Attitude toward Foreign Direct Investment
Luxembourg offers a public policy framework and political stability which remain highly attractive for foreign investors, particularly for U.S. investors, given the historically-strong bilateral relationship between the two countries. Commensurate with its open-mindedness shaped over decades by its small size and successful integration of immigrants, Luxembourg has maintained a very favorable and welcoming attitude toward FDI. Successive Luxembourg governments have furthered a pro-business attitude and flexibility with respect to business development and innovation - a unique model in Europe. Luxembourg has also increased its support in the form of incentives for new ventures, including capital investment subsidies, financing of equipment, and aid to start-up entities, through the state lending agency, SNCI. As a result, Luxembourg has attracted new investment in medium, light, and high-tech industries, especially in the areas of Health Technologies and Research and Development (R&D), and most recently in Space technology (satellites), and Financial Technology (“FinTech”). Luxembourg remains the most promising location for business investment in Europe, along with Switzerland, with the advantage of being a member of the European Union (EU).
Thanks to the competitiveness of its economy and its central European location, many international firms find it effective to locate European headquarters or holding companies in Luxembourg. The country's openness to foreign cultures, the high quality of life and consumer purchasing power, as well as the highly-qualified workforce, are competitive advantages. Approximately 46 percent of Luxembourg residents and over 60 percent of the workforce are composed of foreigners (non-Luxembourgers), mainly from EU countries (Italy, Portugal), and especially from neighboring countries (160,000 cross-border workers daily from Belgium, France and Germany).
There is no overall economic or industrial strategy that has discriminatory effects on foreign investors. There are no limits on foreign ownership or control (for example, all the banks are wholly-owned subsidiaries of their parent entities). General screening of foreign investment exists in line with that of domestic investment, with routine and non-discriminatory screening mechanisms. There are no major sectors/matters in Luxembourg in which foreign investors are denied national treatment (equivalent to domestic firms). While Luxembourg has sought to simplify administrative procedures, it still takes an average of six months for a company to register, even with the support of the Luxembourg Chamber of Commerce, which requires all commercial enterprises to become members by registering.
Other Investment Policy Reviews
The World Bank's Doing Business 2015 Economic Profile provides additional detail on Luxembourg's investment climate.
Laws/Regulations on Foreign Direct Investment
Luxembourg has assimilated the laws of neighboring countries according to the nature of the laws: German tax law, French civil law, and Belgian commercial law (written and consistently applied). Judgments of foreign courts are accepted and enforced by the local courts, and Luxembourg does have a written and consistently applied bankruptcy law, which is based, like in other European countries, on EU-wide legislation. Monetary judgments are usually made in local currency (euro).
There is no government or authority interference in the court system that could affect foreign investors. Website: www.guichet.lu
The registration process for a new business in Luxembourg is now clearly summarized on the following webpage: http://www.investinluxembourg.lu/en/invest/doing-business-luxembourg
A new business must be registered with the Registry of Commerce (Registre du Commerce) Website: https://www.rcsl.lu/. Foreign companies can use the site (after translating from the original French language via Google Translate), but it is best to consult with a local lawyer or fiduciary to complete the overall process. It is necessary to engage a notary to submit the company’s by-laws for registration. The required minimum capitalization of a new company is 12,500 euro, which must be deposited in a bank account in the company’s name. After receiving a certificate from the Registry of Commerce, companies must register with and pay annual dues to the Luxembourg Chamber of Commerce (legally-mandated), as well as the Social Security Administration, the Tax Administration (Administration des Contributions Directes) and the Value-Added-Tax Authority (TVA = taxe à la valeur ajoutée). The company will receive an official registration number reflecting the date of inception of the entity, and this number will be used in all business transactions and correspondence with administrative authorities.
There are many “micro” companies of fewer than ten employees (often with just one principal), and small- and medium-sized (SMEs) enterprises are generally understood as having fewer than 50 (small) and 100 (medium) employees. All companies, including foreign-owned ones, receive the same level of service.
For the past few years, Luxembourg for Business, an agency created specifically to promote Luxembourg as an attractive location for economic activity, has acted as the investment promotion agency to facilitate foreign investment. The services are available to all investors, regardless of the amount of investment or number of employees. This agency works in close tandem with the Ministry of Economy and Foreign Trade and helps support trade missions abroad to recruit foreign investors. Programs are on the site: www.luxembourgforbusiness.lu
For over a decade, Luxembourg has followed a diversification strategy to reduce its economic dependence on the historically-dominant financial sector. This diversification, focused on “new” and innovative sectors of activity, has yielded strong economic growth from the logistics, information and communications technology (ICT), health technologies, “green” energy, and now space technology and satellites. The GoL also strongly supports manufacturing to increase job growth via incentives for plant openings and hiring.
Limits on Foreign Control and Right to Private Ownership and Establishment
There is no overall economic or industrial strategy that has discriminatory effects on foreign investors. There are no limits on foreign ownership or control (for example, all the banks are wholly-owned subsidiaries of their parent entities). General screening of foreign investment exists in line with that of domestic investment, with routine and non-discriminatory screening mechanisms. There are no major sectors/matters in Luxembourg in which foreign investors are denied national treatment (equivalent to domestic firms). Bureaucratic procedures, including those for licenses and permits, are sufficiently streamlined and transparent.
There is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity.
Foreign investors are allowed to participate equally in ongoing privatization programs, and the bidding process is transparent with no barriers erected against foreign investors at the time of the initial investment or after the investment is made. Moreover, there are no laws or regulations specifically authorizing private firms to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control, and there are no other practices by private firms to force local ownership or restrict foreign investment, participation in, or control of domestic enterprises. Potential conflicts of interest (GoL officials sitting on boards of directors, for example) do not impact freedom of investment in the private sector.
Screening of FDI
The Luxembourg government actively seeks foreign investment, and there are no special procedures for the approval of foreign direct investment. The government particularly encourages environmentally-friendly light industries, such as communications, finance, and information technology, as a way to diversify the economy and provide new employment in industries with high value-added, in which high wage costs will not put Luxembourg at a disadvantage. Responsibility for attracting foreign investment lies with the Board of Economic Development. According to the board, Luxembourg offers a full range of tailored investment incentives for new ventures. The government may grant support for funding specific projects for small and medium-sized companies; located in development areas; research, development, and innovative investment focusing on new products, services or processes; and environmental protection or the efficient use of energy. Financial support may take the form of capital grants and medium and long-term loans by the National Credit and Investment Corporation (SNCI).
The Competition Inspectorate, a department within the Ministry of the Economy, is in charge of investigating competition cases.