All you need to know about Business setup in Luxembourg (2025)

Q: Why is Luxembourg an attractive destination for setting up a business?

Luxembourg is a prime choice for entrepreneurs and companies looking to expand their business operations internationally. Known for its strategic location in the heart of Europe, Luxembourg offers unparalleled access to key European markets. Its stable political environment, pro-business policies, and thriving economy contribute to it being a top destination for both startups and established companies. Additionally, Luxembourg boasts a highly-skilled multilingual workforce and a favorable tax regime, making it ideal for business growth and international operations.

Furthermore, Luxembourg is home to a wide range of industries, including finance, technology, logistics, and manufacturing. It is also recognized as a global financial hub with a network of banks, investment funds, and insurance companies, making it particularly attractive for those in the financial sector. The government’s supportive attitude towards innovation and digital transformation further solidifies Luxembourg’s position as a leading business-friendly country.

Q: What are the main business structures available in Luxembourg?

When setting up a business in Luxembourg, you can choose from several business structures. Below are the most common types:

• Société à Responsabilité Limitée (SARL): This is the most common structure, particularly suited for small and medium-sized businesses. It requires a minimum number of one shareholder and has a minimum share capital of €12,000.
• Société Anonyme (SA): Ideal for larger businesses, this structure requires a minimum share capital of €30,000 and at least one shareholder. Shares can be transferable, making it more suitable for businesses looking to raise capital through investors.
• Société en Commandite Simple (SCS): This is a limited partnership suitable for investment-related projects. It consists of two types of partners: general partners who manage the business and bear unlimited liability, and limited partners who contribute capital and have limited liability.
• Société en Commandite par Actions (SCA): This is a partnership limited by shares and designed for businesses needing flexibility in management while raising capital through shareholders.
• Société Coopérative (SC): A cooperative society suitable for member-owned enterprises or collaborative businesses.
• Branch or Subsidiary: Foreign companies looking to expand into Luxembourg can establish either a branch (not a separate legal entity) or a subsidiary (a separate legal entity).

Each structure has its own advantages and requirements, so it’s important to assess your business goals and consult with a professional advisor to determine the best fit.

Q: What are the key steps for setting up a business in Luxembourg?

Setting up a business in Luxembourg involves several steps, each of which is important to ensure compliance with local laws and regulations. Here’s a step-by-step guide:

• Choose a Business Structure: Decide on the most appropriate legal structure for your business, as outlined above.
• Draft a Business Plan: Prepare a detailed business plan, including financial projections, target market analysis, and operational strategy. A solid business plan will help you secure funding and navigate the registration process.
• Reserve a Company Name: Check the availability of your desired company name through the Luxembourg Register of Commerce and Companies (RCS) and reserve it.
• Open a Bank Account and Deposit Initial Capital: Open a corporate bank account in Luxembourg and deposit the required minimum share capital for your chosen business structure.
• Prepare Articles of Incorporation: Draft the company’s articles of incorporation with the help of a notary. These documents should outline the key details of your business, including its purpose, share capital, and governance.
• Register with the Luxembourg Business Register: File the incorporation documents with the RCS to officially register your business.
• Obtain Business Licenses and Permits: Depending on your industry, you may need specific licenses or permits to operate legally in Luxembourg. Be sure to check with the Ministry of the Economy or other relevant authorities.
• Register for Taxes: Apply for a tax identification number (TIN) with the Luxembourg tax authorities and register for VAT if applicable.
• Social Security Registration: Register your employees (if applicable) with the Luxembourg social security system (CCSS) and comply with labor law obligations.

Once all the legal and administrative steps have been completed, you’re ready to launch your business operations.

Q: What aspects of taxation should businesses in Luxembourg be aware of?

Luxembourg offers a competitive tax regime that is attractive to businesses. Here are the key taxation aspects to consider:

• Corporate Income Tax (CIT): The standard CIT rate is 17%, but the effective rate, including municipal business tax and contributions, varies depending on the municipality (e.g., 24.94% in Luxembourg City).
• Value-Added Tax (VAT): The standard VAT rate is 17%, with reduced rates of 14%, 8%, and 3% applicable to specific goods and services.
• Net Wealth Tax: Luxembourg-based companies are subject to an annual net wealth tax, calculated at a rate of 0.5% on their net assets.
• Withholding Tax: Dividends paid to shareholders are subject to a 15% withholding tax, though this rate can be lowered depending on double taxation treaties.
• Tax Incentives: Luxembourg provides a range of tax incentives for businesses in sectors such as research and development, intellectual property, and renewable energy.

