Avoid costly pitfalls and ensure your business in Luxembourg complies fully with the legal, fiscal and tax system
Luxembourg is the second-smallest country in the European Union (EU), but boasts the highest income per person in the world. As home to 12 European institutions, Luxembourg City ranks alongside Brussels and Strasbourg as one of the EU’s key centres.
Luxembourg’s stable and wealthy economy – one of just ten with an AAA rating – is renowned for the strength of its financial sector, which accounts for 26.5% of annual gross domestic product (GDP).
Luxembourg specialises in private banking, life insurance and investment fund administration. It has a large number of fintech start-ups and is seeing rapid growth in the automotive component sector and space industry.
As one of the world’s most business-friendly jurisdictions, there are no restrictions on foreign investments in Luxembourg. There are several options for setting up a business, with the most common legal entities for international investors being:
A company is considered as a tax resident in Luxembourg if its headquarters or central administration are located there. Non-resident companies pay Luxembourg tax only on their Luxembourg-sourced income.
Luxembourg recognises the importance of international talent and allows highly skilled employees from non-EU countries to apply for the EU Blue Card residence permit. This allows the holder and their family freedom of movement within the EU.
EU nationals and those from the European Economic Area (EEA) and Switzerland can work in Luxembourg without a permit for three months. For stays of more than three months, they must either:
Citizens from non-EU countries, including the UK from 1 January 2021, need a residence permit to stay longer than three months and must apply before entering the country. If they wish to stay on and work after three months they will need a long-term visa.
Although Luxembourg’s labour laws recognise oral contracts, most employment contracts are written.
Annual paid leave is a right for all employees. New employees must work continuously for three months before taking annual leave, unless allowed by their employer. This latter rule does not apply to temporary agency workers.
An employee is entitled to 26 working days’ leave a year, although companies can grant more leave through a collective agreement or an individual agreement between employer and employee.
The Luxembourg Labour Code oversees individual and collective employment relationships. Companies with at least 15 employees must have employee representatives. These have a duty to protect employees’ interests, and must be kept up-to-date about business activities and employment conditions.
The Labour Code also requires employers to take measures to prevent workplace harassment.
Luxembourg’s social security system covers illness, maternity, disability, death and old age. Employers have to deduct social security contributions from employees’ gross salaries.
As well as tax advantages, favourable land rates in industrial areas and good access to innovation centres, businesses in Luxembourg enjoy a number of grants and benefits, including government grants. The government prioritises sectors such as IT, technological development, environmental protection and energy efficiency for incentives.
Intertrust Group provides a wide range of financial and administrative services to clients operating and investing in the international business environment.
Our 4,000 professionals working together across 30 jurisdictions offer a global reach, deep local knowledge and an extensive international network to help clients achieve their strategic goals.
Our team in Luxembourg includes specialists in administration services dedicated to servicing multinational, private equity and fund clients.
Intertrust Group is a publicly listed company with more than 65 years’ experience in providing world-class trust and corporate services to clients around the world.