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How to get support and benefits for business in Luxembourg
In this article we will explain what kind of help a business can get from the government, private or public programs and other companies.
Luxembourg offers entrepreneurs everything they need to develop their business — financial support, tax optimization tools, business incubators, and much more.
In the Grand Duchy, there are many support measures for start-ups, as well as for developing companies and start-ups. The Fit 4 Start program, which takes place twice a year, and the support of the HoST business incubator are the most common.
The Luxembourg government is picking tech start-ups to essentially make them its own. These projects can be at completely different stages of development and readiness. Each start-up that reaches the finals receives 150 000 euros. There’s no specific field Luxembourg favors: the projects chosen are always different.
Alex in interview for Luxtoday
State program for startups Fit 4 Start
This is a special government accelerator program. It brings together startups from all over the world, funds them and helps them relocate.
Supported industries:
Medicine
Digital therapeutics and diagnostics, remote monitoring, medical devices and in vitro diagnostics
Digital Technologies
Automotive, logistics, energy, cybersecurity
New Technologies
Blockchain, Artificial Intelligence, Machine Learning, Robotics, Cybernetics
Space Technologies
Telecommunications, Earth Observation, Navigation, Space Security
Participants are recruited twice a year. Only 15 startups are selected. And this is an opportunity for them to receive a grant of 150,000 euros and to relocate to Luxembourg.
Upon successful completion of the program and raising over 50,000 euros in private capital, an additional 100,000 euros can be obtained.
Support from Fit 4 Start includes:
Coaching Program
Six months of work with experts in startup operations and development.
Business Funding
Opportunity to receive up to 150,000 euros in business support.
Office space
Free access to office space to collaborate on projects.
Network
Opportunity to make useful contacts for the further development of the company.
Access to technology
Access to high performance computers and technologies available in Luxembourg.
Startup Development Center
It is also known as the House of Startups (HoST). HoST is the Grand Duchy's shared workspace with an area of almost 6,000 square meters. It houses teams of different startups under one roof, as well as innovation centers, incubators, business accelerators and consulting services for startups.
In addition to IT infrastructure, the Startup House is equipped with conference rooms for meetings and focused work, as well as spaces for thinking through hypotheses and discussing ideas.
Supportet industries:
FinTech
Technologies and innovations in financial and banking services
UrbanTech
Commerce, tourism, ecology, logistics, housing
RegTech
Technologies that regulate the use and analysis of data
FundTech
Development of technologies for investment funds, blockchain, digital security
HOST supports other industries as well:
Insurance
Ecology
Tourism
Retail
Logistics
Construction
Support from HOST includes:
Technologies
Advanced IT technologies with secure access.
Events
Special events for entrepreneurs and their employees.
Network
Access to a vast network of members and partners.
24/7
24/7 access to a secure network.
Dedicated registration desk
And technical support during business hours.
The House of Entrepreneurship (HoE) has the same goal as HoST — to support entrepreneurial ideas and projects. The House of Entrepreneurship supports both start-ups and established businesses:
- For those who have already started a business — organizes special webinars where it breaks down news relevant to its target audience.
- For those who are in the process of starting a business — advises on legal issues related to starting a business.
- For all entrepreneurs — advises on business management issues, e.g. tax, legal, etc., creates an ecosystem of entrepreneurs by networking in the community.
If you are just thinking about starting a business, you may find it helpful to read a step-by-step guide to the process.
How to register a company in Luxembourg
The Luxembourg Innovation Agency promotes the digital transformation of the economy in general and businesses in particular. Its mission is to promote collaborative innovation projects that stimulate the development of a sustainable, competitive and digital economy.
Luxinnovation. Source: Facebook
Luxinnovation acts as a partner for those who want to launch successful innovation activities in Luxembourg: from start-ups and managers of established companies to foreign companies and investors.
In Luxembourg and especially in LuxInnovations I felt the difference from the first interaction. If before I had more or less Zoom calls with no results, here I was allocated to a huge meeting room, and I got a cup of coffee. Then two people came to evaluate and listen to my idea. And they liked the potential.
