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Luxembourg is a great logistics hub for any expanding business as it is nestled among the highly developed and affluent markets of Europe. The problem with this is the complex laws and regulations in the country can make your daily operations difficult if you do not have the right help.
Over the years, Luxembourg has established itself as a strategic center for businesses that want a foot into Europe and this is helped with the country’s central location. The central airport is home to some of the largest freight companies and is the seventh-largest cargo hub on the continent. There are also railway connections that provide access to North Sea ports such as Antwerp, Hamburg, Rotterdam, Amsterdam, and Zeebrugge.
It is important to consider the domestic economy as well which is nothing to sneer at. While it is one of the smallest countries in the world, it is also one of the wealthiest. This is due to the healthy business environment and the very modern finance sector. One of the main pillars of the financial industry in the country is private banking. It is also the largest in the eurozone and has been ranked sixth in the world.
While all of this can make the country appealing, doing business in the country can be difficult. This is much harder if you do not have any prior experience with corporate Luxembourg.
Starting A Business
Luxembourg has been ranked 93rd in the world in terms of ease of starting a business according to the World Bank and IFC. This is actually a 9 place drop since 2012. It will take around 2 weeks to file and process all of the documents for a business license. You will also have to complete the capital requirements before the business is established.
The Construction Permits
There are 12 procedures that you need to complete to get construction permits and this will take an average of 157 days to complete. There are a number of inter-governmental departments that you have to consult during the process. This will include the Environment Department, Cadatre Administration and the Urban Department of the Commune. You also need to contact the Ministry of Works.
Another time-consuming process is getting an electrical connection for your property. This will take around 120 days on average to achieve. You will have to consult Creos Luxembourg S.A first to get a certificate on the availability of electrical capacity. You will then have to get an excavation permit from the local government department as well as a private unite substation for external works. In order to have the external work done, you will need to have an application for final development.
The majority of the work for registering a property will be done by a notary. They will have to draft and authenticate the sales agreement as well as the full search at the property registry. They also complete a search at the Administration du Cadastre and will notify the tax office of the transfer. At a later point in the process, the notary will register the transfer at the correct authority.
It can be very difficult to get credit in Luxembourg. This is due to the fact that there is little information through private credit bureaus and public credit registries. The law for collateral and bankruptcy are also limited and will constrain the lending system.
Protecting Your Investors
In terms of investor protection, the IFC and the World Bank have ranked Luxembourg within the bottom 50 countries in the world. This is due to the weakness of the shareholder suits index and the director liability index.
Each year, you will have to make 23 tax payments which will take less than 60 hours to process. The corporate tax rates are competitive, but will have some levies. These levies will take a bite into your company earnings as well as personal profits. To stay up to date on tax rules visit this website.
It is expensive to trade across borders. Exporting products will require 5 documents to be filed and this will take 7 days to complete. Importing will take the same amount of time, but will require fewer documents.
Enforcing Contracts And Resolving Insolvency
Contract enforcement will take less than a year to complete. It will also involve only 26 procedures compared to the 31 which is the OECD average. Insolvency resolution will take around 2 years and has a fairly low recovery rate.
Business culture in Luxembourg is very formal and there is a clear segregation between corporate and personal life. Small talk is used to build rapport, but personal questions are not asked. The national language is Luxembourgish, but English, German and French are also widely spoken.