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Background Checks / Employee Screening In Luxembourg

Set up a Sole Proprietorship in Luxembourg: Comprehensive Guide

Luxembourg has a healthy economic environment and a relatively stable political framework attracting foreign investors. The country holds an AAA rating, implying a stable outlook and the capacity to withstand an economic crisis. Moreover, Luxembourg has one of the highest and strongest GDPs, $86.7 billion as of 2021, which makes it a suitable country for setting up a sole proprietorship. 

Getting a sole proprietorship in Luxembourg is relatively easy as the country is best known for its economic policies attracting entrepreneurs worldwide. The geographic location of Luxembourg makes it one of the best destinations to set up a business. Apart from minimum paperwork and comprehensive procession, there are other factors to consider while choosing Luxembourg. 

However, some prerequisites must be considered before setting up a sole proprietorship in Luxembourg. Companies willing to open a business in Luxembourg must have the status of trader, craftsmanship, or self-employed intellectual worker. They should also acquire decent educational qualifications and work permits to run a business in Luxembourg. Moreover, the government provides easy investment loans, export credits, special guarantees, or subsidies. 

Entrepreneurs who want to establish their business in Luxembourg should know that anyone willing to acquire a sole proprietorship will have combined personal and business property. Therefore you will be liable for all the business debts and costs. 

Read this guide to understand more about sole proprietorship in Luxembourg. 

Benefits of Sole Proprietorship in Luxembourg

There are several advantages to setting up a sole proprietorship in Luxembourg, which are as follows:

  • Business permits can be granted within two weeks.
  • A non-native citizen can also establish their business in the country by establishing a sole proprietorship in Luxembourg.
  • There are minimal tax complications for a sole proprietorship in the country.
  • Sole proprietorship Luxembourg laws are straightforward and extensive.
  • The sole protectorship process is more flexible and involves minor administrative procedures. 
  • A sole proprietor has to pay tax on profit as a part of their income as a natural person. They have to pay communal business tax, personal income tax, and property tax.  

Documents Required for Registering Your Business in Luxembourg

The documents required to open a business in Luxembourg are:-

  • Incorporation deed: It includes articles of incorporation that must be filed within one month by the Luxembourg Register of Commerce and the respective company. The incorporation deed is then published in full to the Luxembourg electronic gazette. 
  • Articles of association:  It is the statutory document that entrepreneurs require, represented in the form of articles of association. It is a critical step that should be followed by the investors setting up a sole proprietorship in Luxembourg.   
  • Information on the stakeholders and directors: The company law in Luxembourg must have directors or managers. It comes with certain specifications such as– citizenship of the directors, managers’ rights, the liability of managers, etc. 
  • Bank certificate related to the capital: Also known as start-up capital information, it is the minimum amount required to establish a business in Luxembourg. Entrepreneurs must show this minimum capital to the bank to pass the eligibility criteria. 
  • Business permit: All businesses must get a legal business permit from the Ministry of Economy, which includes skilled craft, commercial, industrial activities, and liberal professionals. For this, certain conditions such as qualifications, professional integrity, and physical establishment of their business must be fulfilled.
  • Immigration certificate: Anyone from a third-country nation planning to stay in Luxembourg for more than 90 days or three months must apply for a legal residency permit. Luxembourg Ministry of Foreign and European affairs undertake an immigration certificate. 

Other Criteria for Registering a Sole Proprietorship in Luxembourg

Some other criteria necessary for registering a sole proprietorship in Luxembourg are:-

  • Financing and support measures: Entrepreneurs who want to establish their own businesses in Luxembourg can access various financing and support measures provided by the government. This financial aid assists sole proprietors with additional activities and developing innovative business products. These are investment aid, R&D and innovation, young innovative enterprise measures, and Ph.D. and post-doctoral research.
  • Legal form: Sole proprietorship in Luxembourg calls for setting up a business as a natural person instead of forming a discrete legal entity. It means that entrepreneurs should attach their business property to their private property. This way, the business owners form an individual identity instead of a legal entity. 
  • Education: Educational qualifications are necessary for running a business in Luxembourg. Whether you have attained a high school certificate or degree qualification, you must show it to the legal authorities while applying for a sole proprietorship. 
  • Taxation: Companies operating in Luxembourg require corporate tax and must apply for value-added tax (VAT) on their product. Individual tax is related to their personal situation. Some taxes involved in setting up a business in Luxembourg are corporate tax law, Luxembourg vat rates, and personal income tax rate. 

How to Register a Sole Proprietorship Company in Luxembourg

Since sole proprietors don’t establish a legal identity, registering for a sole proprietorship in Luxembourg becomes effortless. You must follow these steps to register for a sole proprietorship in Luxembourg.

Step 1: Registering with the Trade and Companies who are registering as Sole Proprietorship

Companies registering as natural persons must register online on the RCS website with a LuxTrust certificate. The application is lodged with:- 

  • The duly-completed requisition form originated from the electronic submission system.
  • The documents required are scanned in PDF/A format, including the marriage certificate, power of attorney of the business owner, and declaration of purchase.
  • After registration, the applicant will receive a receipt online as a softcopy. 

Step 2: Availability of the company name 

Entrepreneurs can check for the availability of their name under Luxembourg Business Registers (LBR). When the certificate (of confirmation) is available, it is sent by the officials on the given mail id. The certificate can be downloaded within 20 days from www.lbr.lu

Two types of certificate information could be received from the LBR. These are:- 

  • ‘Certificate of unavailability of the company name’: confirms that the request is unavailable and some other firm has already registered with the same name.
  • ‘Certificate of availability of the company name’: confirms that the name you wish for is available and has not yet been registered by anyone. 

Step 3: Business registration and filings with the RCS

Entrepreneurs must provide all documents stated above with the necessary information, such as persons tasked with overseeing the company and their preferred financial year.

Applicants get two options: they can apply for an appointment with RCS’s filing assistance office (in person). Or they can file electronically with the RCS having LuxTrust.

The electronic version of the form is available on the LBR website. All documents must be attested by the business owner applying with RCS and must be completed in less than a month with all the articles signed. 

Once the filing is completed, you will receive an e-receipt, along with registered instruments, in your registered mail. 

How can Multiplier Help?

Getting a sole proprietorship in Luxembourg is simple and involves minimal steps. However, it is essential to understand how and where to register for a sole proprietorship. To help entrepreneurs with legal procedures and document-related queries, Multiplier’s global employment solution helps to onboard and set up a business in Luxembourg. Multiplier is present in over 150+ countries with its team of experts who are acquainted with the rules and compliances necessary for business. We offer effortless, accurate, and secure global payroll services to freelancers. It includes quick and timely payroll processing across different countries and incurs heavy costs. Besides that, Multiplier also allows freelancers to submit reimbursement claims for any work-related expenses.

Frequently Asked Questions

As a foreigner, you must attain a trading license for SME to start a sole proprietorship in Luxembourg.

A foreigner has to pay income tax in Luxembourg. However, you must pay income tax and VAT as a business owner.

Getting a sole proprietorship in Luxembourg is the easiest and most straightforward. Only a few documents are required to register for sole proprietorship; it doesn’t take much time to be completely registered.

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