Policies Towards Foreign Direct Investment

Belgium has traditionally maintained an open economy that is highly dependent on international trade.  Since WWII, foreign investment has played a vital role in the Belgian economy, providing technology and employment.  It is a key economic policy of the government to make Belgium a more attractive destination to foreign investment. Though the federal government regulates important elements of foreign direct investment such as salaries and labor conditions, it is primarily the responsibility of the regions to attract FDI.  Flanders Investment and Trade (FIT), Wallonia Foreign Trade and Investment Agency (AWEX), and Brussels Invest and Export are the three investment promotion agencies who seek to attract FDI to Flanders, Wallonia and the Brussels Capital Region, respectively.

The regional investment promotion agencies have focused their industrial strategy on key sectors including aerospace and defense; agribusiness, automotive and ground transportation; architecture and engineering; chemicals, petrochemicals, plastics and composites; environmental technologies; food processing and packaging; health technologies; information and communication; and services.

Foreign corporations account for about one-third of the top 3,000 corporations in Belgium.  According to Graydon, a Belgian company specializing in commercial and marketing information, there are currently more than one million companies registered in Belgium. The federal government and the regions do not have specific policies that prioritize investment retention or maintain an ongoing dialogue with investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign ownership or control in Belgium.  There are no distinctions between Belgian and foreign companies when establishing or owning a business or setting up a remunerative activity.

Other Investment Policy Reviews

Over the past 3 years, the country has not been the subject of third-party investment policy reviews (IPRs) through a multilateral organization such as the OECD, WTO, or UNCTAD.

Business Facilitation

In order to set up a business in Belgium, one must:

1. Deposit at least 20 percent of the initial capital with a Belgian credit institution and obtain a standard certification confirming that the amount is held in a blocked capital account;
2. Deposit a financial plan with a notary, sign the deed of incorporation and the by-laws in the presence of a notary, who authenticates the documents and registers the deed of incorporation.  The authentication act must be drawn up in either French, Dutch or German (Belgium’s three official languages);
3. Register with one of the Registers of legal entities, VAT and social security at a centralized company docket and obtain a company number.

In most cases, the business registration process can be completed within one week.

https://www.business.belgium.be/en/managing_your_business/setting_up_your_business  

http://procedures.business.belgium.be/en/procedures-iframe/?_ga=2.174982369.210217559.1555582522-1537979373.1536327711  

Based on the number of employees, the projected annual turnover and the shareholder class, a company will qualify as a small or medium-sized enterprise (SME) according to the meaning of the Promotion of Independent Enterprise Act of February 10, 1998.  For a small or medium-sized enterprise, registration will only be possible once a certificate of competence has been obtained. The person in charge of the daily management of the company must prove his or her knowledge of business management, with diplomas and/or practical experience. In the Global Enterprise Register, Belgium currently scores 7 out of 10 for ease of setting up a limited liability company.

Business facilitation agencies provide for equitable treatment of women and underrepresented minorities in the economy.

The three Belgian regions each have their own investment promotion agency, whose services are available to all foreign investors.

Outward Investment

The Belgian governments do not promote outward investment as such.  There are also no restrictions to certain countries or sectors, other than those where Belgium applies UN resolutions.

Belgium has no specific investment agreement with the United States; investment-related issues are covered in the 1951 Treaty of Friendship, Enterprise and Navigation.  Belgium has bilateral investment treaties in force with Albania, Algeria, Argentina, Armenia, Bangladesh, Bolivia, Burkina Faso, Burundi, Chile, China, Democratic Republic of the Congo, Egypt, El Salvador, Philippines, Gabon, Georgia, Hong Kong, India, Indonesia, Yemen, Cameroon, Kazakhstan, Kuwait, Korea, Lebanon, Lithuania, Macedonia, Morocco, Mexico, Moldavia, Mongolia, Ukraine, Uzbekistan, Paraguay, Rwanda, Saudi Arabia, Singapore, South Africa, Sri-Lanka, Thailand, Tunisia, Uruguay, Russia, Venezuela, and Vietnam.

Additionally, Belgium and Luxembourg have jointly signed (as The Belgium Luxembourg Economic Union – BLEU) but not yet unimplemented agreements with Liberia, Mauritania, and Thailand.  Belgium and Luxembourg also have joint investment treaties with Poland and Russia, but these are not BLEU agreements. All these agreements provide for mutual protection of investments.

Belgium does have a bilateral taxation treaty with the United States, the last version of which dates from 2006 but which has been augmented with various MOUs since then.  In January 2016, the European Commission ruled that Belgium had to reclaim more than USD 900 million from companies that had benefitted from “excess profit” rulings. The scheme had reduced the corporate tax base of the companies by between 50% and 90% to discount for excess profits that allegedly resulted from being part of a multinational group. However, in a February 14, 2019 ruling, the EU General Court decided that the excess profit ruling was not a State-aid scheme. Observers note that the ruling is based on a procedural defect from the European Commission, and highlight that the General Court did not per se validate the excess profit ruling. The European Commission has two months and ten days to appeal the ruling.

Transparency of the Regulatory System

The Belgian government has adopted a generally transparent competition policy.  The government has implemented tax, labor, health, safety, and other laws and policies to avoid distortions or impediments to the efficient mobilization and allocation of investment, comparable to those in other EU member states.  Draft bills are never made available for public comment, but have to go through an independent court for vetting and consistency. Nevertheless, foreign and domestic investors in some sectors face stringent regulations designed to protect small- and medium-sized enterprises.  Many companies in Belgium also try to limit their number of employees to 49, the threshold above which certain employee committees must be set up, such as for safety and trade union interests.

Recognizing the need to streamline administrative procedures in many areas, in 2015 the federal government set up a special task force to simplify official procedures.  It also agreed to streamline laws regarding the telecommunications sector into one comprehensive volume after new entrants in this sector had complained about a lack of transparency.  Additionally the government beefed up its Competition Policy Authority with a number of academic experts and additional resources. Traditionally, scientific studies or quantitative analysis conducted on the impact of regulations are made publicly available for comment. However, not all public comments received by regulators are made public.

Accounting standards are regulated by the Belgian law of January 30, 2001, and balance sheet and profit and loss statements are identical with international accounting norms. Cash flow positions and reporting changes in non-borrowed capital formation are not required.  However, contrary to IAS/IFRS standards, Belgian accounting rules do require an extensive annual policy report.

Belgium publishes all its relevant legislation and administrative guidelines in an official Gazette, called Le Moniteur Belge (www.moniteur.be  ). The American Chamber of Commerce has called attention to the adverse impact of cumbersome procedures and unnecessary red tape on foreign investors, although foreign companies do not appear to be impacted more than Belgian firms.

International Regulatory Considerations

Belgium is a founding member of the EU, whose directives are enforced.  On May 25, 2018 Belgium implemented the General Data Protection Regulation (GDPR) (EU) 2016/679, an EU regulation on data protection and privacy for all individuals within the European Union.

Through the European Union, Belgium is a member of the WTO, and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Belgium’s (civil) legal system is independent of the government and is a means for resolving commercial disputes or protecting property rights.  Belgium has a wide-ranging codified law system since 1830. There are specialized commercial courts which apply the existing commercial and contractual laws. As in many countries, the Belgian courts labor under a growing caseload, and backlogs cause delays. There are several levels of appeal.

Laws and Regulations on Foreign Direct Investment

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Belgium has no debt-to-equity requirements.  Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital.  No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Since there are three different regional Investment Authorities, the links to their respective websites are given below.

• Flanders: www.flandersinvestmentandtrade.com
• Wallonia; www.awex.be
• Brussels: www.investinbrussels.com  

Competition and Anti-Trust Laws

The contact address for competition-related concerns:

Federal Competition Authority
City Atrium, 6th floor
Vooruitgangsstraat 50
1210 Brussels
tel: +32 2 277 5272
fax: +32 2 277 5323
email: info@bma-abc.be
Website: www.bma-abc.be

Expropriation and Compensation

There are no outstanding expropriation or nationalization cases in Belgium with U.S. investors. There is no pattern of discrimination against foreign investment in Belgium.

