Accounting for a Luxembourg SARL throughout the year

A Luxembourg private limited liability company, or SARL, must keep double-entry accounts and record its transactions without delay. Bookkeeping covers the company’s assets, debts and commitments as well as its bank movements. Preparing annual accounts starts with those records throughout the year.

For an ordinary unregulated SARL reporting under Luxembourg generally accepted accounting principles, known as Lux GAAP, the work connects supporting documents, accounting entries, reconciliations and the year-end close. The method applies to an operating company or an ordinary subsidiary. Regulated entities and companies using another permitted accounting framework require their own assessment.

The accounts follow the company, even when activity is limited

Articles 9 to 11 of the Commercial Code require accounting appropriate to the nature and extent of the business, covering its operations, assets, rights, debts, obligations and commitments. Transactions must be recorded accurately, completely, in date order and without delay.

A small number of payments does not remove those duties. An SARL with little trading activity may still have bank charges, financing, unpaid suppliers or amounts owed to shareholders. Its books need to explain those balances. Low turnover alone does not place an SARL within the simplified bookkeeping exception available to qualifying sole traders.

For a company formed during the year, the starting records include the incorporation deed, subscribed capital, amounts paid or still due, and any initial financing. The SARL formation rules and actual payment records determine that opening position. An existing company starts from reconciled balances carried forward from the preceding year.

The transaction matters more than the payment

Double entry records both sides of an operation. A supplier invoice normally creates an expense or an asset and an amount payable. Its later payment reduces the payable and the bank balance. Recording the payment as a new expense would count the same cost twice.

The invoice still needs to be understood. A purchase may be a current expense, an asset used over several years or an amount paid for another company. A bank transfer from a shareholder may represent share capital, a loan or settlement of a balance. The identity of the payer does not decide the accounting category.

The company boundary matters especially in a group. An invoice addressed to the parent is not automatically the subsidiary’s expense. The arrangement behind a recharge, payment on behalf of another company or intragroup loan should explain which entity bears the amount and why.

Each entry needs its supporting record

Invoices, credit notes, contracts, bank statements and company decisions serve different purposes. An invoice describes a purchase or sale. A bank statement shows the movement of cash. A loan agreement explains principal and interest. A shareholder decision supports a capital movement or distribution. The accounting entry needs the evidence relevant to the transaction.

Article 14 of the Commercial Code requires supporting documents and business correspondence to be kept systematically in date order. A useful document reference makes it possible to move from an entry to its supporting record and from that record back to the ledger, the detailed register of accounts.

An unexplained bank movement should remain visible while its nature is investigated. A temporary suspense account can help organise that work, but it does not establish an expense or justify a tax treatment. Missing documents and unresolved balances should be followed through to an explained entry, rather than carried forward without review.

Balances are reconciled during the year

For a company that regularly invoices customers, pays suppliers or employs staff, monthly reconciliations help identify errors while the supporting information is still available. That is a practical organisation of the work. The statutory requirement remains recording without delay, with a frequency suited to the activity.

The review connects the principal balances to evidence outside the ledger.

A bank reconciliation is only part of this review. A matching bank balance can coexist with an omitted invoice, a payment booked against the wrong supplier or a loan recorded as revenue. The other balances explain what the company owns and owes beyond its cash.

For an employer, payroll records also explain gross remuneration, employer charges and the liabilities settled through net payments and remittances. A company without employees has a different set of records. The review should follow the actual activity rather than assume that every SARL has the same VAT or payroll obligations.

An internal chart must map to the Luxembourg PCN

The Luxembourg standard chart of accounts is the plan comptable normalisé, or PCN. The Commission des normes comptables publishes the PCN 2020 and tables connecting its accounts to the balance sheet and profit and loss account headings.

For companies subject to the PCN obligation, Article 6 of the Regulation of 12 September 2019 permits an internal chart for day-to-day bookkeeping. The correspondence with the PCN must be adequately documented and kept at the company’s registered office. Annual balances under the PCN must still be supplied for the required filing.

A group chart therefore needs more than a once-a-year conversion of account numbers. A single group account may combine items that belong in different local headings. The correspondence should follow the nature of the balances and be updated when new transactions or accounts appear.

Article 10 of the same Regulation also requires the table linking PCN accounts to annual-account headings to be adapted where the standard link does not faithfully represent the transaction. Software can carry the correspondence, but the classification still needs an accounting review. Different group accounting policies may require separate adjustments for the local statutory accounts.

The PCN and standardised filing framework have exceptions. Their application must be checked for the company concerned, particularly where a special regime, authorised derogation or international accounting framework is involved.

Income and expenses belong to their financial year

The payment date does not, by itself, determine the year of the expense or income. Article 51 of the Accounting Act requires amounts relating to the financial year to be taken into account regardless of when they are paid or received.

