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How to start a business in Luxembourg

The administrative procedure required to create and operate a business in Luxembourg, whether as an entity or as a sole-proprietor, is complicated and time-consuming. To help you understand the steps and the necessary documents, we have written this article. To be clear, we are neither lawyers nor accountants and the following information should not be considered legal advice. You should seek an appropriate information for your own situation. This material is intended for refugees and other newcomers to Luxembourg. If you are doing business outside of Luxembourg, we encourage you to find relevant resources to operate a business there.

Preparation and first steps for becoming self-employed

 

 

If you are an asylum seeker, you will not be able to obtain a business permit until you have obtained your residence permit. However, we encourage you to start with 4 initial steps, so you can start a business sooner once you get residency. And if you don't get a residency, you will have gained valuable skills - such as language proficiency, computer literacy, mathematics, writing and presentation skills that can help you find a job anywhere in the world.

 

These four initial steps are:

 

 

  1. Obtaining proficiency in a language commonly spoken in Luxembourg (French, Luxembourgish, German or English).

  2. Getting your high school diploma, if you have one, recognized by the Diploma Recognition Service.

  3. Completing at least one training program relevant to your project.

  4. Creating a basic business plan.

NB: These steps do not require business or work authorisation and generally useful for anyone seeking to eventually create a business.

Preparations and initial steps
1. Langauge proficiency

1. Language proficiency

 

Languages are important for doing business in any country, but in Luxembourg the lack of strong non-European ethnic communities makes it even more important. Depending on your business, mainly French, but in some cases also German, Luxembourgish or English is crucial for communicating with customers, suppliers and officials.

  • To register for language courses, go to the "Youarewelcome.lu" platform to explore different options.

  • "My first 500 words and phrases in the 5 languages of Luxembourg" is a search that you can find here:  http://www.amcham.lu/language-learning/. It was developed by the American Chamber of Commerce in Luxembourg.

  • There are many free (i.e. Youtube or Duolingo) or paid online resources that can complement your language learning program.

  • Last but not leastinteracting with locals, watching TV and reading books or newspapers will help you become fluent.

2. Recognition of diplomas

Many businesses do not require any qualification to start. However, having your high school or university diploma recognised could be useful to eventually obtaining a business permit for certain types of businesses. Even if you're not starting a business, a recognized degree could be useful for finding a job or negotiating a higher salary.

Depending on your business, you can obtain an authorisation by obtaining proof of a few years of professional experience in the chosen activity, but you must check the specific requirements for your profession under the following link: http://www.guichet.public.lu/[. ..]/authorization-establishment/


Requirements differ by country and degree type. For up-to-date information on how to have your diploma recognised, please visit: http://www.luxembourg.public.lu/[...]reconnaissance-diplomes/

 

You can also contact the Ministry of Higher Education and Research by telephone (+352 247 86619) or by e-mail (registre@mesr.etat.lu) to inquire about your particular case.

2. Diploma recognition

3. Training 

The House of TrainingNyuko, ADEM's StartYourBusiness and House of Entrepreneurship provide training on how to become an entrepreneur or improve related skills. It's a good way to improve your professional qualifications while improving your language skills. For up-to-date information on the latest courses and topics, please visit the links above.

 

For projects involving the preparation or consumption of food or beverages on site, either proof of one year experience in HORECA or completing a 15 hours HORECA course and passing the test at the end is required. The course is in French and German with the possibility of taking the exams in English.


For those who want to practice activities considered as artisanal (such as baking, hairdressing, cleaning or machine-related work), it is generally required to present proof of official government-issued professional qualifications and experience as an entrepreneur. These documents must be validated by an official government body and  may involve something as simple as an official registration slip or tax notice from your home country. Please contact the House of Entrepreneurship and/or the Chamber of Trades to receive information on the requirements for your specific trade.

3. Training

4. Business plan

A business plan helps you think through your project, test your idea on paper, plan out important details and secure financing (if needed) for your project. It doesn't have to be complex at first, but you should be able to answer some basic questions about your project.

