The establishment
Good management of your company begins even before operations begin. Since the creation ...
We will try to draw your attention to some points that you should always keep in mind to ensure the durability of your business. We will start with some ideas that we must absolutely give up!
Fictitious company or mailbox
This is unfortunately the most commonly acquired idea!
Now that I have a company in Luxembourg, I will no longer pay tax
WRONG !!!
Luxembourg is not a tax haven, but a country with a moderate taxation. If you are looking to not pay taxes, go your way and go to the side of the offshore companies. Please be aware that today, do not pay a minimum tax is utopian! Luxembourg companies are fully taxable. However, taxation is less heavy than some other neighboring countries.
For my business, I do not need Office, but just a domiciliation/mailbox because either I work from home, either I am frequently on the move.
WRONG !!!
A corporation must have necessarily a physical, private office and allows for further commercial activity defined in the corporate purpose of the company. This is very clearly defined in the law on the establishment in Luxembourg from the 02 September 2011. Otherwise, you will be carrying illegally because you will not be able to get your trade permit to do business in Luxembourg.
Many have interpreted this requirement to have a physical office as punishment because obviously this creates more substantial costs than a domiciliation. In our view, we believe that this is something beneficial for the client. In large number of cases, the company's commercial activity takes place in a neighboring country, maybe even in the country where you currently reside. However, the tax administrations of neighboring countries have an unfortunate tendency to want to impose anything that happens on their territory. The first angle is generally the requalification of the permanent establishment of your company, i.e. they will try to show that you manage your company from home (as in our example). To have maximum incriminating, the administrations will apply for European cooperation in Luxembourg so that it can truly determine the existence (or not) of the company. If the Luxembourg authorities come to check your company and they realize that the head office is in domiciliary center or even your office is always closed, they will take steps to remedy one hand and close your company and moreover transmit information like what they found no local activity of the company.
To defend the economic reality of your company in Luxembourg, it is not enough to just have one office in a business center. You have to truly live this company. And that means several things. First, of course, have all the documents in this office showing real activity of the company. Second, the company's manager must be regularly present in Luxembourg to perform all the common management operations such as sending invoices, vendor payments, marketing development, organization of meetings etc... By doing all that, which ultimately reflects a real business, you build consistency in your structure, key elements in the event of administrative control.
Good habits
A good management is not something that should be done occasionally, but throughout the life of your business. Naturally, you must take into consideration the size of the structure to adopt the good organization. A big company can put more means at its disposal that small business hiring a person. For large projects with vocation to international development, we strongly advise the establishment of employees to monitor daily operations. Having a company in Luxembourg involves organization and costs of the organization, but it takes a minimum of consistency to ensure consistency of arrangements. It is inconceivable to currently still see companies who transit hundreds of millions of euros by Luxembourg and renting an office of 5 m² without anybody inside...
It is important to define a person who will be in charge of the daily management. This person will come as regularly as possible to the office to handle mail, update company documents with customer’s specifications, suppliers, invoices of purchases and sales, which will handle the management of the phone, to prepare the documents for accounting etc...
I will take care of administrative files later because I do not have time, I have to develop my business.
In companies with small and medium sizes, we often find that executive or entrepreneur will devote his time primarily to commercial development rather than holding its administrative records and that is all natural. But it is a trap to avoid. In Luxembourg as in other European countries, there is an administrative schedule to comply with the filing statement to be accompanied by a numbers of publication. But if the documents are not updated, your accountant will not be able to arrange which will result in fines imposed by the different administrations as Direct Taxation (IS) or Recording and Domains (VAT). If you accumulate too many fines, besides the fact that it will cost you, it will mainly trigger alerts about your company that may lead to an accounting control, which believe us will make you lose much more time and money if the documents had been processed in a timely manner.
Do not hesitate to contact us for further information.
