Freelancing in Luxembourg: stay independent or form a company?

An independent (indépendant) and their business are one legal person. A company is a second one, and everything else follows from that. As an independent, business debts are your debts and profit is taxed on your personal scale, which runs to a top marginal 42%; the contribution to the employment fund is a separate charge on the tax due rather than part of that rate, and is 7% at ordinary income levels.

A company owns its own debts and meets corporate tax before anything reaches you — a combined 23.87% for a company seated in Luxembourg City, at the standard band. A Sàrl-S is formed from €1 of capital, a Sàrl from €12,000. Both routes need the same business permit, at the same €50 chancellery fee.

Rates and social parameters here are those in force in 2026. The corporate-tax bands come from the law of 20 December 2024; the corporate rate, the combined Luxembourg City rate and the minimum net wealth tax from the Administration des contributions directes; the contribution rates from the CCSS social parameters; and the personal scale, the minimum wage and contribution ceiling, the company forms and the permit from guichet.lu.

What follows compares the two structures on liability, contributions and admin. It does not say which one your situation calls for — that turns on facts this page cannot see.

One legal person, or two

That single split decides liability, the tax base, filing duties and what happens when you sell. As an independent you are the business: the contract, the debt and the tax assessment all land on the same person, and there is no line between the money in the business and the money in your account.

A company interposes a second legal person, which signs its own contracts, owes its own debts, files its own accounts and has to pay you before anything is yours. The first row of the table below is the load-bearing one; every other row is a consequence of it.

Limited liability caps the shareholder's exposure; it is not a shield over every act of management, since a manager's own faults are a separate question from the company's debts.

The two company forms part company on formality. For a Sàrl-S the incorporation document is a private deed — a notarised document is not required. For a Sàrl it is a notarial deed — the company must be formed in the presence of a notary.

The Sàrl-S is then restricted at both ends. Its shareholders can be only natural persons — a company can never be a shareholder. And the form carries a capital ceiling: share capital above €12,000 obliges the company to change its legal form, so growth eventually forces a conversion rather than permitting one.

What each route pays into the social system

Both routes affiliate with the CCSS, but on different bases and at different rates. An independent contributes on their own professional income. A founder employed by their own company appears twice, once in the share deducted from the salary and once in the share the company pays on top of it.

The table below quotes the 2026 rates as the CCSS publishes them, in percent of contributory income, with the component legs in brackets. The employer figure is a band rather than a single rate because the accident leg is a base rate adjusted by that employer's bonus-malus factor and the employers' mutual class varies.

A founder on their own company's payroll sits on both sides of that split, so the honest comparison for the company route is the employee and employer lines read together, not the employee line alone.

The base is capped. The social parameters set a maximum monthly contribution base of €13,856.63, against a monthly minimum wage of €2,771.33 for an unskilled adult worker. Above the ceiling, contributions stop growing while income does not, so the contribution difference between the two routes stops widening once income passes it.

The practitioner point is about timing rather than rate. An independent's contributions are called provisionally and adjusted later against assessed income, so a strong year produces a catch-up long after the money has been spent. A company running its founder on payroll settles month by month instead. They land on the calendar differently, and that is what is felt in a first good year.

The tax layer, and where the two diverge

An independent's profit joins the rest of their personal income and climbs the same progressive scale as a salary, to a top marginal 42%. The employment-fund contribution sits beside that scale rather than inside it: it is charged on the income tax due, and is 7% at ordinary income levels, so the two are read as separate charges rather than multiplied into one headline rate.

A company's profit is taxed at the company first, in three bands: corporate income tax of 14% on taxable income up to €175,000; then a transition band, €24,500 + 30% of the income above €175,000, running to €200,000; then 16% above that.

Add the corporate employment-fund surcharge and municipal business tax and a company seated in Luxembourg City reaches a combined 23.87% — that figure is the standard-band rate, for that commune, on taxable income from €200,000. Companies operating in other communes carry a different municipal layer.

A company also meets a floor an independent never does: minimum net wealth tax of €535 a year for a balance sheet up to €350,000, due in loss-making years too.

Then comes extraction. Money leaves a company either as salary, which meets the personal scale and payroll contributions, or as a dividend, which carries 15% withholding tax before it reaches a shareholder.