What is your product/service? Who will buy it and why? How/where/when will you distribute your product/service? Who are your competitors and what makes you unique?

There is always a form of competition.​
We are either competing for time, or for money, or for both.
So what are people doing with their time and money when they are NOT consuming your product or service...?

In order to test the idea, the business plan should include real numbers, such as expected expenses, revenues and profits. The business can only be successful if the revenues are greater than the expenses. To obtain financing (credits, investments or subsidies), the figures must be defensible. The business plan should contain a realistic estimate of start-up costs. When applying for a loan or an investment, it is important to approach potential investors with hard numbers that you can explain.

​There are many different business plan templates out there, and you should feel free to pick the one that works best for you. However, Touchpoints offers a simplified three-page version that you can download here:

4. Business plan
Administrative steps

Administrative steps and procedures

1

BUSINESS PERMIT

2

LEGAL FORM

3

BUSINESS REGISTER

4

SOCIAL SECURITY

5

VALUE ADDED TAX (VAT)

Administrative steps for setting up a business in Luxembourg 

The steps in the business creation process differ depending on your personal situation and the nature of your business activity. Therefore, it is best to seek professional help. Nevertheless, this article is meant to give you a brief overview of the basic steps involved.

1. Business permit

1. Applying for a business permit

To legally carry out a commercial activity in Luxembourg, you must first apply for a business permit. To submit a successful application, you generally need 4 things:

  • Residence  (residence permit) in Luxembourg or in neighbouring countries not too far from the Luxembourg border;

  • Professional qualifications, which may or may not apply depending on the profession. 

  • Professional integrity

  • A fixed business address that is appropriate for the activity.

Craft versus trade

Activities that fall under “trade” do not require professional qualifications. Such activities typically include the simple buying and selling of products (i.e. a clothing or grocery store).

For businesses involving the preparation or consumption of food and beverages on site (such as cafes and restaurants), either one year of experience in a restaurant, cafe, or hotel, or participation in the Horeca course is required. For specific conditions related to your profession, please see this page: window.public.lu/[...]authorization-establishment/

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Manual activities such as cleaning, hairdressing, baking, vehicle repair and other trades require professional qualifications, such as a recognized diploma, certificate, or work experience. These business permits are generally more difficult to obtain, as the requirements are strictly regulated. Here is a list of available crafts: http://www.cdm.lu/Artisanat/les-activites-artisanales

Professional integrity

As a newcomer to Europe, the Luxembourg authorities do not have a detailed history of your professional reputation (for example, whether you have a history of bankruptcy and/or dishonest business dealings). To prove that you have a clean work history, you will need to go to a notary and (for a small fee) sign an attestation/affidavit.

 

Fixed location

For the last condition, a fixed location means a place in Luxembourg where you are authorised to work and which is suitable for the activity you wish to carry out there. Depending on the nature of your professional activity, this may be a room that you rent specifically for your activity (shop, office, warehouse, etc.) or a dedicated space in your private apartment (with agreement from the owner ). There are also a few coworking spaces in Luxembourg available for this purpose. Your fixed location must be suitable for the activity.

You may be able to request an “agreement in principle” for your business authorization without yet having the fixed location. The advantage of applying for the “agreement in principle” is that if you’re unsure whether the ministry will accept your professional qualifications, you can check to see prior to signing a lease. This way, you can know for sure whether you will be able to obtain the business licence before signing an expensive rental contract. Another advantage of requesting an agreement is principle is that once you sign a lease for a fixed location, you may be able to obtain your authorisation faster and avoid losing time.

