Luxembourg: corporate benefits and taxes

Luxembourg is not an offshore jurisdiction in the sense that you cannot find zero taxes there. The personal income tax is 39% in the country, the corporate profit tax is 18%, and the VAT is 17%. However, Luxembourg is very popular with international businesspeople. The investment funds in the country are smaller than investment funds in the US only. Besides, Doing Business ranks Luxembourg first for cross-border trading. These are not the only two factors that attract international investors to this tiny national state in the center of Europe.  

Here we would like to give you a general understanding of the characteristics of this jurisdiction. We focus on the information that is of practical relevance for entrepreneurs. This includes the process of company registration in Luxembourg, the taxation system, the forms of company ownership there, and the specifics of setting up a bank account in the country. We also discuss the opportunity to buy a shelf company in Luxembourg instead of registering a new one.  

Key information about Luxembourg

We invite you to consider the opportunity to register a company in Luxembourg. Even though it is not a low-tax jurisdiction, it has many advantages of other kinds. Below please find the main requirements to a corporate structure domiciled in Luxembourg.

• A registered legal address in Luxembourg is mandatory.
• The Register of company owners is publicly accessible. Luxembourg is not a country where you can confidentially own a company.
• There are no restrictions as to the place where the corporate documents should be kept.
• The country does not practice currency control.
• Luxembourg has signed multiple treaties on avoidance of double taxation.
• Registering a company in the country takes between two and three weeks. Please bear in mind that buying a ready-made company in Luxembourg works out faster.
• The most popular forms of company ownership are SARL (Société à Responsabilitée Limitée) and, SA (Société Anonyme).
• Keeping accounts is obligatory in the country.
• Submission of annual financial reports is also obligatory.

Luxembourg is not only attractive for establishing a business company there but it is a very comfortable country to live with your family too. Here is what you will find living in Luxembourg:

• Multiple nationalities without any discrimination, racism, nor xenophobia;  
• An exceptionally amicable environment;
• High levels of primary and secondary education;
• Advanced medical care;
• Very inexpensive medical insurance for international travel;
• A highly beneficial geographical location;
• A sturdy financial system (Luxembourg boasts the highest AAA credit rating).

Taxes and state duties in Luxembourg

Luxembourg has a rather peculiar tax system. Residents of the country pay taxes only on their global income while non-residents are taxed on the income that they make within the borders of Luxembourg. Incentives are available to foreign businesspeople opening companies in Luxembourg and InternationalWealth.info portal experts will be happy to tell you how you can use them if you apply for a personal consultation.

Any kind of personal income is taxed in Luxembourg including taxes on commerce, returns on investments, pensions, royalties, and so on.

As far as the corporate income is concerned, the main taxes are the following ones:

• Corporate profit tax – 18%.
• Additional municipal taxes – 6-12%.
• Tax on present property value – 0,5%.
• Reductions are available on Intellectual Property tax.
• Minimal tax – 1,500 EUR.
• Capital gains tax is usually calculated as profit tax.

The VAT is also payable in Luxembourg at the rate of 17%. Discounted rates of 14%, 8%, 3%, and 0% apply to certain products. The company has to register for the VAT in Luxembourg if its annual turnover exceeds 25,000 EUR.

Please also bear in mind that the annual returns need to be submitted. If the VAT is levied, the report on this tax may have to be submitted every quarter or every month.

The process of company registration in Luxembourg

Doing Business ranks Luxembourg 76^th for starting a business, which is not a very high rank. This means that establishing a company in the country is not so easy. However, with our assistance it is quite possible anyway!

The forms of company ownership most popular with foreign entrepreneurs in Luxembourg are S.A.R.L. and S.A. There are other company ownership types available but they are much less popular. Below please find minimal requirements for setting up the first and the second of these company types.

Company ownership form	Société à Responsabilitée Limitée, S.A.R.L.	Société Anonyme, S.A.
Charter capital	31,000 EUR, deposit of minimum 25% at company registration	12,500 EUR, deposit of 100% at company registration
Stare types	Ordinary, preferred, voting, non-voting	Same + bearer shares
Shareholders, directors	1 shareholder + 1 director, natural person/ legal entity, no residency requirements	Same. We recommend having the majority of company beneficiaries residents of Luxembourg
Nominee services	Permitted	Same
Annual meetings	Shareholder and Board of Director meetings can be held anywhere	Same
Basic tax conditions	IRC 22.88% + ICC 6.75%, maximum rate 29.63%	Same
Requirements to the company name	Must end in S.A.R.L.	Must end in SA, Société Anonyme or AG alternatively

Please note that opening a partnership in Luxembourg is also possible but the main argument against establishing one is the need to have at least one unlimited partner. At the same time, there is also a possibility to set up a limited personal company in Luxembourg. Acting as a sole proprietor with limited liabilities can be of interest to a small business.

Company registration document package

Below we provide only the basic list of documents that are required when applying for company registration in Luxembourg. Please remember that it is a complicated process and we do not recommend that you should engage in it without professional assistance.

The following personal documents are required for all company officers and beneficiaries (shareholders, directors, and secretaries):

• Passport copies.
• Proofs of residential addresses. Normally, recent utility bills are used for this purpose.
• Resumes.
• Police clearances.
• If one of the Luxembourg company founders is a corporate entity, a set of corporate documents is required.

There are multiple banks in Luxembourg were you can open a corporate account for your company domiciled in the country. Here are the banks that we have partner relationships with: 

• Banque de Luxembourg.
• East-West United Bank.
• RCB Bank.
• Novo Banco.

Each bank will have its own requirements to prospective clients but the company has to be registered prior to applying for banking services in any case. The normal requirements are as follows:

• Recommendations are not required.
• A detailed description of the business company is required.
• Visiting the bank is not necessary but a meeting with a bank officer elsewhere is required.
• A long list of personal and corporate documents has to be submitted, the legality of the sources of income has to be confirmed, and the KYC procedures are inescapable.  
• In addition to a corporate account, you can also set up a personal current account.
• The possibility of service denial exists but the risks are calculable. Please discuss your chances to set up a bank account in Luxembourg with our banking experts.

How you can buy a company in Luxembourg

If you urgently need a company in Luxembourg, buying a ready-made one will let you save time considerably. Besides, there is a reputational factor as well: a company that was registered several years ago will evoke more respect on the part of your partners and clients than a company that was registered yesterday. What is more, buying a company in Luxembourg does not cost much more than setting up a new one. We have a few offers for your consideration:

• EUROTOP International Holding SA. Charter capital – 31,000 EUR (you undertake the obligation to deposit it at some time in the future); the company was registered in 2003.
• An SA, registered in 2008. Charter capital – 31,000 EUR, a VAT number available, a bank account opened.
• An SARL, registered in 2008. Charter capital – 12,500 EUR, a VAT number available, a bank account opened.

If you would like to register a new company in Luxembourg or buy an existing one, you may need the following additional services that we will be happy to provide:

• Company legal address in Luxembourg;
• A virtual office;
• Nominee director;
• External accounting support.

Is it easy to establish a company in Luxembourg? The answer is ‘no’ but with our assistance everything is possible. We have helped clients set up companies in Luxembourg before and we will gladly do it for you too. We hold the country very high because we know that the corporate legislation, the taxation system, the regulation requirements, and the business environment in general are highly beneficial in Luxembourg. We vouch for this jurisdiction if you would like to do business from there.

Please use the email address found at the top of the page to contact us. We are also available in WhatsApp and live chat during office hours. We reply promptly in any case!