Luxembourg offshore company: benefits and formation guide
Why choose Luxembourg for an offshore company?
Luxembourg is one of Europe’s most attractive destinations for business incorporation. While not traditionally classified as a tax haven, its business-friendly policies, strong financial sector, and efficient tax system make it a preferred jurisdiction for global investors. Many entrepreneurs and multinational corporations open offshore companies in Luxembourg due to its favourable tax structures, political stability, and access to the EU market.
If you're wondering, "Is Luxembourg an offshore jurisdiction?" the answer depends on how you define "offshore." While Luxembourg complies with OECD and EU tax regulations, it offers tax-efficient company structures for international businesses, making it a preferred offshore incorporation destination.
Key benefits of incorporating an offshore company in Luxembourg
- Tax optimisation. Competitive corporate tax rates and tax treaties with over 80 countries.
- Strong financial sector. Luxembourg is one of Europe’s largest financial hubs with great banking institutions, with banking being the largest sector in the local economy.
- Political and economic stability. Luxembourg has a stable legal system and strong investor protections.Confidentiality and asset protection. Grand Duchy of Luxembourg provides high levels of privacy for company owners and assets.
- Confidentiality and asset protection. Grand Duchy of Luxembourg provides high levels of privacy for company owners and assets.
- Access to EU markets. Companies incorporated in Luxembourg can benefit from free trade across Europe.
What is an offshore company?
Let’s begin with a definition.
Offshore entities are commonly used for:
1. 💼Holding investments
Managing assets like real estate, stocks, or intellectual property.
2. 📈Trading operations
Facilitating international trade without heavy local taxation.
3. 💸Wealth management
Protecting personal or corporate wealth from excessive taxation.
4. 🏛️Financial services
Running financial operations under beneficial regulatory conditions.
Legal framework for offshore companies in Luxembourg
While Luxembourg offshore companies benefit from various tax incentives, they must comply with strict EU and OECD regulations to prevent tax evasion and ensure transparency.
Relevant laws and Regulations:
- The Luxembourg commercial companies law (1915): Defines business structures and corporate governance.
- OECD and EU Directives on tax transparency: Luxembourg follows BEPS (Base Erosion and Profit Shifting) and DAC 6 regulations to ensure compliance.
- Double tax treaties: Over 80 tax treaties prevent double taxation and encourage business activities.
Luxembourg is not a blacklisted tax haven by the EU, making it a reputable offshore jurisdiction.
How to open an offshore company in Luxembourg
Step 1. Choose the right business structure
Luxembourg provides three company types for offshore businesses:
- Limited Liability Company (SARL), which offers limited liability with a minimum capital requirement of €12,000 and up to 100 shareholders involved.
- Public Limited Company (SA), suitable for larger businesses, requires a minimum capital of €31,000 and unlimited in terms of shareholders.
- Simplified Limited Liability Company (SARL-S), introduced in 2016, is a new structure, simplifying the incorporation compared to traditional SARL with almost no shared capital required.
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Step 2. Register the company
There are five steps to incorporation:
1. Company name approval.
Check name availability with the Luxembourg Business Register.
2. Draft company statutes.
Define company structure and purpose.
3. Deposit minimum share capital.
SARL (€12,000 minimum capital) or SA (€31,000 minimum capital.)
4. Notary public and business registration.
Officially register the company.
5. Obtain a business license.
Required for regulated activities (finance, investment, etc.).
Timeline: Incorporation usually takes 5-10 business days, depending on documentation.
How to open an offshore bank account in Luxembourg
In order for your company to function properly, you’ll need a fully functional bank account in the local bank. A Luxembourg offshore account is essential for managing business transactions securely.
The process involves:
1. 🏛️Choose a bank.
Luxembourg hosts major banks like Banque de Luxembourg, BGL BNP Paribas, and ING Luxembourg.
2. 📑Provide documentation.
Company registration documents, proof of address, and beneficial owner details.
3. 💵Deposit minimum capital.
Banks may require a minimum deposit, typically €10,000 or more.
4. ✅Compliance checks.
Due diligence and KYC (Know Your Customer) verification.
Tax advantages for Luxembourg offshore companies
While Luxembourg is not a traditional tax haven, it offers several tax-efficient structures:
- 📌 Corporate income tax. A standard rate of 23.87%, but exemptions and deductions apply.
- 📌 Holding company benefits (SOPARFI & SPF). No capital gains tax on dividends.
- 📌 VAT exemptions. Many financial and investment-related services are VAT-exempt.
- 📌 IP box regime. 80% tax exemption on income from intellectual property.
- 📌 Double taxation treaties. Agreements with 80+ countries prevent double taxation.
Starting from the 2025 tax year, the corporate income tax rate in Luxembourg will be 16% for companies with taxable income exceeding €200,000, down from the previous 17%. For businesses with taxable income up to €175,000, the rate will be 14%, reduced from 15%. Companies with taxable income between €175,000 and €200,000 will owe a fixed corporate tax of €24,500 (calculated as €175,000 × 14%) plus 30% on any taxable income exceeding €175,000.
The municipal business tax varies between 6.75% and 10.5%, depending on the business location. In the municipality of Luxembourg City, the effective corporate income tax rate will be 23.87% (previously 24.94%), including the unemployment fund contribution ("Surtax") and the municipal business tax.
Investment fund vehicles that meet qualification criteria remain exempt from corporate income tax and municipal business tax.
Who should open an offshore company in Luxembourg?
- 📍 Entrepreneurs and investors – Seeking tax-efficient business operations.
- 📍 Holding companies – For asset protection and wealth management.
- 📍 E-commerce and digital businesses – Benefiting from Luxembourg’s fintech ecosystem.
- 📍 Private equity and investment firms – Leveraging the SCSp structure for fund management.
👉Luxembourg is ideal for companies trading internationally, managing investments, or structuring financial holdings.
Challenges and considerations
Opening an offshore company in Luxembourg, just as in any other country, comes hand in hand with some challenges.
- Regulatory compliance. Companies must adhere to OECD & EU tax transparency laws.
- Substance requirements. Must have a real presence (e.g., office, employees) in Luxembourg.
- Banking requirements. Strict due diligence procedures when opening a Luxembourg offshore account.
Conclusion
Incorporating a Luxembourg offshore company offers tax efficiency, asset protection, and access to global markets. While not a traditional offshore jurisdiction, Luxembourg provides favourable business structures, strong financial regulations, and international credibility.
Whether you want to open an offshore bank account in Luxembourg or establish a holding company, the country remains a top choice for international entrepreneurs and investors.
