The reform of the right of establishment in luxembourg enacted by the law of july 26, 2023

The right of establishment in Luxembourg is subject to a major reform with the entry into force on September 1, 2023 of the law of July 26, 2023 (the “New Law”) which amends the amended law of September 2, 2011 regulating the access to the profession of craftsman, merchant, industrialist as well as certain liberal provisions.

With the aim of modernizing the right of establishment by creating a modern legal framework which would stimulate the entrepreneurial spirit, the New Law provides for many changes:

(i) New requirements applying to the manager (dirigeant) holding the business license (autorisation d’établissement)

- New requirement of a “physical presence in the establishment” of the manager to ensure the permanent and effective daily management of the business. This reflects the existing practice of the administration in charge of delivering business licenses.

- The manager no longer needs to be a partner, shareholder or employee of the business to justify a real link (lien réel) with the business. The manager now either (i) has to be the owner of the business (if he/she carries out the business activities in his/her own name), or (ii) is duly registered with the Register of Commerce and Companies as authorized representative (mandataire) in case the business is a legal entity.

- Introduction of a “new chance principle” in relation to the professional integrity (honorabilité professionnelle) of the manager: it is now possible for a former manager of a business which has been declared bankrupt to keep his/her professional integrity and therefore remain eligible to a business license should the previous bankruptcy be due to certain circumstances set forth in the New Law (for example a natural disaster recognized by the Government, the loss of a prominent client, a pandemic recognized by the Government…).

- Introduction of disqualifying criteria to the assessment of professional integrity of the manager, such as repeatedly failing to file and publish the annual accounts or to file tax returns.

- Introduction of an obligation to notify within one (1) month the change of habitual residence of the manager. A lack of notification would result in the loss of validity of the business license.

(ii) New requirements in case of a change of manager holding the business license

In case of a new application for a business license due to a change of manager within the company, the Minister of Economy will issue the business license only if the company:

- does not have social security and tax debts exceeding certain amounts prescribed by the New Law;

- is up to date with its tax returns; and

- is up to date with its filing and publication obligations under the amended law of December 19, 2022 on the Register of Commerce and Companies and the accounting and annual accounts and the amended law of January 13, 2019 establishing a Register of Beneficial Owners.

(iii) Supervision of certain activities

- Creation of the commercial activity of “real estate business introducer” (apporteur d’affaires immobilier) which consists in the “commercial activity of putting a real estate agent or property developer in touch with any other person wishing to sell or rent a property”. The real estate business introducer shall require specific professional qualifications.

- Creation of the commercial activity of “nightclub operator” (exploitant d’une discothèque).

- Precision of the concept of “operator of an accommodation establishment” (exploitant d’un établissement d’hébergement) which now means the “commercial activity of renting out accommodation units for a total of ninety (90) nights or more, accumulated over the course of a year”. The New Law precises that an accommodation unit (unité d’hébergement) is “furnished accommodation intended for a visiting clientele who do not take up residence there and who stay there on a daily, weekly or monthly basis”. As a result, individuals renting out their property (for example through dedicated platforms such as Airbnb, Abritel or Booking) may require obtaining a business license should the ninety-nights threshold be reached.

-Creation of new categories of commercial activities or service which require a dedicated business license (i.e. a regular business license for commercial activities and services will no longer be sufficient) for companies that:

  • sell motor vehicles;
  • rent out offices or shared workspaces;
  • carry out food retailing activities; and
  • proceed with commercial activities of high value goods (biens meubles de grande valeur) such as art, precious metals or precious stones, jewellery, watcheswhere the value of the transaction or a series of related transactions is equal to or greater than EUR 10,000 excluding VAT.

(iv) Update of the administrative procedures

-The business license is issued by online transmission only via the government's dedicated exchange portal. It can be consulted online by the public on the same portal.

-A QR code is assigned to each business license and must be displayed on the company’s website and at every sales point.

-Reinforcement of data exchanges between the Ministry of Economy in charge of the issuance of business licenses and (i) the Register of Commerce and Companies, (ii) the Register of Beneficial Owners, (iii) the VAT Administration and (iv) the Social Security Center in the event of a breach of obligations.

(v) Miscellaneous

- For liberal professions subject to a business license: removal of the reference to the “independent engineer” (and “landscape engineer”, which are not required to apply for a business license.

- For craft activities: creation by the New Law of a new so-called “C list” depicting the craft activities which do not require any professional qualification.