In a hypothetical example, an SARL pays on 1 October for a service contract running until 30 September of the following year. The service is provided evenly over those 12 months and the company closes on 31 December. Only 3 months of the cost relate to the current year. The other 9 months are a prepayment for the following year. The full cash payment and the current-year expense consequently have different amounts.

The reverse can also occur. A supplier invoice received in January may relate to a service already provided in December. The closing work needs to identify the liability and the expense belonging to the completed year, using the contract and evidence of the service. Waiting for payment would leave the preceding year’s accounts incomplete.

These period-end adjustments explain why a bank feed alone cannot produce reliable annual accounts. The ledger must also reflect transactions and balances that have not yet resulted in cash movements.

The year-end review comes before the accounts

Article 15 of the Commercial Code requires an annual inventory of assets, rights, debts, obligations and commitments. The accounts are brought into agreement with that inventory before being summarised in the annual accounts. This involves all relevant balances, including receivables and borrowings, rather than only physical stock.

The closing review therefore covers unpaid invoices, asset records, financing, tax balances and commitments. Under the ordinary cost-based rules, fixed assets with a limited useful life are depreciated systematically over that life. Any required impairment, provision or other closing adjustment follows the applicable accounting conditions and supporting evidence.

The adjusted trial balance summarises the ledger balances after that work. It supplies the figures for the statutory accounts, but does not replace them. Article 26 of the Accounting Act defines the annual accounts as the balance sheet, profit and loss account and notes, forming a single set of documents. Eligibility for an abridged presentation does not turn the underlying bookkeeping into a cash-only record.

Accounting and tax conclusions stay connected

The accounts provide the starting information for the company’s tax work. The Income Tax Law connects tax values with commercial accounting values while retaining the applicable tax rules. Recording an expense does not, on its own, establish that all conditions for tax deduction are met.

The ledger and supporting documents should allow any differences between the accounting result and taxable income to be explained. Shareholder payments, financing costs, exemptions and other adjustments need their own analysis. The corporate tax guide develops the company’s tax obligations separately from the preparation of its annual accounts.

A filed set of accounts also does not establish that every tax return has been submitted. Accounting, corporate income tax and any applicable VAT obligations follow connected but distinct processes.

eCDF validation, approval and RCS filing are separate steps

For a company within the standardised filing framework, LBR’s eCDF guidance describes preparation and validation of the balance sheet, profit and loss account, PCN balances and mapping table. eCDF is the government’s electronic platform for collecting financial data. The subsequent RCS filing also includes the supporting documents required for the entity.

Successful validation does not establish that each transaction has been correctly understood, nor does it replace shareholder approval. The figures, reporting period and allocation of the result must remain consistent across the closing records, approved accounts and filing package.

The official filing procedure requires SARL approval within 6 months after financial year-end and filing within one month of approval, no later than 7 months after year-end. Earlier approval starts the one-month period earlier. The annual accounts filing analysis explains the documents, publication and consequences of delay in detail.

A parent’s reporting package does not automatically replace the subsidiary’s local obligations. Article 70 of the Accounting Act exempts a subsidiary only under strict conditions. Its parent must be governed by the law of a Member State as defined by Article 24bis of the Accounting Act and guarantee the subsidiary’s commitments, all the subsidiary’s shareholders must agree to the exemption each year, and the subsidiary must be included in the parent’s consolidated accounts, with the required declarations and accounts published. The exemption concerns the content, audit and publication of the annual accounts, not the bookkeeping duties of the Commercial Code. The distinction also matters when choosing between a Luxembourg branch and a subsidiary.

Records are kept and management remains responsible

Article 16 of the Commercial Code requires the covered accounting documents and information to be retained for 10 years from the end of the financial year concerned. Copies are permitted under the statutory conditions, with an exception for the balance sheet and profit and loss account. Scanning documents is therefore not a general permission to discard every original.

The archive needs to preserve readable entries, supporting records and the correspondence between the internal chart and the PCN. When software or the accounting provider changes, exporting only the final accounts loses the detail needed to explain how they were prepared. The opening balances and unresolved items should remain traceable through the handover.

Outsourcing bookkeeping does not transfer the company’s legal management duties. Article 69ter of the Accounting Act places responsibility for compliant preparation and publication on the relevant management bodies acting within their powers. Approval remains a shareholder decision. Any required audit is a separate function.

Conclusion

Reliable SARL accounts connect each transaction to its evidence, the correct entity and the correct financial year. Regular reconciliations and a maintained PCN correspondence make the year-end close an extension of that work. The resulting accounts then support approval, filing, tax analysis and an archive that preserves the explanation behind the figures.