2. Legal forms

2.Choose a legal form

When you complete the business permit application, you must choose the legal form in which to set up and manage your business. There are several options for legal forms in Luxembourg, but here we focus on the most common:

  • Sole Proprietorship (Independent)

  • Private Limited Liability Company (SARL)

  • simplified limited liability company (SARL-S)

  • Public Limited Company (SA)

  • Non-profit Association (ASBL)

  • Social Impact Company (SIS)

Sole proprietorship (Independent)

Establishing a sole proprietorship means setting up your business as a private person instead of establishing a separate legal entity. It differs from other forms of businesses in that it involves the most flexibility as well as the least administrative procedures and set-up costs, but it is also the most risky. A separate legal entity protects you from bankruptcy by allowing you to separate your private property from your commercial/corporate property.

Creating a separate legal entity

In this situation, there is a strict separation between the property belonging to you and the property belonging to the company. This means that if the company goes bankrupt, you lose the property belonging to the company (e.g. company car, refrigerator, offices, etc.), not your personal property (your personal car , your apartment, your clothes, etc.). In return for these protections, however, you must follow certain rules, such as not using company property for personal gain without fair compensation.

 

Some entrepreneurs with low investment capital requirements start as sole proprietors and transition to a corporate structure once the business grows.

 

Simplified Limited Liability, LTD (SARL-S)

Until several years ago, the SARL, which required more than a thousand euros in initial administrative costs as well as a minimum of 12,500 euros in capital investment, was the main alternative to the sole proprietorship. However, with the aim of making entrepreneurship accessible to a greater number of people, Luxembourg created in January 2017 a new form called SARL-S, which  is similar to the classic SARL except that it requires only one euro of capital investment.

Specificities :

  • The partners/shareholders of a SARL-S must be physical persons. A company can never be a partner of a SARL-S.

  • A natural person can only be a shareholder of only one SARL-S at a time.

  • Five percent of your annual profit is locked in capital until you reach 12,500 euros. At this point, you will need to upgrade to an SARL or other legal form.

Find more details on SARLs here:  SARL-S on Guichet.lu

Non-profit and social impact

 

If you intend to create a project that has a social objective, you can create an ASBL (Association Sans But Lucrative) or a SIS (Société d’Impact Sociétal).

Although non-profit associations are not allowed to generate profit, they can employ people and pay them salaries under certain conditions (!). Non-profit associations require at least three co-founders and generally receive most of their funding from donations and foundations. For more information on the creation of an ASBL, please consult this link of the CLAE (Liaison Committee of Foreigners' Associations).

 

In very simple terms, a SIS is a mixture of SARL and ASBL and was created to better protect and regulate business activities carried out by non-profit organisations. SISs are allowed to make profit, but with substantial restrictions. To obtain SIS status, you will first need to set up a company (such as a SARL) following the normal procedure to create an SARL(-S). To learn more about creating a SIS, please consult this link.

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Ultimately, the choice of legal form depends on your personal situation and the type of business activity

  • For help in setting up a business, get support from la House of Entrepreneurship.

  • For help setting up an ASBL, get help from le CLAE.

  • For help with creating a SIS, ask for help from SBI.

3. Register with the Luxembourg Business Registry (LBR)

You must register your company, sole proprietorship or ASBL with the Trade and Companies Register. If you’ve created an ASBL or company, you must start by checking the availability of the company name. Then register using a Luxtrust certificate (PDF login guide) or in person at their office in Luxembourg or Diekirch. If you are creating an association, you must include the articles of association with your request.

3. Business register
4. Social security

4. Registering for social security

The fourth step is registering at the Joint Social Security Center (CCSS) for social security. Social security benefits include unemployment insurance, retirement pension, disability insurance, parental leave, health insurance and more. If you plan to live directly from your activity without a fixed salary, you will pay about 25% of your gross income to social security. Consequently, the CCSS will ask you to estimate how much you hope to earn in the first year, and you will have to pay 25% of this amount spread over the 12 months from your affiliation to social security (Ex.: if annual taxable income = €24,000, then €24,000 X 25% divided by 12 months).

