Luxembourg Subsidiary Entity Set Up

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Luxembourg Entity Set Up

Luxembourg welcomes foreign investment into its open and robust economy with a powerful finance and banking sector and healthy import-export balance. Luxembourg is one of the smallest nations in the world with a population of around 630,000 – however, the World Bank ranks Luxembourg as the richest nation globally with Gross Domestic Product per capita of over 120,000 US dollars.

Even so, expanding overseas is a major step, especially for companies considering opening a legal entity in their new territory.

At Bradford Jacobs, we believe this adventure should be exciting instead of frustrating and time-consuming. By partnering with us, you create the possibility to bypass this process and utilize our expertise. By using our PEO-service, we take care of the complicated paperwork.

How to set up a Luxembourg Subsidiary

Setting up a subsidiary in Luxembourg? First, choose a company type. Most typically the choice will be between a private limited liability subsidiary and a branch, regulated by the Commercial Companies Act. A Société á Responsabilité Limitée (S.a.r.l.), has most of the characteristics of a private limited liability company. The company law reform in 2016 introduced a rationalized form of a company limited by shares, a Société par actions simplifiée (SAS) as another choice.

The subsidiary is a legal entity entirely independent of the parent company and is incorporated in Luxembourg as a local company. Various documents and procedures must be completed to set up the subsidiary. These include:

  • Check availability and select a unique company name followed by the abbreviations S.a.r.l. or SAS, if they represent the chosen company type, and log with the Trade and Companies Register (RCS)
  • Obtain a Certificate of Good Standing from the RCS, stating that the day before incorporation the Luxembourg Commerce Court confirmed there were no issues with the proposed company
  • Deposit minimum share capital of at least €12,000 (US$13,564), which may be divided into various classes of shares
  • Provide register of shareholders, which can number from one to 100 and who generally have no personal liability
  • Draw up the constitutional documents in the form of a Deed of Incorporation or Articles of Association in the presence of a notary. This should detail the individuals on whose behalf it is signed; the registered office; type of business; distribution of share capital; predicted timescale of operation; names of business managers and their responsibilities
  • The documents should be drawn up in French or German, as required by the parties. Documents can be drafted in English, for example, provided a French or German version is subsequently provided. In the event of dispute, French or German translations will take precedence
  • Once signed the notary must register the deeds with the Registration Duties, Estates and VAT Authority, within 15 days
  • The documents must be lodged electronically with the RCS to be published on the Electronic Companies Gazette (RESA)
  • Apply for a business permit (autorisation de commerce), which can take up to three months
  • There are no nationality requirements for managers or shareholders

Benefits of setting up a Subsidiary in Luxembourg

Specific advantages for a foreign company opening a subsidiary in Luxembourg include not being responsible for the subsidiary’s debts or liabilities. Also, the foreign parent company’s financial statements and accounts do not need to be presented to Luxembourg authorities.

The subsidiary can operate under a different company name and can pursue separate business interests. It operates under Luxembourg corporate law in the same way as local companies and is taxed on its worldwide income and liable for Corporate Tax at 15% or 17% depending on business profits, although with additional solidarity and municipal corporate tax levies the total rate can climb to 24.94%. The liability of the subsidiary’s shareholders is limited to their investment in shares.

Through its subsidiary, the parent company has the advantage of exploring the Luxembourg market and further afield among the European Union’s member nations.

Other benefits for a subsidiary: 

  • Easier to obtain regulatory approvals, loans and finance and enter contracts with other Luxembourg and European Union companies 
  • More impact with clients and suppliers, as subsidiaries imply more permanency than branches 

Employees feel there is more stability and job security than from being with a branch