When the Belgian government uses its eminent domain powers to acquire property compulsorily for a public purpose, adequate compensation is paid to the property owners. Recourse to the courts is available if necessary.  The only expropriations that occurred during the last decade were related to infrastructure projects such as port expansion, roads, and railroads.

Dispute Settlement

ICSID Convention and New York Convention

Belgium is a member of the International Center for the Settlement of Investment Disputes (ICSID) and regularly includes provision for ICSID arbitration in investment agreements.

Investor-State Dispute Settlement

The government accepts binding international arbitration of disputes between foreign investors and the state. There have been no investment disputes involving a U.S. person within the past 10 years.  Local courts are expected to enforce foreign arbitral awards issued against the government. To date, there has been no evidence of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

1. Alternative Dispute Resolution is not mandatory by law and is therefore not commonly used in disputes, except for matters where the determination by an expert is sought, whether appointed by the parties in agreement or in accordance with a contractual clause or appointed by the court in the context of dispute resolution.
2. Belgium has no domestic arbitration bodies.
3. Local courts recognize and enforce foreign arbitral awards. Judgments of foreign courts are recognized and enforceable under the local courts.
4. There are no reports or complaints targeting Court proceedings involving SOEs or alleged favoritism for them.

Bankruptcy Regulations

Belgian bankruptcy law is governed by the Bankruptcy Act of 1997 and is under the jurisdiction of the commercial courts.  The commercial court appoints a judge-auditor to preside over the bankruptcy proceeding and whose primary task is to supervise the management and liquidation of the bankrupt estate, in particular with respect to the claims of the employees.  Belgian bankruptcy law recognizes several classes of preferred or secured creditors. A person who has been declared bankrupt may subsequently start a new business unless the person is found guilty of certain criminal offences that are directly related to the bankruptcy.  The Business Continuity Act of 2009 provides the possibility for companies in financial difficulty to enter into a judicial reorganization. These proceedings are to some extent similar to Chapter 11 as the aim is to facilitate business recovery. In the World Bank’s Doing Business Report, Belgium ranks number 8 (out of 198) for the ease of resolving insolvency.

Investment Incentives

Since the law of August 1980 on regional devolution in Belgium, investment incentives and subsidies have been the responsibility of Belgian’s three regions: Brussels, Flanders, and Wallonia.  Nonetheless, most tax measures remain under the control of the federal government as do the parameters (social security, wage agreements) that govern general salary and benefit levels. In general, all regional and national incentives are available to foreign and domestic investors alike.

Belgian investment incentive programs at all levels of government are limited by EU regulations and are normally kept in line with those of the other EU member states.  The European Commission has tended to discourage certain investment incentives in the belief that they distort the single market, impair structural change, and threaten EU convergence, as well as social and economic cohesion.   In January 2016, the European Commission ordered Belgium to reclaim up to USD 900 million in tax breaks from 36 companies (12 of whom are U.S. companies) going as far back as 2004. The Belgian Government had given these breaks to companies through a series of one-off fiscal rulings. Belgium legally challenged the EC decision and won, but the EC can still appeal the ruling (see above).

In their investment policies, the regions emphasize innovation promotion, research and development, energy savings, environmental cleanliness, exports, and most of all, employment.  The three regional agencies have staff specializing on specific regions of the world, including the United States, and have representation offices in different countries. In addition, the Finance Ministry established a foreign investment tax unit in 2000 to provide assistance and to make the tax administration more “user friendly” to foreign investors.

In 2005, the Belgian Federal Finance Ministry proposed a new investment incentive program in the form of a notional interest rate deduction.  This was adopted by Parliament, and since January 1, 2006, the new tax law permits a corporation established in Belgium, foreign or domestic, to deduct from its taxable profits a percentage of its adjusted net assets linked to the rate of the Belgian long-term state bond.  The law permits all companies operating in Belgium to deduct the “notional” interest rate that would have been paid on their locally invested capital had it been borrowed at a rate of interest equal to the current rate the Belgian government pays on its 10-year bonds. This amount is deducted from profits, thus lowering nominal Belgian corporate taxes.  The applicable interest rate is adjusted annually, but will never be allowed to vary more than one percent (100 basis points) in one year nor exceed 6.5 percent.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones or free ports as such in Belgium.  However, the country utilizes the concept of customs warehouses. A customs warehouse is a warehouse approved by the customs authorities where imported goods may be stored without payment of customs duties and VAT.  Only non-EU goods can be placed under a customs warehouse regime. In principle, non-EU goods of any kind may be admitted, regardless of their nature, quantity, and country of origin or destination. Individuals and companies wishing to operate a customs warehouse must be established in the EU and obtain authorization from the customs authorities.  Authorization may be obtained by filing a written request and by demonstrating an economic need for the warehouse.

Performance and Data Localization Requirements

Performance requirements in Belgium usually relate to the number of jobs created. There are no national requirement rules for senior management or board of directors. There are no known cases where export targets or local purchase requirements were imposed, with the exception of military offset programs, which were reintroduced under Prime Minister Verhofstadt in 2006.  While the government reserves the right to reclaim incentives if the investor fails to meet his employment commitments, enforcement is rare. However, in 2012, with the announced closure of an automotive plant in Flanders, the Flanders regional government successfully reclaimed training subsidies that had been provided to the company.

There is currently no requirement for foreign IT providers to share source code and/or provide access to surveillance agencies.  There is for the moment no forced localization, but the European Parliament is currently considering legislative steps in that direction.

Real Property

Property rights in Belgium are well protected by law, and the courts are independent and considered effective in enforcing property rights.  Mortgages and liens exist through a reliable recording system operated by the Belgian notaries.

However, on the World Bank’s latest ranking on the ease for registering property, Belgium ranks only 143rd on a total of 190 countries.

Intellectual Property Rights

While Belgium generally meets very high standards in the protection of intellectual property rights (IPR), rights granted under specific American patent, trademark, or copyright law can only be enforced in the United States, its territories, and possessions.  The European Union has taken a number of initiatives to promote intellectual property protection, but in cases of non-implementation, national laws continue to apply. Despite legal protection of intellectual property, Belgium experiences a rate of commercial and private infringement – particularly internet music piracy and illegal copying of software – similar to most EU states.

All intellectual property rights are administered and enforced by the Belgian Office of Intellectual Property in the Ministry for Economic Affairs: https://economie.fgov.be/en/themes/intellectual-property/institutions-and-actors/belgian-office-intellectual   The Office of Intellectual Property, Directorate General Regulation and Market Organization (ORPI) administers intellectual property in Belgium.  The Director General is Ms. Severine Waterbley. This office manages and provides Belgian intellectual property titles, informs the public about IPR, drafts legislation and advises Belgian authorities with regard to national and international issues. Belgium is currently not listed on USTR’s Special 301 Report.

Enforcement of IPR is in the hands of the Belgian Ministry of Justice.  For additional information about treaty obligations and points of contact at local IP offices, please see the World Intellectual Property Organization’s country profiles at http://www.wipo.int/directory/en/ .

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ 

Capital Markets and Portfolio Investment

Belgium has policies in place to facilitate the free flow of financial resources. Credit is allocated at market rates and is available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives.  At the same time, Belgium currently ranks 60th out of 190 for “getting credit” on the World Bank’s “Doing Business” rankings, and in the bottom quintile among OECD high income countries.

Bruges established the world’s first stock market almost 600 years ago, and the Belgian bourse is well-established today.  On Euronext, a company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure, and new shares may be offered either to the public or to existing shareholders.  A public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as a public issue of shares: the company’s capital must be entirely paid up, and existing shareholders must be given preferential subscription rights.

