The business permit as a safeguard for a healthy economy

Natalia Zuvak

Natalia Zuvak

Emmanuel Lebek

Emmanuel Lebek

The business permit as a safeguard for a healthy economy


With a thousand years of history, first officially mentioned in 9641, Luxembourg has always been a geopolitical battleground for its powerful neighbors.


The Luxembourg people and their elites have nevertheless always been guided by the pragmatism and challenges of successive eras, favoring diplomacy over force.


Thousand years later, the Grand Duchy of Luxembourg has created a modern economy whose consecration lies in its recognition as a global financial center. If Luxembourg’s modesty does not seek recognition through the noisy subjugation of its neighbors, then this state, the heart of many European institutions, certainly does not deserve to have to constantly defend itself against external attacks whose sole aim is defamation.


As the Grand Duchy of Luxembourg has been the target of a multitude of attacks in recent years, especially because of the large number of companies setting up there, the question that immediately springs to mind is whether anyone can really set up in Luxembourg.


Now that the law of July 26, 20232 amending the amended law of September 2, 2011 has recently been passed, we take this opportunity to remind you that in the Grand Duchy of Luxembourg, anyone wishing to carry on a commercial, craft or industrial activity must obtain a business permit. Consequently, we will remind you the conditions for obtaining it, and the sanctions for those who risk ignoring it.


When to apply for a business permit


France3, Belgium4 and Germany5 do not have a system of business permit, preferring to focus their attractiveness on the possibility of incorporating companies within 48 hours, with the only concern of the entrepreneur wishing to set up there being the corporate form to be adopted to conduct his future business.


The Grand Duchy of Luxembourg, on the other hand, takes a different approach, putting people before capital, and checks the identity and pedigree of individuals wishing to establish themselves on its soil, through the intermediary of the Ministry of the Economy, reserving the right to refuse an application.


The application for an business permit is therefore the first mandatory step to be taken before incorporating a company. It should be noted, however, that draft articles of association must be sent to the Ministry of the Economy at the same time as the application for the permit.


Who can be granted a business permit?


Only individuals can be granted a business license. In most cases, this will be the future manager in charge of the day-to-day running of the company.


Legal entities, whether Luxembourgish or foreign, cannot apply for, and therefore obtain, an business permit.


In order to obtain an business permit, the applicant must satisfy a number of criteria:

  • Requirements in terms of professional qualifications and integrity (Example 1).
  • Effective and permanent management of the business (Example 2).
  • Be effectively connected to the business as the owner of the business (Example 3).
  • Must not have evaded business and tax obligations in their previous or current business activities, whether these activities were carried out under their own name or through a company run by said business manager (Example 4).

Certain liberal professions, such as lawyers, doctors, dentists, veterinary surgeons or auditors, will be subject to laws other than those concerning the regular business permit (Example 5)


Having an infrastructure in Luxembourg


Since a company must have its own premises, all applicants must provide proof of a fixed place of business in the Grand Duchy of Luxembourg (Example 6). The infrastructure must be suitable for the activities to be carried out there, which implies that the manager must be present on a regular basis. With particular regard to this point, the authorities will systematically refuse to issue a business permit to a person who cannot be regularly present in Luxembourg because of the remoteness of his or her place of residence.


Processing time


The administration has 3 months from receipt of a complete application to process it. Without a response before the end of the 3-month period is equivalent to a tacit authorization.


What about a Luxembourg resident doing business in or from abroad


It is a common misconception that a regular resident in the Grand Duchy of Luxembourg would be exempt from the requirement to obtain an business permit if the activity takes place outside the country’s borders (Example 7), or if he or she carries out the activity in the Grand Duchy of Luxembourg through a company incorporated abroad (Example 8).


In both cases, carrying on a commercial activity without an business permit is strictly forbidden. Not only would the resident find himself in a situation of continuous fraud with regard to Luxembourg social security contributions (CCSS) and taxes (VAT in particular), but he would also be exposed to criminal prosecution.




