Company Formation Services in Luxembourg
The Grand Duchy of Luxembourg
The Grand Duchy of Luxembourg is a landlocked nation situated in Western Europe. This country shares its international boundaries with Belgium to the west and north, Germany to the east, and France to the south. Luxembourg’s geographical landscape is characterized by two primary regions: the Oesling, which is a part of the Ardennes massif, featuring hilly terrain with extensive deciduous forests in the northern part, and the Gutland, often referred to as the “good country,” a relatively urbanized region located in the southern part.
Constitutional Monarchy and Parliamentary Democracy
Key Political Features
Luxembourg is a Constitutional Monarchy and a Parliamentary Democracy, and it holds a prominent position as a financial center. The nation is a member of the Benelux Economic Union and was among the founding countries of the European Union. With a land area of 2,586 km² (approximately 999 square miles), Luxembourg is more than ten times smaller than its neighboring country, Belgium, and slightly smaller than the U.S. state of Rhode Island.
The Grand Duchy is inhabited by approximately 645,000 people (as of 2022), and its capital and largest city is Luxembourg-City (Lëtzebuerg), boasting a population of about 130,000 residents. Luxembourgish is the spoken language, while French, German, and Luxembourgish serve as the administrative languages. The country uses the euro (EUR) as its official currency.
Luxembourg is known for its reputation as a reliable political and economic partner. The nation’s economic policy is marked by its highly professional and dynamic spirit.
Historically, the steel industry had a significant impact on the economy. In the early 1970s, the government initiated substantial efforts to diversify the economy to reduce dependence on this single industrial sector and attract foreign multinational corporations. As a result, Luxembourg’s economy has experienced rapid growth and now encompasses a broad range of industries. These include chemistry, plastics, synthetic materials, mechanics, machine construction, ferrous and nonferrous metal processing, supply of components to the automotive industry, precision instruments, and a thriving glass industry. These industries enhance Luxembourg’s competitiveness on the global stage.
The financial sector represents a vital part of the Grand Duchy’s economy, featuring around 124 authorized banks in 2021, the second-lowest number since 1994. There are also 4,000 investment vehicles and over 20,000 holding companies. The top five banks are Societe Generale Bank & Trust, Banque de Luxembourg S.A., BGL BNP Paribas S.A., Banque et Caisse d’Epargne de l’Etat (BCEE), and Banque Internationale à Luxembourg S.A. (BIL). Luxembourg is recognized as one of Europe’s most significant financial centers, offering a complete range of financial services in both corporate and private banking. It ranks as the third-largest investment fund center globally.
The country’s highly competitive tax regime, stringent banking secrecy laws, and international business environment have established Luxembourg as a prime location for corporate headquarters and a favorable jurisdiction for holding companies. These holding companies offer numerous structural, administrative, financial, and fiscal advantages. Additionally, insurance, private pension funds, securitization, and venture capital investment vehicles play a substantial role in the financial sector and have become key sources of employment.
With ongoing economic growth, residents in Luxembourg enjoy a high standard of living, featuring one of the highest Gross Domestic Product (GDP) per capita, reaching US$133,590 per inhabitant, reflecting a 13.82% increase from 2020. The nation maintains low inflation, low unemployment, and a balanced budget.
Luxembourg is a representative democracy operating as a constitutional monarchy under the rule of Grand Duke Henri, although the Grand Duke’s role is primarily ceremonial. The country is practically governed by the Cabinet of Ministers, responsible for the executive power, and the Parliament, representing the legislative authority in Luxembourg. The Cabinet of Ministers includes the Prime Minister, who serves as the head of government. The Prime Minister leads the political party or coalition of parties with the most seats in Parliament, known as the Chamber of Deputies. Members of the Chamber of Deputies are elected to five-year terms. The Council of State (Conseil d’Etat), composed of 21 ordinary citizens appointed by the Grand Duke, advises the Chamber of Deputies in the development of legislation, although the Council’s opinions are not legally binding.
Administratively, the Grand Duchy is divided into three districts, which are further subdivided into Cantons, Communes, and Municipalities. Communes are administrative authorities with legal status, managing their assets. A Communal Council (Conseil Communal) is directly elected by the inhabitants, and the Commune is administered by the mayor and aldermen (Collège des bourgmestres et échevins) selected from the Communal councilors.
Laws, Regulations, and Standards
The legal system of Luxembourg primarily draws from Roman law. The Luxembourg Constitution establishes the constitutional provisions of the Grand Duchy, the fundamental rights of individual citizens, and the organization of public bodies. It holds superior status compared to ordinary laws and executive regulations, which must align with the Constitution.
