With more and more newcomers to Luxembourg poised to create their own businesses in the country, we decided to make the information of our infosessions available to a wider audience by presenting it in an online format.

This article is meant to give you an overview on how to prepare your project and the administrative steps involved.

How to start a business in Luxembourg

 

To be clear from the outset, we are not lawyers and the following information should not be considered legal advice. You should seek appropriate counsel for your own situation. This material is directed toward refugees and other newcomers in Luxembourg. If you are conducting business elsewhere, we encourage you to find sources relevant for conducting business there.

It’s not about ideas. It’s about making ideas happen.

 

{ Scott Belsky, co-founder of Behance }

Preparation and initial steps before launching your own business

 

 


This material is intended for your use if you’re an asylum seeker, beneficiary of international protection, or other newcomer to Luxembourg looking to set up a business.

If you are an asylum seeker, you will not be able to obtain a business authorization until you receive your residency. However, we encourage you to begin with 4 initial steps, so that you will be able to set up a business sooner once you receive residency. And if you don’t get residency, at least you’ll have gained valuable skills – such as stronger language, computer, writing, and presentation skills that could help you find a job anywhere in the world.

These four initial steps are:

 

  1. Obtaining proficiency in one commonly spoken language of Luxembourg (French, Luxembourgish, German or English).

  2. Getting your high school diploma, if you have one, recognized by the Service de la Reconnaissance des Diplômes.

  3. Participating in at least one training program relevant to your project.

  4. Creating a basic business plan.

These steps are useful for all entrepreneurs, and you don’t need residency in order to complete them.

 

1. Language proficiency

 

 

Languages are important for doing business in any country, but in Luxembourg, the lack of strong non-European ethnic communities makes it even more important. Speaking primarily French, but in some cases also German, Luxembourgish or English is crucial to communicate with clients, suppliers and government officials.



 

2. Diploma recognition

 


Getting your high school or university diploma recognized is important for eventually obtaining a business permit. Even if you don’t start a business, a recognized diploma could prove useful for finding a job or bargaining for a higher salary.

 

If you would like to get your high school diploma recognized, you can do this before obtaining residency by contacting the Service de la reconnaissance des diplômes and following the necessary procedures. If you would like to get your university diploma, training certificate, or other non-high school qualification recognized, you must wait until you receive residency. Then, contact the Ministry of Higher Education to complete the necessary procedures.

If you do not have a high school or university diploma, you may substitute this requirement by taking a 50-hour course in French at the House of Training and pass an exam to access "Not Particularly Regulated Commercial Activities" (course in French and German, though with the option to respond to written answers in English) at the end. Here is the link.

 

You may also be able to substitute this requirement by obtaining a few years of work experience in your chosen activity, but you should check specific requirements for your profession, i.e. under the following link: http://www.guichet.public.lu/entreprises/en/creation-developpement/autorisation-etablissement/index.html

The requirements differ by country and type of diplomas. For up to date information on how to get your diploma recognized, please visit: http://www.luxembourg.public.lu/en/etudier/reconnaissance-diplomes/index.html

You may also contact the Ministry of Higher Education and Research by phone (247 86619) or email (registre@mesr.etat.lu) to inquire about your particular case.

3. Training

Touchpoints (project Sleeves Up), House of Training, Nyuko, Fit4Entrepreneurship, and Chambre des Métiers offer training on how to become an entrepreneur or improve related skills. This is a good way to improve your business qualifications while simultaneously improving your language skills. For up to date information on the latest courses and the topics, please visit the links above.


Certain trainings may be necessary for later obtaining a business permit. The course Commerçants Niveau 1 is usually necessary unless you already have proven experience in managing a business. There's an exam at the end. The course can also serve as a substitute for not having a recognized high school or university diploma. The course, given in French, covers diverse topics such as marketing, administrative procedures, business management, and others relevant for any entrepreneur.  Though the exam is in French, participants may respond in English, German or Luxembourgish.


For any project that involves preparation or consumption of food or beverages on site, successful completion of the 13-hour HORECA course, and passage of the test at the end, is also required. The course and test are in French. Some exceptions may be made for cases in which people have over a year's worth of HORECA experience within the EU.


