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Opening a SARL in Luxembourg in 2025
The SARL is one of the most common forms of company in Luxembourg and is designed for small and medium-sized companies. In this structure, the shareholders' liability is limited to their capital contributions, which means that they are not liable with their assets for the company's debts. Keep reading to discover the main characteristics of this type of company, the tax implications involved and the procedure to create one.
The creation of a SARL in Luxembourg may or may not be a good option, it all depends on the business project you wish to develop and your personal circumstances. The important thing is to know well the characteristics, advantages and disadvantages of this type of company in order to make an informed decision.
What is SARL in Luxembourg
A Private Limited Liability Company (SARL) in Luxembourg is, as its name indicates, a company where the liability of the partners is limited to the capital contributed. It can be formed by one or more partners, up to a maximum of 100, can be started with a minimum share capital of 12,000 euros and is managed by one or more managers, who may or may not be partners.
This type of company enjoys great popularity in Luxembourg, to such an extent that the SARL is the most common type of company in the Grand Duchy with about two thirds of the country's companies operating under this modality.
Limited liability
The partners are liable only up to the amount of the capital contributed which makes it possible to isolate personal assets in case of debts or financial problems of the company.
Low minimum share capital
With only 12,000 euros minimum share capital, the SARL is accessible to many entrepreneurs and small businesses.
Shareholdings
The transfer of shares is restricted and requires the approval of the majority of the partners, which provides stability to the business structure and protects the interests of the partners.
Flexibility
The SARL offers a flexible management structure, with one or more managers who may or may not be partners.
In Luxembourg, there is also a very similar type of company called a simplified limited liability company (SARL-S). This type of company differs mainly from a SARL by freeing entrepreneurs from certain constraints associated with the creation of the company. For example, a minimum share capital reduced to one euro and a constitution that can be made by private deed, without the intervention of a notary. The following table shows more clearly the differences between the two types of companies.
| Aspect | SARL | SARL-S |
| Incorporation | By mandatory notarial act | By private deed, notarial deed is not required |
| Statutory Flexibility | Flexibility in drafting articles of association | Flexibility in drafting articles of association |
| Duration | Limited or unlimited, must be set by the articles of association | Limited or unlimited, must be set by the articles of association |
| Minimum Share Capital | €12,000 minimum, fully subscribed and fully paid up at incorporation | From €1 to €11,999, fully subscribed and fully paid up at incorporation |
| Shares | Nominative shares, with or without nominal value | Nominative shares, with or without nominal value |
| Transfer of Shares | Requires approval of at least 75% of the share capital, reducible to 50% by the articles of association. | Requires approval of at least 75% of the share capital, reducible to 50% by the articles of association. |
| Stock Exchange Listing | Not allowed | Not allowed |
| Number of shareholders or associates | Minimum 1, maximum 100 shareholders | Minimum 1, maximum 100 shareholders |
| Shareholders' Liability | Limited to the amount of their contributions | Limited to the amount of their contributions |
| Governance Structure | Managed by one or more managers | Managed by one or more managers |
| Application Sector | Suitable for small to medium-sized businesses across various sectors | Designed specifically for sole proprietors and microentrepreneurs |
Tax regimes and benefits
In Luxembourg, limited liability companies are subject to the following taxes:
Corporate income tax (CIT)
This tax is a direct tax levied on profits earned by companies in Luxembourg including SARLs. As of 2025, the tax rate will be reduced by one percentage point to 14% for companies with a taxable income of less than 175,000 euros and 16% for companies with a taxable income of more than 200,000 euros. Between these two income levels, there is a smoothing mechanism. In addition, all legal entities based in Luxembourg must contribute to the employment fund, so this rate must be increased by 7% in favor of this fund. This increases the normal tax rate from 16% to 17.12%.
Communal business tax
The value of this tax depends on the municipality, in the municipality of Luxembourg it amounts to 6.75%. However, a tax allowance of 17,500 euros on taxable profits must be taken into account.
