Luxembourg provides a unique low-tax environment for international investors, despite pressure from the EU and OECD. The country is widely used in corporate structuring for cross border transactions, but due to its place in Europe's political environment it is constantly adapting its tax legislation to avoid adverse conflict with the tax authorities of other EU countries.
What are the main types of structure in Luxembourg ?
These are the main forms of standard Luxembourg companies:
- joint stock company (SA), minimum share capital €30,000; requirements include at least one director, a registered office in Luxembourg, and audited accounts if the company exceeds a certain size
- limited liability company (SARL), minimum share capital €12,000, requirements include at least one director, a registered office in Luxembourg, and audited accounts subject to size.
- general partnership, limited partnership, special limited partnership and branch of foreign company
- special business entity – the SOPARFI.. This type of company is not a legal entity in its own right. Rather, it employs one of the above forms, such as an SA or a SARL, as their legal base but is the typical Holding and low tax entity.
Main features of a SOPARFI company
subject to normal corporate income tax, however dividends are generally exempt from tax
- eligible to benefit from double-taxation treaties
- some beneficial tax treatment of profits and dividends
The unemployment rate in Luxembourg is low but businesses have little trouble recruiting staff as the labour pool is bolstered by workers commuting into Luxembourg from neighbouring countries. The workforce is well educated and is particularly attuned to the financial services sector.
Luxembourg is regarded as slightly more bureaucratic than some other EU states. It complies with EU directives on labour, health and safety etc, and indeed on most taxation issues, apart from the particular circumstances of low-tax holding companies. Domestic and foreign investors alike have the right to establish business entities in Luxembourg.
Luxembourg has a number of schemes designed to promote investment. It has established a framework for investment incentives to counter the country's historic reliance on the steel sector, and grants are available to encourage investment in other manufacturing and high-tech industries. The government also provides equity funding for certain kinds of investment, particularly in development areas.
All companies are required to file annual financial statements, although these records do not need to be kept in Luxembourg. Annual tax returns must also be submitted.
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