For those wishing to pursue what are considered craft activities (such as baking, hairdressing, cleaning, or work machinery-related) it is generaly required to present a official gouvernement issued proof of professional qualifications and experience. This could involve something as simple as an official business registration slip or tax notice from your home country. Please contact the House of Entrepreneurship and/or Chambre des Métiers to receive information about requirements for your specific craft.

4. Business Plan

 

A Business Plan helps you think through all aspects of the project, test your idea on paper, plan details of your business, and obtain financing (if needed) for your project. It doesn't have to be complex in the beginning, but you should be able to answer basic questions about your project.

What is your product/service? Who will buy it and why? How/where/when are you going to distribute your product/service? Who are your competitors and what makes you unique?

 
 
 
 
 
There is always some form of competition.
We are either competing for time or for money or for both.
So what are people doing, when they are NOT consuming your product or service...?

In order to test the idea, the business plan includes concrete numbers, like expected expenses, revenue and profit. The business can only be successful if revenue is higher than expense. In order to obtain financing, the numbers must be defendable. The business plan also contains a realistic assessment of start-up costs. When asking for a loan or investment, it’s important to approach potential investors with concrete numbers that you can explain.

There are many different models for business plans, and you should feel free to adopt one that works best for you. However, Sleeves Up proposes a simplified three-page version that you can download here:

Administrative steps to starting a business in Luxembourg

Steps in the business creation process differ depending on your personal situation and the nature of your commercial activity. Therefore, it is best to seek professional assistance from us or the House of Entrepreneurship. Nevertheless, this article is meant to give you a brief overview of the basic steps involved.

 

Administrative steps

1. Ask for a business permit

To legally practice a business activity, you must first apply for a business permit. To submit a successful application, you generally need 4 things:

  • residency in Luxembourg or another EU country,

  • the necessary qualifications,

  • a clean professional reputation,

  • and a fixed and suitable place of operation.

Craft versus Trade


Professional qualifications for traders and food/beverage related industries typically require:

  • a high school, college or master’s degree,

  • or three years of work experience in EU,

  • or completion of a business management course (in French).

To learn about how to get your high school or university degree recognized by Luxembourg, please visit the “Diploma Recognition” section above. Business permits for trade and food related activities fall under the responsibility of the Chamber of Commerce.

The business management course (in French), including an exam at the end, may be required in cases where sufficient business or educational experience is lacking. The exam, however, can be answered in English. Participants are allowed to bring dictionaries and ask the proctor to translate difficult words or sentences during the test.

 

For businesses involving the preparation or consumption of food and beverages on site (such as cafes and restaurants), participation in a specific Horeca course is generaly required. For more specific conditions relating to your particular profession, please visit this page : http://www.guichet.public.lu/entreprises/fr/creation-developpement/autorisation-etablissement/index.html

______

Professional qualifications for business activities like cleaning, hair dressing, baking, vehicle repair, and others crafts require a recognized diploma or certificate. These business permits are usually more difficult to obtain, as the requirements are strictly regulated. Business permits for craft-related activities fall under the responsibility of the Chamber of Crafts (Chambre des Métiers). Here's a list of available crafts: http://www.cdm.lu/artisanat/les-activites-artisanales

Reputation & honorability
 

As a recent newcomer to Europe, Luxembourgish authorities don’t have an extensive history of your professional reputation (for example, if you have a history of bankruptcy and/or dishonest business dealings). This means that you will need to visit a notary and (for a small fee) sign a statement declaring that you have a clean professional history.


 

Fixed location


For the last condition, a fixed location means a place in Luxembourg where you are allowed to work. Depending on the nature of your business activity, this can be a place you rent specificaly for your business or your private apartment (with a contractual agreement from the owner). There are also a few "coworking" spaces in Luxembourg available for this purpose. Your fixed location must be suitable to the activity.