Given the complexity of taxation, it’s advisable to seek expert tax advice to optimize your business’s tax structure while ensuring compliance with local regulations.

Q: How easy is it to access financing in Luxembourg?

Luxembourg provides a favorable ecosystem for accessing finance. Businesses can tap into funding from local banks, private equity firms, venture capitalists, and government-backed programs. The country’s strong financial sector also attracts international investors looking for opportunities in a stable market.

The National Institute for Credit and State Investment (SNCI) provides financial assistance to startups and established businesses through loans, equity investments, and guarantees. Additionally, the Luxembourg Future Fund (LFF) supports the financing of innovative companies, particularly in the technology sector.

For small businesses and startups, incubators and accelerators such as Luxembourg House of Financial Technology (LHoFT) and Technoport offer both funding opportunities and mentorship programs to help entrepreneurs scale their operations.

Q: What is the labor market like in Luxembourg?

Luxembourg’s labor market is highly attractive due to its diverse and multilingual workforce. The country’s workforce speaks multiple European languages, including English, French, and German, making it an ideal environment for international companies. With strong labor laws and social benefits, Luxembourg is also a popular choice for professionals seeking employment opportunities.

Employers must comply with Luxembourg’s labor laws, which regulate employment contracts, working hours, minimum wages, and employee benefits. The country’s social security system provides comprehensive coverage for health, pension, and unemployment benefits.

Given its commitment to fostering a positive work-life balance, Luxembourg ranks high in terms of employee satisfaction, which can be a key driver of productivity for businesses.

Q: Are there any specific challenges businesses may face in Luxembourg?

While Luxembourg offers numerous advantages, businesses may face a few challenges. These include:

• High Cost of Living: Luxembourg is one of the most expensive countries in Europe, which could impact employee compensation and operational costs.
• Regulatory Compliance: Although the government is pro-business, businesses must navigate complex regulatory and tax requirements to ensure compliance.
• Competition for Talent: The demand for talent in sectors such as technology and finance can make it challenging to recruit highly-skilled professionals.
• Market Size: Luxembourg’s small domestic market may limit growth opportunities for businesses targeting local customers, though this is offset by its access to broader European markets.

These challenges can often be mitigated with proper planning, the use of local expertise, and investment in technology and human resources.

Q: What government initiatives support business growth in Luxembourg?

The Luxembourg government actively supports businesses through various initiatives and programs. Some of these include:

• Fit 4 Start: A startup accelerator program designed to help tech startups develop their business and secure funding.
• Digital Luxembourg: A government-led initiative to enhance digital transformation and innovation across all sectors.
• EcoInnovation Initiative: A program that supports environmentally sustainable businesses and projects.
• Tax Incentives for R&D: Companies engaged in research and development activities can benefit from generous tax credits and subsidies.

Such initiatives reflect Luxembourg’s commitment to fostering an attractive business environment and promoting innovation and sustainability.

Q: How can businesses benefit from Luxembourg’s international position?

Luxembourg is a member of the European Union, Eurozone, Schengen Area, and OECD, providing businesses with direct access to a vast network of international markets. The country’s well-developed infrastructure, including modern transport and digital connectivity, makes it an ideal base for international operations.

Moreover, Luxembourg’s strong double taxation treaty network with over 80 countries ensures favorable tax treatment for international businesses. This unique position has made Luxembourg a hub for multinational corporations, fostering cross-border trade and investment opportunities.

Q: Is it necessary to hire professional advisors for business setup in Luxembourg?

Although it is not mandatory, hiring professional advisors such as lawyers, accountants, and business consultants is highly recommended for setting up a business in Luxembourg. These professionals can help you navigate the complexities of company formation, taxation, and regulatory compliance, which may be challenging for newcomers. Their expertise ensures that you establish your business efficiently and in full legal compliance.

With the combination of professional guidance and Luxembourg’s business-friendly environment, your enterprise will be well-positioned for success in both the local and international markets.