Who is this for?
I am not sure how many people will find this article useful, given that you have to come from outside of the EU, find yourself in the small country of Luxembourg, and also decide to freelance. But hey here I am!
Also if you want to set up a shop in Luxembourg where you have customers walking in this article is not for you.
Ideally, this best suits a digital business owner who is considered a "third-country national" and thus anyone who is not a citizen of any EU country.
The well-known path can be unfriendly
The process itself is well documented and not hard to follow through. The problem is that the requirements and vetting process is soo old, you hardly find anything suitable for someone working in the digital space.
For example, while I was going through the process, I was asked to provide a master's degree in an engineering field to work as a freelance software engineer, now that's messed up.
The House of Entrepreneurs is supposed to be an agency that helps you go through the process of setting up as a business owner, but unfortunately, all I kept getting were brochures and long-ass write-ups of things I could easily find on the official government website.
So yeah it takes a bit of work to set up shop in Luxembourg. Once you are done though you are good except for those pricey accounting fees.
And ooh, since your residence permit is tied to how well your business fairs, you better make sure you make a good enough profit.
The lesser-known Path
There is a lesser-known approach to setting up in Luxembourg which is getting a private residence permit. So since I do not have a master's degree laying around I had to find an alternative, that is when I discovered the private residence permit, essentially all you need to get one is to prove you already have **enough resources to live on or coming in. There are other requirements like health insurance and having a home address, but the main one is having enough funds.
How much funds is enough?
Well, you need to ensure each month you have an income comparable to the monthly social minimum wage for unskilled workers in Luxembourg which is about 2,256.95 Euros as of the time of writing. To prove you have funds using your bank account balance you will have to multiply the monthly requirement by 12 thus 2,256.95 X 12 = 27,083.4 EUROS. By 12 because the permit is first issued for a year so proving you have a year's worth of funds is good enough.
Why I went with a private permit
With the self-employed permit, you still have to prove you are meeting the wage requirements anyways and it's a bit higher for say a freelance software engineer because it's considered skilled work.
But then the source of funds you use to prove you are doing well must come from the business whereas with the private permit it could be from anywhere as long as you can prove the source of it.
So for example in my case, I earn dividend income outside of freelancing and all of that counts towards meeting the income requirement I got my permit using just the dividend earnings even before I started earning from freelancing.
Also because I am not required to set up a business in Luxembourg, I ended up setting one up in a country with a much simpler setup process, and lower cooperate taxes. Also with good accounting, I get to keep a large chunk of my earnings.
A few things to note!
If you do not already live in Luxembourg and think the private permit sounds right for you, I will say consider starting and running your business outside of Luxembourg for a bit before coming, this way you have enough capital and a tax return that will come in handy.
For example, most landlords are just like the slow-to-evolve business permit process and will always ask you for 3 months' payslips, preferring to rent out to individuals with a permanent job contract. So if you do find a reasonable landlord it helps your case to have a healthy rental guarantee and a tax return to prove you are good for it.
The tax return is also a good document to prove you have enough funds when requesting the permit. It's easier compared to proving using money in the bank since the bank needs to be in Luxembourg, but then you need to already be a resident to open up a bank account (more or less).
The most important thing to note however is that under the private residence permit you cannot take up employment in Luxembourg unless you change your residence permit to one for salaried workers. However, there is the Axillary permit which you can ask for under the private permit. This way you can work as an employee in Luxembourg whiles retaining your private life status.
To be honest with you though, a potential employer in Luxembourg is likely going to want you to go in for the salaried worker permit.
If you already find yourself in Luxembourg or looking to gain access to the EU market as a freelancer I think the private residence permit Luxembourg offers to non-EU citizens is a good one. In my opinion, it beats the Portuguese freelancer residence permit and Luxembourgs own investor residence permit .
As far as what Luxembourg has to offer goes, a simple google search can help with that.