Setting up a company in Luxembourg

Luxembourg is another popular European country in which to set up a company. In most cases, Luxembourg companies are set up as holding due to the different facilities and possibilities the current regulation allows.

 

One option when setting up a company in Luxembourg is to manage and control other companies. Depending on the type of the business, the industry in which they operate after an accurate study of the particular circumstances of the business, it is possible to optimise and mitigate the impact of corporation tax. This can be applied between EU and no EU entities.

 

Types of entity

There are different types of entities that can be set up. You should consider all the factors to ensure you make the best decision for your business model.

The main type of entities requested in Luxembourg are Private Limited Company (S.A.R.L.) and Public Limited Company (S.A.).

Both structures require at least one Director and one shareholder in order to be duly incorporated. The members of the company could either be other corporations as well as individuals.

With regards to the capital share, the S.A.R.L. structure requires a minimum capital of € 12,500, which must be fully subscribed. For the S.A. structure, instead, the minimum capital share required is €31,000, and only 25% of that has to be paid to incorporate the entity.

Another difference is that whilst the S.A. entities can issue bearer shares, S.A.R.L. companies can issue nominative shares only. Shares could also be issued with different voting rights, privileged rights, etc.

Corporation Tax

The current regulation states that the current corporation tax rate applicable to Luxembourg entities is 19%.

Participation exemption

According to the Income Tax Law, dividends are exempt from corporate income tax and municipal business tax if the following conditions are met:

A fully taxable capital company which has been incorporated outside of the EU but is a resident of Luxembourg; or a non-resident capital company which is liable to a tax corresponding to Luxembourg corporate income tax.

Luxembourg tax authorities generally consider that the foreign tax must be assessed at a minimum tax rate of 10,5% on a basis comparable to the Luxembourg taxable basis;

At the date the dividend is placed at the disposal of the recipient company, the latter holds or commits to hold a continuous shareholding for at least 12 months;

This shareholding should represent at least 10% of the capital of the distributing company, or its acquisition price should amount to at least € 1,2 million.

Dividends distributed by a Luxembourg company are in principle subject to a withholding tax at a rate of 15%, unless a reduced rate under the provisions of a double tax treaty applies.

Deductibility of interest

Luxembourg tax law does not stipulate a specific debt- to-equity ratio. The tax authorities require companies to comply with the arm’s length standard. For a holding company, a debt-to-equity ratio of 85:15 is required to finance shareholding.

Double Tax Treaties

Luxembourg has signed double tax treaties with 64 other countries, many of which follow the OECD Model Tax Convention.

CONTACT US

ACCEPTANCE

SERVICES

Incorporation Company
Private Limited Company (S.A.R.L.)

The service is comprehensive of the following:

  • Incorporation of the company at the Companies House
  • Articles of Association;
  • Certificate of Incorporation;

Time frame to incorporate the company is between 5 and 10 working days.

Public Limited Company (S.A.)

The service is comprehensive of the following:

  • Incorporation of the company at the Companies House
  • Articles of Association;
  • Certificate of Incorporation;

Time frame to incorporate the company is between 5 and 10 working days.

Bank account

Assistance with the bank account opening for the new company
Assistance with the bank account opening for an existing company
Assistance with the bank account opening for individuals

Other Services

Fiduciary services for shareholders
Fiduciary services for directors  
VAT number application
Registered office in the Luxembourg
Set of documents legalised “Apostille”
Set of documents translated and legalised “Apostille”

Should you require any other service not listed above, please do not hesitate to contact us.