Luxembourg Private Limited Liability Company (SARL)
Formation of a Private Limited Liability Company (SARL) in Luxembourg
In Luxembourg, the SARL legal structure is the most widely used company form for medium-sized businesses. This type of company suits all commercial purposes, from the trading of goods to asset management.
Luxembourg benefits from favourable tax treaty agreements with more than 80 countries, as well as no withholding taxes on dividends, interest and royalties paid to the EU. It is an internationally recognised financial centre that offers a stable, secure and well-regulated environment for international business.
FACTS & INFO
A private limited liability company (Société à responsabilité limitée, or SARL) is a corporation whose assets are, in principle, wholly liable for the company‘s liabilities. A SARL is equivalent to a private company limited by shares in the United Kingdom, or a limited liability company in the United States.
In Luxembourg, a SARL can be formed for the carrying on of commercial or non-commercial purposes. Notwithstanding this, insurance companies, as well as financial sector companies, are not permitted to be formed in the guise of a limited liability company.
The company name of a Luxembourgish private limited company must end in “GmbH” or “SARL” and must be approved by the Registre de Commerce et des Sociétés. Prior to the formation, it is highly advisable to verify the availability of the name chosen by the shareholders for the new corporation with the Business Registers in order to avoid any confusion with any existing company. Within two or three days from a written request, the Business Registers is able to grant a certificate of free denomination in this respect.
ARTICLES OF ASSOCIATION
The articles of association are drawn up by the founding shareholders and then submitted to a notary. The articles of association may be written in Luxembourgish, French, German or English. If originally written in English, a translation to Luxembourgish, French, or German must be included.
At the incorporation, the articles of association shall be signed by the shareholders and the notary. Shareholders may assign a proxy to represent them in Luxembourg, which may be granted to lawyers. The newly created corporation may then begin its activities.
The incorporation deed as well as the articles of association must be registered with the Luxembourg Capital Duty Office and then filed with the Business Registers by the notary subsequent to the notarization of the deed (within a month in principle as from the incorporation). These must then be published in the Luxembourg Official Gazette.
The minimum number of shareholders in a company is 1 and the maximum is 100. A shareholder can be a physical or legal person of any nationality. Notwithstanding this, the formation of a single-person private liability company (Société à Responsabilité limitée unipersonelle) with a sole shareholder is possible. The provisions which apply to a private liability company equally apply to a single-person private liability company (Société à Responsabilité limitée unipersonelle). Moreover, the shareholders of a private liability company in Luxembourg must always be registered in the Trade and Companies Register.
A Luxembourgish SARL company should have a minimum authorised share capital of €12,000 of which must be contributed in full. The capital is divided into registered shares, each having the same value. The said value is required to be at least €25.
The paid-up capital is blocked in a Luxembourg bank account opened under the name of the corporation to be formed during the process of its formation. This provides confirmation to the notary that the funds have been received when the shares are subscribed in cash. The setting up of such a bank account (including the KYC procedure for the banks) is often the key element in the timing required for the formation of a corporation (one to two weeks are required).
The share capital may be expressed in any foreign currency, provided that the amount converted in Euros meets the minimum amounts required by law.
Transfer of company shares:
- shares are not freely transferable;
- they can only be transferred between living persons to non-partners with the consent of the partners’ general meeting representing at least 3/4 of the share capital;
- the transfer of shares must be recorded in a notarized deed or in a private deed.
DIRECTORS AND COMPANY SECRETARY
The minimum number of directors is one. A director can be a physical or legal person of any nationality.
Every company is required to have a registered office and address in Luxembourg which should be notified to the trade registry.
In the interest of Luxembourg's business and commerce, and to allow for the appropriate supervision of commercial activity, legislation sets out conditions for entry into certain professions and for the carrying out of certain trading activity, which are subject to the granting of a business license.
The granting of a business license is not required for corporations which have as their principal object the taking of shareholdings in Luxembourg or foreign companies (e.g. Soparfis).
A business license is personal and granted to individuals by the Ministry of Middle Classes after being advised by a committee, which considers the applicant’s professional qualifications and respectability. For companies, the conditions relating to professional qualifications and respectability need to be fulfilled by an individual in charge of the direction or management of the company.
