Articles
Establish a Branch in Luxembourg
Updated on Monday 08th January 2024 Rate this article
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based on 17 reviews
By choosing to establish a branch in Luxembourg, the foreign legal entity gains easy access to the Luxembourgish market and can start its business activities faster than if incorporating a local company. The branch will be totally dependent on the parent company and the latter will be liable for the branch’s debts in Luxembourg.
Establishing a branch in Luxembourg is a simple process if certain steps for company formation in Luxembourg are followed and the documents are properly submitted. The whole process doesn’t take longer than a few weeks and in order to operate on the market, the branch will need to have a business permit and to be registered with Trade and Companies Registrar. Our company formation representatives in Luxembourg can offer in-depth support for opening a branch in Luxembourg in 2024.
| Quick Facts | |
|---|---|
| Applicable legislation | For foreign countries |
| Best used for | - banking, - insurance, - financial activities |
| Minimum share capital | No |
| Time frame for the incorporation (approx.) | Around 3 months |
| Management | Local |
| Legal representative required | Yes |
| Local bank account | Local, but not mandatory |
| Independence from the parent company | Full liability on the branch office's debt and obligations |
| Liability of the parent company | The parent company has limited liability |
| Corporate tax rate | 17% |
| Possibility of hiring local staff | Yes |
The characteristics of a branch in Luxembourg
A few requirements must be respected for opening a branch in Luxembourg: the branch must have its own premises in Luxembourg, distinct from the ones of the foreign company and it must have its own clients. A minimum share capital for a branch opened in Luxembourg is not mandatory, however, the foreign company can decide to provide an initial capital to its branch. Here is information about branches in Luxembourg:
- The branch office must disclose any necessary financial information about the foreign company to the Luxembourg Inland Revenue, even though some of the information might be confidential in the country of origin.
- The accounts of the parent company can be audited by the Luxembourg authorities anytime they request to do so.
- The advantages of opening a branch in Luxembourg include lower incorporation costs and quicker incorporation time than for other types of companies.
- The branch will also have to observe lighter reporting and auditing requirements while doing business in Luxembourg.
A disadvantage for the foreign company is that it is completely liable for the debts and obligations of its Luxembourg branch. Foreign companies that want to have a separate identity on the Luxembourgish market can also open a subsidiary which is a completely distinct legal entity from its parent company.
Having a branch means invoicing clients in approximately 4 weeks. The same thing is available to hiring staff in the firm, local or foreign, a matter where our representatives can offer entire support.
The company incorporation process for a Luxembourg branch
Before commencing any business activities, the branch of a foreign company or any other type of company in Luxembourg must receive a business permit. The permit is obtained from the General Directorate for SMEs and Entrepreneurship after submitting specific documents such as those proving the qualification and integrity of the parent company, the articles of association of the company, a passport copy for the branch’s local representative, stamp duty payment proof.
The documents necessary for opening a branch in Luxembourg must be accompanied by the translation into French, German or English. The permit is no longer valid if it’s not used for a period of two years, if the company is liquidated or if the company is bankrupt.The following documents must be submitted at the same time as the application for the business permit at the Trade and Companies Register:
- The articles of association of the foreign company which act as proof that the foreign company exists.
- Information about the authority that released the certificate of registration in the country of origin.
- The minute of the meeting where the decision of opening a branch was taken.
- The decision to appoint a branch representative.
- The identification data for the representatives, the branch’s local address and others.
As a result, a unique registration number is attached to the certificate of registration of the Luxembourg branch and the commercial activities may begin.
A bank account for a branch in Luxembourg can be ready in about 2 months, depending on the paperwork and formalities implicated. This will serve as a corporate bank account for the company's financial activities.
We invite you to watch a video about opening a branch, helped by our company formation specialists in Luxembourg:
What are the accounting requirements for a branch in Luxembourg?
The registration for tax purposes is mandatory for branches in Luxembourg in 2024, just like for any kind of business structure established in this country, mentioning that the VAT returns can be made on a monthly, quarterly or annual basis. This is one of the important accounting requirements for branches in Luxembourg, with the mention that the Company Law and the Commercial Code in Luxembourg need to be respected.
Branches can have an accounting department or better yet, such services can be externalized. Our accounting firm in Luxembourg is at your disposal as soon as you register your branch in the country by providing the needed accounting services for your firm. Feel free to address your questions to our team and find out more details in this matter.
Externalizing the payroll in Luxembourg is much more advantageous in terms of costs, compared to an entire department of accountants in the company. Our team of specialists can explain what this type of service entails, namely how salaries are calculated and how they are distributed in the company. There are a series of rules and formalities that must be respected, but all aspects can be explained to you by our team.
