Establishing a company in Luxembourg

Luxembourg is one of the tiniest states in the world but also one of the richest in terms of per capita income. The country is officiously titled the “Grand Duchy of Luxembourg” and is surrounded by various West European countries – France to the southwest, Belgium to the north and Germany to the east. Its total area is 2,586.4 km2 (82 km lengthwise and 57 km in width). Its northern region is made up of a the ridge of the Ardennes and typified by low-slung hills and tolls, while its southern region is larger and includes five diverse and distinct geographical areas (plains, impressive European forests and a green, fertile valley).

The climate is usually temperate with cold winters and pleasant summers, but also a relatively high measure of precipitation.  The capital and also largest city is Luxembourg (City) and the general population is 540,000. The official languages are French, German, and Luxembourgish, although French is in predominant usage. It has been independent since 1815 when it separated from France, and is currently a global financial center drawing in many foreign companies and investments. Registering a company there is not a strategy suitable to all types of offshore companies but for companies that are suitable this destination can be a great success.

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Three things you did not know about Luxembourg:

  • Thanks to its geographic location in the center of Europe, and its extremely developed economy, this miniscule state concentrates several EU institutions, including the European Parliament in various periods, the ECJ (European Court of Justice), the European Investment Bank and others.
  • Despite its size and its very friendly neighbors, Luxembourg maintains an active army. Military service is not mandatory for all citizens, the annual military expense constitutes only 0.9% of its GDP, and Luxembourg is even one of NATO’s active member states.
  • In order to understand just how powerful the local economy is, and how widespread in terms of impact, you need only glance at its statistics: GDP of 42 billion USD and per capita income of 82,000 USD – the fourth highest in the world.

Luxembourg’s economy

Luxembourg has a modern economic policy, maintains a market economy that shows continued and moderate growth, low inflation, very low unemployment rates and overall economic innovation. The majority of the economy is founded on various financial services that are regularly incentivized by a lenient tax policy. Also, it has comparatively diversified industrial, tourism and a small-farm agricultural sectors. The banking sector is vast relative to its size, and the extensive financial sector contributes hugely to GDP. Local currency is of course the euro. Corporate tax rates are 20%-21% applied to income from any source in the world for companies registered locally, but there are also breaks and exemptions for various companies (such as holding companies and others).

Additional information about establishing offshore companies in Luxembourg:

General
Type of company
1990 SOPARFI Holding S.A. or S.A.R.L.
Relevant Companies Law
The Law on Commercial Companies of 15 August 1915 (as amended)
Offices
Law requires companies to provide a local office address
Language of original incorporation documents
French or German
Finance and Taxation
Currency
EUR
Corporate tax rate
21% on income over 15,000 EUR from outside the country
Standard share capital
31,000 EUR for A.S. companies 12,500 EUR for S.A.R.L companies
Office Holders
Secretary
Obligation to appoint company secretary
Not required
Obligation to appoint local secretary
Irrelevant
Type of entity that may function as company secretary
Irrelevant
Director
Obligation to appoint company director
Required
Obligation to appoint local company director
Not required
Minimum number of directors
1
Type of entity that may serve as company director
Individual and/or company
Shareholders
Obligation to register shareholders
Required
Obligation to register local shareholders
None
Minimum number of shareholders
1
Type of entity that may register as shareholder
Individual and/or company
Type of shares
Registered shares and/or bearer shares (only in A.S. companies)
Accessibility of Information
Company registrar
Information regarding office holders is not accessible to the public
Annual Assembly and Reporting
Obligation to hold annual assembly
Not required
Obligation to prepare financial reports
Required
Obligation to submit financial reports
Required