Key considerations for incorporating in Luxembourg
In our latest annual GBCI (Global Business Complexity Index) report, Luxembourg ranked as the 66th most complex business environment. This is a marked improvement on the previous year, when it ranked 57th. Here we take a look at some of the key factors influencing business incorporation in the region.
Luxembourg’s government actively supports business and has enacted a series of reforms over the last few years to facilitate a more business-friendly environment. The country is committed to business transparency and has rejected the notion that it is a tax haven.
While Luxembourg’s business practices have become less complex, incorporating in this region can be challenging and delays often occur, particularly when opening a bank account.
Company incorporation in Luxembourg can usually be completed within two weeks. We recommend consulting with legal and tax advisers and preparing in advance to ensure that your company’s proposed activities are clearly defined.
There are a number of business entities that can be incorporated in Luxembourg – depending on your business requirements – but the most common entity types are:
- Public limited liability companies (Société anonyme, SA)
- Private limited liability companies (Société à responsabilité limitée, SARL)
- Special limited partnerships (Société en commandite spéciale, SCSp)
The first step to incorporation is checking the availability of your company name in the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés, RCS). Once your company name has been confirmed, the next step is drafting the incorporation documentation, which includes: a deed of incorporation, a power of attorney and a beneficial owner declaration or limited partnership agreement in the case of a special limited partnership.
The entity must also have a registered office in Luxembourg.
At least 50% of your company’s directors should be Luxembourg residents. Directors must exercise due diligence and must demonstrate that they closely monitor the activities of the entities they are managing.
Opening a business bank account in Luxembourg can be challenging. Not all banks follow the same procedures and some banks are more restrictive, which means that opening an account may take longer.
Typically, banks require a company presence in Luxembourg, including an address or a physical office. Applicants must also list their reasons for choosing Luxembourg as a place to do business, in order to get bank account approval.
An existing banking relationship may help speed up the process, but this is more likely to be the case when companies or shareholders already have entities in Luxembourg. Banking alternatives, such as electronic payment institutions, are also a viable option for speeding up the process.
Acquiring a shelf company could help expedite the incorporation process and allow companies to conduct transactions, but new companies may find that their accounts remain inoperative or frozen until all Know Your Client (KYC) and Anti-money laundering (AML) data has been obtained by the bank.
KYC and AML requirements often delay bank account approval. It’s important to plan carefully, especially if your company needs to be established by a certain deadline. Providing airtight KYC documentation at the outset – this is especially important for directors – is critical.
The Luxembourg government is aware of the banking issues and has invited professional associations, capital markets and private equity trust providers to offer solutions or to help facilitate the process to reduce frustration.
Talk to us
Our experts on the ground offer services across the three core business lines of accounting and tax, global entity management, and human resources and payroll. In addition to assisting with incorporation procedures, we help you streamline your operations and stay compliant.
To learn more about how we can help you set up a company in Luxembourg, make an enquiry today.
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