In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Money and Banking System

Because the Belgian economy is directed toward international trade, more than half of its banking activities involve foreign countries.  Belgium’s major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices.  The country does have a central bank, the National Bank of Belgium (NBB), whose governor is also a board member of the European Central Bank (ECB).

Belgium is one of the countries with the highest number of banks per capita in the world. The banking system is considered sound but was hard hit by the financial crisis that began in the fall of 2008, when federal and regional governments had to step in with lending and guarantees for the three largest banks. Following a review of the 2008 financial crisis, the Belgian government decided in 2012 to shift the authority of bank supervision from the Financial Market Supervision Authority (FMSA) to the NBB. In 2017, supervision of systemically important Belgian banks shifted to the ECB.  The country has not lost any correspondent banking relationships in the past 3 years, nor are there any correspondent banking relationships currently in jeopardy.

The developments since September 2008 have also resulted in a major de-risking of the Belgian banks’ balance sheets, on the back of a rising share of exposure to the public sector – albeit more concentrated on Belgium – and a gradual further expansion of the domestic mortgage loan portfolio. Since the introduction of the Single Supervisory Mechanism (SSM), the vast majority of the Belgian banking sector’s assets are held by banks that come under SSM supervision, including the “significant institutions” KBC Bank, Belfius Bank, Argenta, AXA Bank Europe, Bank of New-York Mellon and Bank Degroof/Petercam. Other banks governed by Belgian law – such as BNP Paribas Fortis and ING Belgium – are also subject to SSM supervision as they are subsidiaries of non-Belgian “significant institutions.”

In 2018, the banking sector conducted its business in a context of gradual economic recovery and persistently low interest rates. That situation had two effects: it put pressure on the sector’s profitability and caused a credit default problem in some European banks. The National Bank of Belgium designated eight Belgian banks as domestic systemically important institutions, and divided them into two groups according to their level of importance. A 1.5 % capital surcharge was imposed on the first group (BNP Paribas Fortis, KBC Group and Belfius Bank).  The second group (AXA Bank Europe, Argenta, Euroclear and The Bank of New York Mellon) is required to hold a supplementary capital buffer of 0.75 %. These surcharges will be phased in over a three-year period.

Under pressure from the European Union, bank debt has decreased in volume overall, from close to 1.6 trillion euros in 2007 to just over 1 trillion euros in 2018, according to the National Bank of Belgium, particularly in the risky derivative markets.

Belgian banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) has its headquarters in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.

Opening a bank account in the country is linked to residency status.  FATCA (Foreign Account Tax Compliance Act) requires Belgian banks to report information on U.S. account holders directly to the Belgian tax authorities, who then release the information to the IRS.

Some Belgian banks have already made great progress with blockchain technology: for instance, one Belgian bank offers a product called MyCar, a digital ecosystem that connects all the players in a car purchase with blockchain technology, creating a single, trusted source of confidence and a centralized workflow that takes the hassle out of buying a car.

With regard to cryptocurrencies, the National Bank of Belgium has no central authority overseeing the network.

Unlike most other EU countries, there are no cryptocurrency ATMs, and the NBB has repeatedly warned about the potential consequences of the use of cryptocurrencies for financial stability.

Foreign Exchange and Remittances

Foreign Exchange

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Remittance Policies

Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Sovereign Wealth Funds

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company, a quasi-independent entity created in 2004 and now mainly used as a vehicle to manage the banking assets which were taken on board during the 2008 banking crisis.  The SWF has a board whose members reflect the composition of the governing coalition and are regularly audited by the “Cour des Comptes” or national auditor. At the end of 2017, its total assets amounted to € 2.2 billion. Due to the origins of the fund, the majority of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks.  The SWF is required by law to publish an annual report and is subject to the same domestic and international accounting standards and rules. The SWF routinely fulfills all legal obligations. However, it is not a member of the International Forum of Sovereign Wealth Funds, and as such not a subscriber to the Santiago Principles.

Belgium does not have any State Owned Enterprises (SOEs) that exercise delegated government powers.  Private enterprises are allowed to compete with public enterprises under the same terms and conditions, but since the EU started to liberalize network industries such as electricity, gas, water, telecoms and railways, there have been regular complaints in Belgium about unfair competition from the former state monopolists.  Complaints have ranged from lower salaries (railways) to lower VAT rates (gas and electricity) to regulators with a conflict of interest (telecom). Although these complaints have now largely subsided, many of these former monopolies are now market leaders in their sector, due mainly to their ability to charge high access costs to networks fully amortized years ago. However, former telecom monopolist Proximus still features on the EU’s list of companies receiving state aid.  Belgium has about 80,000 employees working in SOEs, mainly in the railways, telecoms and general utility sectors. There are also several regional-owned enterprises where the regions often have a controlling majority: for a full listing on the companies located in Wallonia, see www.actionnariatwallon.be  .  There is no equivalent website for companies located in Flanders or in Brussels. Details on the shareholders of the Bel20 (benchmark stock market index of Euronext Brussels) can be found on http://www.gresea.be/Qui-sont-les-actionnaires-du-BEL-20  .

Privatization Program

Belgium currently has no ongoing privatization programs.  There are ongoing discussions about the possible privatization of the state-owned bank Belfius and the government share in telecom operator Proximus, in which the government needs to weigh of the benefits of a one-time sale against the recurring stream of dividends generated by these holdings.  There are no indications that foreign investors would be excluded from these eventual privatizations.

The Belgian government encourages both foreign and local enterprises to follow generally accepted Corporate Social Responsibility principles such as the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights, endorsed by the UN Human Rights Council in 2011.  The Belgian government also encourages adherence to the OECD Due Diligence guidance for responsible supply chains of minerals from conflict-affected areas.

When it comes to human rights, labor rights, consumer and environmental protection, or laws/regulations which would protect individuals from adverse business impacts, the Belgian government is generally considered to enforce domestic laws in a fair and effective manner.

There is a general awareness of corporate social responsibility among producers and consumers. Boards of directors are encouraged to pay attention to corporate social responsibility in the 2009 Belgian Code on corporate governance. This Code, also known as the ‘Code Buysse II’ was drafted by a group of independent corporate experts and stresses the importance of sound entrepreneurship, good corporate governance, an active board of directors and an advisory council.  It deals with unlisted companies and is complementary to existing Belgian legislation. However, adherence to the Code Buysse II is not factored into public procurement decisions. For listed companies, far stricter guidelines apply, which are monitored by the Financial Services and Markets Authority.

Belgium is part of the Extractive Industries Transparency Initiative.

Belgian anti-bribery legislation was revised completely in March 1999, when the competence of Belgian courts was extended to extraterritorial bribery.  Bribing foreign officials is a criminal offense in Belgium. Belgium has been a signatory to the OECD Anti-Bribery Convention since 1999, and is a participating member of the OECD Working Group on Bribery.  In the Working Group’s Phase 3 review of Belgium in 2013 it called on Belgium to address the lack of resources available for fighting foreign bribery.

Under Article 3 of the Belgian criminal code, jurisdiction is established over offenses committed within Belgian territory by Belgian or foreign nationals. Act 99/808 added Article 10 related to the code of criminal procedure. This Article provides for jurisdiction in certain cases over persons (foreign as well as Belgian nationals) who commit bribery offenses outside the territory of Belgium. Various limitations apply, however.  For example, if the bribe recipient exercises a public function in an EU member state, Belgian prosecution may not proceed without the formal consent of the other state.

Under the 1999 Belgian law, the definition of corruption was extended considerably.  It is considered passive bribery if a government official or employer requests or accepts a benefit for him or herself or for somebody else in exchange for behaving in a certain way.  Active bribery is defined as the proposal of a promise or benefit in exchange for undertaking a specific action. Until 1999, Belgian anti-corruption law did not cover attempts at passive bribery.  The most controversial innovation of the 1999 law was the introduction of the concept of “private corruption,” or corruption among private individuals.