Daria in interview for Luxtoday
Luxinnovation's programmes
Many business support programs are designed primarily to help companies improve their competitiveness. They provide you with expert advice as well as government funding.
Fit 4 Digital
This track will help you better understand various digital technologies and how they can help you increase sales of your product, find new customers, improve relationships with your audience, and eliminate unnecessary manual processes.
Fit 4 Innovation
In this program, you will learn how to make your business more efficient. You will work with consultants to analyze your operations and identify opportunities to improve your internal organization, finances, and customer relationships.
Fit 4 Innovation — Health Tech Market
This program helps companies navigate the regulatory framework to obtain the specific labeling required for new medical devices and technologies. With this program, you will be able to legalize your product faster and bring it to the European market
Fit 4 Sustainability
For companies that want to combine sustainability with competitiveness. Experts in the field will help you understand energy reduction, carbon footprint and waste reduction, and other environmental issues.
The Innovation Agency offers a wide range of support programs. To understand if you can benefit from their support, just fill out the form on the website.
Luxinnovation has many different programs to support companies of different sizes, and each has its own rules. However, in most cases you can follow our checklist:
What do you need to apply for Luxinnovation programm
Review the checklist carefully
Properly filling out and preparing the application in one of the most important steps in obtaining the support from Luxinnovation.
*The mandatory items are marked with red asterisks.
Ask for consultation from Luxinnovation
In a special section of the website, you can fill out an application and a Luxinnovation consultant will help you choose a program and tell you how to apply correctly.
Review the key selection criteria
These are usually described in the Eligibility section and relate to company size and development areas.
Fill out a special form on the website
The questionnaire consists of standard questions such as company name and logo, names of founders, contact information, etc..
Prepare a short video
Each program has its own requirements for this, but it should always be no longer than 1 minute.
Meet the deadlines
You can always find them on the official Luxinnovation website.
Get feedback
If your application is filled out correctly, Luxinnovation will get back to you with feedback.
Prepare for the pitch
To which you will be invited after your application has been selected To which you will be invited after your application has been selected.
Review the checklist carefully
Properly filling out and preparing the application in one of the most important steps in obtaining the support from Luxinnovation.
*The mandatory items are marked with red asterisks.
Once your application is approved, you will have to:
- Analyze your company
Together with a Luxinnovation consultant, you will be able to analyze your business for a further action plan.
- Get feedback from the expert
Based on the analysis, the expert will draw up a specific plan for the development of your company, including a financial plan and recommendations for further actions.
- Request financial compensation
After receiving the final plan from the expert, you will be eligible for a government grant that will cover up to 50% of the cost of the consultation.
Any company established in or operating from Luxembourg must pay taxes: such companies are considered tax residents. However, the Grand Duchy has a rather convenient tax system and several tax regimes.
Tech companies in Luxembourg have an effective income tax rate of 5%. If what you are doing is an intellectual property product, then you can pay taxes at a favorable rate.
Alex on interview for Luxtoday
Tax optimization
This is available to a group of companies in Luxembourg thanks to the consolidated taxpayer regime. It allows the entrepreneur to reallocate profits and losses within the group and reduce the overall tax base.
The regime is available if the parent company holds 95% or more of the capital of the subsidiaries.
Progressive corporate tax scale
Works according to the following principles:
- 17% for companies with a turnover of more than 200 thousand euros per year. Including unemployment contributions and a municipal tax of between 6.75% and 10.5%, the effective tax rate would be approximately 24.94%.
- 15% on income up to 175,000 euros per year. Including unemployment contributions, plus a municipal tax of between 6.75% and 10.5%, the effective tax rate will be approximately 22.8%.
- Fixed amount of 26,250 euros + 31% on the amount above 175,000 euros — for income between 175,000 euros and 200,000 euros per year.
Variable VAT rate
- The standard 17% is charged to companies for the supply of goods and services. But! If the turnover is less than 35 thousand euros per year, a preferential VAT regime applies.
- The reduced 14% applies to businesses selling certain wines, as well as securities management companies and some others.