You may be able to request a “demande de principe,” or conditional approval for a business permit, before you obtain a fixed location. This way, you can find out for sure whether you’ll be able to obtain the business permit before signing a costly rental contract.
Click here to view the formulaire for obtaining a business authorization (in French).
 

 

2. Choose a legal form

There are multiple options for legal forms in Luxembourg, but we focus here on the most common ones:

  • sole proprietorship

  • limited liability company (SARL)

  • simplified limited liability company (SARL-S)

  • not-for-profit association (ASBL)

  • Societé d’Impact Sociétal (SIS)

Sole proprietorship (self-employed)

Establishing a sole proprietorship means setting up your business as a private person instead of establishing a separate legal entity. It is different from other business forms in that it involves the most flexibility as well as the least administrative procedures and fees for setting up, but it is also the riskiest. A separate legal entity protects you from bankruptcy by allowing you to divide your private property from your commercial property.

 
personal property = business property
appartment                                truck                        
appartment furniture              oven                         
personal bank savings             office furniture      
...                                                  ...                              

Establishing a separate legal entity

In this situation, there is a strict separation between the property belonging to you and the property belonging to the company. This means that in the case of business failure, you only risk losing the property belonging to the company (for example, the company car, refrigerator, desks, etc), not your personal property (your personal car, apartment, clothes, etc). In exchange for these protections, however, you must follow certain rules, such as a not using company property for personal use without fair compensation.

 

Some entrepreneurs with low capital investment requirements start as sole proprietors and switch over to SARL once their business grows.

personal property ≠ business property
appartment                                truck                        
appartment furniture              oven                         
personal bank savings             office furniture      
...                                                  ...                              
A simplified SARL

 

Until recently, the SARL, which required over a thousand euros in initial administrative costs as well as a minimum of 12,500 euros in capital investment, was the primary alternative to sole proprietorship. However, in a bid to make entrepreneurship accessible to more people, Luxembourg created a new form in January 2017 called SARL-S. The SARL-S is mostly similar to the classic SARL, except that it only requires 1 euro in capital investment and a few hundred euros in initial set-up costs.

 

Specificities:

  • Partners in an SARL-S must be natural persons. A company can never be a partner in an SARL-S.

  • A natural person may only be a shareholder in one SARL-S at a time.

  • Five percent of your profit becomes blocked in a separate account until you reach 12,500 euros. At that time, you’d need to switch to a SARL or other legal form in order to unblock these funds and make them available for use.

Find additional details about the SARL-S here: SARL-S on guichet.lu

Non-profit and social impact

 

If you intend to create a project that aims at a social objective, consider creating a non-profit organization (Association Sans But Lucrative or ASBL) or a Société d’Impact Societal (SIS).

 

Although ASBLs are not allowed to produce any profit, they can employ people and pay them salaries under certain conditions (!). ASBLs require at least three co-founders and typically receive most of their funding from donations and outside foundations. For more information on establishing an ASBL, please consult this link from CLAE (Comité de Liaison des Associations d'Étrangers).

 

Simply put, a SIS falls between an SARL and an ASBL and has been created to better protect and regulate commercial activities performed by non-profits. SISs are allowed to make profit, though with substantial restrictions. To obtain SIS status, you will first need to create a company (like SARL) following the normal SARL procedure. To find out more about creating an SIS, please visit this link.

_______________

 

Ultimately, selecting the legal form depends on your personal situation and type of commercial activity
  • For help in establishing a company, obtain assistance from the House of Entrepreneurship.

  • For help in establishing an ASBL, obtain assistance from CLAE.

  • For help in creating a SIS, obtain assistance from 6zero1.

3. Register with the Trade and Companies Register

You must register your company, sole proprietorship or non-profit with the Trade and Companies Register. First, check availability of company name. Then register using a Luxtrust Certificate or in person at their office in Luxembourg or Diekirch. If you’re creating a company or a non-profit, you must include the constitutional document along with your application.
 

 

4. Register for Social Security

 

 

The fourth step is to visit the Centre Commun de la Securité Sociale (CCSS) to register for social security. Social security benefits include unemployment insurance, a pension for retirement, disability insurance, parental leave, health insurance, and other benefits. If you plan to live off your business, you will likely be required to pay 25% of your taxable income in social security. As a result, CCSS will ask you to estimate how much you expect to make in the first year, and you will need to pay 25% of this amount every month starting the moment you register for social security.