Corruption by public officials carries heavy fines and/or imprisonment between 5 and 10 years. Private individuals face similar fines and slightly shorter prison terms (between six months and two years).  The current law not only holds individuals accountable, but also the company for which they work. Contrary to earlier legislation, the 1999 law stipulates that payment of bribes to secure or maintain public procurement or administrative authorization through bribery in foreign countries is no longer tax deductible.  Recent court cases in Belgium suggest that corruption is most serious in government procurement and public works contracting. American companies have not, however, identified corruption as a barrier to investment.

The responsibility for enforcing corruption laws is shared by the Ministry of Justice through investigating magistrates of the courts, and the Ministry of the Interior through the Belgian federal police, which has jurisdiction in all criminal cases.  A special unit, the Central Service for Combating Corruption, has been created for enforcement purposes but continues to lack the necessary staff. Belgium is also an active participant in the Global Forum on Asset Recovery.

The Belgian Employers Federation encourages its members to establish internal codes of conduct aimed at prohibiting bribery.  To date, U.S. firms have not identified corruption as an obstacle to FDI.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Belgium has signed and ratified the UN Anticorruption Convention of 1998, and is also party to the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Office of the Federal Prosecutor of Belgium
Transparency International Belgium
Wolstraat 66-1 – 1000 Brussels
T 02 55 777 64
F 02 55 777 94

Transparency Belgium
Nijverheidsstraat 10, 1000 Brussels
tel: +32 (0)2 893 2584
email: infoa@transparencybelgium.be

Belgium is a peaceful, democratic nation comprised of federal, regional, and municipal political units: the Belgian federal government, the regional governments of Flanders, Wallonia, and the Brussels capital region, and 581 communes (municipalities).  Political divisions do exist between the Flemish and the Walloons, but they are addressed in democratic institutions and generally resolved through compromise. The Federal Council of Ministers, headed by the prime minister, remains in office as long as it retains the confidence of the lower house (Chamber of Representatives) of the bicameral parliament.  Observers considered federal parliamentary elections held in 2014 to be free and fair.

In 2015, the Belgian government eliminated the differential contractual treatment between blue collar and white collar employees.  The main result of this streamlining will be a substantial reduction in the cost of firing employees. The government also increased the retirement age from the current age of 65 to 66 as of 2027 and 67 as of 2030.

Under the plan various schemes of early retirement before the age of 65 will be gradually phased out, and unemployment benefits will decrease over time as an incentive for the unemployed to regain employment.  Historically, unemployment benefits do not expire and some unemployed lived off the benefits indefinitely. Finally, during the 2015 budget negotiations the government and labor agreed to skip the 2015 automatic wage adjustment, but the process of automatic wage indexation resumed in 2016.

Wage increases are negotiated by sector within the parameters set by automatic wage indexation and the 1996 Law on Competitiveness.  The purpose of automatic wage indexation is to establish a bottom margin that protects employees against inflation: for every increase in consumer price index above 2 percent, wages must be increased by (at least) 2 percent as well. The top margin is determined by the competitiveness law, which requires the Central Economic Council (CCE) to study wage projections in neighboring countries and make a recommendation on the maximum margin that will ensure Belgian competitiveness.  The CCE is made up of civil society organizations, primarily representatives from employer and employee organizations, and its mission is to promote a socio-economic compromise in Belgium by providing informed recommendations to the government. The CCE’s projected increases in neighboring countries have historically been higher than their real increases, however, and have caused Belgium’s wages to increase more rapidly than its neighbors. Since 2016 however, that wage gap has decreased substantially.

Belgian labor law provides for dispute settlement procedures, with the labor minister appointing an official as mediator between the employers and employee representatives.

The Belgian labor force is generally well trained, highly motivated and very productive.  Workers have an excellent command of foreign languages, particularly in Flanders. There is a low unemployment rate among skilled workers, such as local managers.  Enlargement of the EU in May 2004 and January 2007 facilitated the entry of skilled workers into Belgium from new member states. However, registration procedures were required until mid-2009 for entrants from some new EU member states.  Non-EU nationals must apply for work permits before they can be employed. Minimum wages vary according to the age and responsibility level of the employee and are adjusted for the cost of living.

Belgian workers are highly unionized and usually enjoy good salaries and benefits.  Belgian wage and social security contributions, along with those in Germany, are among the highest in Western Europe.  For 2018, Belgium’s harmonized unemployment figure was 5.5 percent, below the EU28 average of 6.6 percent (OECD). High wage levels and pockets of high unemployment coexist, reflecting both strong productivity in new technology sector investments and weak skills of Belgium’s long-term unemployed, whose overall education level is significantly lower than that of the general population.  There are also significant differences in regional unemployment levels: 4 percent in Flanders, against 9 percent in Wallonia and 13.5 percent in Brussels. As a consequence of high wage costs, employers have tended to invest more in capital than in labor. At the same time, a shortage exists of workers with training in computer hardware and software, automation and marketing, increasing wage pressures in these sectors.

Belgian’s comprehensive social security package is composed of five major elements: family allowance, unemployment insurance, retirement, medical benefits and a sick leave program that guarantees salary in event of illness.  Currently, average employer payments to the social security system stand at 25 percent of salary while employee contributions comprise 13 percent. In addition, many private companies offer supplemental programs for medical benefits and retirement.

Belgian labor unions, while maintaining a national superstructure, are, in effect, divided along linguistic lines.  The two main confederations, the Confederation of Christian Unions and the General Labor Federation of Belgium, maintain close relationships with the Christian Democratic and Socialist political parties, respectively.  They exert a strong influence in the country, politically and socially. A national bargaining process covers inter-professional agreements that the trade union confederations negotiate biennially with the government and the employers’ associations. In addition to these negotiations, bargaining on wages and working conditions takes place in the various industrial sectors and at the plant level.  About 51 percent of employees from the public service and private sector are labor union members. A cause for concern in labor negotiation tactics is isolated cases where union members in Wallonia have resorted to physically forcing management to stay in their offices until an agreement can be reached.

Firing a Belgian employee can be very expensive.  An employee may be dismissed immediately for cause, such as embezzlement or other illegal activity, but when a reduction in force occurs, the procedure is far more complicated.  In those instances where the employer and employee cannot agree on the amount of severance pay or indemnity, the case is referred to the labor courts for a decision. To avoid these complications, some firms include a “trial period” (of up to one year) in any employer-employee contract.  Belgium is a strict adherent to ILO labor conventions.

Belgium was one of the first countries in the EU to harmonize its legislation with the EU Works Council Directive of December 1994.  Its flexible approach to the consultation and information requirements specified in the Directive compares favorably with that of other EU member states.

Belgium, as a developed country, does not qualify for OPIC programs.  No other countries operate investment insurance programs in Belgium.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* Source for Host Country Data:
GDP: https://stat.nbb.be/Index.aspx?ThemeTreeId=41&lang=fr#  
National Bank of Belgium offers different statistics, but it does not match the BEA stats. https://stat.nbb.be/Index.aspx?DataSetCode=INVDIR  

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

New link: http://data.imf.org/CPIS   

Susan Delja
Economic Officer
U.S. Embassy Brussels
Boulevard du Regent 25
1000 Bruxelles
0032-2-811-4167

Policies Towards 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 focus on growth sectors and the historically strong bilateral relationship between the two countries.  The government has increased its outreach toward companies looking to expand in Europe.

In the March 2017 Regional Competitiveness Index published by the European Union (EU), Luxembourg is ranked one of the best European regions to attract business.  Ranked seventh with a score of 91 out of 100 (behind London and other regions of the United Kingdom; Utrecht, Netherlands; Stockholm, Sweden; Copenhagen, Denmark; Paris, France; and Munich, Germany), Luxembourg demonstrates “the ability to provide an attractive and sustainable environment for attracting businesses and citizens.”

