Business

How to start a company in Luxembourg in 2025

Creating a company may seem like a titanic task. Although the process involves some challenges, with good preparation and knowledge of the different necessary steps, it is not as complicated as it seems. In this article, we will then help you with this task by reviewing the different legal forms a company can take and the step-by-step process for setting up a company in Luxembourg. We will also briefly examine the tax implications and other details worth knowing.

Table of content

Although this guide reviews many aspects related to opening a company in Luxembourg, it is highly advisable to consult a specialized advisor on many occasions. This professional will be able to give you personalized advice indicating special procedures required for a certain type of company, advise you as to the best type of legal structure, or give you recommendations for the drafting of the articles of association.

Why choose Luxembourg for business

Luxembourg is one of the wealthiest countries in Europe and presents an ideal environment for entrepreneurs wishing to establish a business. Its strong and stable economy, its strategic location in the heart of Europe, and its business-friendly regulatory framework make it a very attractive destination for investors and entrepreneurs. The benefits of setting up a company in Luxembourg are numerous, in particular, a company in the Grand Duchy can benefit from the following aspects:

Strategic geographical position

Luxembourg is located in a strategic geographical position throughout the center of Europe and has an excellent transport infrastructure.

Political and economic stability

Luxembourg's political stability and diversified economy offer a secure and reliable environment for business.

Favorable tax environment

Luxembourg's tax framework is extremely attractive, as evidenced by the high quality of offshore companies or holding companies, although the tax advantages are not limited to this type of company.

Support for entrepreneurship and innovation

Support for entrepreneurship and innovation: Luxembourg has a large number of programs and resources to support innovation and entrepreneurship which makes starting a project from scratch much easier.

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Legal form of business entities in Luxembourg

Luxembourg has a wide range of possibilities in terms of legal structures available to companies. Each one adapts to different needs and has different characteristics and requirements, and it is important to know all these types to see which one best suits the business project you have in mind. Below we will briefly look at the main ones, although there are many more.

SARL

This is one of the most common forms of company in Luxembourg and is designed for small and medium-sized companies. In this structure, the liability of the shareholders is limited to their capital contributions, which means that they are not liable with their personal assets for the debts of the company.

Minimum accessible capital

The required share capital is only 12,000 euros.

Limited number of partners

You can have between 1 and 100 partners.

Limited liability

Partners are liable only up to the amount of their contribution.

Structured management

Requires a manager appointed to represent the company.

SA

A Public Limited Company along with the SARL is one of the most common legal forms in Luxembourg. Similar to an SARL there is a limitation of liability up to the amount of the capital contributed. A major difference is that an SA can issue shares that are listed on the stock exchange which makes this legal form the preferred choice for companies wishing to raise capital through the stock market.

High minimum capital

Requires a minimum share capital of 30,000 euros fully subscribed and paid up to at least one quarter.

Issuance of shares

May issue negotiable shares in public or private markets.

Formal structure

A board of directors or a board of directors is mandatory for its management.

Limited liability

Shareholders are liable only up to the amount of their investment.

SAS

The Simplified Joint Stock Company (SAS) is a form of company very similar to the Public Limited Company (SA) characterized by its great flexibility in structure and governance. SAS is particularly suitable for startups, joint ventures, and small or medium-sized companies looking for a less formal structure than the SA, but with sufficient capacity to develop complex projects. SAS allows shareholders to freely define the rules of governance and transfer of shares through the bylaws although they cannot be listed on the stock exchange. Their minimum share capital is only 1 euro and the shareholders' liability is limited to the amount of their investment.

Structural flexibility

The bylaws can be customized to define governance and decision-making.

Minimum accessible capital

Only a minimum capital of 1 euro is required for incorporation.

Transfer of shares

This structure allows flexible conditions for the transfer of shares, although they are not listed on the stock exchange.

Limited liability

Shareholders are liable only up to the amount of their contribution to the capital stock.

SCS

The Société en Commandite Simple is a partnership composed of two types of partners: limited partners, whose liability is limited to their contributions, and general partners, who have unlimited liability. It is a suitable structure for certain investments or businesses where some partners wish to limit their risk while others are more involved in the management.

Structural flexibility

Allows to freely define the management rules in the agreement between partners.

Types of partners

It is composed of limited partners with unlimited liability and limited partners with limited liability.

No minimum capital required

No minimum capital stock is required for its incorporation.

Frequent use

Popular for managing investment funds and equity structures.

SCSp

The SCSp is a limited partnership that does not have a legal personality, which means that it is not considered a separate entity from its partners from a legal and tax point of view. Like the SCS, it is composed of limited partners who can be considered passive investors and general partners who manage the partnership.

No legal personality

An SCSp has no legal personality of its own and is managed directly by its partners.

Contractual flexibility

The operating rules are freely determined in the Limited Partnership Agreement.

Types of partners:

Includes limited partners with unlimited liability and limited partners with limited liability.

No minimum capital

No minimum share capital is required for its creation.

SCA

The Limited Partnership by Shares is similar to the SCS but allows limited partners to own shares in the company, making it a hybrid structure between a limited partnership and a limited liability company. It is used primarily in more complex investment structures.

