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Setting up a trading company in Luxembourg

Updated on Thursday 14th April 2016

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trading_company.jpgWhat is a trading company in Luxembourg?

 

Setting up a trading company in Luxembourg is very much alike with the procedure of opening a holding company, as both forms have many aspects in common. However, there some particularities that create differences between these two forms, for example a holding company in Luxembourg has the main purpose of controlling other companies by achieving shares in those companies, rather than perform any commercial activities. However, a SOPARPI (type of holding company in Luxembourg) can also be implied in trade or business, when the articles of association or the law do not provide otherwise. In case of trade, a holding company needs an authorization from the Ministry of Middle Classes, which is obtained on the basis of the company's management professional qualifications.

 

How is managed a trading company in Luxembourg?

 

When setting up a trading company in Luxembourg, there must be taken in consideration that the system of management is based on the decision taken in the general meeting of shareholders, as also available for a holding company. They are entitled to approve, to draw up or to ratify acts or decision in the company's name and concerning the company itself. Moreover, when setting up a trading company in Luxembourg, the articles of association must provide a day in which a general meeting takes place each year. Thus, there must be held at least one general meeting in an year.

The trading company in Luxembourg is ran and administered by a board of directors which must contain at least three members.

An entrepreneur willing to set up a trading company in Luxembourg must be aware that the composition of the company board can be maintained for maximum six years and after this period an election must be held. However, even though the company board has a six years mandate, it can be elected again, in the same consistence or by individual.

The law also provides that an auditor must be appointed to check the financial status. This rule is applied for large companies and the auditors can be appointed for a maxim period of six years.

 

Which are the accounting requirements?

 

Both trading companies and holding companies in Luxembourg must present the annual accounts to the shareholders. This documentation must be then submitted to the Registrar of the District Court which validates the deposit by filling a notice in the Grand Duchy of Luxembourg Gazette.

A holding company in Luxembourg (SOPARFI) must also deposit a a consolidated annual accounts when is entitled by a majority of voting rights in another company or under an agreement with the other shareholders of the company. This provision is not required for a trading company in Luxembourg.

 

Which are the taxation benefits?

 

An important advantage in front of the holding companies in Luxembourg (SOPARFI) consists in the exemption of certain taxes, or at least minimizing them, on the basis of several double tax treaties concluded between Luxembourg and other countries. In Luxembourg, the dividends distributed by a Luxembourg company are subject to withholding tax, but this tax rate of 15% can be exempted or reduced on the basis of double tax treaties, in accordance to certain rules applied for this type of company.

 

Our company formation agents from Luxembourg can provide you further information and support in setting up a trading company in Luxembourg and they can offer you services for company incorporation in Luxembourg.

 

 

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