 

It is important to estimate your income as accurately as possible. If you estimate it too little, CCSS will ask you to repay the discrepancy a year later. If unanticipated, CCSS repayments threaten to create a short-term cash shortage for your business.

 

CCSS will assume that you expect to make at least the social minimum salary (which is 1989.59 euros per month as of 2017). That means that you’ll be asked to pay a minimum of about 500 euros in social security each month - even if your business is not yet generating any profit.. However, there are exceptions to this procedure for persons who earn less than the minimum salary on a yearly basis or exercise their independant activity in addition to a job as employee.

 

If your total income as an entrepreneur is less than 666.20 euros per month, you can choose not to pay social security at all. In this case, however, you may receive reduced social security benefits.

 

Like many institutions in Luxembourg, the CCSS operates largely on a case-by-case basis. Contact them before and after launching your business to see how best they can help, either by going to their offices or writing an email.

 

For more detailed information about social security, follow this link.

 

 

5. Register for VAT

 

 

To register for VAT, you must submit an initial declaration to the Land Registration and Estates Department (Administration de l’enregistrement et des domaines - AED).

 

VAT, or Value Added Tax (known as TVA “Taxe sur la Valeur Ajoutée” in French), is paid by the final consumer on all purchased goods. Usually the rate is 17%, but it can be less for certain varieties of goods. It is your responsibility to collect this tax from your clients and transfer it to the government. To reward you for this service to the government, as a company, you are allowed to subtract the VAT you pay on goods and services you need for your business. This means that, in the end, a company doesn't pay VAT on goods or services that it buys.

 

Example:

 

  • You have to invoice 1,000.00€ of services. To your customer, you make an invoice with 1,000.00€ + 170.00€ VAT (17%).

  • At the same time, you buy a cell phone for your business for 200.00€ + 34.00€ VAT (17%).

  • The VAT you will have to pay to the government is: 170.00€ - 34.00€ = 136.00€

  • So, a private person would have paid 234.00€ for the cell phone. The company, in the end, only pays 200.00€.

 

Of course, calculating VAT on a monthly, quarterly or annual base (depending on your revenue) is much more complex, especially when you are selling goods and services to other European Countries. In any case, you should seek professional help from a tax adviser to prepare VAT declarations for submission to the Land Registration and Estates Department (Administration de l'enregistrement et des domaines) every month, quarter or year (depending on your revenue).

 

 

Regime de franchise - Invoices without VAT

 

If your total annual income is strictly less than 30.000,00€, you can ask the AED for what's called the "Regime de franchise" when you register for VAT. This means that you don't have to add VAT on your invoices and your customers don't have to pay it. This option reduces paperwork considerably and could be useful for starting small or as a sole proprietorship.

 

Please note that either way, you must register at the Administration de l'Enregistrement et des Domaines. 

 

 

Other taxes: Income Tax

 

The Luxembourg Administration des contributions directes, ACD, which is responsible for income tax, will contact you by post. If it fails to do so, you must contact the ACD and provide an initial declaration including details of your business and how much you expect to earn in the first two years of activity. For more information about how to register for income tax, click here.

 

 
 

Financing

The first question entrepreneurs tend to ask is: Where do I get the money? The answer to that is:
How much do you need and what for?
Whatever the way with which you will fund your project, most of the resources will require you to
present a proper business plan and have strong knowledge about what you need to succeed.

 

 

 

 

1. Preparation

 

Traditional banks, investors and business angels advise strong preparation, a complete and updated file, and an understanding of key numbers, including anticipated costs, revenues, and profits. Be realistic about those numbers and able to justify them. Research well your area of activity, and be prepared to answer in detail any questions about your project or the sector you’ll be involved.

