Key Considerations For Starting A Business In Luxembourg In 2024

Luxembourg, a small country in the heart of Europe, is also one of the continent’s most dynamic economies.

It has drawn in a number of businesses due to its hard-working population, great location and competitive corporate income tax. Here, we take a look at everything you need to consider before starting a business in Luxembourg, including how to set one up.

Let’s take a look…

What Are The Benefits Of Setting Up A Business In Luxembourg?

There are a number of benefits to setting up a business in Luxembourg. Some of these include:

Location

Luxembourg has direct air links to over 75 destinations around Europe, making it a great hub for business travel. Positioned in the middle of France, Germany and Belgium, the country has a direct connection to 3 strong European economies.

Political Stability & Economy

Luxembourg is known for its political stability and strong economy. In fact, the country has such promising opportunities that it attracts commuters from France, Belgium and Germany every day.

Competitive Corporate Taxes

Luxembourg offers a competitive corporate tax rate compared to other European countries. To put this into perspective, their corporate tax rate sits between 15-17%, whereas in the UK, this is 25%.

Skilled Workforce

Luxembourg’s population is both highly educated and multilingual, making it easy to find and recruit top talent. This has led it to be named one of Europes ‘startup nations’ – boasting around 500 startups despite its population of just over 650,000.

What To Consider Before Moving To Luxembourg For Business

Before deciding to relocate to Luxembourg for business, it’s important to know what you’re getting yourself in for. You should consider:

Cost of Living

Luxembourg is known for its high cost of living, with a family of four needing between €6,000 – €8,000 to have a good quality of life.

However, what you get for this is a very high quality of living, with great healthcare, education and public services. Additionally, given the minimum wage is much higher than other countries, this can help balance the higher costs.

Multilingual Environments

Luxembourg is multilingual, with the population speaking Luxembourgish, French and German as the country’s official languages.

When it comes to business, many companies work in English, especially if they are dealing with companies in other countries. Knowing multiple languages can be helpful for business and networking.

Strict Laws Around Employment

Luxembourg is highly bureaucratic, with strong laws around employees and what is expected from employers. Understanding these is important and having a professional on hand to help you navigate them can be a big help.

Step-by-Step Process To Starting A Business In Luxembourg

If you are a Luxembourg local, setting up a business is relatively straightforward. However, if you live outside of the EU or EFTA, you’ll need a residents permit before applying.

If you have this ready to go, then here are a few key elements to consider:

1. Choosing Your Business Structure

The first step in starting a business in Luxembourg is choosing the right legal structure for your business.

Some of these options include include:

• Sole Trader: Simple to set up as long as you have a resident’s permit with very little administration needed. However, the owner is liable for all business debts and legalities.
• Public Limited Company (SA): More regularly chosen by larger companies as it requires a minimum capital injection of €30,000. Shares can be traded publicly and new shareholders can be added regularly.
• Private Limited Company (SARL): Requires a minimum investment of €12,000, with the company shareholders liable for all assets. This is a popular choice for SMEs and startups.
• Simplified Limited Liability Company (SARL-S): Designed for startups or companies with less initial capital (from €1 to €12,000). It can only be set up by a person with a business permit but is a more straightforward (and less expensive) option than a SARL.

2. Register Your Business

Once you have chosen the structure of your business, the next step is to register it. All businesses need to be registered with the Trade and Companies Register (Registre de Commerce et des Sociétés – RCS).

Whilst the process for a sole trader is relatively simple, limited companies require a few more steps. It’s worth noting that a business permit is required before submitting, so make sure you have that to hand. In general, registration includes:

• Drafting Company Documents: These documents outline the company’s purpose, shareholder details, share capital, and other legal requirements. A notary must sign and submit these to the RCS.
• Deposit Share Capital: The minimum share capital (depending on your business structure) must be deposited in a Luxembourg-based corporate bank account.
• Get A Certificate Of Availability For The Name: Ensure your business name is available register it with the Luxembourg Business Registers (LBR).

3. Get Your Business Licence

Most businesses in Luxembourg need a business permit issued by the Ministry of the Economy. To get the permit, you will need to provide:

• Qualifications and Experience: Depending on the business type, you may need to show your qualifications to prove that you are able to run a business in this field.
• Financial Resources: Evidence of finances to set up and sustain the business.
• A Clean Criminal Record: Proving that you are a citizen that complies with the law.

Certain industries may also need other permits, for example those in healthcare or food and drink. If you are unsure if your company will need any additional documentation, visit the relevant website.

4. Register For Taxes

After applying for your business permit, register for tax through the Luxembourg Inland Revenue (Administration des Contributions Directes – ACD).

Whilst they may get in touch automatically after a business is registered, it’s best to stay on top of the process and get your application in early.

You will need to register for:

• Corporate Income Tax (CIT): Ranges from 15% (if profit is below €175,000) to 17% (if profit exceeds €175,000)
• Value-Added Tax (VAT):  The standard VAT rate in Luxembourg is 17%, the lowest in the EU. Businesses must register for VAT if their yearly turnover is above €35,000.
• Social Security Registration: You will need to register for this if you are a sole trader and also if you are a company. This covers things like unemployment, health insurance and workplace accidents. All business leaders will need to register with the Joint Social Security Centre (Centre Commun de la Sécurité Sociale – CCSS) who will be able to provide more details based on a company’s specific set up.

5. Open A Corporate Bank Account

Opening a corporate bank account is an important step, especially for companies that will need to deposit a minimum investment. Luxembourg is well set up to offer a huge number of options for businesses, so don’t worry too much about finding the right option.

You’ll need this account when you register, although it will become useful when you start operating too.

6. Hire Employees

If you are planning to hire employees, it’s important that you get to know the country’s labour laws.

• Employment Contracts: All contracts must be registered, and companies are liable to ensure their workers can legally work in the country. This includes both open and fixed term contracts.
• Minimum Wage: Luxembourg has one of the highest minimum wages in Europe, standing at €2,141.99 per month.
• Social Security Contributions: Both the employer and employee contribute to social security, so ensure that any budgets around wages include this contribution.

Starting A Business In Luxembourg

Starting a business in Luxembourg can be an amazing opportunity to work in a dynamic economy with a highly skilled workforce. However, given the laws and regulations, it does require a lot of planning to sail through the process smoothly.

Either way, with careful preparation you can make sure you set your business up for success from the start. Good luck!