How to start a business in Luxembourg as a startup?
Sponsored content by Simône van Schouwenburg – Business Development ING Expat Services • Insights •Expat Corner• 13.11.2018
Photo: ING Luxembourg
As Luxembourg want to become a startup nation, more and more newcomers are poised to create their own businesses. According to the Global Entrepreneurship Monitor Luxembourg 2016/2017, the proportion of entrepreneurs was 9,2% in 2016, higher than the European average (8,6%). But is it so easy to start a startup in Luxembourg? Yes, provided that you follow the administrative steps described below.
Step 1: choosing the legal form
There are multiple options for legal forms in Luxembourg. The most common ones are the sole proprietorship, the limited liability company (SARL) and the simplified company (SARL-S). A sole proprietorship is a business form whereby you finance the business and make all the business decisions alone. No distinction is made between your startup and you. You assume full responsibility vis-à-vis third parties and invest your personal assets. In a SARL, there is a strict separation between the property belonging to you and the property belonging to the company. This means that you are only liable for the debts of the company up to the amount of your contribution. In January 2017, in a bid to make entrepreneurship accessible to more people, Luxembourg created a new form called SARL-S. SARL-S is mostly similar to the classic SARL except that it only requires 1 euro instead of 12,500 euros.
Step 2: establishing a registered office
Once you have chosen the legal form, you have to establish your registered office in Luxembourg. Leasing an office space in the Grand Duchy is easy. Many hubs and incubators, such as the House of Startups in Luxembourg City, offer equipped and operational office spaces on advantageous renting terms.
Step 3: obtaining a business license
In Luxembourg, your startup must obtain a business license (autorisation d’établissement) from the Ministry of Economy prior to conducting any commercial, craft, industrial or liberal activities.
Some conditions are required. Your startup must have in the country a fixed physical establishment, equipped with the administrative and technical installations suitable for your activities. Other conditions are related to the owner of the holder of the business license. First, you must satisfy the conditions of professional integrity. Professional integrity aims to guarantee the integrity of the profession and to protect future contracting partners and clients. In practice, the Ministry assesses your professional integrity based on the following documents: your criminal record and a sworn declaration indicating any management positions held by you during the 3 years prior to the application. If you have resided in Luxembourg for less than 5 years, you must also provide a notarial declaration of non-bankruptcy by which you declare that you have never been involved in a bankruptcy.
Then you must prove that you possess the required professional qualifications. Their extent and nature may vary according to the nature of your business. For instance, there are 3 ways to comply with the qualifications required for commercial activities. Either you possess the appropriate degree, diploma or certificate of completion. Or you have practiced relevant professional activity for at least 3 years in an EU Member State. Or you have successfully passed the final exam which completes the course for access to commercial activities organized by the Chamber of Commerce via the House of Training or any similar training course provided in another Member State. A legislative reform is underway in order to abolish any prerequisite for professional qualifications for basic commercial activities.
If you are a non-EU national, you must submit your business license application together with your application to stay as a self-employed person and send them in a single dossier to the Ministry of Immigration.
Step 4: carrying out additional formalities
Upon receipt of the business license, you need to carry out additional formalities with other Luxembourg administrative bodies. You must be affiliated with the Social Security Centre as a self-employed person or as an employer if you intend to recruit staff. You must register for income tax with the Luxembourg Inland Revenue and for VAT with the Registration Duties, Estates and VAT Authority.
You don’t know which legal form choose for your business? You want some help to obtain your business license and to carry out other formalities? You can find assistance at the Contact Entreprise of the Chamber at the Chamber of Skilled Trades and Crafts for craft activities or at the House of Entrepreneurship for commercial activities and provision of services.