How to open a freelance business in Luxembourg

The first thing you need to decide on at the outset is a business permit. For most paid services (including many "intellectual" services, unless they are included in a narrow list of exempt services), you cannot do without one. The permit is issued subject to compliance with the conditions of good repute, qualifications (if required), actual management and the existence of a real place of business in Luxembourg, and the fee for issuance is €50.

The second nuance is your passport and residency status. Third-country nationals who want to start a business "on the spot" usually need to go through a migration procedure: first, obtain a residence permit, then file a declaration of arrival, undergo a medical examination, and apply for a residence permit.

Further on, everything boils down to three mandatory blocks: taxes (including VAT), social contributions, and banking infrastructure. For VAT, the key threshold for small businesses is €50,000 in annual turnover excluding VAT: if this threshold is not reached, an exemption applies, but it does not remove obligations in a number of cross-border cases (for example, when you become a 'payer' due to services/purchases from abroad or provide services in another EU country under B2B rules).

Where to start

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In Luxembourg, "freelancing" in IT/design/consulting almost always means that you sell your services regularly and for money. This falls under the characteristics of economic activity, so you become a taxpayer and a participant in the social security system.

Industry-specific nuances (regulated professions, requirements for diplomas/work experience/membership in professional bodies, licences) need to be clarified for your specific activity: the list of types of work subject to authorisation and qualification requirements depend on the profession code.

Learn about taxes

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Understanding the tax system in Luxembourg will significantly reduce stress and help you avoid future problems with the authorities.

Direct taxes: what freelancers usually pay

Income tax in Luxembourg is progressive: a rate of 0% applies to income up to €13,230 per year, with a top rate of 42% for income above €234,870 (the 2025 rate applies as a baseline).

A "solidarity levy" is added on top of this to the employment fund: usually 7% of the tax amount, and 9% for high incomes (the threshold depends on the tax class).

Important point for service freelancers: impôt commercial communal only applies to the profits of "commercial enterprises". The calculation formula is based on 3% of profits and includes a tax-free allowance (specifically, €40,000 for "other" taxpayers who are not subject to corporation tax).

VAT: thresholds, rates, reporting

The "low turnover" threshold is €50,000 per year. As long as this threshold is not exceeded, VAT does not apply, but you are still required to report your turnover for the previous year to the authorities. You may be liable for VAT due to cross-border transactions (for example, if you become a VAT payer for services received from abroad or provide B2B services in another EU country).

The standard VAT rate is 17%; reduced rates are 14% and 8%, and the super-reduced rate is 3%. The frequency of declarations depends on turnover; according to the law, the default regime is monthly, and the specific regime is determined by the administration.

Invoicing

Even freelancers in Luxembourg need to be disciplined when it comes to invoicing: for amounts over €100, there are additional mandatory details; for invoices up to €100, the requirements are less stringent (date, seller, description, price including taxes and VAT amount/calculation data).

A VAT-compliant invoice requires a unique serial number and other mandatory elements. If you are exempt from VAT, invoices must bear the note "TVA non applicable – Article 57bis...".

Social insurance and pension contributions

Self-employed persons are required to pay social security contributions themselves and insure themselves against key risks (illness, retirement, accident, dependency). For beginners, contributions are often calculated on a "temporary basis" and then recalculated based on actual income. The base can be adjusted according to the expected income forecast.

Official social security rates are published annually. As a guide for the 2026 parameters, the Centre commun de la sécurité sociale notification specifies, in particular: pension insurance 8.50% from the employee and 8.50% from the employer; sickness 2.80% + 2.80%; accident insurance — basic 0.65% with a bonus-malus coefficient; as well as the minimum and maximum bases (€2,703.74 and €13,518.68 per month).

An important aspect for freelancers is that theoretical tax risks should be included in the cost of services/work, as the former will increase along with income growth.

If you do not live in Luxembourg and are self-employed in several countries, coordination rules apply: as a general rule, you pay contributions either where you live (if a significant part of your activity — 25% or more — is carried out there) or where the 'centre of interest' of your activity is located.

Banks and accounting

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For VAT registration, a bank account (IBAN/BIC) is usually required. The list of bank checks is not much different from the standard one. You will be asked to provide: your identity, address, ownership structure (for companies), sources of funds, and the economic rationale for transactions. The specialised guide to opening a corporate account (through the banking association) directly refers to standard documents on beneficiaries, including a current extract from the register of beneficiaries and a UBO form (for companies).

Accounting and reporting

Guichet emphasises the basic principle: the obligation to keep accounts and prepare annual accounts applies to companies subject to the provisions of the Commercial Code. For companies, there is an additional public aspect: annual reports are submitted online to the register and recorded in the publication system; publication of documents in RESA is free of charge, but fees are charged for registration/deposit actions at the rate set by the registry operator.

If you choose SARL-S as your operating mode, the form description itself specifies a deadline: financial statements must be submitted to the RCS within seven months of the end of the financial year (six months for the meeting + one month).

Liability insurance and "business address"

Professional responsibility is another important aspect of freelance work. In some industries, it is mandatory under professional access rules; clients almost always require it in contracts (especially B2B with large companies). Industry differences need to be clarified here.

The key administrative pitfall is the address and actual presence. A business permit requires physical infrastructure in the country; a "post office box" as a substitute for a place of business is often not accepted.

If you want to work from a coworking space, check that the chosen scheme provides you not only with a postal address, but also with a real workplace that can be confirmed by a contract — because confirmation of establishment/lease appears in the business permit documents.

Contracts, customer acquisition and typical risks

One of the main risks for a novice freelancer is a cash flow gap. There is a basic list of regular expenses that are best included in the price from the outset:

• taxes and advances;
• social contributions;
• reserve in case of downtime without projects;
• accounting/banking/insurance expenses;
• VAT (if applicable).

The most sustainable path for a freelancer in Luxembourg is B2B contracts with clear technical specifications and understandable payment terms. Be sure to include the following in the contract:

• subject/result, terms and procedure for acceptance
• rate/fixed price
• billing procedure and payment terms
• IP (rights to the result)
• confidentiality, liability/limitations
• termination procedure, applicable law and dispute resolution

Main reasons for failures

Most often, failures at the start-up and development stage of a freelance business are associated with inattention or an insufficiently serious attitude towards legal requirements:

• They incorrectly determined whether a business permit was required and started without one — there are specific penalties for this.
• No actual place of business (or it cannot be confirmed by documents) — the permit is tied to physical installation/lease.
• Bank compliance: without a transparent model of income and sources of funds, it can take a long time to open an account, which slows down VAT registration and normal work with clients.
• VAT errors in cross-border services: even with a "franchise", you may still be required to file returns in certain cases.
• Underestimation of social contributions and cash gaps.