If you have a company in a foreign country and you plan on extending your business in Luxembourg as well, you may choose to open a branch or subsidiary in Luxembourg
, that requires registration with the Trade Register, or set up a liaison office
, meaning a lighter structure also known as a representative office
Why open a liaison office in Luxembourg?
Unlike a branch or subsidiary, that requires registration with authorities, a liaison office is a much simpler alternative that allows a foreign legal entity to create on-site contacts in Luxembourg with stakeholders such as potential customers or suppliers. The liaison office can help the business development by ensuring communication, advertising and other public relation activities with partners and clients, undertakings that are hard to perform remote. A liaison office allows a company to be at the heart of the business environment with less documentation and responsibilities.
Actions allowed to be undertaken in a liaison office
A liaison office in Luxembourg is not allowed to conclude contracts in the name and for the account of the foreign company, as its main purpose is related to research, public relations and communication and not at all with commercial activity. The liaison office has a very strict preparatory relay role in the early stage of the negotiation process lead between client and the respective foreign company. Therefore, all documents, such as invoices or contracts, must be issued or signed, depending of the type of document, by the foreign parent company.
The liaison office does not have legal personality
In Luxembourg, the liaison offices opened by a foreign entity do not have a legal personality. Here are other important aspects:
- It is not separated by the foreign company’s heritage,
- It does not have a distinct name, a trade name, own property or capital.
If the liaison office has financial problems, then the foreign company that opened the liaison office in Luxembourg is liable for the debts of the office.
If you would like the support of our accountants in Luxembourg you can discover the services offered by our experts. You can benefit from a certified team of accountants, in charge of payroll, bookkeeping, tax registration, preparation of annual financial statements, and submission to the revealing authorities. On the other hand, business owners can ask for tax minimization options that can be implemented in the firm.
Responsibilities of a liaison officer in Luxembourg
If the representative office in Luxembourg is your business choice, then you will need a liaison officer. Here are some of his/her responsibilities:
- • Coordinates the activities of the representative office in Luxembourg, in order to promote the respective business.
- • Develop permanent communication between clients in Luxembourg and the represented company.
- • Must have negotiation skills.
- • Fostering relationships.
- • First of all, he must understand the business direction of the company he represents, to be able to provide complete information to those interested.
- • Among the responsibilities of a liaison officer is the reporting, as well as the analysis required by the company it represents.
- • A good liaison officer should have experience in business, international relations, management, or political science.
These are some of the responsibilities, but also the attributes of a liaison officer. If you are interested in opening a representative office in Luxembourg, we recommend the services offered by our specialists. They can help you with company formation in Luxembourg.
Differences between branches in Luxembourg and liaison offices
Branches in Luxembourg
are extensions of foreign companies in this territory. They are supervised by the parent company, including from a financial point of view, and must not carry out activities other than those already established.
On the other hand, a representative office in Luxembourg must be strictly limited to the parent company's projects, namely its promotion on international markets, in this case, Luxembourg. Also, the liaison office in Luxembourg does not undertake economic activities to generate income.
Who financially supports the representative office in Luxembourg?
A liaison office in Luxembourg represents the interests of a foreign company in this country. Having activities strictly for the promotion of the respective business, from a financial point of view it is supported by the foreign company. It can be said, therefore, that the expenses of this representative office come under the attention of the entity that wants to be promoted in Luxembourg. However, it should be mentioned that all these expenses must be proven with invoices and various documents, which reach the parent company and the accounting department.
Areas where liaison offices in Luxembourg can be found
Opening a liaison office in Luxembourg has a specific purpose, depending on the field in which it operates. Here are some examples:
- • Import and export,
- • education,
- • Health care,
- • Government,
- • Large organizations,
- • militaries,
- • External relations.
The tax regime for liaison offices in Luxembourg
As mentioned in this article, a representative office in Luxembourg has no economic operations and therefore does not generate income or profits. Thus, it can be said that this entity is not subject to corporate tax in Luxembourg. Also, a liaison office in Luxembourg does not have to make and submit VAT declarations because it does not issue invoices. On the other hand, if you purchase goods and services in Luxembourg, you must pay VAT. We recommend those interested in the charging system for the liaison office in Luxembourg ask our local specialists for information.
Here is some information about the Luxembourg economy:
- • According to the 2022 Global Competitiveness Index and the World Economic Forum, Luxembourg ranks 13th, in terms of economy.
- • The main investor in Luxembourg is Bermuda, with around 13.5% of the total FDI.
If you are interested in opening a company in Luxembourg
or a liaison office
, our local agents will provide the needed assistance. Contact us
for more information. We offer company incorporation in Luxembourg
and related services.