Luxembourg law change: Reform of the right of establishment

On July 20, 2023, the Luxembourg Parliament passed a law called the Reform, which modifies the right of establishment in Luxembourg. The Reform aims to update the Business License Law from September 2, 2011, which governs access to various professions, to align with changes in regulations, economics, technology, and entrepreneurship.

Key Changes and Points:

1.     Purpose of the Reform: The Reform seeks to adapt the Business License Law to changing environments and encourage entrepreneurship.

2.     Effective Date: The Reform becomes effective on the fourth day after its publication in the official gazette. A two-year transitional period starting from September 1, 2023, is granted for businesses to comply with new provisions.

3.     New Cumulative Conditions for Business License Holders: Business license holders must meet new cumulative conditions, including professional qualification, good repute, effective and permanent management (with physical presence), and no history of evading social security and tax obligations.

4.     Real Link with Company: Business license holders no longer need to be a partner, shareholder, or employee of the company. Instead, they must have a real and effective link with the company, demonstrated by ownership or registration as the company's representative.

5.     Disqualifying Criteria for Professional Integrity: The Reform adds new criteria for assessing professional integrity, including compliance with filing obligations, registration requirements, and tax returns.

6.     Conditions for Changing Business License Holder: Certain conditions must be met for a new business license to be issued when changing the business license holder, including no excessive social security and tax debts, up-to-date tax declarations, and compliance with filing obligations.

7.     Notification of Events: Certain events, like changes in the business license holder's residence or the creation of a branch, must be notified to the minister responsible for business licenses.

8.     Facilitating Business Transfers: The Reform introduces provisions for the provisional transfer of a business license to an employee in case of death, disability, or retirement of the company's manager in certain craft activities.

9.     New Chance for Entrepreneurs: Entrepreneurs who faced bankruptcy may have a chance to obtain a new business license under certain conditions, including proof of bankruptcy reasons and payment agreements with public creditors.

10. Supervision of Activities: Specific licenses will be required for renting shared offices/workspaces and certain short-term rental activities. Real estate business providers will need training. Consumer protection is enhanced through digitalization and display of business license information.

11. Issuance of Business License: Business licenses will be issued based on requests and administrative instructions demonstrating compliance with the Business License Law. A two-dimensional barcode will provide access to license information.

In summary, the Reform introduces changes to the Business License Law in Luxembourg to adapt to evolving business environments, enhance professional integrity, and encourage entrepreneurship while ensuring consumer protection.

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