Key points considered are health, infrastructure, higher education, labor efficiency, and innovation.  According to the Index, Luxembourg ranks number one for innovation – a direct result of the increase in incentives and support for research and development, as well as for start-up ventures through the state lending agency (capital investment subsidies, financing of equipment, and seed aid to start-up entities).

In 2017, Luxembourg’s Deputy Prime Minister and Minister of the Economy and Foreign Trade, Etienne Schneider, unveiled a strategy to promote economic growth focusing on attracting FDI and supporting companies’ moving into other markets.  The Luxembourg “Let’s Make It Happen” campaign, developed by the state Trade and Investment Board, focuses on five key objectives:

• Improving Luxembourg-based companies’ access to international markets
• Attracting FDI in a “targeted, service-oriented” way
• Strengthening the country’s international “economic-promotion network”
• Improving Luxembourg’s image as a “smart location” for high-performance business and industry
• Ensuring the coherence of economic promotion efforts

There is no overall economic or industrial strategy that has discriminatory effects on foreign investors, either at a market-access or post-establishment phase of investment.  Luxembourg strives to attract and retain foreign investors with its unique model of “easy-access to decision-makers” and its known ability to “act swiftly.”

The Trade and Investment Board has taken the lead in investment promotion and includes representatives from the ministries of Economy, Higher Education and Research, Finance, Foreign and European Affairs, and State.  Public-private trade associations such as FEDIL (Business Federation of Luxembourg, the main employers’ trade association), the Luxembourg Chamber of Commerce, and the Chamber of Skilled Trades and Crafts, as well as Luxinnovation, are also represented.

The Board is working in cooperation with Luxembourg embassies and trade and investment offices worldwide, as well as economic and commercial attachés, honorary consuls, and foreign trade advisers, to attract FDI and retain investors. In 2016, the Ministry of the Economy expanded the role of Luxinnovation to incorporate promotion of Luxembourg abroad and to attract FDI into the country.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity.  There are no limits on foreign ownership or control, and there are no sector-specific restrictions.

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 (domestic) treatment.

Other Investment Policy Reviews

The World Bank’s Doing Business 2019 Economy Profile provides additional detail on Luxembourg’s investment climate.

Luxembourg is included in Trade Policy Reviews (TPRs) of the EU/EC; see the TPR gateway for explanations and background.

Business Facilitation

In terms of the United Nations Conference on Trade and Development (UNCTAD) Global Action Menu for Investment Facilitation, Luxembourg’s business facilitation efforts are aligned with most of the recommended action points.  Over the past decade, Luxembourg has been furthering accessibility and transparency in investment policies and regulations, as well as procedures relevant to investors.

The Government has improved the efficiency of investment administrative procedures, notably in the context of the overall “Digitalization” movement to offer a multitude of government services online or electronically.  It usually takes 2-3 months to register a business, depending on the complexity of the business itself. On a scale of 1 to 10, Luxembourg rates 6.5 in website registration clarity and completeness of instructions to register a limited liability company, according to the Global Enterprise Registration portal of the Global Entrepreneurship Network of UNCTAD.

The Government provides a website in multiple languages, including English that explains the business registration process: http://www.guichet.public.lu/en  .  A new business must register with the Registry of Commerce (Registre du Commerce: https://www.rcsl.lu/  .)  Foreign companies can use the site (after translating from the original French language), 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.

In 2017, the Government reduced the required minimum capitalization of a new company from 12,500 euro to just 1 euro (symbolic), to encourage start-up creation.  Between January 2017 and January 2018, over 680 such simplified limited liability companies (Société à responsabilité limitée simplifiée SARL-S) have registered.  According to the Luxembourgish Chamber of Commerce, one client out of three has requested information on SARL-S.

After receiving a certificate from the Registry of Commerce, companies are required by law to register with and pay annual dues to the Luxembourg Chamber of Commerce , 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.

The House of Entrepreneurship, opened in 2016 within the Luxembourg Chamber of Commerce, also provides guidance on the entire registration and creation process of a business.  Between 2016 and 2018, the House of Entrepreneurship was contacted 30,000 times.

The Ministry of Economy continues to support networks and associations acting in favor of female entrepreneurship. The Law of December 15, 2016 incorporated the principle of equal salaries in the Grand Duchy’s legislation, which makes any difference in the salaries paid to men and women carrying out the same task or work of equal value, illegal.

In general, the most promising instruments are outside the jurisdiction of the Ministry of Economy but are critical.  For example, there has been an increase in the number of childcare centers close to business districts which is helping dual career families better manage.

Outward Investment

The same government services website listed above, http://www.guichet.public.lu/en  , includes an “International Trade” tab which provides guidance on outward investment by Luxembourgish companies on various topics including intra-EU trade and services; import, export, and transit; licensing; and transport.  The Luxembourg Government promotes outward investment via the Trade and Investment Board, which functions as a promotion entity for both inward and outward investment.

The “Let’s Make It Happen” initiative, among its many missions, is working to facilitate access to international markets for Luxembourgish companies and to strengthen Luxembourg’s international economic promotion network. Luxembourg does not restrict domestic investors from investing abroad.

The United States and Luxembourg have shared a Friendship, Establishment, and Navigation Treaty since 1963, which assures national treatment and other investor protections.  Luxembourg and the United States also have an aviation treaty.

In addition to its open trade with other member states of the European Union, and free-trade agreements between the EU and other countries, Luxembourg also signed bilateral agreements with the following countries:

Albania, Algeria, Argentina, Armenia, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Benin, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Burundi, Cameroon, Chile, China, Colombia, Comoros, Congo (Democratic Republic of the), Costa Rica, Cote d’Ivoire, Croatia, Cuba, Cyprus, Czech Republic, Egypt, El Salvador, Estonia, Ethiopia, Gabon, Georgia, Guatemala, Hong Kong, Hungary, India, Iran, Kazakhstan, Korea (Republic of), Kuwait, Kyrgyzstan, Latvia, Lebanon, Liberia, Libya, Lithuania, Macedonia, Madagascar, Malaysia, Malta, Mauritania, Mauritius, Mexico, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Nicaragua, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Qatar, Romania, Russia, Rwanda, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Sri Lanka, Sudan, Tajikistan, Thailand, Togo, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, Yemen, and Zambia.

Links to the treaty texts can be found at http://investmentpolicyhub.unctad.org/IIA/CountryBits/122  

Luxembourg is a member of the Multilateral Investment Guarantee Agency (MIGA).

Luxembourg has a bilateral taxation agreement with the United States, which was amended to upgrade to OECD information exchange standards on bank accounts in 2009.  In 2014, the bilateral agreement on FATCA allowed Luxembourg to comply with the U.S. reporting requirements to the IRS by financial institutions with U.S. citizen clients or “U.S. Person” clients.  The law came into effect in 2015.

There are no other taxation issues of concern to U.S. investors.

Transparency of the Regulatory System

The Government of Luxembourg uses transparent policies and effective laws to foster competition and establish clear ground rules on a non-discriminatory basis.  The legal system is quite welcoming with respect to FDI, and legal, regulatory, and accounting systems are transparent and consistent with international norms. There are no informal regulatory processes managed by non-governmental organizations or private sector associations.  In addition to the Government, the Luxembourg Institute of Regulation, a public agency, proposes regulatory policies.

As confirmed by the World Bank report on Global Indicators of Regulatory Governance, the Luxembourg Government develops forward regulatory plans – a public list of anticipated regulatory changes and proposals intended to be adopted and implemented.  These plans are available to the public, as the texts of proposed legislation are published before Parliamentary debate and voting.

Draft texts are published on a unified website where all proposed regulations are published and directly distributed to interested stakeholders.  While the ministries do not have a legal obligation to publish the text of proposed regulations before their enactment, the entire text of the proposed draft law is published.

