by Lieven Goossens and Hannelore Durieu
5 important tips for anyone wanting to do business in Luxembourg
Does your company intend to start doing business in Luxembourg soon? Before you do, there are a few important matters to take care of first. Luxembourg imposes various obligations on foreign companies wishing to enter its labour market temporarily. Ignoring these obligations may result in a fine. So, what exactly will you need to take into account?
Submit a notification in advance
Foreign businesses wishing to provide temporary services on Luxembourg territory are required to notify the General Directorate for Small and Medium-Sized Enterprises (Direction générale des classes moyennes) beforehand. Advance notification is required whether you are providing services in Luxembourg yourself or are posting workers there. In other words, this obligation also applies to subcontractors. To meet the notification obligation, you must provide an EU certificate of experience and pay stamp duty amounting to EUR 24 (2021 rate).
Check whether Luxembourg VAT registration is required
If they are carrying out construction work or certain services within Luxembourg, foreign companies are obliged to charge customers Luxembourg VAT. After all, application of a reverse charge mechanism will not be possible under such circumstances. This means you must register for Luxembourg VAT before starting work. You will also need to submit a Luxembourg VAT declaration.
Apply for an A1 form in advance
An A1 form is used to prove your continued Belgian social security coverage while carrying out temporary work in Luxembourg. Anyone doing business in Luxembourg temporarily must be in possession of this document. Be sure to request A1 certificates of coverage for the duration of your work in Luxembourg in advance, both for yourself and for any accompanying employees.
Apply for social badges for all employees
In addition to an A1 form, employees working in Luxembourg temporarily must also carry a social identification badge. It is therefore important to obtain these badges in good time. The social badge is a professional ID card and is used by the labour inspectorate to determine compliance with Luxembourg labour law for your employees, for example regarding medical fitness, adequate skills, minimum wage and working hours.
Beware permanent establishment
If you carry out construction work for longer than six months, in accordance with the double taxation treaty between Belgium and Luxembourg, this is considered a permanent establishment. Once you have a permanent establishment, the portion of your profits related to this Luxembourg construction site will be taxable in Luxembourg as well. It may be possible to obtain an exemption from Belgian taxation for such profits. To do so, your company will need to file a Luxembourg tax return.
What about labour inspections?
Labour inspections of foreign service providers are increasingly frequent in Luxembourg. These inspections monitor your compliance with all the obligations noted above. A failure to comply will result in the imposition of an administrative fine. The fine’s (initial) amount may vary between EUR 750 and 3,000, depending on the number of violations. If you do not agree with the imposed fine, it is possible to dispute it. In that case, be sure to engage a legal advisor to support you.
Lieven Goossens
Team Manager Social Legal lieven.goossens@vdl.be
Hannelore Durieu
Partner International Tax - Certified Tax Advisor hannelore.durieu@vdl.be
Disclaimer
In our opinions, we rely on current legislation, interpretations and legal doctrine. This does not prevent the administration from disputing them or from changing existing interpretations.
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