It is important to estimate your income as accurately as possible. If you estimate it at too little, the CCSS will ask you to repay the difference one year later once you’ve filed your tax declaration and the CCSS sees your real income. If you estimate it at too much, you’ll pay more in the short run, and the extra money will be credited back to you. If not anticipated, excess payments to CCSS in the short run or the need to pay more later due to insufficient payment at the beginning can create untimely cash shortages for your business.

 

The CCSS assumes that you expect to earn at least the social minimum wage. This means that you will be asked to pay a minimum of around 550 euros in social security each month - even if your business is not yet generating a profit. However, there are exceptions to this procedure  for people who earn less than the minimum wage on an annual basis or are employed elsewhere.

 

If your total income as an entrepreneur is less than 1/3 of the minimum income per month, you can request not to pay social security at all (see exceptions above). In this case, however, you will not be entitled to social security benefits, including health insurance, unless you are already entitled to it through a spouse, employment, or buy it separately.

 

Like many Luxembourg institutions, the CCSS operates largely on a case-by-case basis. Contact them before and after launching your business to see how they can help you, either by visiting their offices, or by writing an email.

For more information on social security, follow this link.

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5. Registering for VAT

To register for VAT, you must file an initial declaration with Administration of registration and domains (AED).

The VAT, or Value Added Tax (called TVA, "Taxe sur la valeur ajoutée" in French), is paid by the end consumer on all goods and services purchased. Usually the rate is 17%. The exemption threshold which allows certain companies to opt out of collecting VAT is €35,000 in turnover per calendar year. To learn more about this and the eligibility criteria, click here. Unless you request the exemption, you will receive a VAT number when registering for VAT. It  is your responsibility to put this number on your bills, collect this tax from your customers, and pass it on to the government. As a business that collects VAT, you are allowed to subtract the VAT you pay on the goods and services you need for your business. This means that if you have a VAT number, you will not not pay VAT on the goods or services you purchase for running your business.

 

Example:

 

  • You must invoice €1,000.00 for services. To your client, you invoice €1,000.00 + €170.00 VAT (17%).

  • At the same time, you buy a mobile phone for your business for €200.00 + €34.00 VAT (17%).

  • The VAT you will have to pay to the government is €170.00 - €34.00 = €136.00

  • Thus, an individual would have paid €234.00 for the mobile phone. The business only pays €200.00.

 

Of course, calculating VAT on a monthly, quarterly or annual basis (depending on your income) is much more complex, especially when selling goods and services in other European countries. In all cases, you should seek the assistance of a professional tax adviser to prepare the VAT returns to be submitted to The Registration Duties, Estates and VAT Authority (AED)  every month, quarter or year (depending on your income).

VAT Exemption - Invoicing without VAT

If your annual turnover is less than €35,000.00, you can ask the AED for a VAT exemption, or what is called the "Régime de franchise," when registering for VAT. This means you won’t add VAT to your invoices and your customers won’t pay it. This option reduces paperwork considerably and could be useful for starting small,

Note that in all cases, you must register with the Administration de l'Enregistrement et des Domaines.

Other taxes: Income tax

The Luxembourg Administration of Direct Contributions, CDA, which is responsible for income tax, will contact you by mail. If it does not, you should contact them and provide an initial statement including details of your business and how much you expect to earn in the first two years of business. For more information on how to register for income tax, Click here. Note that there’s a minimum wealth tax to be paid for companies, even if they’re unprofitable.

5. Value added tax (VAT)
Financing.png

Financing

Financing
1. Preparation

An important question that entrepreneurs tend to ask themselves after developing an idea is "Where can I find the money...?" A good start to answering this question is to ask “how much do I need and why?"

 

However you decide to finance your project - whether through loans, investments or personal savings - it is important to prepare an appropriate business plan and have a solid knowledge of what you need to be successful.

​​​​

1. Preparation

Before presenting your project to investors or sponsors, experts advise solid preparation, a complete and up-to-date file, and an understanding of key figures, including costs, revenues and expected profits. Be realistic about these numbers and be able to justify them. Thoroughly research your field of activity and be prepared to answer questions in detail about your project or the sector in which you will be involved.

