Doing Business in Luxembourg
ComplianceMay 08, 2020

Doing business in Luxembourg

Luxembourg is a small, yet prosperous, landlocked nation in western Europe. It is home to one of the most stable economies in the region and, despite its size, ranks as one of the wealthiest countries in the world in terms of GDP per capita.

Bordered by Belgium, Germany, and France; Luxembourg’s strategic location coupled with business-friendly regulations make it attractive to global businesses.

Furthermore, the country’s multi-lingual workforce is highly skilled, and its transportation infrastructure is well developed with direct access to the rest of Europe and North Sea ports.

To successfully conduct business in Luxembourg, companies must understand the nation’s laws, rules, and regulations. In this article we review the advantages of doing business in Luxembourg, the risks and considerations, and address common FAQs.


Prepare for expansion in this region with all of the key information about tax rates, incorporation details, entity types, business environment, and more. Download our country guide for a practical breakdown.



Advantages of doing business in Luxembourg

A European Union capital

Luxembourg is one of the founding members of the European Union (EU) and its capital city, Luxembourg City, is one of the EU’s three official parliamentary capitals alongside Strasbourg and Brussels. As an important center for the EU, Luxembourg also seats the European Union’s Court of Justice.

Information and communication technology (ICT)

A globally recognized hub for information and communication technologies, Luxembourg is rapidly becoming a center of excellence for cybersecurity and data protection, ranking highly in the Global Innovation Index. Due to efficient public research infrastructures and projects, it offers many opportunities for start-ups, SMEs, and large enterprises.

Emerging biotech industry

Aided by a well-developed ICT infrastructure, Luxembourg’s biotech industry ranks highly in the Global Biotechnology Innovation Scorecard for strong IP protection, national spending on R&D, policy, and overall stability – each of which are indicators of how favorable an innovation environment a country may present.

Solid banking and financial services

Luxembourg is one of the most competitive financial centers in Europe – ranked third after Zurich and London. The banking sector is the driving force behind the nation’s economy and accounts for about one-third of the country’s GDP. The success of its financial industry is due to its cross-border financial expertise, range of financial services offered, political stability, skilled staff, and availability of a qualified multilingual workforce.

Risks and considerations

Despite the significant advantages of doing business in Luxembourg, starting and running a business presents some challenges which outside investors and businesses should be aware.

Ease of starting a business

There are many steps needed to get operations up and running in Luxembourg, for that reason it ranks low in ease of doing business. Just some of the factors to consider include:

  • Incorporation: Incorporating an entity in Luxembourg is a lengthy process. To complicate matters, different types of businesses are governed by different local regulations. Finally, the time in which a company can begin operating depends on its commercial activity.
  • Obtaining a business license: This process typically takes about two weeks; however, companies must meet capital requirements before a license is granted. Certain businesses may also need to present evidence of professional qualifications and professional integrity.
  • Securing credit: If financing is required, securing credit in Luxembourg can be complicated. There is little information available through public credit registries and credit bureaus on how to obtain credit. Without the help of an experienced advisor it can be hard to know where to start.
  • Construction permits: For construction projects, time must also be built in to allow for permits to be granted. There are about 12 steps to complete a permit application and up to 157 days on average to receive one.
  • Registering a property: Property registration is also a lengthy process and must be carried out by a locally registered public notary.

Despite these hurdles, with the right help, the process of establishing a business in Luxembourg can be a smooth one, and once a company is set up there are many benefits.

Business taxes

Although Luxembourg has favorable tax treaties with a number of countries and relatively low corporate tax rates, its business tax climate places onerous requirements on companies. There are around 23 taxes that businesses must pay each year which can take an estimated 55-60 hours to process and file.

Business culture

Luxembourg’s business culture can be very formal and an adjustment for Americans. Punctuality is valued and lateness is considered very rude. Politeness and respect for hierarchy are appreciated and key to successful business dealings.

There is also a strict separation between personal and business life. Small talk is encouraged to build rapport, but it’s not viewed positively when used to ask personal questions.

Understanding and respecting these cultural differences can help build and maintain strong business relationships.

Frequently asked questions for doing business in Luxembourg

Why should I consider doing business in Luxembourg?

Luxembourg’s strategic location, highly skilled work force, and business friendly policies that encourage innovation, makes this an attractive option for businesses looking to expand their footprint into the European market.

What challenges should I consider when expanding to Luxembourg?

While there are many benefits to incorporating in Luxembourg, they country has very specific requirements and highly enforced rules businesses must follow. Processes can be long and time-consuming, which can affect the time to market.

What is the corporate tax rate?

In Luxembourg, tax rates are applied based on income level. Rates are as follows:

  • 15% for income below EUR 175,000
  • 31% for income between EUR 175,001 – 200,000
  • 17% for income exceeding EUR 200,001

What are the business entity types available?

There are several entity types to choose from, including Private Limited Liability Company, Public Limited Liability Company and Special Limited Partnership.

How long does it take to complete the incorporation process?

The incorporation process can take up to 4 weeks to complete.


Prepare for expansion in this region with all of the key information about tax rates, incorporation details, entity types, business environment, and more. Download our country guide for a practical breakdown.



Conclusion

If you are considering entering the Luxembourg market, it is critical to have an experienced partner with a global footprint. With a worldwide network of in-country experts, CT will make sure your local needs are met, accurately and on time.

CT can help you get set up, through a single point of contact and provide you with customized solutions for all your compliance needs. We’ll help to ensure you have the right support tailored to your global goals.

CT has helped businesses and law firms expertly manage compliance issues for 125 years. To learn more about how we can help you better manage your global compliance needs, contact a CT representative at (855) 444-5358 (toll-free U.S.).

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