After freelancing in the UK for several years, I recently emigrated to Luxembourg. Since then, I’ve been forced to learn far more about tax, health insurance, and the crushing weight of bureaucracy than I ever wanted to.
Setting up: 6 months, over €200 in admin fees
I actually wish this guide existed before I started the process. All the information on what you need to do is in so many different places I could add a whole other step just for research.
1. Get a business permit
You will need:
Criminal records from Luxembourg and your previous country of residence (in fairness, getting the Luxembourg police check was far easier than getting the UK one).
A sworn statement (signed in front of a notary at a cost of €150) that you have never been bankrupt. I went through four notaries to find one that was available. I signed a French document. I don’t speak French.
Your Luxembourg residence certificate, collected in person from the town hall in the week you arrive.
The completed application form.
€24 for the fee.
A combined 6 months of time to gather all the relevant documents and then wait for approval.
2. Register for Social Security
You collect the business from the social security centre and register at the same time. They need to know your estimated yearly income, but for some reason you can’t tell them at the time. Instead, you have to request a form online to be sent to you via post to then be returned via post.
3. Get your Residence Permit
Now you need to go (again, in person) to the town hall, present your business permit (which by the way is paper… better not lose it), and be granted your Carte de Séjour.
4. Register with the Luxembourg Business Register
This one’s online, ah, but to access the site you’ll need a LuxTrust token. That’ll set you back €35, and cost at least another month of your time.
Once you do get into it, the website is so badly designed, badly worded, and generally nonsensical that you’ll probably have to call their helpline to walk you through it.
It asks you to enter the name of a document it already knows the name of. It then gives you an error saying you spelt it incorrectly. Except, of course, it doesn’t actually say you spelt it incorrectly; the error message reads: ‘Please indicate the name of the document’. 😐
Judging by the detailed instructions provided to me after calling the helpline — down to exactly which buttons to push — I get the feeling they are pretty used to everyone being unable to use their website. They built an expensive, self-service website just to hire a team of even more expensive human beings to walk people through how to use it… Hey wait, there’s a book about this!
5. Register for VAT
If you expect to earn more than €30,000 you must also register online for VAT.
6. Profit (finally)
The worst part about this process is that, until it’s over, you’re legally not allowed to work in Luxembourg.
You have to wait 6 months for an extravagant number of different government bodies to process the mountain of documents — which for some reason cannot be done simultaneously — all while paying enormous fees for registration, application, notarisation… And you’re expected not to earn a penny in this time.
An Extra 12% Tax Just for Freelancers
In Luxembourg, employees pay around 12% of their income for social security. This is then matched by their employer.
Unfortunately for the self-employed, this means paying both the employee’s contributions and the employer’s.
That’s right. You end up paying** double** the social security contributions of a traditional worker: one quarter of everything you earn. Luxembourg’s low income tax doesn’t even come close to making up for this.
You also have to pay in advance, every two months, based on your estimated yearly income. This makes it particularly hellish with the unpredictable work schedule of a Freelancer.
What is worse, a Luxembourger who finds themselves unemployed would actually make more money staying on benefits than becoming an entrepreneur. In the words of RTL, Luxembourg social security payments are:
“… a serious financial disincentive for individuals engaging in self-employed activities as a way out of unemployment.”
A Better Way
In a world full of Brexit doom and gloom, it’s nice to be able to say something good about the UK:
Freelancing in the UK is about as easy as it gets.
Becoming a ‘Sole Trader’ is automatic: just start working, register online, and submit a tax return at the end of the year.
You owe the same as anyone else and it is (relatively) simple:
Social Security: 9% of your income between £8k and £50k, 2% beyond.
Tax: 20% of your income over £12.5k, 40% over £50k, and 45% over £150k.
Both of these are paid at the same time, at the end of the year, on a well-designed website. It’s quick, you only ever pay what you owe, and because it’s online, if your English is as bad as my French, you can use Google Translate.
That’s the entire bureaucratic burden of freelancing in Britain, and it weighs in at about 100 words… Need I say more?
For all these criticisms, there is no way I could have navigated the quagmire of red tape without Luxembourg’s enormously helpful public sector workers. Throughout this entire process, everyone I’ve spoken to has:
spoken English (and usually several other languages)
been tremendously quick and efficient
gone out of their way to help
These wonderful people really are the only thing holding an otherwise completely broken system together.
For anyone else going through the painful bureaucracy of freelancing in Luxembourg, my number one tip is to sort out as much as possible in person.
Wish me luck with my Luxembourg tax return next year, I get the feeling it’s going to be a bumpy ride…