Articles
Establish a Subsidiary in Luxembourg
Updated on Monday 08th January 2024 Rate this article
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From the beginning, it is important to know that a subsidiary is a form of business which can be established by a foreign company in Luxembourg whose majority of capital is owned by the foreign stockholders. If you would like to know the incorporation procedures of a subsidiary in Luxembourg, it is best to get in touch with our team of company formation specialists in Luxembourg and find out more about the conditions imposed in this matter. Our team is able to provide you with the necessary support and guidance, in order for you to skip any errors in terms of registration and get straight to business without thinking of harsh formalities related to company formation in Luxembourg.
| Quick Facts | |
|---|---|
| Applicable legislation (home country/foreign country) | Company Law in Luxembourg |
| Best used for | - banking, - financial and insurance services, - IT |
| Minimum share capital | Yes |
| Time frame for the incorporation (approx.) | Around 3 weeks |
| Management (local/foreign) | Local |
| Legal representative required | Yes |
| Local bank account | Yes |
| Independence from the parent company | Yes |
| Liability of the parent company | Limited |
| Corporate tax rate | 17% |
| Possibility of hiring local staff | Yes |
How can I open a subsidiary in Luxembourg in 2024?
A subsidiary is Luxembourg is a legal and independent entity, compared to a branch whose actions are managed by the parent company. Likewise, a subsidiary is incorporated as a company with a legal entity in Luxembourg. There are two forms of business through which a subsidiary can operate: the private limited liability company and the joint stock company.
SARL is the best option for subsidiaries in Luxembourg due to simplified procedures, formalities and structure. The incorporation of such a business might take around 3 weeks and one of our local agents can help.
Subsidiaries in Luxembourg must have a business license before operating in the market. As such, applicants, respectively the business owners should present proof of knowledge to the Ministry of Economy for industrial activities, or Ministry of Middle Classes for a Commercial Activity in Luxembourg.
Registering a subsidiary as a private limited liability company
The private limited liability company is normally suggested for small or medium foreign companies, and it can be registered by at least 2 founders and a maximum number of 40 members. Many business activities choose the private limited liability company because it provides limited liability and has lower registration costs compared to a public limited company which is subject to higher expenses. Such an entity requires a minimum share capital of EUR 12,500 which needs to be contributed at the time of the registration.
Are you planning to open a company in Luxembourg? The recommendation is to also take into account the accounting aspects. So, in this endeavor, you can collaborate with our accountants in Luxembourg who have vast experience. Tax advice and planning are important aspects, as well as various types of audits, for which you can receive the support of our specialists.
Registering a subsidiary as a public limited liability company
The public limited company or the joint stock company is a preferred business form by big companies from abroad willing to expand in Luxembourg. It is good to know that the shareholders have limited liability which is an important benefit. Even the minimum share capital for this business structure is larger and established at EUR 31,000. It is good to know that contributions can be made in cash or in kind and it can be increased later on. Like in the case of a private company, at least two founders are needed for establishing a subsidiary in 2024.
A subsidiary with operations in Luxembourg is based on a decision of opening it which a document signed by the foreign company. The foundation deeds containing the name and the address of the subsidiary, the name of the shareholders and their identification details, plus the contribution to the capital and the articles of association containing provisions regarding the good function of the company need to be submitted by the founders. After the incorporation process is complete, a certificate of registration is issued for the new company, in order for you to start the activities.
How long does it take to register a subsidiary in Luxembourg?
In Luxembourg, the company formation process takes around 19 days or 3 weeks if all the documents are accepted. A bank account must be opened for the company in order to start the incorporation procedure and deposit the minimum share capital. It is good to know that businesses in Luxembourg will activate only if special permits and licenses are obtained if they operate in certain business fields.
The next thing to do is to register with the relevant tax authorities in order to obtain a tax identification number and a VAT number. Our company formation specialists in Luxembourg can help foreigners open a subsidiary in this country and make all the necessary preparations to register the new company. International investors who choose to establish their presence on the Luxembourgish market can also benefit from the big number of double tax treaties signed by Luxembourg with countries worldwide.
The corporate tax rate in Luxembourg is set at 15% and it is imposed on subsidiaries with activities in this country with taxable income lower than EUR 175,000. In the case of taxable income between EUR 175,000 and EUR 200,001 CIT is EUR 26,250 plus 31% tax rate base above EUR 175,000.
If you want to open a special limited partnership in Luxembourg, our company formation specialists can help you.
