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Luxembourg


Luxembourg

LUXEMBOURG

HISTORY AND POLITICAL STRUCTURE

Luxembourg is a landlocked country in Western Europe, bordered by Belgium, France, and Germany. Luxembourg has a population of over half a million people in an area of approximately 2,586 square kilometers. A representative democracy with a constitutional monarch, it is ruled by a Grand Duke. It is the worlds only remaining sovereign Grand Duchy. Its historic and strategic importance dates back to its founding as a Roman era fortress site and Frankish count’s castle site in the Early Middle Ages. It was an important bastion along the Spanish Road when Spain was the principal European power influencing the whole western hemisphere and beyond in the 16th-17th centuries.

The Belgian Revolution of 1830-1839 reduced Luxembourg’s territory by more than half, as the predominantly francophone western part of the country was transferred to Belgium. Luxembourg’s independence was reaffirmed by the 1839 First Treaty of London. In the same year, Luxembourg joined the Zollverein. Luxembourg’s independence and neutrality were again affirmed by the 1867 Second Treaty of London, after the Luxembourg Crisis nearly led to war between Prussia and France. After the latter conflict, the Confederate fortress was dismantled.

During World War I Luxembourg was invaded and occupied by Germany, but was allowed to maintain its independence and political mechanisms.

During World War II, Luxembourg was unable to maintain its policy of neutrality when in 1940 Nazi Germany invaded and occupied the country, due to its strategic location on the invasion route into France.

Luxembourg is a member of the European Union, NATO, OECD, the United Nations, Benelux, and the Western Eu-
ropean Union, reflecting the political consensus in favour of economic, political, and military integration. The city of
Luxembourg, the capital and largest city, is the seat of several institutions and agencies of the European Union.

Luxembourg culture is a mix of Romance Europe and Germanic Europe, borrowing customs from each of the distinct traditions. Luxembourg is a trilingual country; German, French and Luxembourgish are official languages. Although a secular state, Luxembourg is predominantly Roman Catholic.

Luxembourg has a parliamentary form of government with a constitutional monarchy by inheritance. Under the constitution of 1868, as amended, executive power is exercised by the Grand Duke and the Council of Government (cabinet), which includes the prime minister, who serves as head of government. The prime minister is the leader of the political party or coalition of parties, known as the Chamber of Deputies.

Legislative power is vested in the Chamber of Deputies, the members of which are elected directly to 5-year terms. A second body, the “Conseil d’Etat” (Council of State), composed of 21 citizens appointed by the Grand Duke, advises the Chamber of Deputies in the drafting of legislation. The Council’s opinions have no binding effect, and the responsibilities of its members are in addition to their normal professional duties.

Luxembourg law is a composite of local practice, legal tradition, and French, Belgian, and German systems, as well as
European Union law. The apex of the judicial system is the Superior Court, whose judges are appointed by the Grand
Duke.

ECONOMY

Luxembourg’s stable, high-income economy features moderate growth, low inflation, and low unemployment. The
industrial sector, which was dominated until the 1960s by steel, has diversified to include chemicals, rubber, and other
products. During the past decades, growth in the financial sector has more than compensated for the decline in steel.
Luxembourg can be characterized as having political stability, good communications, easy access to other European
financial centers, and skilled multilingual staff all of which have contributed to the growth of the financial sector. Ger-
man banks represent the largest number, with Belgian, French, Italian, U.K., and U.S. banks also having a significant
presence in the country.

Luxembourg participates in an economic union with Belgium on trade and most financial matters, is also closely con-
nected economically to the Netherlands and as a member of the EU enjoys the advantages of the open European
market.

Over the past decade, Luxembourg has sought to diversify its services economy beyond the very successful financial sector through exponential growth of the high-tech/information technology and e-commerce sector. The government has made significant investments in infrastructure to increase broadband capacity and has become one of the leading countries in high-speed Internet connection.

Due to its powerful services sector, Luxembourg maintains a high current account balance.

WHY CHOOSE LUXEMBOURG WHEN STARTING A BUSINESS?

Luxembourg company formation is, if properly structured, an excellent way for international investors to conduct
business in a respectable jurisdiction with the efficiencies of offshore incorporation. The two most common and most
popular forms of Luxembourg company incorporation are Societe Anonyme (SA) and Societe Anonyme a Responsa-
bilite Limitee (SARL).

Advantages of the Jurisdiction of Luxembourg

 

•   Luxembourg company formation has reasonable minimum capital requirements.

•   Can hold and manage legally tax-exempt investments.

•   Can conduct trade in Europe using a stable, well regulated jurisdiction which is part of the European Union (EU).

•   A minimum of two shareholders is required to set up a Luxembourg SA or SARL company. Shareholders and direc-
     
tors may be individuals or corporate entities of any nationality, and need not be resident in Luxembourg. The board
     
of directors must have at least three managers/directors.

•   A Luxembourg SA or SARL can qualify as a Societe de Gestion de Patrimoine Familial (SPF), which replaced the
      1929 Holding Company in 2006. The SPF is an excellent, tax-efficient vehicle through which financial assets (e.g.
     
cash and assets on deposit, shares, bonds, depository certificates, trade receivables, monetary market instru-
      ments, options and commodities) can be acquired, held and managed.

