What are domiciliation services?
The registered office is not just an address in Luxembourg, it represents the place from which the company is administered and managed. It is therefore the address where the company will receive all official correspondence, as well as the place where it must keep several official legal documents such as accounting documents, establishment authorizations, shareholders' register and even minutes of the Board of Directors' ordinary and extraordinary general meetings.
Functions and benefits of domiciliation services
The head office is a vital place and domiciliation services play a very important role given the wide range of services they offer. The most relevant ones are presented below:
- Legal presence without the need for a physical office. Domiciliation services provide an official address in Luxembourg which serves as a legal seat for tax and administrative purposes so that the company does not have to maintain a physical office. By not requiring physical infrastructure, companies can significantly reduce operating costs, this allows international and multinational companies to operate in Luxembourg and manage investments or activities in Europe at lower costs.
- Administrative management. Domiciliation providers can take care of administrative tasks such as receiving mail, managing documents, preparing reports and handling correspondence with authorities. They can also include the management of board meetings and shareholders' meetings as well as the preparation and preservation of minutes and corporate documents.
- Regulatory compliance. Domiciliation services help ensure the company complies with regulations such as anti-money laundering (AML) and Know Your Customer (KYC) regulations.
- Legal representation before authorities. Domiciliation providers can act as the company's representative before regulatory bodies such as the CSSF, tax bodies or the Commercial Registry.
- Accounting and tax services. In some cases, providers also offer accounting, tax filing and bookkeeping services, ensuring compliance with tax obligations.
Overview of the legal and regulatory framework in Luxembourg
Since domiciliation services are so important, this is a strictly regulated activity. The legal basis is provided by the law of May 31, 1999 on the domiciliation of companies although there are other laws and regulations that intervene in one way or another.
Some of the indirectly influencing regulations worth mentioning are the Trade Law of September 2, 2011 and the Law of July 26, 2023 which regulate access to commercial, craft, industrial and some liberal professions in Luxembourg.
These laws oblige certain companies to apply for an establishment authorization, which requires meeting administrative criteria that prevent recourse to domiciliation services. In particular, the following companies require an establishment permit:
- Commercial companies: these companies must have consistent premises, which may be a warehouse or a store unless the corporate purpose demonstrates that the intended activity only requires the use of a simple office.
- Craft companies: the company must have a workshop or a warehouse.
- Service companies: the companies need to have an office.
In these cases, it is then impossible to use the domiciliation services in Luxembourg and the company must have its own premises. Moreover, following the major disputes that have arisen in the past as a result of the “mailbox” phenomenon, the authorities and the Ministry of Economy systematically and scrupulously check that each legal entity has actual physical premises where the regular presence of a legal representative is essential.
On the other hand, certain types of companies can make use of this type of service, here are the main ones:
- Holding Companies (Soparfi). These companies are used to hold shares in other companies, they are generally used by multinational groups to manage their stakes in other companies. These companies do not carry out direct commercial activities but focus on investment management and therefore require an active physical operation and can benefit from domiciliation services.
- Investment Funds (SIF, SICAV, SICAR). Investment funds such as Specialized Investment Funds (SIF), Open-Ended Investment Companies (SICAV) and Private Equity Investment Companies (SICAR) are used to manage collective investments. The main activity of these investment vehicles is the management of financial assets and therefore they do not require a physical operational presence in Luxembourg and can access domiciliation services.
- Special Purpose Vehicles (SPV). Special purpose vehicles (SPVs) are legal structures created for specific purposes such as bond issuance, asset securitization or project finance. Since they are not involved in commercial activities, SPVs can use these services.
- Family Wealth Management Companies (SPF). SPFs are structures designed for family wealth management and are not involved in commercial or industrial activities but focus on holding and managing financial assets. Due to their purely wealthy nature, they can resort to these services.
- Securitization Companies. These structures are used for asset securitization, a process by which assets such as loans or mortgages are pooled and securities backed by them are issued. As these companies do not carry out commercial activities they can use these services.
- Civil Real Estate Companies (SCI). Civil Real Estate Corporations (SCI), can use domiciliation services as long as they do not engage in commercial activities that require an establishment permit. SCIs are usually used by individuals or families to manage real estate properties for investment purposes or to hold family real estate assets. They generally do not engage in commercial activities so they do not require an establishment permit and can use domiciliation services.
- Inactive companies. Companies that have temporarily suspended their commercial or craft activity can temporarily domicile their registered office with a domiciliation agent who will manage the company during the entire period of inactivity. In this case, the establishment permit must be returned for the duration of the domiciliation.
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Luxembourg domiciliation services offer a practical solution for companies wishing to establish a legal presence in one of Europe's major financial centers without having to have physical offices.
This article has presented an overview of the subject, it has shown how these domiciliation services offer not only an address for the company but also a wide range of services and it has been mentioned the importance of verifying if it is possible to resort to this type of services. However, this is not an exhaustive review on the subject, there are details that have not been covered and doubts may remain on multiple aspects. If you need to go deeper in some issues or have doubts, do not hesitate to contact us, EasyBiz is here to help you.