Although the Grand Ducal dungeons have long since disappeared, and the medieval punishment of the wheel has been definitively abandoned, the Grand Duchy of Luxembourg is nonetheless extremely severe towards those who wish to avoid having to obtain a business permit.


Those who establish themselves in the Grand Duchy of Luxembourg for the purpose of carrying on an activity covered by the law, without having first obtained the requisite authorization, are liable to a prison sentence of between eight days and three years, as well as a fine of between EUR 251 and 125,000.




Far from being the “Wild West” of the modern business world, Luxembourg is undoubtedly one of the few European states to filter the entry of business people wishing to establish themselves here.


While legal professionals and the start-up ecosystem would welcome reforms aimed at speeding up the processing of applications for establishment permits, the system itself remains the guarantor of a healthy financial center, as well as of a mature state that assumes its regalian responsibilities.


Luxembourg is therefore not a bad pupil to point the finger at, but rather an example from which its large and powerful neighbors could draw inspiration.

1 Histoire du Luxembourg, « Que sais-je », 5ème édition 2010, Jean-Marie Kreins, p. 20.

2 Mémorial A N° 552 du 28 août 2023.




Examples of situations

Example 1


Dr. Dipl.-Ing. Rupert Umwelt is a leading businessman who has held very important and prestigious positions within multinational companies in his country’s automotive sector. Particularly concerned by environmental issues, he has developed a system whereby cars produced by his group, and required to pass pollution tests in the USA, are certified as having the “best” climate impact. As the system failed to convince on the other side of the Atlantic, his home country also recently notified him of its ingratitude through a criminal conviction handed down by a Munich court.


Wishing to go green, while remaining a consultant in his spare time, he is convinced that he will do honor to the Grand Duchy by choosing to settle here, willingly complying with the exercise of applying for a business permit for his future advisory activities.


Since Dr. Dipl.-Ing. Rupert Umwelt has been convicted of a criminal offence, his reputation has been tarnished. He will therefore have no chance of obtaining an business permit in the Grand Duchy of Luxembourg.

Example 2


Mrs Prudence, daughter of a famous Australian media magnate, wants to launch her first magazine, “Super Lux”, in the Grand Duchy. She has a facility for writing and wants to spread her opinion, which she knows to be out of the ordinary, so she wants to set up a SARL-S called “Me & Myself”.


Wishing to be known as soon as the first issue was launched, she asked her father, who now raises ostriches near Perth, to become her 50% partner and official manager. Prudence assures him that all he has to do is attend the annual general meeting once or twice a year. Convinced, her father hurriedly sent his application for authorization to set up in Luxembourg City by TNT Express.


Although Mrs Prudence’s father met the professional qualification requirements, the fact that he lived 14,000 km from the Grand Duchy is an obstacle to the granting of the business permit. Indeed, his remoteness cannot guarantee the effective and permanent day-to-day management of the business.

Example 3


Mrs Abbondanza Generosità, a world-renowned expert in the field of space engineering, would do anything to help her children fulfill their dreams. Her two sons, Leonardo and Michelangelo, have artistic talents which they would like to pool to launch their own clothing brand “Made in Luxembourg”, through a corporate form in which each would hold 50% of the capital, with the two brothers acting as joint presidents, and hiring no employees for the time being. The two brothers knew that they would not be able to obtain a business permit, but did not wish to disclose the reasons to their mother, so they asked her to submit an application for a business permit on their behalf.


Mrs Abbondanza Generosità, enthusiastic about her sons’ project and impressed by their flexible interpretation of Luxembourg law, agreed to submit the application on her behalf.


As Mrs. Abbondanza Generosità will not be the owner of her sons’ company, her real link with this project is limited to a relationship of kinship and goodwill. The application for an establishment permit will therefore not be accepted by the authorities.