The legislative framework in Luxembourg comprises laws, codes, and regulations. Many laws are rooted in French or Belgian legislation, with an increasing portion originating from European Union regulations, directives, and decisions. Significant individual codes include the Civil Code, Commercial Code, Penal Code, Criminal Procedure, and Civil Procedure Codes. Current Luxembourg legislation is initially published in the official gazette – Mémorial.
The population of the Grand Duchy totals approximately 645,000 inhabitants as of 2022. Luxembourgers are typically fluent in French, German, and English, in addition to their mother tongue, Luxembourgish. French is often the administrative and business language, although German and English are also widely used in business circles.
Multilingualism is a natural result of Luxembourg’s small size and its historical connections with France and Germany. Given its proximity to other countries, Luxembourgers must speak multiple languages when traveling abroad because their native language is not understood elsewhere. It is common for many Luxembourgers to be multilingual. In the business sector in Luxembourg, fluency in at least one foreign language is essential.
Luxembourgers are known for their politeness, intelligence, punctuality, perseverance, practical approach to business, and strong work ethic. Their cosmopolitan nature and diverse cultural influences are significant characteristics of the Luxembourgers. On the other hand, Luxembourgers tend to be cautious and careful, taking their time to establish trust in people and preferring a measured, deliberate approach to building relationships.
The legislative framework in Luxembourg encompasses six distinct forms of business entities through which enterprises can operate. Each of these six forms enjoys legal personhood, setting them apart from their members. The selection of a particular legal form hinges on economic and legal considerations, including factors such as the extent of members’ liability and the transferability of shares. Furthermore, it is imperative that no company selects a name that could lead to confusion with an existing entity.
Primary Business Entity Structures
The primary business structures typically utilized include:
Société à Responsabilité Limitée (SARL): This structure corresponds to the private limited liability company.
Société Anonyme (SA): Regarded as the equivalent of a public limited company, the liability of SA members is limited to their contributions to the company’s capital.
Société en Nom Collectif (SENC): This type of entity is considered a partnership, formed by two or more individuals, all of whom bear personal, joint, and indefinite liability for the partnership’s debts. Typically, shares of an SENC are not transferable, although exceptions can be provided for in the articles of association.
Société en Commandite Simple (SECS): This structure is a limited partnership formed by one or more general partners who share joint and indefinite liability for the partnership’s debts, along with one or more limited partners whose liability is restricted to their initial contributions. Both SENC and SECS do not incur tax at the entity level; instead, personal income tax is levied on the partners based on their share in the partnership’s income.
Société en Commandite par Actions (SCA): The SCA is akin to the limited partnership (SECS), with the sole difference being that the shares of limited partners are freely transferable.
Société Coopérative (SC): The cooperative company allows for limitations on members’ liability through the company’s statutes. The shares of an SC, however, cannot be transferred to third parties.
SA and SARL Corporations
In practice, the Société Anonyme (SA) and the Société à Responsabilité Limitée (SARL) have emerged as the most widely favored corporate structures. The key characteristics of these two corporate forms are summarized in the table below:
Particulars Société Anonyme (SA)
Société à Responsabilité Limitée (SRL)
|Minimum subscribed capital||€ 31,000||€ 12,500|
|Minimum paid-up capital||25%||100%|
|Number of shareholders||1 minimum||1 to 40|
|Type of shares||Registered or bearer||Registered|
|Management||Board of directors (1 if 1 shareholder, 3 otherwise)||Director(s) (minimum 1)|
|Annual Shareholder’s Meeting||1 per year||if more than 25 associates|
|Auditor||required||required if more than 25 associates|
Luxembourg’s constitution of 1868 secures the freedom of trade and industry, as well as the liberty to establish a business for every citizen. However, with a view to safeguarding the administrative oversight of the nation’s business environment and promoting industry and commerce, specific conditions for access to and the practice of trades and occupations are outlined in local legislation.
According to the law dated December 28, 1988, any industrial or trade activity in Luxembourg necessitates a government permit. This permit is issued by the Ministry of Middle Classes, taking into account the applicant’s professional qualifications and good standing. Importantly, the permit is strictly individual and cannot be transferred to other entities. Legal entities, including partnerships, must adhere to the same application process, demonstrating the requisite professional qualifications and the integrity of the firm’s management.
Our company licensing services
— What we do and do not do
Our company is EXCLUSIVELY engaged in assisting worldwide clients, either individuals or corporate entities, to get duly and properly licensed with local Regulators and Financial Authorities to get respective official licenses to legally carry out their cryptocurrency or financial related business activities.
TBA & Associates Tax Business Advisors does not provide or carry out any sort of Cryptocurrency or Financial services!
Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.