 

When meeting with potential investors also bring an updated CV, as they assess your abilities as project owner and your personal capacities to realize the project (or the capabilities of your team). The CV (written, online or spoken) should include civil status, address, training and diplomas, professional experiences & skills, soft skills, and network. Your skills, abilities, and viability of your plan are critical.

 

 

 

 

2. Small business

 

Traditional banks and investors in Luxembourg usually require you to have a long-time residence in Europe, some credit history in Europe, own some property and have a regular salary. As a newcomer to Luxembourg, you will probably not be able to fulfill these kinds of requirements.

Nevertheless, there are other options to finance small businesses with a good idea, a strong business plan, and a motivated project owner, among which:

 

  • Microlux: Provides microcredits up to 15.000 euros for the creation and up to 25.000 € for the development of existing micro or social companies in Luxembourg. They also offer free personalized coaching to help prepare and later set up the project.

  • FUSE: Provides a small interest-free loan from up to 5.000 euros typically to guarantee a rental deposit or cover start-up costs. Their idea is to provide you with just the little boost you need to start out on your own.

  • MCAC: The Mutualité de Cautionnement et d’Aide aux Commerçants facilitates access to traditional bank loans by vouching for your company. They also provide helpful information on the various public aids for SMEs (financial helps that usually require pre-financing).

  • Crowdfunding: Collective websites where anyone can donate money to fund your project, often in exchange for some sort of reward. Different crowdfunding sites have different approaches and models. Find some of the most well-known platforms and useful advice on this link .

 

If you are setting up a business that doesn’t necessarily need investments to start (i.e. selling only services or various online businesses), you should consider starting out without any foreign money at all, building on your own private resources and an organic (means natural and slow) growth of your activities. With its Sàrl-S company model (see above) and the various possibilities to combine salary work or RMG with freelance work, Luxembourg strongly encourages micro-entrepreneurs to start out.

 

3. Fund a non-profit

 

A non-profit organization in Luxembourg (either ASBL or NGO – see above) shouldn’t sell products or services to generate revenue. ASBLs in Luxembourg typically receive most of their funding from private donations, public institutions or foundations. If your project is entirely non-profit and in relation with culture, sports, environment or in the social field, you can submit your project idea and financial plan to the following institutions (among others):

 

  • Oeuvre: The Oeuvre Nationale de Secours Grande-Duchesse Charlotte supports social, cultural and environmental projects that meet the needs of society in Luxembourg in their start-up phase. Check out the recurring calls for projects on their website:

  • Fondation de Luxembourg: The Foundation regroups multiple foundations from private donors with different philanthropic objectives. Organizations can submit projects related to a certain cause and the Foundation submits it to members who want to support that topic.

  • European Funds: Numerous European funds support social or business initiatives for a certain period. I.e. the European Social Fund is Europe’s main instrument for supporting jobs, whereas the AMIF concentrated on topics related to asylum and integration. These financial aids require a heavy load of administrative work, fund only part of the expenses and often require pre-financing. Nonetheless, it can be interesting for project owners to see if their project fits the objectives of a fund and get in touch with the competent authority.

 

As an ASBL you can also rely on your personal network, including friends and family members, as well as some crowdfunding platforms to raise money for a cause.

 
 
 

This article is work in progress and will be continuously updated and completed with additional information.

Stay tuned!

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Touchpoints ASBL

(JUICE Administrative HQ)

Op der Haart 4A L-9999 Wemperhardt

Mondays 2pm - 5pm

(HOUSE OF ENTREPRENEURSHIP, Kirchberg)

Rue Erasme 14 L-1468 Luxembourg

Tuesdays 2pm - 5pm

(MESIS)

Côte d'Eich 15 L-1450 Luxembourg

Thursdays 2pm - 5pm

info@touchpoints.lu  |  www.touchpoints.lu

Tel: +352 20 20 22 80  |  F. +352 26 95 73 58

 

RCSL : F10937

Matricule : 2016 61 02694

Compte : LU61 0141 9568 5870 0000

(CELLLULL)​

 

CONTACT PERSON

 

M. Jordan Gerstler-Holton

T. +352 691 997 421  |  info@sleevesup.lu

© 2016 Sleeves Up