•   A Luxembourg SA and SARL have limited liability up to the amount of subscribed capital of each shareholder, not
      paid-up capital.

•   Luxembourg is an EU member with a stable government, economy and legal system and therefore Luxembourg
      company formation portrays a positive image to clients, suppliers and venture capitalists.

•   Luxembourg is positively ranked as the world’s 11th least corrupt country in the 2010 Corruption Perceptions Index
      by Transparency International, a global measure of corruption amongst public officials and politicians.

•   A Luxembourg SA or SARL that qualifies as a Trading Company can register for EU value added tax (VAT) and ac-
     
cess double taxation treaties with more than 40 countries including China, France, Germany, Singapore, the US
      and the UK.

•   Luxembourg Trading Company is free to conduct commercial activity both in Luxembourg and internationally, mak-
      ing it a popular entity for entrepreneurs conducting business and trading activity in central Europe.

 

How to form a Luxembourg Company

 

In order to form a company in Luxembourg the following steps must take place:

1.   Check the company name for uniqueness with the “Registre de commerce et des sociιtιs du Luxembourg”.

2.   Open a bank account in Luxembourg and deposit the minimum share capital (EUR 12.500). The bank will then is-
      sue a money blocking certificate for the incorporation before a notary.

3.   The incorporation must be done before a notary.

4.   Provide power of attorney to a mandatory proxy if the shareholders cannot attend the incorporation meeting.

5.   Article of association could be prepared with the collaboration of the notary.

6.   The Registration and publication of the incorporation of the company with to appropriate authorities is done by the
     
notary (official journal “Mιmorial”, trade register).

7.   After the incorporation meeting, the notary issues the money releasing certificate to make money in the bank ac-
      count available for the company.

8.   Incorporation taxes are paid by the notary and invoiced to the company.

 

Requirements for the Registration of a Company

 

•   Director: Only 1 director is required. A director can be of any nationality. Business licences are easy to obtain if one
      of the directors is a resident of the European Union. The names of directors do not appear in public records. While
      corporate directors are allowed, we recommend that the initial shareholder is an individual, to make due diligence
      work easier with the bank.

•   Secretary: The Company does not require a secretary by law, however it is allowable.

•   Shareholder: Only 1 shareholder is required, limited to 40. If there are fewer than 25 shareholders, annual general
      meetings need not be held. A shareholder can be any nationality. Corporate shareholders are allowed. Nominee
      shareholders are allowed. Confidentiality of a shareholder can be obtained by using our nominee service.

•   Shares & Capital: The minimum share capital for a Sΰrl is fixed at the equivalent of €12,500 and has to be fully
     
paid up and the capital may be expressed in any currency. Shares are not freely transferable, transfers require the
     
agreement of all shareholders

•   Name of the Company: The company name can be in any language using the Latin alphabet. However the registry
      may request a French or German translation if a foreign language is used. The Registrar will reject the registration
      of a company if the name already exists. Any name which in the opinion of the Trade Registry is offensive will not
      be allowed.

 

Documents required for the registration:

•   Certificate of Incorporation

•   Memorandum & Articles information

•   Register of Annual Return Transactions

•   Register of Directors

•   Shareholders

•   Financial Accounts.

 

Luxembourg can be characterized as one of the countries where international investors would want to start a business. It is a good place to start a business due to the high quality infrastructure and a good Internet Communication Technology (ICT) infrastructure, making it easier and cheaper for businesses to conduct their operations efficiently. In addition, by starting a business in Luxembourg you will have the advantage of tapping into the professional environment of major accounting, legal and consulting firms.

GENERAL OVERVIEW

Location

Central Europe.

Time zone

GMT + 1 hour.

Population

More than 450,000.

Capital

Luxembourg.

Airport(s)

One.

Language

Luxembourgish, French, German.

Currency

Euro.

Political system

Democracy.

International dialling code

+352.

Legal system

Roman Law.

Centre’s expertise

Financial.

TAX

Personal income tax

0% to 38,95%.

Corporate income tax

29,63%.

Exchange restrictions

No.

Tax treaties

69

SHARE CAPITAL

Permitted currencies

Any currency.

Minimum authorised capital

€12,500 (SARL) or €31,000 (SA).

Minimum share issue

25% of capital of an SA. 100% of capital for an SARL.

TYPE OF ENTITY

Shelf companies

No.

Timescale for new entities

Two days.

Incorporation fees

€5,700 (some costs min. capital).

Annual fees

€7,500 (some costs min. capital).

DIRECTORS

Minimum number

One. SARL - one. SA - three.

Residency requirements

No.

Corporate directors

Yes.

Meetings/frequency

Annual Minimum.

SHAREHOLDERS

Disclosure

Yes. Nominee normal.

Bearer shares

SA: yes. SARL: no.

Minimum number

One.

Public share registry

Yes.

Meetings / frequency

One per year minimum.

ACCOUNTS

Annual return

Yes.

Audit requirements

Yes, if two of the conditions are exceeded: average number of employees of 50; balance sheet total of €3,125,000; turnover of €6,250,000. SA requires a commissaire.

OTHER

Registered office

Luxembourg.

Domicile issues

No.

Company naming restrictions

Different from existing ones.

Friendship

With loyalty we prosper