Trading Companies in Luxembourg: Why Is It Beneficial?
Thanks to its favorable tax regime, Luxembourg is one of the best destinations in Europe for establishing a trading company.
Moreover, its highly regulated environment ensures security and transparency for investors, making Luxembourg the preferred choice over other European countries.
In this article, we will explore the advantages of setting up a trading company in Luxembourg, the required authorizations, and the regulations governing collective asset management.
Trading Companies in Luxembourg: Tax and Regulatory Advantages
The decision to establish a trading company in Luxembourg is driven by several benefits:
- Favorable tax regime.
- Advanced financial system, aimed at the continuous development of businesses and companies that have their business hub in Luxembourg.
- Strong regulation: Luxembourg laws provide a high level of transparency and security for investors, making it a reliable location for trading and investment activities.
Trading Companies in Luxembourg: Compliance Requirements and CSSF authorization
When establishing a trading company in Luxembourg, the first step is to choose the legal structure.
The two most common forms are the Société Anonyme (SA) and the Société à Responsabilité Limitée (SARL). The choice will depend on the type of business activity and the desired corporate structure.
These two legal forms also differ in terms of the minimum capital required for incorporation:
- SA: Requires a minimum capital of €30,000.
- SARL: Requires a minimum capital of €12,000.
All trading companies in Luxembourg must be registered with the Trade and Companies Register. As in Italy, they must have their own articles of incorporation and bylaws and open a bank account to deposit the share capital and manage funds on behalf of investors.
Finally, and most importantly, in order to operate, the company must obtain authorization from the CSSF (Commission de Surveillance du Secteur Financier), the financial supervisory authority in Luxembourg.
Without CSSF authorization, a trading company cannot operate.
The CSSF supervises trading and investment activities, ensuring that companies comply with Luxembourg and European regulations.
Authorizations may vary depending on the type of activity performed, as follows:
- Authorization for trading financial instruments (such as stocks, bonds, or derivatives).
- Registration as a "PSF" (Professionals of the Financial Sector)
- Compliance with anti-money laundering (AML) regulations.
Trading Companies in Luxembourg: Regulations on Collective Asset Management
Collective asset management in Luxembourg is highly regulated and follows strict European and local regulations.
Today, the most common structures used for collective asset management in Luxembourg are:
1. Financial Investment Funds, including:
- UCITS (Undertaking for Collective Investment in Transferable Securities), the most common vehicle in Europe for collective asset management, offering high investor protection.
- AIF (Alternative Investment Fund), which includes hedge funds, private equity funds, and other alternative investment vehicles.
Both types of funds must comply with the AIFMD (Alternative Investment Fund Managers Directive) of the EU.
2. Compliance and reporting regulations, based on principles of transparency and investor protection, including reporting obligations to the CSSF, adherence to minimum capital requirements to ensure financial stability, and safeguard investors.
Trading Companies in Luxembourg: How Can We Help You?
Choosing to establish a trading company in Luxembourg is undoubtedly the best option for those looking to operate in the European financial sector while managing investors' capital.
Benefiting from a favorable tax environment and a stable regulatory system makes Luxembourg the European country with the highest level of security for those acting as public asset managers. At the same time, Luxembourg is the ideal choice for investors, as its legal framework guarantees transparency and reliability.
In this context, the guidance of industry experts is essential for anyone looking to set up a trading company or a Luxembourg-based investment fund.
The International Law Firm Arnone & Sicomo has a dedicated department of lawyers and tax consultants who operate directly in Luxembourg, with extensive knowledge of the country's tax and legal system.
Our lawyers and consultants support individuals and businesses in any corporate project they wish to undertake. We specialize in corporate law and have been assisting clients with the formation of Luxembourg investment funds for years.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