The split between the two is arithmetic rather than preference, and we set it out in salary versus dividends. A Sàrl-S has one further claim on profit ahead of all of this, though not a permanent one: 5% of the annual result goes to a legal reserve, and the allocation continues until the legal reserve and the share capital together reach €12,000, and then it stops.

The permit, and who has to be honourable

The business permit is the requirement both routes share on identical terms, at the same €50 chancellery fee. The ministry acknowledges receipt within 15 days and then has 3 months to decide, and the absence of a ministerial reply before the end of the 3-month period counts as a tacit authorisation.

What changes with a company is how many people the integrity test reaches. It must be proved by the manager of the business in whose name the permit will be issued; and, where the business is operated as a company, also the person holding the majority of the shares and anyone who can exert a significant influence on the management or administration of the business.

That is easy to read past, because the permit is issued in the name of the business and its manager: the shareholder leg lives in the conditions, not on the face of the document. Anyone planning to hold the shares while someone else manages should read it twice.

What each route files

VAT is indifferent to the choice. The €50,000 franchise threshold, with its tolerance to €55,000, is a turnover test rather than a legal-form test, so a small independent and a small Sàrl-S sit in the same regime.

Accounts filing is not indifferent. A company approves its annual accounts within 6 months of year-end and files them within 1 month of approval — an outer limit of 7 months. On the independent side the turnover test is written for a commerçant personne physique, an individual trader, who files with the RCS only above €100,000 of turnover excluding VAT.

The scope matters more than the figure here: the test is drawn around trading in the legal sense rather than around working for yourself, which is what makes it easy to read a trader's threshold as a rule for every independent.

Four questions that do the work

Rules of thumb about revenue levels travel badly, because they hide the variables that actually move the answer: the size of a plausible claim against you, what happens to the profit, who signs your contracts, and where the business is going next.

Two people on identical turnover can land on opposite sides of this decision, which makes turnover the least useful thing they have in common. The four questions below are the ones that change the answer, and they are worth writing down before the structure is chosen rather than after.

1. Exposure. Could one bad project produce a claim larger than the business? Unlimited liability means that claim reaches personal assets; limited liability confines the shareholder to what was contributed.
2. What happens to the profit. Profit consumed each month is taxed once, personally. Profit left in the business meets corporate rates and stays there until it is extracted, when the extraction layer applies.
3. Who the clients are. Individuals and small businesses rarely mind. Corporate procurement and public tenders often specify a legal entity, sometimes without saying so until contract stage.
4. Where the work is going. Hiring, taking a partner or building something sellable all assume an entity. If the Sàrl-S is the route, note the constraint: a natural person may not be a shareholder in more than one SARL-S at the same time.

The switch, when it comes

Moving from independent to company is routine work: new entity, permit aligned, clients told, contracts renewed in the company's name. The regret is about timing rather than direction — personal liability gets carried longer than intended, because no single month makes the switch feel urgent and the exposure only shows up in the project that goes wrong.

See what company formation includes, from €899

Sequencing matters more than speed, because the articles of association must be registered with the Trade and Companies Register before the permit is definitively granted. The two therefore run in order rather than in parallel, and applying for both on the same morning still means waiting on the register.

Common questions

The comparison above settles the structure. What follows is the mechanics of moving from one to the other, which is where the two routes stop being abstract: a permit that does not travel with you, a VAT number that does not either, and a social-security file that follows the capacity you work in rather than your name.

Each of the three carries its own deadline, and each is easy to leave until the company already exists — which is the point at which all three become urgent at once.

Does my business permit transfer to the company?

No. The permit belongs to the business it was issued for, so the company applies in its own right, through the same procedure and the same €50 chancellery fee that covers initial applications and modifications.

Can I keep my VAT number?

No. The company is a new taxable person and registers separately; the initial VAT declaration is due within 15 days. Your personal number stays attached to you and is closed when the independent activity ends.

What happens to my CCSS affiliation?

It follows the capacity in which you actually work, not the person. If the company puts you on its payroll, the employer's entry declaration for a new employee is due within 8 days, and contributions move from the self-employed basis to the employee and employer lines above.

Where this leaves you

Liability, contributions and admin pull in different directions, and the crossover sits on numbers only you hold: how much profit you consume, how much you leave in, and what a claim against you could cost. Run it on your own figures before you move. If the arithmetic says stay independent for now, that is the honest reading of it, and nothing on this page is written to talk you past it.