Luxembourg

Luxembourg is one of the smallest countries in Europe, and ranked 179th in size of all the 194 independent countries of the world; the country is about 2,586 square kilometres (998 sq mi) in size, and measures 82 km (51 mi) long and 57 km (35 mi) wide. Its capital, Luxembourg City, together with Brussels and Strasbourg, is one of the three official capitals of the European Union and the seat of the European Court of Justice, the highest judicial authority in the EU.

Population:

In 2016, Luxembourg had a population of 576,249, which makes it one of the least-populous countries in Europe.

Language:

Three languages are recognised as official in Luxembourg: German, French, and Luxembourgish.

The Grand Duchy of Luxembourg is a representative democracy in the form of a constitutional monarchy, with hereditary succession in the Nassau family. The Grand Duchy of Luxembourg has been an independent sovereign state since the Treaty of London was signed on 19 April 1839. This parliamentary democracy has one particularity: it is currently the only Grand Duchy in the world.

The organisation of the Luxembourg State is based on the principle that the functions of the different powers have to be spread between different organs. As in many other parliamentary democracies, the separation of powers is flexible in Luxembourg. Indeed, there are many relationships between the executive and legislative powers although the judiciary remains completely independent.

Luxembourg is one of the world’s wealthiest countries. It has one of the eurozone’s highest current account surpluses as a share of GDP, maintains a healthy budgetary position, and has the region’s lowest level of public debt. Economic competitiveness is sustained by the solid institutional foundations of an open-market system

Currency:

EUR (€)

Exchange Control:

There are no exchange control or currency regulations. However, under anti-money laundering rules, customers must fulfil identification requirements when entering into business relations, opening bank accounts or transferring more than EUR 15,000.

Financial services industry:

The financial sector is the largest contributor to the Luxembourg economy. Luxembourg is an international financial center in the European Union, with over 140 international banks having an office in the country. In the most recent Global Financial Centers Index, Luxembourg was ranked as having the third most competitive financial center in Europe after London and Zürich. Indeed, the financial assets of investments funds as a ratio to GDP increased from approximately 4,568 percent in 2008 to 7,327 percent in 2015.

Read more:

• Luxembourg merchant account
• Luxembourg bank account

The Luxembourg Corporate Law is represented by the Law concerning Commercial Companies 1915 revised several times. The Law stipulates the conditions the legal entities can be established, the rules of their function, the procedures which needs to be performed before mergers, liquidation and any type of legal entity transformation.

Type of Company/Corporation:

One IBC Limited provide Incorporation service in Luxembourg with the type Soparfi and Commercial.

Business Restriction:

The European Union (EU) imposes certain prohibitions or restrictions on:

• the import/export of certain types of goods (weapons, ammunition, dual-use goods, etc.) to/from certain third countries;
• persons or establishments (freezing of funds and economic and financial resources, denial of visa, etc.).

Some of these restrictions are derived from Resolutions taken by the United Nations Security Council or the Organisation for Security and Co-operation in Europe (OSCE). They are adopted in the EU either through common positions of the Member States in the EU Council, or by decisions taken by the EU Council, or by EU Regulations directly applicable in Luxembourg.

Company Name Restriction:

A newly formed Luxembourg corporation must select a unique corporate name which is not similar to other corporations. The corporate name must also end with the initials “AG” or “SA” to designate the particular type of corporation that it is. Also, the corporation’s name cannot be similar to a corporate shareholder. Once formed the Luxembourg certificate of incorporation will bear the company name.

• Step 1: Select basic Resident/Founder nationality information and other additional services which you want (if any).
• Step 2: Register or login and fill in the company names and director/ shareholder(s) and fill in billing address and special request (if any).
• Step 3: Choose your payment method (We accept payment by Credit/Debit Card, PayPal or Wire Transfer). (Read: Liechtenstein company formation cost)
• Step 4: You will receive soft copies of necessary documents including: Certificate of Incorporation, Business Registration, Memorandum and Articles of Association, etc. Then, your new company in Luxembourg is ready to do business. You can bring the documents in company kit to open corporate bank account or we can help you with our long experience of Banking support service.

• Passport of each shareholder/beneficial owner and director;
• Proof of residential address of each director and shareholder (Must be in English or certified translation version);
• The proposed company names;
• The issued share capital and par value of shares.

Read more:

• Luxembourg offshore company
• How to set up a company in Luxembourg

Capital:

Private limited liability company (SARL): EUR12,000, which must be fully paid up.

Share:

In Luxembourg, a corporation is permitted to issue registered shares. Corporate shares may be issued with or without voting rights, depending on the company’s discretion. Corporate registered shares must be logged in the corporation’s log book. Registered shares can only be transferred by issuing a transfer statement which is authorized by both the transferor and transferee.

Luxembourg corporations can also issue bearer shares which are usually transferred by delivery of bearer certificates. Whoever is in possession of a bearer share certificate is the owner.

Director:

At least one director must be appointed. The director can reside in any country and be a private person or corporate entity.

Shareholder:

At least one shareholder is required. The shareholder can reside in any country and be a private person or corporate entity.

Luxembourg corporate tax rate:

The corporate income tax (CIT) rate has been reduced from 19% (2017) to 18%, leading to an overall tax rate for companies of 26.01% in Luxembourg City (taking into account the solidarity surtax of 7% and including 6.75% municipal business tax rate applicable and which may vary depending on the seat of the company). This measure was planned in order to strengthen the competitiveness of companies.

Also read: Accounting Luxembourg

Financial statement:

Accounting is mandatory for corporations. Records must be kept of the corporation’s finances and business transactions, and maintained so they are always up-to-date.

Office Address and Local Agent:

Luxembourg corporations must have both a local office and local registered agent in order to receive process server requests and official notices. The corporation is allowed to have a main address anywhere in the world.

Double Taxation Agreements:

Luxembourg has concluded more than 70 double tax treaties and nearly 20 such agreements are pending for approval. A Convention for the avoidance of double taxation is advantageous for foreign investors from that country who want to open a business in Luxembourg or vice versa. Luxembourg has signed double tax treaties with the following countries: Armenia, Austria, Azerbaijan, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, china, the Czech Republic, Denmark,...

Business License Luxembourg:

The business license is mandatory, no matter the company’s legal form: SA (PLC), SARL (LLC), SARL-S, sole-proprietorship…

The formation of SARL-S company or a sole proprietorship starts by applying for a business license, which is necessary to register to the Trade Register. SAs and SARLs can registered with the Trade Register before receiving the business license but they are not allowed to perform any operational, commercial or artisanal activities as long as they have not been granted the license in due form.

The business license is in effect a holy grail which allows a Luxembourg company to operate, hire, issue invoices…

Payment, Company Return Due Date

Companies must file their tax returns by 31 May of each year following the calendar year during which the income was earned.

Quarterly tax advances must be paid. These payments are fixed by the tax administration on the basis of the tax assessed for the preceding year or on the basis of the estimate for the first year. This estimate is given by the company pursuant to the request of the Luxembourg tax authorities.

Final payment of CIT must be paid by the end of the month that follows the month of reception by the company of its tax assessment.

Penalty:

A 0.6% monthly interest charge applies for failure to pay or for late payment of tax. Failure to submit tax return, or late submission, result in a penalty of 10% of the tax due and a fine up to EUR 25,000. In the case of late payment authorised by the tax authorities, the rate ranges from 0% to 0.2% per month, depending on the period of time.