Net wealth tax
This tax is levied on the net wealth of the company and its rate is as follows: 0.5% on the part of the net wealth less than or equal to 500,000,000 euros and 0.05% on the part of the net wealth exceeding 500,000,000 euros.
Property tax
This is a tax levied by local authorities on all real estate, whether built or not, owned by individuals or legal entities, including SARLs. If a SARL does not own real estate, it will not have to pay this tax.
Fixed registration fee
The registration fee is an indirect tax levied when a company is incorporated, including SARLs, the amount is 75 euros and must be paid to the Administration of the Registry, Domains, and TVA (AED).
Nevertheless, there are a great number of tax incentives and legal advantages available to SARLs in Luxembourg, which make the Grand Duchy a very attractive center for the creation of companies. Let us take a brief look at some of them:
Participation exemption regime
The participation exemption regime is one of the most relevant incentives of the Luxembourg tax system and applies to SARLs as well as to other corporate entities. To benefit from this regime, the company must have as its main purpose the acquisition of participations in other Luxembourg or foreign companies and the management of such participations.
The company must hold at least a 10% interest in a subsidiary company or have an investment in that entity of at least EUR 1.2 million. In addition, the participation must be held for at least 12 months or the company must undertake to hold it for that period. This tax regime offers the following benefits:
- No taxation on dividends from subsidiaries.
- A total exemption from withholding tax on dividends from subsidiaries.
- No taxation on capital gains from the sale of subsidiaries.
- No taxation of liquidation surpluses.
- No withholding tax on liquidation distributions.
- No withholding tax on arm's length interest payments if the interest is not profit sharing.
- Taxation of about 5.2% on net income from certain intellectual property assets such as patents, utility models, software copyrights or plant breeders' rights.
Double taxation treaties
Luxembourg has signed more than 80 double tax treaties with other countries, allowing SARLs to benefit from withholding tax reductions on cross-border income such as dividends, interest and royalties and the elimination of double taxation on income generated in other countries.
Grants and benefits for startups and SMEs
Luxembourg offers a variety of financial aids for small and medium-sized companies, many of which may be applicable to SARLs. Among these grants are the following:
Aid for RDI projects: research, development and innovation
The amended law of May 17, 2017 on the promotion of research, development and innovation in Luxembourg establishes a legal framework for granting state aid aimed at promoting R&D&I activities in the country. These aids seek to incentivize competitiveness and economic growth by supporting innovative projects. Among these aids are the following:
Investment aid for environmental protection
These aids are granted under the state aid scheme aimed at promoting environmental protection which was established by the amended law of December 15, 2017. These aids are designed to encourage companies to adopt sustainable practices and environmentally friendly technologies. These aids include the following:
How to establish SARL in Luxembourg
Registering a SARL in Luxembourg requires multiple steps and can take some time, so it is important to know the process well and above all to plan the different stages with anticipation and care. Below we will detail this process step by step.
Preparation of the project and creation of a business plan
Before starting the legal process of incorporation, it is essential to carefully prepare the business project, this involves preparing a detailed business plan containing a market analysis, a marketing strategy, the organizational structure and financial projections.
This document is essential as it serves as a roadmap to guide the company's growth and make informed decisions. It is also a key tool for attracting investors, obtaining financing, assessing the viability of the business and anticipating challenges and opportunities.
Furthermore, during this phase, it is crucial to define many of the aspects that will later be included in the articles of association, such as governance structure, the number of partners and their contribution percentages. These elements help to structure the ideas, demonstrate the feasibility of the project and prepare the necessary documentation for the next steps.
Domiciliation of the company
The SARL must have a registered office in Luxembourg, this choice must comply with local regulations and be suitable for the business activity.Choice of a name for the company and verification of its availabilityBefore establishing a company, the entrepreneurs must choose a name for the company and check its availability. This is done by filing an application for a certificate of name availability electronically with the Luxembourg Business Registers (LBR).
