Company in Luxembourg
Luxembourg, or rather the Grand Duchy of Luxembourg is a city-state located in Europe between France, Belgium and Germany. Luxembourg has an extremely highly developed service sector that accounts for about 70% of its gross domestic product, especially the financial sector. It is hardly surprising that opening a company in Luxembourg is of interest to foreign entrepreneurs and investors.
Incorporation of a company in Luxembourg and possible legal forms
The most common legal form of a commercial company chosen for incorporation in Luxembourg is the so-called Société à responsabilité limitée (“SARL”) – it is the equivalent of the Polish limited liability company. The company can be incorporated for an indefinite period of time.
Required share capital and registration of the company in Luxembourg
The minimum initial capital for the SARL company in Luxembourg must amount to 12.000 EUR. It can be covered either by cash contributions or by other assets such as loans, in which case a copy of the loan agreement must be provided. In this case the shareholder of the Luxembourg company will incur a liability from another entity in order to cover the share capital. This is an interesting solution especially for a Polish entrepreneur establishing a company in Luxembourg as the in-kind contribution does not require the establishment of a bank account before registration. The preferred nominal value of 1 share is 1 EUR
Opening a company in Luxembourg and the composition of the management board
A Luxembourg SARL requires the appointment of a management board to represent the company. The board must be composed of
at least one person residing in Luxembourg. For Polish entrepreneurs it is possible to use nominee directors and managers. It is also possible to appoint a proxy to run the affairs of the company e.g. from Poland, but it must be remembered that the central administration of the company must be in Luxembourg. This means that the delegation of management functions would mean that de facto management would be carried out elsewhere (i.e. when these functions are delegated to someone residing in Poland), which is a violation of the corporate law. The management board may grant a power of attorney to perform specific actions (not a general power of attorney, but a power of attorney with a specific scope, for a specific action).
Field of activity of the company in Luxembourg
The establishment of a company in Luxembourg is connected with the choice of its subject of activity. The main object of activity of SARL companies is holding, as running of “real” business activity by the company in Luxembourg (other than holding) requires permission. Running such a company is also a completely different cost. The local manager must have a so-called business license. As a rule you need to have a real office – with phone, employees, badge etc. It is possible to rent an office but there are no virtual offices in Luxembourg in the literal sense, you just get a desk.
Taxes in Luxembourg
The tax year for Luxembourg companies is the same as the calendar year.
Registering a company in Luxembourg – procedure
Establishing a company in Luxembourg is subject to a specific procedure. The first step is to complete the necessary documents, i.e. a scan of your passport, information about your place of residence and then a signed UBO declaration. Compared to other countries this is a relatively small amount of documentation, you don’t have to send for example a document confirming your address.
Opening a company in Luxembourg further involves signing a contract for the registered office, nominee and accounting. The shareholders have to cover the cost of the notary from their own account or funds. A special power of attorney is granted for the notary to draw up the articles of association. The power of attorney takes the form of a simple writing. Depending on whether you decide to cover the capital with cash or with an in-kind contribution, you will need to open a bank account during the whole procedure. The total time needed to set up a company is about 2 months.
A ready-made company in Luxembourg / buying a company in Luxembourg
It is also possible to buy a company in Luxembourg that is already registered. However, this is not a common practice and it is difficult to find a ready-made company in Luxembourg registered for sale. Therefore, buying a company in Luxembourg can be time-consuming and the costs of subsequent changes in the company’s details are similar or even higher than the costs of registering a new entity.