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Expert in corporate and international corporate law. Has extensive experience in supporting the acquisition of financial licenses in Ukraine, as well as business incorporation in the EU, the United Kingdom, Switzerland, the UAE, and key Asian jurisdictions.
Accounting support for business in Luxembourg
Luxembourg has the status of one of the leading financial centers in Europe. Its stable economic environment, favorable tax climate and international focus make Luxembourg an attractive country for starting and doing business.
However, accounting is a problematic aspect for many Ukrainian entrepreneurs in this jurisdiction, which is not only an element of internal management discipline and a technical tool for effective company administration, but also an imperative legal requirement – the legislation of the Grand Duchy of Luxembourg sets high requirements and strict corporate standards for accounting, reporting and publication of annual accounts. Any company that fails to fulfill these obligations in a timely or improper manner risks both sanctions (administrative, criminal or civil in nature) and a deterioration in the reputation and trust of counterparties.
Prikhodko & Partners has many years of experience and expertise in accounting support for legal entities, helping clients not only avoid violations, but also optimize their activities in accordance with local requirements.
General characteristics of accounting support for businesses in Luxembourg
Any company registered and operating in Luxembourg, regardless of its form of ownership, is required to keep accounting records in accordance with the provisions of the Law on Accounting and Financial Reporting of Companies and the Law on Trading Companies. The main requirements are not unique – accounting must provide a true and fair view of the financial position of the enterprise, and annual financial statements must provide complete information for the period for shareholders, creditors and tax authorities.
A feature of the Luxembourg system is a clear distinction between accounting and tax accounting: even small companies are required to prepare financial statements in accordance with LGAAP (Luxembourg Generally Accepted Accounting Principles), and large ones – with IFRS (for companies whose securities are admitted to trading on a stock exchange). This requires not only the professional qualifications of an accountant, but also legal support, as reporting often affects tax obligations, corporate structure and international planning opportunities.
Procedure for organizing accounting support for a business in Luxembourg
The process of accounting support for a business in Luxembourg consists of several key stages, each of which has legal and financial significance. We recommend contacting our leading specialists from the Prikhodko & Partners team for comprehensive accounting support and full-scale leveling of potential risks associated with violations of reporting rules. However, below we will list the main aspects that we would advise you to pay attention to:
- Initial accounting. After registering a company in the jurisdiction of the Grand Duchy, it is necessary to open accounting accounts, approve accounting policies, determine the chart of accounts and document management system. In Luxembourg, these actions are often coordinated with a registered auditor (réviseur d’entreprises agréé) or a certified accountant (expert-comptable). Legal support at this stage ensures the correctness of the registration of internal decisions of management bodies and contracts with contractors in order to avoid conflicts with tax regulations.
- Current accounting. Regular duties include recording transactions, maintaining bank statements, payroll, preparing interim reports, management accounting, etc. Luxembourg companies must keep all accounting documents for at least 10 years, and the accounts must be kept in euros, even if transactions are carried out in another currency.
- Preparation of financial statements. Financial statements are filed with the Registre de Commerce et des Sociétés (RCS) and published via the Luxembourg Business Registers (LBR) platform. The deadline for submission is within 7 months of the end of the financial year. For medium and large enterprises, a mandatory audit confirmation of the statements is also provided.
- Tax aspect of support. After the approval of the statements, the company must also file a corporate tax return (Impôt sur le revenu des collectivités), a wealth tax return (Impôt sur la fortune) and a VAT return (TVA). This segment requires considerable diligence, as even minor errors in financial documents can result in additional tax assessments or an audit by the Administration des Contributions Directes.
Potential pitfalls of accounting support for businesses in Luxembourg
Despite the stability and transparency of the legislation, entrepreneurs operating in Luxembourg often face a number of practical problems:
- High requirements for accounting accuracy – any inaccuracy in financial data can be regarded as a violation of accounting legislation or an attempt at tax optimization. The submission of inaccurate reporting provides for administrative and criminal liability of the manager.
- Complexity of tax legislation – The Luxembourg taxation system includes several levels of taxes: state, municipal and social. Without professional support, it is difficult to take into account all the nuances, in particular, tax offsets between jurisdictions within the EU.
- Transfer pricing issues – for companies that are part of international groups, the arm’s length principle rules apply, which require careful documentation of intra-group transactions. Failure to comply with these requirements may result in fines or profit adjustments.
- Control over ultimate beneficiaries (RBE) – Luxembourg has actively implemented European transparency standards, so accounting statements must be consistent with the data of the Register of Beneficial Owners (Registre des Bénéficiaires Effectifs). Inconsistencies in data in financial documents and RBE may raise questions from regulatory authorities.
- Language and administrative barrier – official documents, including financial statements, must be drawn up in French, German or English. Incorrect translation or inconsistency of terminology may also be grounds for refusal to accept the reporting or request additional clarifications.
The specialists of our company “Prikhodko and Partners” can provide full consultation or help your company directly with the organization of accounting, preparation and approval of annual financial statements, submission of reports to the Registre de Commerce et des Sociétés (RCS), preservation of the archive of primary documents, tax reporting and its submission to tax authorities (Administration des enregistrement, des domaines et de la TVA (AED); Administration des contributions directes (ACD), as well as audit support. We guarantee compliance with local regulations, optimization of processes and minimization of legal risks for your company.
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