- The reduced 8% applies, for example, to the supply of gas and electricity.
- The ultra-low 3% applies to the services of writers, composers and performers, and is also levied on businesses in the food industry and some others — pharmaceuticals, radio and television broadcasting, media and periodicals — electronic and paper.
- Exemption from 0% VAT was granted to resident investment funds, entrepreneurs from the sphere of medical, insurance and financial services.
Special tax regime
- Resident investment funds pay an annual amount of 0.5% of the net assets of the fund. In some cases, this rate may be reduced to 0.1%. This is called the "subscription tax". They are exempt from corporate, municipal and income taxes.
- Private equity funds (SPFs) pay a "subscription tax" at a rate of 0.25% of the tax base. They are exempt from corporate income tax and capital gains tax. The amount of tax for SPFs is not less than 100 euros and not more than 125,000 euros per year.
- In some cases, 80% of the net corporate income from intellectual property assets is exempt from corporate income tax.
Read more about tax declarations for companies and individuals in our article
Read moreIn Luxembourg, there are several ways to get financial support through different instruments.
SNCI
Entrepreneurs engaged in research and innovation activities can obtain financing from the Société Nationale de Crédit et d'Investissement. SNCI is a banking institution specializing in medium and long-term financing for Luxembourg companies.
SNCI credits
The SNCI offers different types of loans depending on the size of the company and the project. Financing ranges from an average of 25% of the value of industrial projects to as much as 75% of the investment in the case of first-time applications by young craftsmen, traders, and in the case of restaurants and hotels.
Credit forms
In Luxembourg, business owners can count on several types of loans.
Bank financing
In addition to a medium or long-term loan, a bullet loan (repayment in one installment at the end of the term), a bridge loan, or auxiliary, syndicated, discount, etc. can be obtained. The type of loan is best chosen in consultation with the bank and the business house.
Mezzanine financing
This is essentially a medium-term loan agreement — 7-10 years — between an investor (a person who puts money into a business and acts as a lender) and an entrepreneur who needs funds for his or her business.
Crowdfunding
Instead of taking out a loan, startups and small businesses can choose crowdfunding to finance specific projects with small amounts of money.
To do this, the entrepreneur must:
- Propose a specific project to finance;
- Choose a crowdfunding platform.
Typically, in this type of fundraising, the platform operator receives a percentage of the funds raised in exchange for providing the platform and publishing auctions.
You can learn more about the crowdfunding process by writing to crowdfunding@cssf.lu.
Investment grants
Companies that meet the general conditions for government aid can apply for it. To do so, you must apply for aid through the online wizard at MyGuichet.lu.
The list of potential beneficiaries includes:
Small and medium enterprises
Green companies
Those that invest in eco-technologies or use environmentally friendly processes.
Tourism projects
Those that aim to develop the national tourism infrastructure.
Agricultural micro-enterprises
Those that employ no more than 10 people and produce agricultural products.
Electric mobility development companies
Those investing in electric vehicle charging infrastructure.
To find out if you are eligible for investment aid, it is worth contacting the House of Entrepreneurship or the Luxembourg Chamber of Commerce. Luxembourg also offers various subsidies and situational/seasonal reimbursements for businesses.
Frequently Asked Questions (FAQ)
Can startups in Luxembourg receive government support
Yes, there is a special government accelerator program called Fit 4 Start. It brings together startups from all over the world, finances them and helps them relocate. Sectors that Fit 4 Start is interested in: HealthTech, FinTech, data analytics, space.
Does Luxembourg have tax incentives for companies and startups
Yes, the Grand Duchy has a fairly convenient tax system, and there are also various tax schemes and incentives in the country. For example, the VAT rate for companies varies from 0% to 17% depending on the annual turnover and the type of business.
Is it possible to get a business loan in Luxembourg
Of course, and banks are ready to offer different loan options: from long-term loans (for 7-10 years) to those that can be repaid in one payment on a fixed date.
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Source: guichet.public.lu, blog.ewub.lu
We took photos from these sources: Floriane Vita for Unsplash
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