The general meeting is convened by the managing director(s) of a private liability company in Luxembourg and consists of all shareholders. If the number of shareholders does not exceed 25, the holding of a general meeting annually is optional.
Normally one week; however, a priority claim can be requested.
RECURRING MAINTENANCE FEES
As from the second year, there are recurring maintenance fees of $4,400. These include:
- Provision of registered office.
A private limited liability company in Luxembourg is liable to corporate taxation at an annual rate of 24.94% for high-earning businesses (taxable income over €200,000) and 22.8% for businesses earning under €175,000. The said rates consists of the following components:
Corporate Income Tax
Corporate tax on income exceeding €200,000 is 17%. Corporate tax on income of up to €175,000 is 15%. Businesses earning between €175,000 and €200,000 must pay €26,250 plus 31% of the profit above €175,000.
Municipal Business Tax
All businesses resident in Luxembourg (e.g. trading-, industrial-, mining- or craft businesses) as well as the permanent establishments of foreign companies are subject to municipal business tax in Luxembourg City at a rate of 6.75%.
The dividend distributions of Private Liability Companies in Luxembourg are liable to withholding tax at a rate of 15%. Royalty and interest payments as well as proceeds from liquidation or partial liquidation are not liable to withholding tax in Luxembourg.
Net Wealth Tax
Private liability companies in Luxembourg which have their registered office or place of central management and control in Luxembourg must pay net wealth tax on their total assets - namely assets within and outside of Luxembourg. However, for private liability companies not resident in Luxembourg, only assets within Luxembourg will be liable to the said tax. The annual rate of net wealth tax on taxable assets is 0.5%.
AUDIT AND ACCOUNTING
Private limited companies are subject to annual accounting obligations. They shall establish annual accounts comprising of a balance sheet, a profit and loss account and an annex, which shall be deposited with the Luxembourg Trade Register. A mention of such deposit shall be published in the Official Gazette.
The annual accounts must be provided at the annual general meeting and approved by shareholders. Such approval should occur within six months as from the closing of the previous financial year. When some size criteria are reached, a qualified auditor (“réviseur d’entreprises”) designated by the general meeting of the shareholders shall audit the annual accounts of the company.
Simplified annual accounts may be established and not subject to the accounting audit provided that they do not exceed two of the following limitations, as at the closing date of the financial year:
- Total balance sheet: not exceeding €3,125,000.
- Total net turnover: not exceeding €6,250,000.
- Number of full time working employees and average number during the financial period: maximum of 50.
Our Services and Requirements
OUR SERVICES INCLUDE:
- Name check and approval
- Filing of the incorporation documents with the Business Registers
- Payment of the government fee
- Memorandum and articles of association
- Rubber stamp
Please note: If applying for a corporate bank account you will need to order a full set of apostilled company documents if the account is opened outside of Luxembourg.
Please provide the following documents for all directors, shareholders, beneficial owners, and authorised signatories:
- Notarized copy of valid passport.
- Original or Certified copy of utility bill / bank statement (as verification of residential address, dated within three months).
- Original or certified copy of Banker’s reference letter (dated within three months).
- In cases where shareholders and/or directors are corporate bodies, full apostilled set of corporate documents and certificate of good standing (for companies registered more than one year).
IMPORTANT NOTE: LICENSABLE BUSINESS ACTIVITIES
If you conduct any activity without the required license or authorisation granted by a relevant authority in any jurisdiction, Starting Business will not be able to assist you with the company formation or bank account opening related to such unlicensed activity.
Licensable activities include, but are not limited to: provision of financial services involving trading/brokerage in foreign exchange, financial and commodity-based derivative instruments and other securities; offering investment advice to public; insurance and banking; operation and administration of collective investment schemes and mutual funds; payment processing services; money exchange, money transmission or money brokering; asset management; safe custody services; gaming, gambling and lotteries.
Please contact us if you need assistance in the licensing of your financial, Forex brokerage or gambling company.
Shipping of corporate documents or banking kits to your destination requires an extra charge and will be automatically added to your order during checkout. Shipping costs for international courier services are set automatically depending on geographic zones.