H&CO
Luxembourg

Can a non-resident or foreigner start a business in Luxembourg? 

Yes, the process is fully accessible to foreign investors. Luxembourg does not discriminate based on nationality, and shareholders are not required to be local residents. However, to legally operate, the company must appoint a managing director or administrator who is either an EU resident or a third-country national who secures a valid residence and work permit before physical operations begin. 

What are the most common company types in Luxembourg?

The vast majority of international and corporate investments utilize two specific limited liability structures:

• S.à r.l. (Société à responsabilité limitée): A private limited liability company. It is the most popular choice for small and medium-sized enterprises due to its management flexibility and lower initial capital requirements.
• S.A. (Société Anonyme): A public limited company. This structure is preferred by multinationals and entities planning to raise capital on public financial markets, as it allows the free transfer of shares.

What is a business permit (autorisation d'établissement) and is it mandatory?

Yes, it is strictly mandatory. Unlike jurisdictions where commercial registration is sufficient to start trading, no entity in Luxembourg can legally invoice or operate without this government authorization. To obtain it, the managing director must demonstrate professional integrity (clear criminal and bankruptcy records) and adequate professional qualifications directly related to the company’s business activity.

What are the corporate tax rates for companies in Luxembourg? 

The corporate tax framework consists of three main components: Corporate Income Tax (CIT), Municipal Business Tax (which varies by municipality, with Luxembourg City being the main benchmark), and a solidarity surcharge. The combined effective corporate tax rate generally ranges between 24% and 26%. Additionally, the country offers a robust participation exemption regime for specific dividend structures (SOPARFI) under EU directives.

What are the physical substance requirements for a Luxembourg company?

To prevent the use of letterbox or shell companies and to comply with OECD and EU standards, a Luxembourg entity must demonstrate real economic substance:

• A dedicated physical office space adequate for its business operations (a simple mailbox address is insufficient).
• Local decision-making power, meaning key board meetings must be held and core contracts must be signed within Luxembourg territory.
• Qualified local personnel or resident managers holding effective management control over operations and corporate bank accounts.

How long does it take to incorporate a company in Luxembourg?

If all preliminary documentation (KYC identification, business plan, and proof of origin of funds) is prepared, the formal incorporation before a notary takes approximately two to three weeks. The primary variable dictating the timeline is typically the bank compliance process required to open the mandatory capital deposit account.

Does Luxembourg have double tax treaties with the US and other countries?

Yes, Luxembourg maintains an extensive network of over 80 active double tax treaties (DTTs), including a robust agreement with the United States. These treaties are fully aligned with OECD BEPS standards and direct tax information exchange protocols. This framework significantly reduces cross-border withholding taxes on dividends, interest, and royalties, making Luxembourg a premier hub for transatlantic and European investments.