The Grand Duchy of Luxembourg is located in the very heart of Europe and is the country with the highest incomes. This became possible thanks to the developed banking and corporate law, which attract capital here with unique opportunities.
The aggregate size of Luxembourg investment funds is second after the USA. This is due to the ease with which the Luxembourg Government adapts its legislation to the requirements of the times. For example, legislation on licensing cryptocurrency exchanges was first developed and adopted here.
Besides, Luxembourg prioritizes the development of high-tech businesses. For this, Luxembourg has tax incentives for investment activities.
Benefits of starting a business in Luxembourg
What are the advantages of registering a business in Luxembourg?
- The main business of this country, as mentioned above, is investment funds. Therefore, those businessmen who would like to manage their assets through investment funds should take a close look at local legislation and business practices, which give a lot for such a business. Entrepreneurs from Germany, France, and other EU countries are establishing more and more diverse foundations in Luxembourg. Among them, there are funds regulated by the state, partially regulated, and completely free from any government interference. It all depends on the specifics, form of creation, and taxation of these business structures. This is the huge economy that Luxembourg is known for. But money loves silence, so this side of Luxembourg life is not widely advertised.
- The next type of business, which received distribution here, are holding companies registered in Luxembourg. For holding companies, there is a participation exemption for income received from foreign subsidiaries in the form of dividends or investment income and capital gains from corporate tax if certain requirements are met.
- SPF Family Foundations. The founders of these foundations can be either individuals (members of the same family) or trusts. They have an exemption from income tax in Luxembourg, but there are certain restrictions on activities. In particular, they cannot take an active part in the management of assets (for example, in the management of subsidiaries), and also cannot own real estate. For such purposes, a holding company is created, which is already passively owned by SPF.
- Luxembourg partnerships are similar to UK partnerships, but with little specificity. These partnerships are used for joint investment by a group of investors in certain projects. Thus, Luxembourg’s partnerships are a tool that allows you to lower the investment threshold for participants in an investment project. Also, it is possible to invest in various assets and receive income or loss from your personally selected project, without interfering with other projects. That is, the so-called tracking shares are created, which allow you to link a specific investor to a specific project. Thus, by co-investing, it is possible not to share risks from those projects for which there is no agreement and for which different investors do not want to share joint risks. This is very convenient because it allows you to accumulate large funds on more flexible financing terms with a simultaneous division of risks into individual risks for each participant in such a partnership. Moreover, the partnerships are transparent for the Luxembourg tax service, which means that the tax burden will be borne by the participants of such a partnership in those countries where they are tax residents. In Luxembourg itself, partnerships are tax-free;
- Securitization companies that are used to hide certain assets from the publicity of their owners. investors of these companies can invest in different projects without interfering with the results of these investments with each other. In many cases, this allows the accumulation of significant funds that would be impossible to collect under other conditions.
How to start a business in Luxembourg?
Starting a business in Luxembourg as a foreign investor is quite easy given that the same rules apply to local and foreign entrepreneurs. The first step in starting a successful company in Luxembourg is choosing the right type of company.
Luxembourg is one of the most important financial centers in the world, and many business structures here are for investment purposes. This is why choosing the right type of company is essential when deciding on upcoming operations.
Main types of companies in Luxembourg
What are the requirements for opening a company in the Grand Duchy? According to Luxembourg commercial law, there are several types of legal entities that can be registered here:
- SA – joint-stock limited company;
- SARL – limited liability company;
- SRLU – Private limited liability company (analog of an individual entrepreneur);
- SENC – Unlimited Partnership.
As in other countries in the world, the most common types of company are SARL limited liability companies and SA limited liability companies.
The authorized capital
The authorized capital of SARL is 12,000 euros, which must be paid in full upon registration of the company.
The share capital can be denominated in a currency other than the euro and payable in cash, but contributions can also be made in the form of real or personal property, depending on the actual situation. Unlike a joint-stock company (SA), SARL contributions (shares) are not subject to public sale and cannot be offered for trading on an exchange.
The circulation of SARL shares is limited, and any sale is subject to the approval procedure among the participants of such a company. These measures are taken in order to allow the company to exercise control over its future partners.
In addition, the procedure for registering a company in Luxembourg can only be completed if there is a deposit of the required amounts of authorized capital in a separate account opened with a bank for a future company. After successful registration of the company, the funds are unlocked and the newly created company can use them at their discretion.
Opening a corporate account in Luxembourg
As mentioned above, an account is opened for the future company in parallel with the beginning of the registration of the company in Luxembourg. This procedure lasts 2-3 weeks, if not more, and can be performed remotely by proxy.
However, there are several ways to significantly speed up this process. The first thing that can be done is to open a personal account in one of the banks in Luxembourg on our recommendation and deposit a certain amount of funds there. This is done so that the bank sees your financial capabilities and the seriousness of your intentions regarding starting a business in Luxembourg.
Another option to speed up the compliance procedure in one of the Luxembourg banks is a personal visit of the company’s founder. As a rule, if you personally come and get acquainted with the bank managers who will further deal with your company, this will significantly speed up the process of opening a bank account in Luxembourg both for you personally and for your company.
As soon as you have a corporate account with a bank in Luxembourg, you can immediately deposit the required amount of share capital for your new company and complete the registration procedure.
Management of a company registered in Luxembourg
The beneficiary and director of a Luxembourg company can be a citizen of any country in the world. However, in practice, the involvement of a foreign director to manage a company in Luxembourg can always be challenged by the tax inspectorate of the country of which this director is a citizen.
From the foregoing, we can conclude that Luxembourg is small in area, but very interesting and large in terms of opportunities in European countries, in which the creation of investment structures will be very beneficial to businessmen with a vision of the prospects for the development of innovative startups.