A director does not have to be paid. If he is, board fees carry a 20% Luxembourg withholding that is final for most non-residents, while a salary is taxed on the days worked in Luxembourg. Social security turns on shareholding above 25%, the business permit and EU rules. A non-EU director needs no permit to attend board meetings, but does to move here. The biggest risk is not the director's tax: it is a company managed from abroad.
A Luxembourg company, a foreign owner, a foreign director
It is the most common set-up we see: a Luxembourg S.à r.l. or S.A. owned by a foreign shareholder, with the owner or a trusted person abroad appointed as manager. Luxembourg law allows it without hesitation: there is no nationality or residence requirement for shareholders or directors.
The questions start afterwards. Does the director have to be paid? Is the pay taxed in Luxembourg or at home? Does social security apply? Does a non-EU director need a permit? And what does a director abroad mean for the company itself? The answers depend on five facts: what the company does, where the director lives, how he is paid, how many shares he holds, and where decisions are really taken.
Foreign owners and directors
No nationality or residence rules for shareholders or managers.
A national number
Every director registered at the RCS needs a Luxembourg identification number, created from a passport for non-residents.
Where decisions happen
A company managed from abroad can lose its Luxembourg tax residence.
Does the director have to be paid?
- No legal obligation. A director's mandate can be unpaid. The general meeting decides on pay unless the articles leave it to the board.
- But unpaid looks odd. A director with real responsibilities and no pay, or paid through another group company, weakens the substance case and invites transfer-pricing questions.
- Two kinds of pay. Board fees (tantièmes, attendance fees) reward supervision and are not deductible for corporate tax. A salary for day-to-day management is employment income and is deductible.
| Board fees | Salary for daily management | |
|---|---|---|
| Luxembourg tax | 20% withholding (25% if the company bears it) | Wage tax through payroll at progressive rates |
| Final for non-residents? | Yes, up to EUR 100,000 a year and no other Luxembourg income | No: a tax card, and a return in many cases |
| Deductible for the company? | No | Yes |
| Treaty article | Article 16: taxed where the company is resident | Article 15: taxed where the work is physically done |
| Work days abroad | Not relevant | Taxable abroad; 34-day tolerance with France, Belgium and Germany |
| VAT | Independent directors may owe 17% VAT on fees | No VAT |
Social security: who is affiliated, and where
- Unpaid mandate. No affiliation in Luxembourg for the mandate itself.
- Paid mandate exercised in Luxembourg. Affiliation as a corporate officer, with contributions on at least the social minimum wage. Practice on purely non-executive fees varies; check case by case.
- More than 25% of the shares, or manager on the business permit. Affiliated as self-employed, with contributions between the minimum wage and five times it.
- Employment contract. Ordinary employee affiliation and payroll.
- Director living elsewhere in the EU. EU rules decide one country: if the director works 25% or more in his home country, that country's system usually applies to everything, shown by an A1 certificate.
- Director outside the EU. Depends on bilateral agreements and on whether the mandate is paid in Luxembourg.
Luxembourg is relaxed about who sits on the board. It is precise about what that person is paid, where he works and who insures him.
Does a non-EU director need a permit?
| Situation | Permit |
|---|---|
| Lives abroad, comes for board meetings | No work permit for business visits under 3 months a year; Schengen visa rules apply |
| Moves to Luxembourg as an employee | Work and residence permit, or an EU Blue Card from EUR 65,652 a year (2026) |
| Moves to Luxembourg to run his own company | Residence permit for self-employed workers: viable business plan, resources, and the Ministry's opinion on the business permit |
| EU, EEA or Swiss director | No permit; registration if staying more than 3 months |
What a director abroad means for the company
- Tax residence. A company is resident in Luxembourg through its registered office or central administration. If directors decide from their home country, that country may claim the company as resident there.
- Business permit. A trading company's permit needs a registered manager who runs the business and is regularly present. A director who rarely visits is a weak choice, and becomes self-employed for social security if named on the permit.
- Liability. Directors are liable to the company for management faults and jointly to third parties for breaches of the law or the articles. Tax law makes them personally liable for unpaid taxes, including wage tax and director-fee withholding.
- Banks and KYC. Foreign shareholders above 25% are registered as beneficial owners; banks will ask for both the owner's and the director's documents.
- Dividends to the foreign shareholder. 15% withholding, 0% for qualifying EU, EEA, Swiss and treaty companies, treaty rates for individuals.
What applies to your director?
Six questions; the summary lists what applies, by area.
What applies to your director?
Six questions. You get the tax, social security, immigration and company-law points for your set-up.
But board fees and salaries are taxed very differently.
Final for non-residents up to EUR 100,000.
Shares over 25%, the business permit and EU rules decide.
Or the company may become resident where the director lives.