Opening of a bank account and deposit of the share capital
Before signing the deed of incorporation, it is necessary to open a bank account in the name of the company being formed and deposit the share capital. Upon doing so the bank will issue a certificate of blocking of funds which must be presented to the notary as proof. For this step the final articles of association of the company are not required but it is necessary to present at least a draft of the articles of association.
Drafting and signing the Articles of Incorporation
In order to register the company, it is indispensable to first draft its bylaws, these must contain essential information such as the name of the company, the registered office, the corporate purpose, the duration of the company and the capital stock and other details. Most of the elements to be included should have been prepared beforehand in the first step which deals with the definition of the project. Once the articles of association have been drafted, they must be signed before a notary.
Registration with the Registry of Commerce and Companies (RCS)
Once the articles of association have been signed, it is necessary to register the company with the Luxembourg Register of Commerce and Companies (RCS), a step that is usually carried out by the same notary. This registration is mandatory and confers legal personality on the company, officially recognizing it as a legal entity in Luxembourg.
Publication in the RESA
Once registered with the RCS, the incorporation of the company must be published in the Recueil Electronique des Sociétés et Associations (RESA), which is the official gazette of Luxembourg where all acts related to companies are published. This publication is a necessary step to make the existence of the company known to the public and to ensure transparency about its incorporation, domicile, share capital and administration. In Luxembourg, the notary is generally responsible for coordinating this publication.
Application for an establishment authorization if this is necessary
In certain cases, depending on the type of activity of the company it is necessary to apply for an establishment authorization. This authorization is mandatory for commercial, industrial, and artisanal activities and some self-employed activities. It is possible to enter an establishment authorization request in two ways, either by submitting your establishment authorization request online via MyGuichet.lu, from your professional space, or by sending a request for establishment authorization by postal mail to the General Directorate PME, craft and commerce.
General Directorate for SME, Craft and Retail:
- Address: B.P. 535 L-2937 Luxembourg
- Phone: (+352) 24 77 47 00
- Passport, valid for at least 3 months after the expiration date of the requested visa. With at least two blank pages.
Social Security registration
If the company is going to hire employees, it must register with the National Health Fund (CNS) to comply with social security and pension contribution obligations.
Registration for TVA purposes (if applicable)
If the company expects to invoice more than 35,000 euros per year, it must register with the TVA administration to obtain a TVA number.
How to register a company in Luxembourg
SARL companies as we have seen have a lot of advantages and are one of the most popular in Luxembourg. This does not mean however that if you are thinking of setting up a company in Luxembourg that this is the most suitable type of company. It all depends on the business project you want to develop and your personal circumstances, so it is essential to know the other types of companies and choose the one that best suits you. In addition the process of creation can be long and some details can be complicated if you are not an expert in the subject, it is therefore advisable to seek professional advice when starting a business project.
Frequently Asked Questions (FAQ)
What is the minimum share capital required to create a SARL?
The minimum share capital required to establish a SARL in Luxembourg is 12,000 euros. This capital must be fully subscribed at the time of incorporation. Each share must have a minimum nominal value of one euro and the capital can be divided into either nominal value shares or proportionate shares without nominal value.
Does the capital need to be fully paid up at incorporation?
Yes, in Luxembourg, the entire share capital of a SARL must be fully paid up at incorporation. This ensures that the company has immediate access to the funds necessary to begin its business operations.
Do I need to use a notary to incorporate a SARL?
Yes, the incorporation of a SARL in Luxembourg requires a notarial deed. The notary validates the company’s articles of association and ensures compliance with all legal requirements for incorporation. This is a mandatory legal step that cannot be bypassed for SARLs.
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Source: guichet.public.lu, guichet.public.lu, guichet.public.lu, www.cc.lu, guichet.public.lu, guichet.public.lu, guichet.public.lu, guichet.public.lu, gouvernement.lu, gouvernement.lu
We took photos from these sources: Getty images on Unsplash
Authors: Luz
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