In addition, the Government solicits comments on proposed laws and regulations from the public.  The comments are received on the same website; through public meetings; and through targeted outreach to stakeholders, such as business associations.

The law requires that the rulemaking body solicit comments on proposed regulations.  The consultation period is typically three months, and the Government reports on the results of the consultation in the form of a consolidated response on the same website.  The official journal Mémorial publishes the final text of laws, both online and in print

International Regulatory Considerations

Luxembourg is a member state of the EU and transposes EU directives and regulations into domestic law.  Luxembourg has been a World Trade Organization (WTO) member since 1995 and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).  Luxembourg ratified the TFA on October 5, 2015 and has an implementation rate of 100 percent.

Legal System and Judicial Independence

Luxembourg is a parliamentary representative democracy headed by a constitutional monarch. The Constitution of 1868 provides for a flexible separation of powers between the executive and the parliament, with the judiciary watching over proper execution of laws.

The Grand Duchy has a written commercial/contractual law.  Magistrate’s courts deal with cases of lesser importance in civil and commercial matters, and also under the urgent procedure in the field of law enforcement.

The district courts  , of which there are three, adjudicate civil and commercial matters for all cases not specifically attributed by law to any other court.  The current judicial process is considered procedurally competent, fair, and reliable, albeit slow (The judicial sector observes all public school holiday periods).  Regulation and enforcement actions are appealable, and they are adjudicated in the national court system.

Laws and 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). There is no government or authority interference in the court system that could affect foreign investors.  As previously mentioned, the website for doing business is: www.guichet.public.lu , and the new one-stop-shop for setting up a business is the House of Entrepreneurship within the Luxembourg Chamber of Commerce.

Competition and Anti-Trust Laws

The Competition Inspectorate, a department within the Ministry of the Economy, is in charge of investigating competition cases.

Expropriation and Compensation

The laws governing expropriation of property are quite complex, and the process can be arduous and lengthy, depending on the property.  The Ministry of the Interior, along with the Ministry of Justice, sets forth the specific regulations according to each type of case.

There have been no known expropriations in the recent past or policy shifts which would indicate such actions in the near future.  There are no tendencies by the Luxembourg Government to discriminate against U.S. investments, companies, or representatives in expropriation.  Instances of indirect expropriation or governmental action tantamount to expropriation, such as confiscatory tax regimes, that might warrant special investigation, are non-existent.

Dispute Settlement

ICSID Convention and New York Convention

Luxembourg is a member state to the International Center for Settlement of Investment Disputes (ICSID Convention).  Luxembourg is a signatory of the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

Investment disputes involving U.S. or other foreign investors in Luxembourg are extremely uncommon.  There are no known claims by or disputes with a U.S. person or foreign investors.

The Luxembourg Chamber of Commerce and the Mediation Center offer the services of domestic dispute settlement and, on an international level, with the International Chamber of Commerce.  There have been no known investment disputes over the past few years involving U.S. or other foreign investors or contractors in Luxembourg.

Within the WTO, there are no known dispute settlement cases involving Luxembourg either as a complainant, respondent, or third-party entity.

International Commercial Arbitration and Foreign Courts

The Government accepts international arbitration of investment disputes between foreign investors and the state, and the courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes among private parties, and there is a domestic arbitration body within the host economy, the Centre de Médiation (Mediation Center).  Luxembourg is a member state to the convention known as International Centre for Settlement of Investment Disputes (ICSID Convention).

As investment disputes are extremely rare or non-existent, there is no information available concerning the duration of a resolution in the local courts.

Bankruptcy Regulations

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 on European Union-wide legislation. Monetary settlements are usually made in local currency (euro).  Bankruptcy is not criminalized.

Luxembourg ranks 90 in “Resolving Insolvency” in the World Bank’s 2019 Doing Business Report.

At the end of 2018, the Luxembourg banking sector comprised 136 credit institutions from 29 different countries.  Under Luxembourg law, two types of licenses are possible for the credit institutions, the Universal Banking License and the Mortgage Bonds Banking License.

The Ministry of Finance grants credit institutions operating out of the Grand Duchy an operating license.  Since the entry into force of the Single Supervisory Mechanism on November 4, 2014, credit institutions are subjected to the control of the European Central Bank, either directly or indirectly through Luxembourg’s financial sector supervisory authority, the CSSF.  The supervision by the ECB/CSSF extends equally to activities performed by these undertakings in another Member State of the EU, whether by means of the establishment of a branch or by free provision of services.

Investment Incentives

Luxembourg is considered to be a very attractive tax location for conducting business: low effective corporate tax rates of 18 percent (with an adjusted rate of 15 percent for entities with annual taxable income less than 25,000 euro); the lowest VAT (value-added tax) rate in Europe (at 17 percent;); and a variety of tax incentives, including investment tax credits, new business tax credit, subsidies for film productions, venture capital investment certificates, small business incentives, regional and national incentives, research and development incentives, and environmental incentives. The investment incentives are provided within the limitations of the EU rules on State aid.

U.S. and foreign firms are able to participate in government/authority-financed and subsidized research and development programs.

Foreign Trade Zones/Free Ports/Trade Facilitation

Luxembourg opened a free-trade zone called Le Freeport in 2014, which was built and integrated into the cargo logistics center at Luxembourg Airport.  This zone, modeled after other successful customs warehousing in premier trade regions such as Geneva and Singapore, allows the warehousing and handling of high-value merchandise (art, cars, wines) in a secure location free of fiscal obligations (no Value-Added-Tax (VAT) or import duties to be paid as long as the goods remain on the premises).  Taxation only occurs when the articles leave the zone as imports into the country of consumption (or if a bottle of wine is opened at Le Freeport, it is also subject to taxation).

Performance and Data Localization Requirements

The host Government does not mandate local employment.  The Government has improved the work visa process in past years, as a result of input from companies, embassies, and visa applicants.  If the application is in order, a work visa should normally take only two months to clear. The difficulty in obtaining a Residence permit is on par with other western European countries, once the applicant has provided all pertinent information to the authorities and the local district of residence.

These incentives are applied uniformly to both domestic and foreign investors.

Data storage has been greatly enhanced via new state-of-the-art data centers, built by the government as part of the long-term massive ICT infrastructure development plan which includes replacing old transmission lines with fiber-optic cable all across the country.  The data centers have served to optimize international connectivity to large hubs such as Paris, Amsterdam, and Frankfurt, and have attracted major ICT and e-commerce players, such as Amazon and PayPal, which located their EU headquarters in Luxembourg. The centers are rated at the highest security level for data storage.

Real Property

Secured interests in property in Luxembourg, both movable and real, are recognized and enforced through intellectual property and community laws.  The legal system that protects and facilitates acquisition and disposition of all property rights, such as land and buildings, is based on a land register called cadastre in French, where each parcel of property is documented in terms of ownership and duration.  There is adherence to key international agreements on intellectual property rights, as well as adequate protection for intellectual property, patents, copyrights, trademarks, and trade secrets.

Luxembourg ranks 92 out of 190 countries in the World Bank’s 2019 Doing Business Report for ease of Registering Property.

Luxembourg law allows the securitization of many types of assets, risks, revenues and activities It makes securitization accessible to all types of investors (institutional or individual), which means that securitization can easily facilitate the financing of a company or the management of personal or family wealth.  An extremely wide range of assets can be securitized: securities, loans, subordinated or non-subordinated bonds), risks linked to debt (commercial and other), moveable and immovable property (whether tangible or not).

Under Luxembourg law, a securitization vehicle can be constituted either as a company or a fund. Securitization companies can benefit from EU directives and double tax treaties. Securitization organizations that continually issue transferable assets for the public must be approved and supervised by the financial sector supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF).

