Luxembourg

Description

Luxembourg is a member state of the EU and is seen as one of its most advanced financial centres. The local laws are favourable to the registration of companies and the tax system is also geared towards attracting companies.

The most popular corporate forms are Société Anonyme (SA) and Société à Responsabilité Limitée (SARL) SA is a legal form that corresponds to a public limited-liability company in which the shareholders’ liability extends to the amount of their contribution. SARL is a private limited-liability company in which the liability of the shareholders is limited. In the case of an SA, at least EUR 31,000, while in the case of an SARL at least EUR 12,500 in equity must be available to the company. Both forms of company are only required to have one manager and one shareholder, who can also be foreign persons, but it is expedient to hire domestic persons to act as managing director in order to maintain tax residence. There are no restrictions on whether they should be legal entities or natural persons. The local court of registration records only the data of the manager. The company must have a local address, which qualifies as its official seat.

Companies in Luxembourg are often referred to as SOPARFI (Société de Participation Financiére), but this legal form is not registered separately either from the point of view of company law or taxation. Still, the designation SOPARFI can best be approached from the point of view of taxation as it is a business form which performs only holding or financing activities. In this context, the dividend received by Luxembourg companies is free of tax, provided that there is at least a 10% stake in the subsidiary paying the dividend, or the value of the stake reaches EUR 1.2 million. The revenues generated by the sale of shares in the subsidiaries are also exempt from corporate tax with the condition that the selling company must have at least a 10% stake or a share valued at least at EUR 6 million in the subsidiary. Under certain conditions, 80% of the royalty paid for intellectual property is free of tax. All this is further supported by the fact that Luxembourg has signed numerous international taxation agreements, which provides additional opportunities for tax planning.

In case a company registered in Luxembourg also performs trading activities, it must have at least one executive in the management who has a license for it issued by the relevant authority. The actual tax rate for any profit stemming from trading is 22.47% outside the city of Luxembourg and 29.22% in the city of Luxembourg (these include corporate tax, local business tax as well as the so-called solidarity tax, which must be paid for any profit exceeding EUR 15 thousand). It is important to note that this tax rate is quite high in Europe, so other member states do not regard Luxembourg as a jurisdiction for offshore company registration.

Companies are required to prepare a report on their operations (and a tax return), which must be provided, with certain exceptions, with an attestation clause by the auditor before being submitted to the local authority. It is important to note that the company report qualifies as public data.

Regional features

  • Audit obligation: Yes
  • Continent: Europe
  • Disclosure of beneficial owners: No
  • EU VAT ID available: Yes
  • Local manager required: No
  • Minimum paid-up capital: SA - EUR 31.000, SARL - EUR 12.500
  • Obligation to submit an annual report: Yes
  • Tax system: Preferential tax