A subsidiary is a form of business established by a foreign company in Luxembourg whose majority of capital is owned by the foreign shareholders.
A subsidiary opened in Luxembourg is considered a legal entity, unlike a branch whose actions are supervised by the foreign company.
The incorporation of a subsidiary in Luxembourg
The subsidiary is incorporated as a company with legal entity in Luxembourg. The two most common forms of business are the private limited liability company and the joint stock company.
The private limited liability company is suited for smaller or medium sized businesses. It must have at least 2 founders and a maximum number of 40 members. This is the most used form of legal entity because it is suited for many business activities, it provides limited liability and has lower incorporation costs compared to the public limited company. The minimum share capital is 12,400 euros that must be fully subscribed at the time of the incorporation.
The public limited company (joint stock company) is a business form preferred by large corporations. Shareholders have limited liability which is an important advantage. The minimum share capital for this business structure is larger, at 31,000 euros. Contributions can be made in cash or in kind and it can be increased afterwards. Like in the case of the private company, at least two founders are needed.
A subsidiary established in Luxembourg is based on a decision of opening taken by the foreign company. The foundation deeds containing the name and address of the subsidiary, the name of the shareholder and their details and contribution to the capital and the articles of association containing provisions regarding the good function of the company need to be submited by the founders. After the incorporation process is complete, a certificate of registration is issued for the new company.
Thecompany incorporation process in Luxembourg takes approximately 19 days, if all the documents are in order. A bank account must be opened for the company in order to start the incorporation procedure. The initial capital is deposited here.
Businesses in Luxembourg need to obtain special permits and licenses if they operate in certain business fields. They must also register with the relevant tax authorities in order to obtain a tax identification number and a VAT number.
Our company registration agents can help you open a subsidiary and make all the necessary arrangements to register the new Luxembourgish company. Foreign investors who choose to establish their presence on the market can also benefit from the large number of double tax treaties signed between Luxembourg and countries worldwide. The EU Parent-Subsidiary Directive also offers tax advantages for subsidiaries based in Luxembourg.
You can watch the following video about opening a subsidiary for more information:
The advantages of a subsidiary
The 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:
-limited liability for the parent company;
-legal independence from the foreign company.
The administrative and operational procedures needed to run a subsidiary in Luxembourg will be more complex than in the case of the 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.
If you need information about how to establish a subsidiary in other European countries, such as Poland, Italy, Malaysia or Hungary, you may call our local representatives.
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