Intellectual Property Rights

Trademarks, designs, patents, and copyrights are the principal forms of intellectual property (IP) protection available to companies and individuals.  Luxembourg has been proactive in developing its IP standards and participates in all the major IP treaties and conventions, including:

• Bern Convention
• Patent Cooperation Treaty (PCT)
• Paris Convention
• Patent Law Treaty (PLT)
• Madrid Agreement and Protocol

The country is a signatory of the European Patent Convention, created by the European Patent Office (EPO), and is a member state of the World Intellectual Property Organization (WIPO).

Adequate steps have also been taken to implement and enforce the World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

In Luxembourg, the Litigation and Research Department (Division des Contentieux et Recherches) of the Directorate of Customs and Excise (Direction des Douanes et Accises) regulates and oversees applications to prohibit the release of counterfeit and pirated goods for free circulation, export, re-export or entry into the country.  Customs officers have every right to seize (but not necessarily destroy) goods. Most cases are related to customs declaration abuses by the owner (importing products above the maximum allowable amount for tax-free treatment within the EU) and not to counterfeit goods.

The merits of a counterfeit goods case are decided by judicial proceedings, thus the ordinary law courts are responsible for deciding whether there are grounds for a case.  A number of provisions within the TRIPS Agreement describe different intellectual property rights and allow for the possibility of confiscating, or even destroying, counterfeit goods and the tools or implements used in their production.

The Luxembourg customs authorities may impose measures, such as seizures or import bans, for a period of six months, which may be renewed at the request of the rights-holder.  The customs office tracks the seizures of counterfeit goods, notably at Luxembourg Airport, but this is a small part of customs work. There are no public statistics on such seizures.

The main rules of civil procedure are contained in the Luxembourg Code of Civil Procedure and in the Administration of Justice Act.  In the absence of specific rules concerning material and local jurisdiction for certain intellectual property rights, ordinary law applies.

In an effort to become the prime location for Europe’s knowledge-based and digital economies, Luxembourg implemented a new IP tax regime in 2008 that provides a very competitive tax rate (first 8 percent, then down to 3 percent) applicable to a broad range of IP income.

The level of IP protections and enforcement is excellent, and an update to the 2008 law was made in 2013.  However, due to pressure from the EU Commission in Brussels to disallow fiscal advantages to specific Member States, the IP fiscal regime in Luxembourg is no longer offered as of 2016, and assets are now subject to the standard VAT rate of 17 percent.

On March 22, 2018, the Luxembourg Government approved legislative measures to bring Luxembourg’s new IP regime into force with effect from January 1, 2018. The new regime is fully consistent with all recommendations made by the Organisation for Economic Cooperation and Development (OECD) Forum on Harmful Tax Practices, including those set out in the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project Action 5 Final Report published in October 2015.

Under the new regime, eligible net income from qualifying IP assets will benefit from an 80 percent exemption on income taxes. Consequently, a corporate taxpayer based in Luxembourg City with eligible net income will be taxed on such income at an overall (i.e. corporate income taxes plus municipal business tax) effective tax rate of 5.202 percent in the 2018 tax year.

IP assets qualifying for the new regime also benefit from a full exemption from Luxembourg’s net wealth tax. Luxembourg is not listed in the United States Trade Representative (USTR) 2019 Special 301 Report, nor is it listed on the Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

Capital Markets and Portfolio Investment

Luxembourg government policies, which reflect the European Union’s free movement of capital framework, facilitate the free flow of financial resources to support the product and factor markets.  Credit is allocated on market terms, and foreign investors are able to get credit on the local market, thanks to the sophisticated and extremely developed international financial sector, depending on the banks’ individual lending policies.

Since the financial crisis and tighter regulation through EU central banking authority and stability mechanisms, banks have become more selective in their lending practices.  The private sector has access to a variety of credit instruments, including those issued by the National Public Investment Agency (SNCI), and there is an effective regulatory system established to encourage and facilitate portfolio investment.

In recent years, Luxembourg has been recognized as a model of fighting money-laundering activities within its banking system through the enactment of strict regulations and monitoring of fund sources.  The country has its own stock market, a sub-set of which was rebranded in 2016 as a “green exchange” to promote securities (primarily bonds in Luxembourg) reflecting ecologically sound investments.

Money and Banking System

Luxembourg’s banking system is sound and strong, having been shored up following the world financial crisis by emergency investments by the Government of Luxembourg in BGL BNP Paribas (formerly Banque Generale du Luxembourg and then Fortis) and by the Government of Luxembourg in Banque Internationale a Luxembourg (BIL), formerly Dexia, in 2008.

At the end of 2018, 136 credit institutions were operating, with total assets of EUR 790 billion during the first quarter of 2019 (USD 894 billion), and approximately 26,000 employees.

Luxembourg has a central bank, Banque Centrale de Luxembourg.  Foreign banks are allowed to establish operations, subject to the same regulations as Luxembourgish banks.

Due to the U.S. FATCA law, local retail bank Raiffeisen bank still refuses U.S. citizens as clients.  However, two banks have offered to serve U.S. citizen customers: BIL and the State Bank and Savings Bank (Banque et Caisse d’Epargne de l’Etat).

On February 21, 2018, the Luxembourg House of Financial Technology (LHoFT) signed a Memorandum of Understanding (MoU) with the European FinTech platform, B-Hive, based in Brussels, and the Dutch Blockchain Coalition, that will favor collaboration in the field of distributed ledger technology, otherwise known as blockchain.  The MoU confirms mutual interest and defines the fields of collaboration, among other things, on how blockchain technology can benefit society and business in general or on how they can help define international and/or European standards for distributed ledger technology.

The Ministry of Finance is tracking developments very closely in the field of virtual currencies and has said it will adapt its legislation in accordance with the results of ongoing European and international studies. Luxembourg places virtual currencies under the legal regime of payment companies.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, lease payments) into a freely usable currency and at a legal market-clearing rate.  Luxembourg was a proponent of the euro currency and adopted it immediately at inception in 1999 (as part of the “Eurozone” of EU member states adopting the euro to replace their former domestic currencies.) The European Central Bank is the authority in charge of the euro currency.

Remittance Policies

There have not been any recent changes to remittance policies with respect to access to foreign exchange for investment remittances.  There is no difficulty in obtaining foreign exchange, which has been freely traded since the 1960s, and the Luxembourg stock market trades in forty different currencies, so is truly international and expanding at a fast rate.

The average delay period currently in effect for remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties and management fees through normal, legal channels is quite brief, approximately 24 hours. Investors can remit through a legal parallel market including one utilizing cash and convertible negotiable instruments (such as dollar-denominated host government bonds issued in lieu of immediate payments in dollars).  There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs.

Sovereign Wealth Funds

Luxembourg created a sovereign wealth fund in 2014. The fund is under the tutelage of the Ministry of Finance and operates with 234 million euros of assets.  Until the fund reaches 250 million euros of assets, it operates a conservative investment policy, with a portfolio of 57 percent of bonds, 40 percent of stocks and 3 percent of liquidities.  The sovereign wealth fund only invests outside of Luxembourg and is audited by an independent audit company.

The most prominent state-owned enterprise (SOE) in Luxembourg is POST (formerly P&T) (postal and telecommunications), whose sole shareholder is the government of Luxembourg and whose board of directors is composed of civil servants.  POST responded to the competition created by new players in the market (Orange, Proximus) by transforming itself from a passive utility company into a commercial enterprise, recruiting from the corporate sector, and improving consumer products and services.  POST also publishes an annual report and communicates in a similar manner to a private company.

Another sector in which SOEs have been very active is the energy sector (electric and gas utilities), which is now liberalized as well.  Anyone can become a provider or distributor (via networks) of electricity and gas. The former state electricity utility, Cegedel, was absorbed into a private company, Enovos, along with a nearby German utility and the former state gas utility, with an independent board of directors.  Creos, the new distribution network for energy, is jointly held by the government and private shareholders.

