Setting up a Luxembourg trading company is identical to the holding company set up process, given that both company structures share many similarities. Despite this, both have their own unique features that distinguishes one from the other. Rather than operate commercially the main function of a Luxembourg-based holding company is gain control over other companies through the acquisition of shares.
In most cases, the limited liability company (SARL) legal form remains the preferred option among foreign investors who are looking to open an import and export business operations in Luxembourg. Additionally, a SARL company is deemed to follow specific provisions of the country’s common and tax laws.
Proper Set Up and Management of a Luxembourg Trading Company
- The management framework of a trading company in Luxembourg is the product of a final decision made by shareholders during a general meeting.
- Shareholders are entitled to approve, formulate, and uphold decisions in a company’s various aspects of management.
- A trading company’s Articles of Association is considered the primary document that includes all relevant information about provisions, as well as thorough details about the owners, primary activities, business address, names of shareholders, shareholder nationalities, date of incorporation, and many more.
Important Pointers to Remember when Setting Up a Trading Company in Luxembourg
- A Luxembourg trading company needs to be under the administration and oversight of at least three board directors.
- The board of directors of a Luxembourg trading company may assume their roles for up to six years.
- While a company’s board of directors have up to six years to assume their essential roles, shareholders may agree to elect new directors at any time.
- An internal auditor is to be appointed to assess and evaluate the financial status of the trading company based on the schedule provisions under Luxembourg. In case there are no internal auditors, the services of an independent auditor must be obtained instead.
The Challenges of Incorporating a SARL trading company in Luxembourg
The process of setting up a trading business in Luxembourg is a simple and straightforward process. This specific business structure is open for both domestic and international investors who wish to incorporate a trading initiative in Luxembourg.
Here are important details to remember when opening a trading company in Luxembourg:
- Minimum Share Capital – EUR 12,500
- Number of Shareholders – 1 to 100
- Opening a Luxembourg bank account and registration for VAT purposes are critical requirements
- A proxy is to be signed by the shareholder represented at the notary public
- A trading company’s Articles of Association and company registration should be duly notarized
- Notarized Articles of Association must be entered into the commercial registry.
Setting up a SARL-S trading company in Luxembourg
The simplified limited liability company (SARL-S) legal form operates as a commercial company and is subject to existing rules that are different from those applied to traditional private limited liability (SARL) companies in Luxembourg. This legal form provides small-sized enterprises a vehicle that allows them to start trading as soon as possible.
- Minimum capital share required to incorporate a simplified limited liability company (SARL-S) is EUR 1.
- SARL-S may be formed by a private deed without the need for notarization.
- It can be formed by a natural person and cannot be a shareholder for more than one SARL-S at the same time unless shares are transferred following the death of a shareholder.
- A natural person who is a SARL-S shareholder while at the same time assuming the role of shareholder of another company having a different legal form.
- Number or shareholders- 1 to 100.
- SARL-S is the preferred legal form for craftsmen, traders, manufacturers, and liberal professionals. It is required to clearly indicate the primary purpose of the company in its deed of incorporation.
- Interested natural persons must obtain a business permit from the Ministry of Economy.
- Business permit is a pre-requisite for company registration with the Trade and Companies Register.
VAT Registration Process and Requirements for Luxembourg Trading Companies
The following entities or natural persons must register for VAT in Luxembourg:
- Legal entities and natural person that are about to undertake taxable activity in Luxembourg.
- Trading companies with projected annual turnover exceeding EUR 35,000.
- Non-residents who have are not domiciled in Luxembourg but carries transactions that are subject to tax. Activities may include short-term or occasional provision of services, such as those related to real estate in Luxembourg, as well as the delivery of goods and installation of goods, all of which are assessed with tax.
- Any non-taxable legal person executing intra-community acquisitions of goods with gross annual amount more than EUR 10,000 excluding taxes.
- Any taxable person residing in Luxembourg carrying out transactions that do not qualify for a deduction and purchases and receives services from taxable persons from overseas.
- Taxable persons who carry out transactions who are not eligible for deduction
- Any taxable person providing taxable services in other EU member states for which the buyer is assessed with tax.
- Any natural person established in Luxembourg who is subject to agricultural and forestry-flat taxation rate schemes.
- Any natural person who supplies wines, wood and other capital goods with an annual income exceeding EUR 35, 000
- Any natural person established and registered to pay VAT in other EU member states and carries out the distribution and supply of goods and services. Services include dispatch or transport to other persons not assessed with VAT and domiciled in Luxembourg with annual income more than EUR 100,000.
Trading Company Incorporation Timeframe
- The incorporation of a Luxembourg trading company can be completed in a few days.
A requirement to be fulfilled by trading companies is obtaining a trading certificate from the Ministry of Mid-Sized Businesses after successful company formation.
In essence, a company already carries full fiscal capacity follow certification by a notary official. Keeping this in mind, trading companies do not have wait for entry or publication of their company into the Luxembourg commercial registry.
The legal right to set up commercial activities, skilled craft trades, and specific professionals is delineated under the Law of 2 September 2011, requires such companies to obtain a business permit.
A business permit shall only be granted for physical installations on Luxembourg that includes infrastructure suitable for the nature and size of the registered company.
Economic Operator Registration and Identification (EORI) Number Registration
Import and export companies in Luxembourg are required to obtain an Economic Operator Registration and Identification (EORI) number before kickstarting activities on the market. The Economic Operator Registration and Identification code is used for customs formalities and easier identification of trading companies and their respective activities in the EU territories.
The Economic Operator Registration and Identification (EORI) number consists of the VAT number, the country-of-origin initials (LU), plus additional assigned digits.
The registration of the Economic Operator Registration and Identification (EORI) number is made before the Customs and Excise Agency. To ensure successful registration the following documents shall be submitted:
- VAT certificate of the trading company
- Certificate of Incorporation
- Identification card of an applicant
The Economic Operator Registration and Identification (EORI) number will be issued after a few days.
Damalion offers a customer-tailored consulting approach to assist foreign legal entities and investors to set up a trading company in Luxembourg successfully and efficiently. To learn about the different company formation solutions and help determine which one suits your needs, reach out to a Damalion expert today.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.