As part of the Organization for Co-operation and Development (OECD), established by Gran Duchy, the 34 state members have enjoyed sustained business collaborations over the years. Hence, starting a business in Luxembourg can undoubtedly reap many benefits such as the ease of doing business, taxation policy and availability of workforce. If you would like to start a Luxembourg holding company, it is important to understand more about setting a holding company there. Here are 6 things to know about a Luxembourg holding company once you decide to register company in Luxembourg.
1. Ease of doing business in Luxembourg:
The skilled workforce in Luxembourg enables efficacy as employers are able to source for employees who possess the necessary skills. In addition, the workforce is multilingual. The languages in Luxembourg are French, German and English, though most of the time English is used for businesses.
On top of that, Luxembourg is a stable and reputable baking jurisdiction which allows for the reliable set up of a corporate bank account. It is straightforward and simple to set up a bank account without having to be physically in Luxembourg. This helps to facilitate the company with doing business with businesses from other countries.
2. Types of holding companies in Luxembourg:
After accessing your business goals and activities, it is important to choose a suitable entity for your holding company. The common types of companies in luxembourg are namely Sarl (Société à responsabilité limitée – Luxembourg private limited liability company), SA (Société Anonyme – Luxembourg public limited liability company) and SCA (Société en Commandite par Actions – Luxembourg partnership limited by shares).
Sarl (Société à responsabilité limitée – Luxembourg private limited liability company)
Sarl is a hybrid of a capital company and a partnership. Since it is private limited, the shares would not be listed on the stock exchange and thus, they cannot be traded freely. Sarl is a separate entity where the shareholders are not liable for debts, losses or legal action taken against the business.
There is a requirement of at least 1 director and 1 shareholder. The minimum share capital is 12,000 euro and it has to be fully paid up during incorporation.
S.A. (Société Anonyme – Luxembourg public limited liability company)
Similar to Sarl, S.A. is a separate entity where the shareholders are not liable for debts, losses or legal action taken against the business. However, since it is a public company, the shares are listed on the stock exchange and are allowed to be traded freely. This allows for easy access to capital.
There is a requirement of at least 1 director and 1 shareholder. The minimum share capital is 10,000 euro and it has to be 25% paid up during incorporation.
SCA (Société en Commandite par Actions – Luxembourg partnership limited by shares)
SCA consists of a minimum of 2 limited partners or 1 general partner. The limited partner will be subjected to limited liability whereas the general partner will be subjected to unlimited liability.
The minimum share capital is 30,000 euros.
3. The annual fee for a holding company in Luxembourg:
The annual fee for a Luxembourg holding company is approximately 5,600 euros.
4. Time taken to set up a holding company in Luxembourg:
It takes approximately 7 days to incorporate a holding company in Luxembourg.
5. Taxation in Luxembourg:
The effective corporate income tax is at the rate of 29.22%. Furthermore, if the holding company consists of financial assets exceeding 90%, they are subjected to an annual flat tax of 3,210 euros. However, a holding company in Luxembourg is exempted from corporate income tax on dividends and capital gains from the nominal paid-up capital of a subsidiary.
Double taxation treaties signed by Luxembourg
Holding companies in Luxembourg can benefit from the double taxation treaties. The double taxation treaties involve partners worldwide allowing for foreign holding companies to avoid paying taxes on income in both Luxembourg and in their home country.
6. Audit requirements for a holding company in Luxembourg:
Statutory audit is required for small holding companies in Luxembourg whereas an audit by an independent auditor registered with the Institut des Reviseurs d’ Enterprises is required for medium to big companies. An independent auditor is needed as long as the holding companies have a net turnover of over 6.25 million euros or more than 50 employees. In addition, the profit and loss balance with the list of shareholders is required during the audits. The accounts are reviewed annually during the general meeting.
There are many benefits to set up a Luxembourg holding company. However, if you are unsure of the process of setting up a holding company in Luxembourg, you may engage the service of Tetra Consultants. With Tetra Consultants by your side, the registration process of your business in Luxembourg will be smooth and hassle-free. Our comprehensive service package includes planning and strategizing with our clients to select a suitable business entity, completing the registration process, obtaining required licenses, opening a corporate bank account, trade license application and financial reporting and taxation obligations.
Contact us to find out more about how to register a company in Luxembourg and our dedicated and experienced team will revert within the next 24 hours.