Startups are an important contributing factor to the development of a country’s economy because they create a new job and they promote innovative products and services. The number of startups has been constantly increasing in Luxembourg, especially since the beginning of 2003, reaching 9.7% in 2014, a growth rate that is higher than the ones in other European countries such as Germany or Belgium.
A startup is usually defined as a newly-formed, innovative company. In Luxembourg, the proportion of innovative companies reaches 66%, an indicator that reveals a high number of entrepreneurs who made the decision to establish a startup in Luxembourg. These newly-formed companies are defined by technological breakthroughs and creativity.
In recent years, Luxembourg has made considerable efforts to become an attractive location for startups, such as the launch of the Digital Tech Fund in 2016. A national agency was also created to promote company formation, innovative research and to provide support for any startup in Luxembourg. For example, the introduction of a simplified business structure for the limited liability company is one of the measures introduced by Luxembourg authorities.
Advantages of establishing a startup in Luxembourg
Luxembourg has a very convenient geographical location, between countries with strong economies such as Germany, Belgium, and France. Many European institutions are based in Luxembourg, as well as multinationals and corporations that have based their headquarters in the country. These aspects represent favorable advantages for entrepreneurs who are considering establishing a startup in Luxembourg.
Due to its central location, Luxembourg makes it easy to travel to other important European startup hubs for business purposes. Given that Luxembourg is a small country in terms of size and population, a startup in Luxembourg has great chances to become a national leader.
Luxembourg is known for having a cosmopolite population. More than 45% of its residents are foreign citizens; therefore a startup in Luxembourg has an international outlook right from the start. It can also be used as a test market for products and services in terms of diversity.
The GDP per capita is one of the highest in the world in Luxembourg, which allows the country to offer highly developed infrastructures, especially in terms of network connectivity and IT, two essentials factors for digital startups.
A startup in Luxembourg can benefit from the support of a very active and well-organized startup community.
The simplified structure of the limited liability company, introduced in 2016, requires a minimum share capital of only 1 euro and without a notarial act. The main objective of this measure was to provide simplified access to form a startup in Luxembourg.
Important facts to know before establishing a startup in Luxembourg
- A startup in Luxembourg requires a business permit, which can be obtained by foreign citizens as well.
- The Luxembourg real estate market is quite expensive; therefore it’s important to look into renting opportunities for company offices.
- Salaries can be high, especially for skilled employees, but public subsidies are available for a startup in Luxembourg that complies with the necessary legislative requirements. In addition, the tax environment is very attractive for startups.
- Luxembourg is a small market, though diversified, which should make entrepreneurs aware that a startup in Luxembourg should have the ability to expand in other countries fast for it to grow and make considerable profits.
To make the best choices regarding the establishment of a startup in Luxembourg, especially in terms of business structure, taxation and business purposes, entrepreneurs should consider working with a firm specialized in incorporating in Luxembourg.