Example 4


Like his car, Mr Dutyfree runs his business smoothly. Viscerously allergic to any tax, while demanding free and impeccable road infrastructures for his car, he has nevertheless developed the unfortunate habit of forgetting to pay taxes in the countries in which he previously resided. Already sentenced in Germany, Belgium and France, but a fervent supporter of the Right to be forgotten and the GDPR, he wants to start on a new footing in Luxembourg.


Having been sentenced abroad of avoiding payment of compulsory taxes, Mr. Dutyfree will naturally be refused a business permit in the Grand Duchy of Luxembourg.

Example 5


A native of Belgium-Town, Wisconsin, Britney has always loved TV series featuring lawyers and judges. After attending a 3-year cycle of law courses at the prestigious University of Chicago as a free listener, with corresponding certificates of attendance, she now wanted to share her legal knowledge with others.


Wishing to practice law in Europe, her uncle revealed that their family had emigrated to the United States in the 19th century from what is now the Belgian Luxembourg province, more precisely from the city of Arel. This ancestry enabled her to obtain Luxembourg nationality, and she saw it as a sign, just like her future in Luxembourg. Deciding to launch her own practice under the name “Lux Best Attorney”, she applied for a business permit.


As the profession of lawyer is regulated by the law of August 10, 1991, the Ministry of the Economy will not be able to issue a business permit. The Luxembourg/Diekirch Bar Association will also be unable to grant her application, as she has no law degree and therefore cannot meet the qualification requirements.

Example 6


An expert in international road freight, and wishing to specialize in the transport of goods between Germany and France, Mr. Schenker has decided to set up his own transport company. The warehouses housing his truck fleet would be located in Wittlich, Germany, while the head office would be in the Grand Duchy. Wishing to minimize the costs associated with the head office, he signed an official domiciliation contract with a friend living in Grevenmacher. For Mr. Schenker, this solution offers the advantage of having an official address in the Grand Duchy, as well as a mailbox for receiving mail.


As he met the criteria of good repute and qualifications, and wished to manage the company personally and directly, he submitted his application for an business permit to the authorities.


As the company’s corporate purpose was to transport goods internationally, an activity requiring a large fleet of trucks, Mr Schenker had to justify not only a permanent place of business, but also premises suited to the activities to be carried out there. Although he has an address in Luxembourg under a domiciliation contract, he will naturally be refused a business permit.

Example 7


Christophe loves beer and surfing. Ever since he was a child, he’s been fascinated by the strong current of the Sûre river, being fascinated by the big waves. Having carefully analyzed surfers on vacation in Saint-Jean-de-Luz for the past 30 years, he decided to produce surfboards in his garage, manufactured “Made in Waasserbëlleg”, which he would sell exclusively on the French Basque coast.


Having read on the Internet that he could open a SARL in France for only 1 EUR in 48 hours, and not wishing to run afoul of the French tax authorities, whom he knew to be legendarily vigilant, he complied with French law. Without realistic perspectives for his surfboards on the Grand Ducal market, he sees no point in seeking any permit from the Luxembourg Ministry of the Economy.


Although Christophe won’t be selling any boards to customers based in the Grand Duchy, he is nevertheless a Luxembourg resident, producing surfboards in his garage for the purpose of selling them. In fact, he has a fixed place of business and is therefore carrying out a commercial activity. He therefore needs to apply for an business permit to comply with the law.

Example 8


Greta Grün is a Swedish artist specializing in decarbonated art. Having heard that the air in Luxembourg is purer than elsewhere, she decided to settle in Clervaux in 2015. Before settling in the Grand Duchy, she had founded the Swedish-registered company “Vi Är Världen AB”, producing various objects of natural origin.


Generating 90% of her sales on the Luxembourg market, and being more attractive than her competitors thanks to the application of a 0% VAT rate on invoices, Greta Grün already has her sights set on winning the prize for ecological artist of the year.


Greta Grün, a Luxembourg resident, is not only defrauding the Luxembourg tax authorities, she is also conducting business to and from Luxembourg without a business permit, thereby exposing herself to sanctions by the Luxembourg criminal courts.