 

When you meet potential investors, do not forget to bring an up-to-date curriculum vitae (CV), as this can help them assess your abilities as a project leader and your personal abilities/experiences to carry out the project (or the abilities of your team). The CV (written, online or oral) should include marital status, address, training and diplomas, professional experience and skills. Your skills, abilities and the viability of your plan are essential.

2. Opening a bank account

Banking and financial services are key factors in the survival, sustainability and success of small businesses and independent professionals. In Luxembourg, the procedure for having a professional bank account is tasking. It is common for registered businesses and/or freelancers to be denied a business bank account by multiple banks. The situation is worse for entrepreneurs of certain nationalities. As the country is a vital international financial and banking centre, financial institutions are required to adhere to strict regulations such as anti-terrorism and anti-money laundering regulations. In response to these challenges, our organisation has created the SCORE Project  to serve as a bridge between small businesses/independent professionals and banks/financial institutions. To learn more about the project and if you are having difficulty opening a business bank account, Click here.

Although this article focuses on business/business bank accounts, we advise aspiring entrepreneurs to open private bank accounts in Luxembourg upon arrival. Luxembourg residents are legally entitled to a private bank account. The resulting financial history will be helpful in the process of opening a business account.​

Steps and Requirements

 

In general, the requirements and procedures for opening a professional bank account in the different Luxembourg banks are similar. Among other things, by applying to the bank of one’s choice, an entrepreneur must submit a complete dossier including (but not limited to) the following:

 

  • Personal identification documents (e.g. residence permit, social security number, CV/portfolio)

  • Certifications and business authorization

  • Statement of accounts (for an existing business)

  • Business plan (with details of financial projections)

  • Letter of application (stating the purpose and destination of the bank account, the origin of the capital of the company, the expected annual turnover and the sources of income expected for the company)

  • Proof of professional address (lease/rent contract)

 

It is important to prepare your file with as many details and documents as possible before contacting the bank, because incomplete information or numerous round trips can lead to very long processing times.

 

There is no guarantee that a bank will surely offer you a business account even if all the obvious checklists are correctly checked. They reserve the right to refuse with or without reason. That said, it should be added that some banks are more receptive to these categories of customers than others.

2. Opening a bank account

3. Financing small and micro entreprises

 

Banks and traditional investors in Luxembourg generally require that you have a long-term residence in Europe, a credit history in Europe, own property and have a regular salary. As a newcomer to Luxembourg, you will probably not be able to meet these kinds of requirements.​

Nevertheless, there are other options for financing small businesses with a good idea, a solid business plan and a motivated project leader, including:​

  • Microlux: Provides microcredits up to €25,000 per person.. They also offer free personalised coaching to help prepare and then set up the project. Follow the link to find out more.

  • FUSE : Provides a small interest-free loan of up to €5,000, usually to secure a rental deposit or cover start-up costs. Their idea is to provide you with just the little nudge you need to get started on your own. Find more information here.

  • CACM: Mutualité de Cautionnement et d'Aide aux Commerçants facilitates access to traditional bank credit by acting as guarantor for your business. They also provide useful information on the various public aids for SMEs (financial aids which generally require pre-financing). More information on their website.

  • Crowdfunding : these are collective websites or platforms where anyone can donate money to fund your project, often in exchange for some sort of reward. Different crowdfunding sites have different approaches and models. Find some of the best-known platforms and useful tips on this link.

If you're building a business that doesn't necessarily need investment to get started (i.e. just selling services or various businesses online), you should consider starting without any foreign money such as investments and loans. You can bet on your own private resources and on an organic (natural and slow) growth of your activities. With the Sàrl-S company model (see above) and the various possibilities of combining salaried work or certain social benefits with an independent income, Luxembourg strongly encourages micro-entrepreneurs to get started.

