Legal forms of business in Luxembourg 2026: choose the right structure

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You want to run your consulting, agency or start-up through Luxembourg, as a resident or from abroad. This guide compares the structures founders use, their 2026 tax, the registration steps and the substance rules that sink remote set-ups.

Luxembourg legal forms of business in 2026: the key figures

What changed for 2026

• No change to the corporate rate. The ACD corporate tax scale applies 14% / 16% from tax year 2025, after a one-point cut, and none of the laws on the ACD 2026 legislation list touches it.
• Simpler minimum wealth tax. Since tax year 2025, the minimum net wealth tax has three bands instead of seven, topping out at EUR 4,815 (ACD wealth tax scale).
• New start-up investment credit. From tax year 2026, individuals who invest more than EUR 10,000 in a qualifying young innovative company get a tax credit of 20% (art. 154quaterdecies L.I.R., one of the laws of 19 December 2025). Founders and employees are excluded.

Is this guide for you?

Read on if you…

• are a freelancer or consultant deciding between a sole trader set-up and a company;
• are founding a start-up or a small holding company in Luxembourg;
• live abroad and want to know whether a Luxembourg company can work for you.

Probably not your case if you…

• are setting up a regulated fund, bank or payment firm (you need a licence and specialist counsel);
• are a salaried employee with no side activity.

Which business structures can you choose in Luxembourg?

Source for capital and formation rules: Guichet.lu company comparison and the law of 10 August 1915.

The SARL-S: the cheap entry ticket

The SARL-S is a simplified SARL with capital between EUR 1 and EUR 12,000, set up by private deed without a notary (Guichet.lu SARL-S page). It has three limits:

1. Only individuals can be partners, never a company.
2. One person can be a partner in only one SARL-S at a time.
3. Its purpose is limited to commercial, craft, industrial and some liberal professions.

If capital goes above EUR 12,000, the company must convert into another form.

SARL, SA or SAS?

The SARL suits most owner-managed businesses: partners' shares can't be transferred freely, which keeps control tight. The SA and SAS have freely transferable shares, which suits investors and later funding rounds. The SAS (société par actions simplifiée) borrows SA rules but leaves more freedom in the articles. Both need a notary and EUR 30,000 of capital.

How are companies and sole traders taxed?

Sole traders

Your profit is taxed as personal income at the progressive scale, which tops out at 42% above EUR 234,870 (ACD tax scale). Add the employment fund surcharge of 7%, or 9% on high incomes, so the top marginal rate is 45.78%.

Commercial profits also pay municipal business tax (impôt commercial communal), a local profit tax. For individuals and partnerships, the first EUR 40,000 of adjusted profit is exempt (ACD business tax calculation).

Companies

A company resident in Luxembourg, because its registered office or central administration is there (art. 159 L.I.R.), pays three layers in 2026:

1. Corporate income tax: 14% up to EUR 175,000 of taxable income and 16% on all income above EUR 200,000. In between, EUR 24,500 plus 30% of the excess over EUR 175,000 bridges the gap (art. 174 L.I.R., ACD scale).
2. Employment fund surcharge: 7% of the corporate income tax (ACD surcharge page).
3. Municipal business tax: 3% × the municipal multiplier, after a EUR 17,500 allowance. In Luxembourg City that comes to 6.75% (PwC, secondary).

At 16%, that's 16% × 1.07 + 6.75% = 23.87% in Luxembourg City. In the 14% band it's 14% × 1.07 + 6.75% = 21.73%. Companies also pay annual net wealth tax of 0.5% on taxable net wealth up to EUR 500 million. The minimum is EUR 535, EUR 1,605 or EUR 4,815, depending on balance-sheet size.

Getting money out

Dividends paid to shareholders face 15% withholding tax, unless a treaty or EU rule lowers it. For a resident individual, half of dividends from a fully taxable company in Luxembourg, the EU or a treaty country is exempt (Guichet.lu, art. 115 n° 15a L.I.R.). Salary paid to you is deductible for the company and taxed as your wages.

For personal deductions on that salary, see personal tax deductions and benefits in Luxembourg. For VAT and other levies, see specific taxes in Luxembourg.

How do you set up a business in Luxembourg, step by step?

1. Apply for a business permit (autorisation d'établissement). Most commercial, craft and some liberal activities need one. It checks professional integrity and, where required, qualifications (Guichet.lu business permit).
2. Secure real premises. The permit is only issued if there is a physical installation in Luxembourg suited to the activity.
3. Pay in the capital to a bank account in the company's name.
4. Sign the articles: before a notary for an SARL, SA or SAS; by private deed for an SARL-S.
5. Register with the Luxembourg Business Registers (RCS) and declare beneficial owners.
6. Register for tax, VAT and social security with the ACD, the indirect tax authority (AED) and the CCSS.