The liabilities of branches established in Luxembourg enter the attention of the parent company. Moreover, the representatives of the branch can jointly hold tax debts. On the other hand, branches in Luxembourg need to submit the financial declarations to the local Company Registry.
What types of companies can I open in Luxembourg?
A branch can be established in Luxembourg under different forms, and the following ones can be chosen for business:
- • SARL or a private limited liability company with a minimum share capital of EUR 12,500.
- • SA or a public limited liability company with a minimum share capital of EUR 30,000.
- • A partnership which can be established with EUR 30,000 as the minimum share capital.
- • A joint-stock company for a minimum share capital of EUR 30,000.
SARL is the preferred business structure for international investors in Luxembourg, whether they want to establish a branch or a subsidiary. The incorporation procedure of a SARL in Luxembourg is not complicated, nevertheless, it is ideal to have the support of a company formation agent in Luxembourg who can handle all the requirements in matters of documents and institutions. You are invited to talk to our team of consultants and find out more about the support they can provide for you. If you want to open a SLP in Luxembourg, our company formation specialists can help you.
Opening a bank account for a branch in Luxembourg
All the financial activities of branches in Luxembourg are linked to a corporate bank account which can be opened in a few simple steps. The procedure is the same for both local and international entrepreneurs, mentioning that the latter ones are not obliged to travel to Luxembourg for opening a bank account. Moreover, you may appoint one of our consultants with a power of attorney to take care of such aspects, especially if you think of opening a bank account for your future branch in Luxembourg.
The banking system in Luxembourg is very attractive especially because there are lower fees or none, and above all, entrepreneurs can benefit from complete internet banking services where they have full control on financial operations, liquidities and more. If you are looking for support in opening a bank account in Luxembourg, do not hesitate to get in touch with our representatives.
Luxembourg is among the countries with huge investment potential. If you too have decided on a business in this country, we advise you to contact our accounting firm in Luxembourg and discover the services you need. You can thus make sure that you will have all the financial reports you want but also help with internal or external audits. As such, we invite you to talk to our team and ask for assistance in this important field.
Choosing Luxemburg for opening a branch
International companies can have branches in Luxembourg in most of the sectors, as long as there are no particular restrictions imposed. The banking sector is a prolific one, and most international financial institutions activate in Luxembourg as branches or subsidiaries. Branch offices have fewer administrative procedures, can be easily established, however, such structures have complete responsibility in front of the parent company meaning that each operation, financial or non-financial needs to be reported. In terms of management, a board of directors is needed, in charge of daily activities and other operational matters.
Even if settling agreements as a branch in Luxembourg depends in a large percent on the foreign company, this does not represent an impediment when choosing such business form for future operations. In matters of taxation, branches established in Luxembourg have an important advantage, and that is related to the fact that there are no taxes to be paid. This means that the parent company will be in charge of such aspects, however, the branch needs to be registered for taxation in Luxembourg.
Notwithstanding the small size, Luxembourg is one of the most powerful financial centers in the world. Around USD 135,000 was the GDP per capita in 2023, the highest in the world. The country was ranked 19th out of 132 countries on the Global Innovation Index 2022.
The business opportunities in Luxembourg are huge, and the stable economy and the support of the authorities provided for international investors is well represented and appreciated. Branches and subsidiaries are easy ways to do business in Luxembourg, taking also into consideration that entrepreneurs can think of the experienced local workforce, an appealing tax structure, good infrastructure and varied investment incentives offered to foreign investors. ICT, shipping and logistics, the financial sector and the automotive are only a few of the fields in which branches of international businesses can be established. Here are some facts and statistics to know about Luxembourg business and economy:
- USD 62.44 billion represent the GDP for Luxembourg in 2018.
- The unemployment rate in Luxembourg is set at 5.47%.
- USD 15.75 billion represent the Luxembourg exported goods for the previous year.
- The GDP volume for Q1 of 2019 rose by 1.6% compared to the same period last year.
When opening a branch in Luxembourg, an office manager is appointed. He or she can only act under the power of attorney, granted by the foreign company interested in establishing a branch in this country.
If you would like to do business in Luxembourg, you may contact our team of company formation specialists in Luxembourg and find out how you can open a branch in Luxembourg in 2024. If you are interested in setting up a company in China we can put you in touch with our local partners.
Meet us in Luxembourg
Contact our specialists in company formation in Luxembourg, who have a large experience in finance and international business.
Set up an appointment with us at +352 671 533 922. Alternatively you can incorporate your company without traveling to Luxembourg.
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As a BridgeWest partner for many years, CompanyFormationLuxembourg.com is for sure a great choice when wanting to start a business in this important financial hub. International entrepreneurs can rely on the professionalism of this team.
Vlad Cuc, Director of BridgeWest www.bridgewest.eu
Read more testimonialsVlad Cuc, Director of BridgeWest www.bridgewest.eu