Starting a new business in a different country can be all the more complex if you’re not aware of the local regulations. Here are some pointers on starting a business when living in Luxembourg.
In Luxembourg, self-starting businesses are set up in three categories: commercial activities, skilled craft trades, and specific professions. These require a business permit, and to obtain one there is a fair amount of paperwork and a few costs involved. If you are an expat living in Luxembourg and are ready to start a small business, the process is fairly simple; larger businesses have to consider employee labor laws and taxes. Here is some useful information when starting a business in Luxembourg.
Three categories of a business
The first step when self-starting a business is to find your fit among the three business categories: commercial activities, skilled craft trades and specific professions.
This includes wholesale, retail, intellectual services, industrial activities, manufacturing, travel agents real estate, hotels and hospitality, and restaurant and catering. If you want to start a business in commercial activities, you must register the business in the business register in one month. Your business or self (if the business is your name) must register under the Luxembourg Chamber of Commerce.
Skilled craft trades
This includes numerous trade and crafts in food, fashion, health and hygiene, mechanics, construction, communication, multimedia, performing arts, arts and miscellaneous.
Your business or self (if the business is your name) must register under the Luxembourg Chamber of Commerce, although this is done automatically by tax authorities.
This includes architects, interior designers, landscape architects or landscape engineers, construction engineers, independent engineers, surveyors, town and country planners, chartered accountants, accountants, economic advisors, consultants, patent attorneys.
Other professions, like lawyers, doctors, auditors, banking and other specific financial services are covered by different laws. Others, like journalists, are considered self-employed intellectual services and do not require a business permit of the work is carried out in their own name (if it is by a company, like a publisher, the business permit is required).
No matter what your business, you will need to register for income tax and value-added tax (VAT), and you will need to register for social security. Use the electronic application at the Luxembourg government site at www.business.lu to complete online. And last, one big rule of thumb for starting a business in Luxembourg is that it must have a physical address as an established location of business when obtaining a business permit.
Starting a business in Luxembourg: applying
An application form can be obtained from the Ministry, from the Chamber of Commerce’s Business Information Center (Espace Enterprises) or downloaded from the Luxembourg government site at www.mcm.public.lu. Stamp duty of €24 must be submitted with each application. Any documents necessary for your application must be translated into French or German by a qualified translator. A permit is usually issued after about three months. After completion, business permits may be collected from the Social Security Centre (Centre Commun de la Securité Sociale).
Business permits for public companies are sent by post. All permits are in the form of a card which must be shown on request. Once opened, the nature of the business and the governmental authorization number must be shown on the company’s stationery, their e-mails, websites, estimates, invoices, and in shop fronts and windows of business premises. If the ministry refuses to grant a permit, an appeal must be made to the Administrative Court within one month of the notification of the refusal.
Evidence of professional qualification usually comes in the form of a certificate, university degree, or other diploma.
You must supply an authenticated copy of evidence; this can be done at a town hall or the Centre Emile Hamilius in Luxembourg City. All expats living in Luxembourg for less than five years must supply evidence of good standing in the form of a criminal record and a certificate of non-bankruptcy, or a declaration made before a notary/affidavit. Attention will be paid to good standing related to business conduct. This means that only breaches of business conduct will be a cause for concern. Applicants involved in bankruptcy without an effect on their good standing might receive a permit on the condition that they receive training in company management.
Costs of obtaining a permit
The overall costs for notaries can add up. Certified copies, notary fees, registration fees, and other legal fees will total out to about €1,000 or more, so be prepared for payments. Also, for the business license, you have to pay a tax stamp for €24, although the price can increase depending on your activity.
While most who start their own small business in Luxembourg are not in the same game, there are a number of tax-efficient vehicles for holding investments or finance activities, namely SPF and SIF. SPF (Societe de Gestion de Patrimoine Familial) are businesses exempt from income, withholding and net worth tax, whose activities are restricted to acquiring, and holding managing and disposing of financial assets. Exactly what defines itself as a financial asset can be a long and broad list of possibilities. Also, all commercial activities, granting interest loans, and offering services are prohibited.
SPF shareholders must be individuals, private wealth vehicles or intermediaries acting on behalf of private wealth vehicles. SIF (Special Investment Fund) received the same tax-exempt perks, set up as a contractual fund, a variable capital or fixed Capital Company. Its net assets must be at least €1.25 million.
Other types of associations
Civil companies, joint ventures, economic interest groups, non-profit organizations and silent partnerships are all recognized types of businesses associations. Those setting up a branch in Luxembourg from a non-resident company can do so under the same registration laws as a company incorporated (address, activity, parent company name, and persons in charge of the branch). If the non-resident company has its main headquarters outside of the EU more documents and registrations may apply.
Adding Social Security
If your business expands to include employees, know that as an employer you will be responsible for a certain percentage of social security: 3.05% for sickness and 8% for a pension for example (the monthly minimum social salary is about €1,800 gross).
Starting a business in Luxembourg: getting financial aid
There is financial aid available for setting up your business. Small and medium-sized businesses can be rewarded with grants or reduced interest rates by the Ministry of Middle Classes. These can be awarded on the condition that the company invests in fixed assets, participates in exhibitions, makes investments related to the protection of the environment, renovates polluted sites, or invests in innovation and research and development. The main principle of supplying this aid is to encourage competition among businesses. Details about the application are available in English on the ministry’s website. Furthermore, the Société Nationale de Crédit et d’Investissement is a bank that specializes in financing investments made by companies. It provides start-up loans for new firms.
New businesses set up in the tourism industry can turn to the Ministry of Tourism. They can be granted financial aid for any investments made in the tourist infrastructure. The Ministry of the Economy and Foreign Trade provides financial aid to companies for investment or research and development if they promote the economic development of Luxembourg.
There are also specific grants available for those that have been unemployed for a while and want to set up their own business. The grant is equivalent to the amount of unemployment benefit the job seeker would receive during six months. Applications should be sent to the Ministry of Labour.
The Chamber of Commerce has set up a company for loan guarantees called the Mutualité de Cautionnement et d’Aide aux Commerçants. This guarantees loans from authorized lenders.
To stay up to date on upcoming legislation that may affect your business look at the Chamber of Commerce website under a section called ‘Avis et Affaires Juridiques’. The information is only available in French. For extra help setting up your business, the Chamber of Commerce supplies brochures, DVDs, and other forms of assistance in English. Other sources include www.businessplan.lu, and the Portail Entreprises on the Luxembourg government site. The first lists instructions in English and requires a login, the second is a business portal in French and the last has a detailed questionnaire in French.
Setting up an offshore company
If you are considering setting up an offshore company, there are several major pros and cons you need to bear in mind.
Offshore incorporation is a straightforward process in all of the popular offshore financial centers and tax havens around the world. They can provide a wide range of benefits to the company and company principals.
You can read more about the pros and cons of setting up an offshore company, including privacy and reduced tax liability, in our helpful guide. This also explains how to register, establish, or incorporate your business outside of your country of residence.
Business terms (French – German)
- Business permit: permis de commerce
- Professional qualification: qualification professionnelle – berufliche qualifikation
- Good standing: en règle – das gute Ansehen
- Financial aid: aide financière – finanzielle unterstützung
- Grant: subvention – zuschuss
- Interest rate: taux d’intérêt – zinssatz