Prefer to have this handled for you? See Heavnn business setup.

Can you run a Luxembourg company from abroad?

Here's the catch. The business permit requires the permit holder to manage the business day to day through a physical presence at the establishment, according to Guichet.lu. A manager living abroad and never on site doesn't meet that test.

Tax adds a second layer. Luxembourg treats a company as resident if its registered office or its central administration is there (art. 159 L.I.R.). Your home country may apply its own place-of-management test. If you take every decision from your laptop abroad, that country can claim the company is resident there. Or it can treat your home office as a permanent establishment, a taxable foothold. Then the treaty tie-breaker decides, and you can face tax in two places while it's sorted out.

To keep a Luxembourg structure defensible:

• appoint a qualified manager who is really present in Luxembourg;
• hold board or partner meetings in Luxembourg, with minutes;
• keep premises, staff or service contracts on the ground.

Leaving Luxembourg but keeping the company? Read how to cease your Luxembourg tax residency and check Luxembourg's international tax treaties. For other countries, compare business forms in Malta and legal forms of business in Austria.

Common mistakes (and what they cost)

• Running the company entirely from abroad → another country taxes the profits as a resident or a permanent establishment, and you may pay twice until the treaty fixes it.
• Starting work before the business permit is issued → you operate without a required authorisation, and an SARL-S can't even file its RCS registration without the permit.
• Picking an SA for a one-person service business → EUR 30,000 of capital and notary costs for no tax benefit over an SARL-S.
• Taking every euro out as salary → you pay up to 45.78% instead of a marginal 21.73% to 23.87% on profits left in a Luxembourg City company.
• Forgetting the minimum net wealth tax → even a loss-making company pays at least EUR 535 a year, and EUR 4,815 once its balance sheet tops EUR 2 million.

Frequently asked questions

What is the cheapest company to set up in Luxembourg?

The SARL-S. You can start with EUR 1 of capital and sign the articles by private deed, without a notary. Only individuals can be partners, and each person can hold only one SARL-S at a time. You still need a business permit, real premises and RCS registration, plus the minimum net wealth tax of at least EUR 535 a year.

Can a non-resident open a company in Luxembourg?

Yes, shareholders can live anywhere. The hurdle is the business permit: it needs a physical installation in Luxembourg and a permit holder who manages the business day to day through a physical presence there. If all decisions are made abroad, your home country may also treat the company as resident or taxable there.

What is the minimum share capital for a Luxembourg SARL?

EUR 12,000, contributed in cash or in kind. The SARL-S needs between EUR 1 and EUR 12,000, fully paid up at formation. The SA and the SAS need EUR 30,000, of which at least a quarter must be paid in at formation. In-kind contributions to an SA or SAS need an auditor's valuation report.

Do I need a business permit in Luxembourg?

Usually yes. Any habitual commercial or craft activity, and some intellectual liberal professions, need an autorisation d'établissement before you start. You must show professional integrity, qualifications where required, real premises in Luxembourg and effective on-site management. Regulated financial activities need a separate licence from the financial regulator.

How is a Luxembourg company taxed in 2026?

It pays corporate income tax of 14% up to EUR 175,000 of taxable income and 16% above EUR 200,000, plus a 7% surcharge. Municipal business tax is added, 6.75% in Luxembourg City after a EUR 17,500 allowance. Above EUR 200,000 the combined rate there is 23.87%. Net wealth tax applies on top.

Should a freelancer in Luxembourg use a company or stay a sole trader?

It depends on how much profit you leave in the business. If you spend everything you earn, a sole trader set-up is simpler and the tax gap is small. If you retain profits, a Luxembourg City company taxed at a marginal 21.73% to 23.87% beats personal rates of up to 45.78%. Running costs, social security and later dividend tax reduce that gap.

Related guides

• Specific taxes in Luxembourg: VAT and more
• Tax incentives for expats and digital nomads in Luxembourg
• Luxembourg's international tax treaties
• How to obtain tax residency in Luxembourg
• Luxembourg tax landscape overview
• Legal forms of business in Austria
• All country tax guides

Sources

• Company comparison: SARL, SA, SCA, SE – Guichet.lu
• Simplified SARL (SARL-S) – Guichet.lu
• Business permit application – Guichet.lu
• Corporate income tax scale from 2025 – Administration des contributions directes
• Luxembourg corporate taxes on income – PwC Worldwide Tax Summaries (secondary)
• Business tax calculation and municipal rates – Administration des contributions directes
• Net wealth tax scale for companies – Administration des contributions directes
• Employment fund surcharge – Administration des contributions directes

This guide is general information, not personalised tax advice. See how we research and review.