Finally, an important market which appears to have barriers to entry is freight air transport, due to the dominance of the majority state-owned Cargolux.  Cargolux, the largest consumer of U.S. production in Luxembourg in terms of value, owing to their all-Boeing fleet of 27 747-freighter aircraft (including 14 of the new-generation 747-8F, of which Cargolux was a launch customer) received a capital increase from the Luxembourg government in return for a larger share of the company.

China has invested in Cargolux, with a Chinese regional fund currently holding approximately one-third of shares.  Cargolux has aggressively expanded in China.

Private enterprises are allowed to compete with public enterprises in Luxembourg under the same terms and conditions in all respects.  All markets are now open or have been liberalized via EU directives to encourage market competition over monopolistic entities. There is a national regulator (National Institute of Regulation), which sets forth regulations and standards for economic sectors, mostly derived from EU directives transposed into local law.  While markets continue to open up, the government has maintained a large enough stake in critical sectors such as energy, to ensure national security.

OECD Guidelines on Corporate Governance of SOEs

Luxembourg is an OECD member with established practices consistent with OECD guidelines as far as SOEs are concerned.  There is no centralized ownership entity that exercises ownership rights for each of the SOEs.

In general, if the government has a share in an enterprise, they will receive board of directors’ seats on a comparable basis to other shareholders and in proportion to their share, with no formal management reporting directly to a line minister.

The court processes are transparent and non-discriminatory.

Privatization Program

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.  There has been no evidence to suggest that potential conflicts of interest. Government officials sitting on boards of directors does not appear to have impacted freedom of investment in the private sector.

Generally speaking, there is a heightened awareness of responsible business conduct in Luxembourg, whether it is in the corporate sector or among the consuming public.  In financial matters, a desire to avoid inclusion on the OECD’s tax haven grey list has driven a push for greater transparency. While Luxembourg has always taken a lead role in ecological matters including stringent trash sorting and mandatory recycling procedures, the global discussion on climate change, pushed to the forefront by the Paris Agreement on Climate Change (COP 21) and pressure from the EU in terms of concrete goals and directives, has made green finance a high priority.

In 2016, Luxembourg Stock Exchange (LuxSE) created the Luxembourg Green Exchange (LGX), the world’s first stock exchange to deal with securities related to climate change.  After only one year, it had already listed €63 (USD 78) billion of green bonds. It currently lists over USD 130 billion of green bonds.  LGX is a dedicated platform for issuers and investors focused on green instruments.  It helps issuers market their green securities by generating awareness for their green projects.

There have been no controversial instances of corporate impact on human rights in Luxembourg.

There are also independent NGOs, worker organizations/unions, and business trade associations promoting and monitoring RBC.  These organizations are able to do their work freely.

Luxembourg has not only implemented EU directives concerning emissions reduction, but also set forth major new energy policies to promote clean energies and energy conservation in consumer households.

In 2010, the energy pass became compulsory for existing dwellings (houses and residences) that change owners or tenants and for accommodations that undergo substantial installation transformation (www.myenergy.lu  ).

Starting in 2017, the government offered subsidies for zero-emissions vehicles as part of the tax reform.  Starting in 2018, the government offered subsidies for hybrid plug-in electric vehicles (PHEV) owned by private customers, and zero emission (100 percent electric) vehicles owned by companies, as part of the tax reform.

OECD Guidelines for Multinational Enterprises

As an OECD member, Luxembourg adheres to the OECD Guidelines for Multinational Enterprises.  Its national contact point promoting these guidelines for responsible business conduct is located in the Ministry of Economy and composed of representatives from several ministries, business associations and trade unions.  Contact information is here: http://mneguidelines.oecd.org/ncps/luxembourg.htm .

Regulations are enforced by the strong but flexible Financial Sector Surveillance Commission (CSSF, which is equivalent to the U.S. Securities and Exchange Commission). U.S. firms have not identified corruption as an obstacle to FDI in Luxembourg.  There are no known areas or sectors where corruption is pervasive, whether in Government procurement, transfers, performance requirements, dispute settlement, regulatory system, or taxation.

Giving or accepting a bribe, including between a local company and a public official, is a criminal act subject to the penal code.  Senior Government officials take anti-corruption efforts seriously. International, regional or local nongovernmental watchdog organizations do not operate in the country, given the low risk.

Luxembourg has laws, regulations, and penalties to combat corruption effectively, and they are enforced impartially with no disproportionate attention to foreign investors or any other group.  The country ranks very favorably on the World Bank’s corruption index.

In particular, Luxembourg has made anti-money laundering and suppression of terrorism financing a priority, given its status as a leading world financial center.  The government has taken the lead in freezing bank accounts suspected to be connected to terrorist networks, and since 2004 extended the law against money-laundering and terrorist financing to additional professional groups (including auditors, accountants, attorneys, and notaries).

On 14 February 2018, a new law implementing a substantial part of the fourth anti-money laundering directive (4th AML Directive) was published in the Official Journal of Luxembourg.  The law entered into force on February 18, 2018. Also, local police, who are responsible for combating corruption, work closely with neighboring countries’ law enforcement officials, as well as with Interpol and Europol.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Luxembourg signed and ratified the UN Anticorruption Convention (signed Dec 2003 and ratified Nov 2007).

Luxembourg is a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Director of Criminal and Judicial Affairs
Ministry of Justice
13 rue Erasme
L-1468 Luxembourg
Telephone: +352 247 84537
Email: info@mj.etat.lu

Contact at “watchdog” organization

GOEDERT
Section Chief
Financial Sector Surveillance Commission(CSSF)
283, route d’Arlon L-1150 Luxembourg
+352 26 251 2217
Email: compta@cssf.lu / audit@cssf.lu

Luxembourg has consistently ranked among the most politically stable and overall safest countries in the world.  There have been no recent serious incidents involving politically motivated damage to projects or installations. The environment is not growing more politicized such that civil disturbances would be likely.

Of note is that many of the demonstrations which occur in Luxembourg are not aimed at the Grand Duchy, but rather at the EU offices located within Luxembourg (for example, the European Court of Justice and the periodic European ministerial meetings).  There are no known nascent insurrections, belligerent neighbors, or other politically-motivated activities.

Luxembourg boasts a very stable, diverse, multilingual and qualified labor market, benefiting from the approximately 192,000 industrial and service employees (known as “cross-border” workers) who come to work in Luxembourg on a daily basis from the neighboring countries of Belgium, France and Germany.  Foreign (non-Luxembourger) workers are treated the same as nationals. Work permit constraints were somewhat relaxed for non-EU applicants (including Americans), particularly for qualified persons for skilled positions.

Foreign investors often cite Luxembourg’s labor relations as a primary reason for locating in the Grand Duchy.  Unemployment in Luxembourg has stabilized at approximately 5 percent. However, this rate remains below the EU average of 6.5 percent, and labor relations have been peaceful since the 1930s.

Most industrial workers are organized by unions, linked to one of the major political parties.  Luxembourg is proud of the system of representatives of business, unions, and Government participating in a tripartite process in the conduct of major labor negotiations, which serves to avoid strikes, common in the neighboring countries of France and Germany.

Luxembourg has a trade relationship with the United States. Every employee working in Luxembourg, whether a resident, European, or a third-country national, is subject to the provisions of labor law.  Most active laws and regulations regarding work and employment in Luxembourg are incorporated in the Labor Code. The Inspectorate of Labor and Mines has responsibility for working conditions and protection of workers in the exercise of their professional activity (with the exception of civil servants).

The Overseas Private Investment Corporation (OPIC) does not currently work in Luxembourg.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* Source for Host Country Data: Luxembourg Statistics office Statec

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Economic Specialist
U.S. Embassy Luxembourg
22 Boulevard Emmanuel Servais
L-2535 Luxembourg, Luxembourg
+352-46-01-23-51
Email: luxembourgpolecon@state.gov