Combination of partners

Includes limited partners (unlimited liability) and limited partners (limited liability).

Minimum capital

Requires a minimum share capital of 30,000 euros fully subscribed.

Differentiated management

Limited partners manage the administration, while limited partners are passive investors.

Versatile use

Popular for asset structures and specialized investment funds.

SCOP

The Cooperative Society is a form of enterprise where members group together to achieve a common goal, such as offering services or products. Cooperatives operate democratically and are often popular in areas such as the agricultural or service sectors. The main characteristics of a cooperative society (SCOP) are a variable number of members, variable contributions and absolute non-transferability of shares to third parties.

Cooperative structure

It is a society based on cooperative principles, such as democratic management and equal participation.

Worker participation

Employees are usually members and have decision-making power in management.

Variable capital

Its capital stock may vary with the entry or exit of members, without a fixed mandatory minimum.

Social purpose

Seeks to balance economic benefits with social and community goals.

Business taxes in Luxembourg

All the companies mentioned above are subject to the same taxes. The only legal form that differs in one point is the SCSp because it lacks legal personality, which makes it transparent for tax purposes and does not pay corporate income tax. However, it is subject to the other taxes. These are briefly presented below:

Fixed registration fee

The registration fee is an indirect tax that is levied when a company is incorporated, its amount is in 75 euros and must be paid to the Administration of the Registry, Domains and TVA (AED).

Property tax

This is a tax levied by the local authorities on all real estate, whether built or not, owned by individuals or legal entities. Obviously, if the company does not own real estate, it will not have to pay this tax.

Corporate income tax (CIT)

This tax is a direct tax levied on the profits earned by businesses in Luxembourg. From 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 that 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, it is necessary to take into account a tax allowance of 17,500 euros on taxable profits.

Net wealth tax

This tax is levied on the net wealth of the company and its rate is 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 higher than 500,000,000 euros.

VAT declaration

In Luxembourg, all companies must register to collect VAT regardless of their economic activity, however, there is an exception that exempts from this obligation small entrepreneurs whose annual turnover excluding taxes does not exceed 35,000 euros. However, these companies must communicate to the authorities the amount of their turnover corresponding to the previous calendar year.

Can a foreigner set up a business in Luxembourg?

Setting up a company in Luxembourg as a foreigner is entirely possible, in fact a significant part of the country's companies are established by foreigners. Nonetheless, it is important to note that foreigners have to add a few more procedural requirements to the list when setting up their company, here are the most important ones:

Residence permit
People coming from non-EU countries must obtain a residence permit including authorization for entrepreneurial activities. This involves demonstrating that they have the necessary knowledge, experience, and financial resources for the economic activity they plan to develop. Here it is important to be aware that the cost of setting up a company in Luxembourg can be quite high in certain cases.
Establishment permit
If the company needs an establishment authorization, foreign entrepreneurs must submit an application which has a couple of extra requirements for foreigners:
- Diplomas and certificates: depending on the type of activity to be carried out, diplomas or certificates may or may not be required. If these are required, foreign entrepreneurs will in certain cases have to perform a validation of their diplomas.
- Background record: an extract from the criminal record less than 6 months old issued by the State(s) in which the person has resided during the last 10 years or if not possible an affidavit.
- Bankruptcy statement: a statement less than 6 months old made under oath before a notary. It provides information about any bankruptcy in which you have been involved either in your personal capacity, as a trustee or as a person in a position to significantly influence the management or administration of the company must be attached.

How to set up a business in Luxembourg

We have now reached a crucial point: how to set up a company in Luxembourg. Below we will describe the process step by step. Although it may seem simple when you read it, there are a lot of things to take into account, so it is advisable to go through this process with good planning and time.

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 company 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 availability

Before 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.

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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 privately or before a notary, depending on the type of legal form chosen.

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
Working Hours: Monday to Friday from 9:00 to 12:00 and from 13:30 - 16:30

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.

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How to register a company in Luxembourg

How to open a branch of a foreign company in Luxembourg

A company may choose to expand by creating a new entity in Luxembourg, this new entity may take different forms such as a representative office, coordination center, a branch or a subsidiary among others.

In the case of a branch the creation process is much simpler as a branch is only an extension of the parent company and does not have an independent legal personality. If the parent company is established in Luxembourg, it is only necessary to notify the opening of a branch to the Ministry of Economy otherwise, the parent company must apply for a business permit to open a branch office in Luxembourg.

Luxembourg is an ideal place to start a business and in this guide we have seen the steps and requirements to carry it out. However, in a single guide it is impossible to summarize everything you need to know when starting a business, it is for example important to understand in greater depth the characteristics of the type of legal form you want to establish, to know how to prepare a business plan and to know the different incentives that Luxembourg offers to companies. It is therefore advisable to seek advice from specialized advisors or from one of the various Luxembourg entities dedicated to entrepreneurship such as the House of Entrepreneurship, the Chambre de Commerce, the Chambre des Métiers or Luxinnovation.