legal structure, and organizing your business plan.
If you’re still thinking about your project or your positioning, visit our page on Starting or Buying a Business in Luxembourg to help you plan ahead.
Regardless of your field of activity, make sure you understand the specific requirements of your sector before getting started.
Certain business activities, such as banking, insurance, and financial services, are subject to strict regulations. To engage in these activities, you will need to obtain the necessary licenses and authorizations.
Are you a licensed professional or do you want to work as a freelancer? You must have your credentials recognized. More information here.
Starting a business in Luxembourg can be an exciting opportunity. However, it is crucial to fully understand the country’s specific requirements regarding business formation, taxation, and regulation. Don’t hesitate to consult local experts and seek professional advice to ensure compliance with all regulations and maximize your chances of success.
For those interested in settling in this prosperous country, it is crucial to understand what moving to Luxembourg really entails and the specificities related to housing.
Find here the essential guidelines for a successful move to Luxembourg
Download our practical guide to Luxembourg for more information on life in Luxembourg.
The administrative steps involved in starting a business
To start a business, several steps are required:
- obtain a business license
- register the business with the Trade and Companies Register (RCS)
- enroll in Social Security
- register your business for VAT. A VAT number is required once certain revenue thresholds are exceeded.
How do you obtain a business license in Luxembourg?
A business license is an essential step for conducting business in Luxembourg, whether you are self-employed or a company executive. It is issued by the Ministry of the Economy and is a prerequisite for starting your business.
This authorization is mandatory for most types of business.
The application must be submitted by the person who actually manages the business:
- the sole proprietor in the case of self-employment
- the manager or director in the case of a company
Requirements
To obtain a business license, you must provide proof of:
- qualifications or degrees relevant to your activity
- or sufficient professional experience in the relevant field
- professional integrity (including a clean criminal record)
Certain regulated activities may require additional conditions.
Application Steps
The application is generally submitted online and involves several steps:
- Prepare supporting documents (degrees, resume, identification documents, criminal record)
- Submit the application to the Ministry of Economy
- Wait for the application to be reviewed
- Receive authorization if the requirements are met
Processing time generally varies by a few weeks depending on the complexity of the application.
Important considerations
- Plan ahead: without authorization, you cannot start your business
- Check in advance that your qualifications are recognized in Luxembourg
- Ensure that your experience aligns with the intended business activity
If you have any doubts about your eligibility or the steps to follow, it may be helpful to seek assistance from a professional (accountant, lawyer) or from entrepreneurship support organizations.
Seeking guidance early on often helps avoid rejections or additional delays.
How do you register your company with the Trade and Companies Register (RCS)?
Registration with the Trade and Companies Register (RCS) is a mandatory step for starting a business in Luxembourg. It gives your company legal standing and makes it visible to third parties (clients, partners, government agencies).
Registration with the RCS allows you to:
- legally conduct your business
- issue invoices
- open a permanent business bank account
- enter into contracts with partners
Who must register?
All business entities (LLCs, corporations, etc.) must be registered with the RCS. Self-employed individuals (sole proprietors) are also required to register in certain cases, particularly if they engage in commercial activities.
Steps for registration
- Draft the company’s articles of incorporation
The articles of incorporation define the operating rules of your business (business activity, registered office, partners, capital, etc.). For certain legal forms, they must be drawn up before a notary. - Deposit the capital
The capital must be deposited into a business bank account in the name of the company being formed. You will be issued a deposit certificate. - Signing the Articles of Incorporation
Depending on the legal form, this document is signed as a private agreement or before a notary. - Submit the registration application
The application is submitted online via the dedicated platform. You will need to provide the necessary documents (articles of incorporation, identification of officers, registered office, etc.). - Official publication
Once the company is registered, the information is published in the Electronic Register of Companies and Associations (RESA).
Documents to provide
- the company’s articles of incorporation
- Proof of identity for the directors and partners
- a certificate of capital deposit (if applicable)
- proof of the registered office address
Timeframes and costs
Registration can take anywhere from a few days to a few weeks, depending on the complexity of the application.
Administrative fees are to be expected, to which may be added the fees of a notary or an advisor if you are working with one.
Points to note
- Verify the consistency of the information provided (articles of incorporation, address, business activity)
- Plan ahead for processing times if you have a scheduled start date
- Seek assistance if your situation is complex
A well-prepared registration allows you to launch your business on a solid and secure foundation.
How do you enroll in social security in Luxembourg?
Enrolling in social security is a mandatory step when you start your business in Luxembourg, whether you are self-employed or a company director. It allows you to benefit from social security coverage (health, retirement, family benefits).
When should you register?
Registration generally takes place after you have obtained your residence permit and established your business. It is essential for operating your business legally.
Steps to Take
You must register with the Joint Social Security Center (CCSS), which centralizes registrations and manages social security contributions in Luxembourg.
- Fill out a registration form
You must complete a registration form as a self-employed individual or company director. - Provide the necessary supporting documents
The required documents generally include:- a copy of your residence permit
- an extract from the RCS
- a valid ID
- bank account information
- Submission of the application
The application can be submitted online or by mail to the CCSS. - Confirmation of enrollment
Once your application is approved, you will receive your Social Security number, which is required for all administrative procedures.
Calculation of contributions
As a self-employed individual, your social security contributions are calculated based on your business income. A minimum income is taken into account, even when you first start your business. This amount may be adjusted at the end of the fiscal year for the following year.
The monthly contributions cover, in particular:
- health and maternity insurance
- pension insurance
- long-term care insurance
Important considerations
- Plan for your social security contributions from the very start of your business
- Ensure you have sufficient cash flow, especially in the first year
- Notify the CCSS promptly in the event of a change in circumstances
How do you register for VAT in Luxembourg?
VAT (Value Added Tax) registration is an essential step for many entrepreneurs in Luxembourg. It allows you to charge VAT to your customers and remit it to the tax authorities.
VAT registration structures your business and enhances your credibility, particularly with business clients. When properly understood and managed, it becomes a driver of growth rather than an administrative burden.
Are you subject to VAT?
VAT registration depends on your revenue and the nature of your business.
- If your annual revenue exceeds 35,000 euros, VAT registration is mandatory
- Below this threshold, you may qualify for the VAT exemption scheme
- Certain activities are exempt or subject to specific rules
Even if it is not mandatory, voluntary registration may be advisable in certain cases, particularly if you have business clients or significant investments.
Steps to follow
The application for VAT registration is submitted to the Administration of Registration, Property, and VAT (AED).
- Fill out the application form
You must complete a VAT registration application, available online. - Provide the necessary information
The information requested generally includes:- information about your business (name, address, activity)
- your RCS number
- an estimate of your revenue
- the date your business began operations
- Submit your application
The application can be submitted online or by mail to the administration. - Receipt of the VAT number
Once your application is approved, you will receive an intra-Community VAT number, which is essential for your invoices and transactions within the European Union.
Obligations after registration
Once registered, you must comply with several obligations:
- Charge VAT to your customers at the applicable rate
- report and pay VAT periodically (monthly, quarterly, or annually)
- maintain accurate accounting records
Important considerations
- Meet filing deadlines to avoid penalties
- Check the VAT rates applicable to your business
- Anticipate the impact of VAT on your cash flow
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