Why establish a subsidiary instead of a branch?
The reasons why foreign investors decide on expanding their businesses with the help of subsidiaries are determined by the independent status of this kind of entity compared to a branch. It is good to know that a subsidiary has limited liability for the parent company, it has an easy incorporation, however, you might want to observe the costs for establishing such an entity, a little bit expensive compared to a branch.
As for a mutual condition, the foreign company will have to prepare the decision of opening a branch or a subsidiary in Luxembourg, as part of the necessary documents for registration. If you would like to know more about how you can establish a subsidiary in Luxembourg and about the requirements in this matter, do not hesitate to get in touch with our team of consultants. Also, you might be interested in accounting services (tax advice, consultancy and management accounting, personnel administration, payroll, financial and management accounting) for your company in Luxembourg, a matter where our team of advisors can help.
The Certificat de Deblocage is issued at the time the subsidiary is established in Luxembourg and shows that such structure is incorporated and ready to develop its activities.
The business license, the VAT registration and unblocking the authorized capital are required for subsidiaries in Luxembourg in 2024. All the procedures can be explained by one of our local agents.
VAT registration for your subsidiary in Luxembourg
The registration for VAT is the next step after you have received the certificate of incorporated related to the subsidiary in Luxembourg in 2024. Companies dealing with import and export activities, selling goods on the internet, in Luxembourg, organizing live events, or holding goods with resale purposes must register for VAT. Here are the main conditions for VAT registration for your subsidiary in Luxembourg:
- An initial declaration for legal persons must be provided to the competent authorities.
- The constitutional documents (in French or German) of the company are necessary.
- The identification documents of the owners and the managers of the subsidiary are needed.
- Information about the bank account of the subsidiary, and about the date the company was registered.
The successful registration for VAT comes with a VAT identification number of 8 digits and a certificate showing the company is a taxpayer in Luxembourg. Please feel free to solicit support for tax registration from our company formation specialists in Luxembourg. You can watch the following video about opening a subsidiary and the process of company formation in Luxembourg for more information:
What are the main procedures for opening a subsidiary in Luxembourg?
It is important to know that there are no harsh formalities for establishing a subsidiary in Luxembourg, however, it is best to observe the main steps in this matter and ask for help from our team of consultants:
- If you decide on a SARL, you need to prepare EUR 12,500 as minimum share capital.
- EUR 31,000 are necessary for a public limited liability for your subsidiary in Luxembourg.
- The declaration of the parent company showing the intention of opening a subsidiary in Luxembourg is mandatory.
- Your subsidiary will need a business address in Luxembourg and a legal representative.
- The Articles of Association and the Memorandum of Association are the company’s main documents.
Luxembourg provides varied business structures to local and international entrepreneurs. In the case of subsidiaries, these can be wholly-owned or partially-owned, depending on the business nature, operations, budget and other aspects.
Accounting conditions for subsidiaries in Luxembourg
Whether you want to open an accounting department in your firm or hire the services of a specialized accounting company, it is important to have a clear picture of the accounting matters for a subsidiary in Luxembourg. The first thing to do is to register for VAT with the Direct Taxation Authority in Luxembourg, the institution that will issue the VAT number. Additionally, it is important to know that the annual accounts can be filed electronically, with the help of the official website of DTA in Luxembourg.
As for the VAT returns, a subsidiary in Luxembourg has the possibility of filing them monthly, quarterly or annually, depending on the business needs. A subsidiary can be easy to register in Luxembourg, however, you should know that our company formation representatives in Luxembourg can help you with all the requirements in this matter, like drafting the needed documents, opening a bank account, register for tax purposes, all these in a proficient and cost-effective manner.
The advantages of a subsidiary in Luxembourg
A subsidiary has certain advantages that differentiate it from the branch or representative office. Although it has larger incorporation costs because the foreign company needs to register a new company in Luxembourg, the subsidiary offers a greater degree of maneuverability and less liability for the foreign company. The advantages of the subsidiary include the limited liability for the parent company and the legal independence from the foreign company. It is important to know that the administrative and operational procedures needed to run a subsidiary in Luxembourg will be more complex compared to a branch. However, the foreign company can enjoy a complete lack of liability towards the actions and debts of the subsidiary in Luxembourg.
Our company registration agents in Luxembourg can give you further details about the requirements for company incorporation and management in the country as well as tax compliance. Do not hesitate to contact us for more details about how you can open a subsidiary in Luxembourg in 2024.
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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