What are the prerequisites to create your business in Luxembourg?
Having a physical address in Luxembourg:
Whether you are self-employed or you want to create a company, you must have your business in Luxembourg. For this you can either opt for a company domiciliation (only for companies) or rent an office or register your business at your home.
However, from a tax perspective, you need to prove that business management is performed in Luxembourg. This has the effect of prohibiting “letterbox companies". Hence the domiciliation presents some tax risks...
Also if you want to register your company at your home and you are renting it, you must ensure that the lease contract does not prohibit commercial activities.
Having a business permit:
It is mandatory for any business and for the exercise of the vast majority of self-employed jobs. This authorization must be requested from the Ministry of the middle classes.
Business permit is always personal. It depends on the integrity of the person and his professional qualifications.
Thus, in the case of a company, it is its manager who must make the request and on whom rests the business permit.
There is no requirement that the holder of the authorization should be resident in Luxembourg but he must live not too far to be able to easily reach the location of its activity. Thus the Ministry admits a distance of about 200 km. If there are means of rapid transportation, the distance is increased. So someone living in Paris may be granted a business permit.
Registration for VAT:
If the activity is subject to VAT, you must register your business at the VAT administration (administration de l’enregistrement et des domaines). You can ask for exemption if your annual turnover is below a certain amount.
Registration for social security:
If you are self-employed, you will be automatically registered as you will need to withdraw your business permit at the social security administration.
If you are manager of a company and you have more than 25% of the shares, you will be considered as self-employed from the social security point of view.
There is a monthly minimum of social contribution fees to pay but you also can ask for an exemption if your income is below a certain amount.