3. Financing SMEs
4. Financing nonprofits

4. Financing a nonprofit association or a cooperative

 

A non-profit association in Luxembourg (ASBL - see above) should not rely on the selling of products or services for income. ASBLs in Luxembourg generally receive most of their funding from private donations, public institutions or foundations. If your project is entirely non-profit and related to culture, sport, the environment or in the social field, you can submit your project idea and your financial plan to the relevant ministry as well as to the following institutions (among others):

  • Oeuvre: The National Relief Work Grande-Duchesse Charlotte (Œuvre Nationale de Secours Grande-Duchesse Charlotte) supports social, cultural and environmental projects that meet the needs of Luxembourg society in their start-up phase. Check out the recurring calls for projects on their website.

  • Fondation de Luxembourg : Fondation de Luxembourg: The Foundation brings together several foundations of private donors with different philanthropic objectives. Associations can submit projects related to a certain cause and the Foundation submits it to members who want to support that topic. Submit your project proposal here.

  • European Funds: Many European funds support social or entrepreneurial initiatives for a certain period. The European Social Fund is the main European instrument for supporting employment and the Asylum, Migration and Integration Fund (AMIF) focuses on topics related to asylum and integration. These sources of financing require a heavy administrative burden, finance only part of the expenditure and often require pre-financing. Nevertheless, it can be interesting for project creators to see if their project corresponds to the objectives of a fund and to get in touch with the competent authority.

Other resources
Other resources
Social capial

We have listed and explained the different steps, resources and requirements leading to the creation of a business. Most of these steps involve tangible and accounting resources. But intangible resources are also very important though often overlooked.

1.Social capital

 

Social capital, by nature, concerns connections and links. In a nutshell, these are the people you know, with whom you share common interests. Undoubtedly, the social network of newcomers to Luxembourg will be somewhat restricted. Nonetheless, entrepreneurs can cultivate social skills such as being friendly, pleasant, hospitable, and generally happy to meet new people. The entrepreneur can find out about events and activities that correspond to his interests and:

  • Observe

  • Listen

  • Participate in discussions

  • Reach out to people

As a small country, information spreads more easily and quickly in Luxembourg than in large countries. It is very common to meet mutual friends or have overlapping encounters. It is also common to meet the same people over and over again.  These can be at sporting, educational or religious activities. It can even be dates or spontaneous encounters in supermarkets or trains.

Acquiring some of the resources you need to start a business may depend on other factors beyond your control. However, by getting to know more people, you can acquire a lot of social capital which can eventually bring you closer to achieving your entrepreneurial goals. ​

A few organisations that host events are listed below. We encourage searching the internet for specific Facebook and LinkedIn groups where most organisations list their events.

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  • Touchpoints ASBL - True to its goal of creating meeting points for collaboration between locals and migrants/newcomers, Touchpoints organises several periodic events including Business MeetUps  and Infosessions. These events offer newcomers, entrepreneurs (established and aspiring), local business owners and experts an opportunity to meet and discuss topics related to doing business in Luxembourg.

  • Nyuko - A startup support/incubator for entrepreneurs from all walks of life. It offers workshops and networking events. It is currently located at the House of Entrepreneurship. Find out more about them at their website.

  • House of StartUps - HoSt offers various services including business incubation, acceleration, space sharing, and more. It is an innovation hub, especially for tech-based companies and startups. They frequently offer workshops, meetings and networking events. To know more, Click here.

  • House of Entrepreneurship - The HoE is powered by the Luxembourg Chamber of Commerce. It offers numerous themed workshops (many of which are free and online), networking events and a range of other useful services for entrepreneurs.

  • Technoport - This business incubator and business support company offers programs to help entrepreneurs. It is located in Belval near the University of Luxembourg. It offers workshops and events. It also offers coworking space  for teams and small businesses. Find out more about them here.

  • Event sites and platforms - There are many digital sites and platforms in Luxembourg for advertising  They include:​

This article is continuously updated

to reflect current realities.

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