Time of establishment of the company
We establish all types of companies, investment companies (e.g. SICAR, SICAV) and other investment funds in Luxembourg. Luxembourg is an attractive place not only to do business, but also to obtain tax residency and invest capital there. Our extensive knowledge of Luxembourg and its opportunities allows us to advise you on the best choices for setting up a company in Luxembourg.
Types of companies:
- Limited Liability Company (SARL – société à responsabilité limitée)
The minimum share capital is EUR 12,500 and must be paid up in full at the time the company is established. It can be used as funds of the company after its foundation. SARL can be set up by from two to forty founders. Their liability is limited to initial contributions. The director must be a natural or legal person who does not have to be a Luxembourg resident. It is also possible to set up a one-man SARL company.
- Joint stock company (société par actions, société anonyme)
The minimum share capital is EUR 31,000, where a SA may be established upon payment of 25% of the share capital. As with SARL, a director can be a natural or legal person who is not a resident of Luxembourg. Min. 3 directors are required. The articles of association must be in the form of a notarial deed. Liability is limited to the amount of the contributed capital.
- General partnership (société en nom collectif)
It must have at least two shareholders. Liability in a general partnership is unlimited. The amount of contributions to the company and the form of the contract depend exclusively on the will of the founders. The articles of association are partially published.
- Limited joint-stock partnership (société en commandite par actions)
As in the case of a joint-stock company, the minimum share capital is EUR 31,000. Company can be established upon payment of 25% of the share capital. There must be at least 7 shareholders in a limited joint-stock partnership. The articles of association must be concluded in the form of a notarial deed.
Company registration procedure
Registration of the company:
- Preparation of the articles of association;
- Payment of the initial capital to the account and obtaining confirmation from the bank;
- Registration of the company in the Commercial Register;
- Obtaining a business license;
- Obtaining a VAT number.
A minimum of one shareholder is required to establish a company. The maximum number of shareholders is 40. Foreign shareholders are allowed.
A minimum of one director is required to manage the company.
Companies with a minimum of 150 employees must establish a mixed works council consisting of both employer representatives and employee representatives in the same number.
The company must have its registered address in Luxembourg.
Time to set up a company:
The time to set up a company is approximately 2 weeks.
The capital amounts to EUR 12500 and is paid into the account in full during the registration of the company.
Taxes and finances
Tax residence of the company
A company is resident if its registered office or central administration is in Luxembourg. Residents pay tax on income from both domestic and non-domestic activities. Non-residents pay tax only on income earned in Luxembourg. Taxable income is calculated on the basis of the profit shown in the balance of trade.
- 18% for companies whose income exceeds EUR 30000
- 15% for companies whose income does not exceed EUR 25,000
- For companies whose income is in the range of 25,000-3000000 Euro, the tax is 3750 Euro + 33% of the income exceeding 25,000 Euro.
- A solidarity fee of 7% is added to each tax return.
Operating expenses may be recognised as a deductible expense and reduce the tax base. Depreciation is usually carried out on a straight-line basis. The degressive method is also acceptable for fixed assets. In the latter case, the depreciation rate may not exceed three times the straight-line method or 30%. From 2017 losses may be deducted only for the next 17 years. Those that arose before 2017 are not subject to such limitation and may be deducted at any time in the past. Retrospective deduction is not allowed.
Counteracting tax avoidance
With regard to transfer pricing documentation, tax authorities may require documentation to verify transactions between related parties. There are no thin capitalisation rules as such, but in practice the tax administration applies a debt-to-equity ratio of 85:15. Multinational companies must prepare a report on their activities in each country in accordance with the OECD guidelines.
A tax year is a calendar year or an accounting year. Tax returns together with payments must be submitted by 31 May of the following tax year. Tax returns are submitted in electronic form. In special cases, the company may express its income in a currency other than the Euro. The submission of consolidated accounts is permitted. The parent company must hold a minimum of 95% of the shares of an associated company. The accounts may also be submitted by two companies subordinate, directly or indirectly, to the same company (which in this case is not subject to the accounts). The limitation period shall be 5 years from the end of the year in which the tax liability arose. In the case of tax evasion or fraud, this period may be extended to 10 years.
Dividends paid to non-residents are subject to 15% tax, unless tax agreements reduce it.
The standard rate is 17% (reduced to 14%; 8%; 3%). As a rule, everyone is subject to VAT registration. Declarations are submitted annually (until 1 March or 1 May, depending on the entrepreneur’s situation), quarterly or monthly (within 15 days from the end of the tax period), depending on the turnover.
- When selling a property, the tax rate ranges from 0.7% to 1% of the property’s value. These rates can be multiplied by coefficients depending on the location and type of property.
- The basic tax rate on transfer of real estate is 6% of its value. A transcription tax of 1% is added to this. For the transfer of real estate in the city of Luxembourg an additional fee of 50% of the transfer tax may apply.
- The stamp duty at different rates is imposed on, among other things, the registration of notarial deeds.
- Customs duty is levied on products coming from outside the EU. Excise duty is levied on electricity, gas, oils, tobacco and alcohol.
- These taxes are levied on electrical and electronic equipment as well as on packaging materials.
Local labor law
Luxembourg is one of the most interesting tax jurisdictions in the world. This is due to many factors such as:
- a network of favourable double taxation treaties;
- holding regime;
- attractive rules governing tax residency
- attractive tax rates.
Note – Tax planning using companies in Luxembourg should only be carried out with the participation of qualified advisors.
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