Luxembourg Private Limited Liability Company (SARL)
Formation of Private Limited Liability Company (SARL) in Luxembourg
A Company name of Private Limited Company must necessarily end in “GmbH” or “SARL” and must be approved by the Companies Register. 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 Luxembourg Trade Register in order to avoid any confusion with any existing company. Within two or three days from a written request, the Luxembourg Trade Register 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 at such incorporation 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 Luxembourg trade register 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 Responsa¬bilité limitée unipersonelle) with a sole shareholder is possible. The provisions which apply to a Private Liability Company essentially, 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 Luxembourg SARL company should have a minimum authorized share capital of 12,000 Euros 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 EUR.
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 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 in principle required).
The share capital may be expressed in any foreign currency, provided that the amount converted in Euros meets the minimum amounts required by the Companies 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.
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 Register.
In the interest of Luxembourg 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 1 week, however a priority claim can be requested
Basic Tax Notes
Since January 1st 2013, a Private Liability Company in Luxembourg is liable to corporate taxation at an annual rate of 29.22%. The said rate consists of the following components:
Corporate Income Tax.
Corporate tax on income exceeding 15,000 EUR is 21%. Corporate tax on income of up to 15,000 EUR is 20%. The minimum payment of corporate income tax for all Private Limited Liability Companies resident in Luxembourg which do not require a trade license and the sum of their assets, securities and bank balance together exceed 90% of their balance sheet total is 3,210 EUR (3,000 EUR plus the 7% solidarity surtax).
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 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 out 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%.
Accounting and Audit
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 EUR 3,125,000.
- Total net turnover: not exceeding EUR 6,250,000.
- Number of full time working employees and average number during the financial period: maximum 50.