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Luxembourg, the only Grand Duchy in the world, is a landlocked country in northwestern Europe surrounded by Belgium, France, and Germany.  Despite its small landmass and small population (626,000), Luxembourg is the second-wealthiest country in the world when measured on a Gross Domestic Product (GDP) per capita basis.

Since 2002, the Luxembourg Government has proactively implemented policies and programs to support economic diversification and to attract foreign direct investment.  The Government focused on key innovative industries that showed promise for supporting economic growth: logistics, information, and communications technology (ICT), health technologies including biotechnology and biomedical research; clean energy technologies, and most recently, space technology and financial services technologies.

Prior to COVID pandemic, the economy had posted a GDP growth rate of 2.3%, higher than the EU average of 1.7%.  Given the economic impact of the COVID-19 pandemic, the Luxembourg government projects GDP to contract by 6% in 2020, with a projected rebound of 7% in 2021. Credit rating agencies Fitch and DBRS Morningstar confirmed Luxembourg’s “AAA” rating in September, with a stable outlook. Both agencies highlighted Luxembourg’s favorable position at the start of the crisis, made possible by implementing a prudent fiscal policy in recent years, thus enabling the government to react quickly to implement generous measures to support the economy.

Beyond  COVID, other factors that could impact growth include the possible introduction of a wealth tax and an inheritance tax. Although far from adopted, various officials have expressed support for the idea and it appears the Government will debate and consider the proposal.

Luxembourg continues to offer a diverse and stable platform and outsized growth potential for a wide variety of U.S. investments and trade within the EU and beyond. Although the full impact of COVID-19 has yet to be determined, Luxembourg remains a financial powerhouse as a result of the past exponential growth of the investment fund sector through the launch and development of cross-border funds (UCITS) in the 1990s.  Luxembourg is the world’s second-largest investment fund asset domicile, after only the United States, with approximately $5 trillion of assets in custody in financial institutions. This has been both an asset and a vulnerability. Foreign investors have taken full advantage. China has also.

Other factors enhancing Luxembourg’s investment climate include:

  • Luxembourg is consistently ranked as one of the world’s most open and transparent economies and has no restrictions on foreign ownership. Luxembourg is also consistently ranked as one of the world’s most competitive and least-corrupt economies.
  • Luxembourg ranks as the world’s safest city in the Mercer city index.
  • Over the past decade, Luxembourg has adopted major fiscal reforms to counter money-laundering, terrorist-financing, and tax evasion.

Luxembourg has not yet adopted national security screening of investments or meaningful cyber protections to meet the emerging risks of the digital economy.  However, as an EU member, it is expected to conform to the EU Framework on National Security Screening.

  • The Government of Luxembourg has actively supported the development of new sectors to diversify the country’s economy, given the dominance of the financial sector. Target sectors include space, logistics, and information technology, including financial technology and biomedicine.
  • Luxembourg launched its initiative in 2016 and in 2017 announced a fund offering financial support for the space resources industry. More than 50 companies dedicated to space initiatives are now active in Luxembourg. Luxembourg added an additional space fund in early 2020 to further bolster its status as a space startup nation.
  • Luxembourg has positioned itself as “the gateway to Europe” to establish European company headquarter operations by virtue of its central European location and advanced road, railway, and air connectivity. Due to uncertainties related to Brexit and COVID-19, 50 insurers, asset managers and banking institutions decided pre-COVID-19 to re-locate their EU headquarters to Luxembourg or transfer a significant part of their activity to Luxembourg.
  • Luxembourg is actively seeking logistics companies to expand the new logistics hub at Luxembourg Airport, home to Cargolux, Europe’s largest all cargo airline. Inaugurated in 2017, the Luxembourg Intermodal Terminal (LIT) is ideally positioned as an international hub for the consolidation of multimodal transport flows across Europe and beyond. Renovations and expansion at the airport are underway
  • Luxembourg is also seeking ICT companies to use the existing high-security, state-of-the-art datacenters, affording high-speed internet connectivity to major international data hubs. Through various initiatives, Luxembourg has initiatives to attract financial technology and biomedical start-ups and small companies to make Luxembourg home.
Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 9 of 198
World Bank’s Doing Business Report 2019 72 of 190
Global Innovation Index 2019 18 of 129
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 766,099
World Bank GNI per capita 2019 USD 73,910

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. Luxembourg has been in the process of implementing the EU standards for the screening of foreign investment according to national security risk, to enter into force in the Fall of 2020. Unfortunately, high-risk Chinese investors have taken full advantage of the absence of national security screening, having established or purchased 8-9 banks including the International Bank of Luxembourg (BIL). In recent months, there are indications that the Chinese investors appear to be moving toward purchasing a number of sensitive space and technology companies .

In 2017, pre-COVID, Luxembourg’s Deputy Prime Minister and Minister of the Economy and Foreign Trade 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.  In fact, the opposite is true. Although legislation has been offered to address screening of national security risks, inadequate measures currently exist to protect existing and new investments from predatory Chinese infiltration efforts to mine sensitive data and technologies. 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.

In February 2020, DPM Schneider departed the government. The new Minister of the Economy, Franz Fayot, will share his priorities in the fall as shaped by the limitations imposed by the Coronavirus and the government’s broader priorities.

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 does exist in line with that of domestic investment, with routine and non-discriminatory screening mechanisms.  However, as noted above, inadequate screening devices exist to protect Luxembourg from Chinese predatory investment. 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 “Digitization” movement to offer a multitude of government services online or electronically.  Pre-COVID, it took 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: .  A new business must register with the Registry of Commerce (Registre du Commerce: .)  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 (i.e. compulsory membership) , 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. In 2019, the House of Entrepreneurship was contacted 12,000 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 illegal any difference in the salaries paid to men and women carrying out the same task or work of equal value. Notably, this has not yet translated into equality/parity of female ownership of businesses or the existence of females in leadership positions in major companies or employers.

In general, the most promising instruments, while outside the jurisdiction of the Ministry of Economy, 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. And there have been major efforts on improving education and housing opportunities.

Outward Investment

The same government services website listed above, , 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 2019 the U.S. Senate ratified the Convention between the United States and the Grand Duchy for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital.

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 

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. This update to the Treaty was ratified in 2019 by both countries and came into effect in September 2019.  In 2014, the bilateral agreement on the U.S. Foreign Account Tax Compliance Act (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.

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.  With the exception of the mandatory membership in the Luxembourg Chamber of Commerce, 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 anticipated and publishes forward-leaning 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. In addition, plans and proposed legislation is subject to review by the State Council and the Grand Duke.

Draft texts are published on a unified website where all proposed regulations are 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.

Proposed legislation also includes a factsheet on the impact on public finances. The Luxembourg Government is transparent with its public finances and debt obligations through the annual budget procedure that requires Parliamentary approval. The Government also communicates on issuances of new State borrowing.

International Regulatory Considerations

Luxembourg is a member state of the EU and routinely 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 application of laws.

The Grand Duchy has a written commercial/contractual law.  Magistrates’ courts deal with cases of lesser importance in civil and commercial matters, and 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 notably 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).    As previously mentioned, the website for doing business is:, 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, oversees 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 soon. There are no tendencies by the Luxembourg Government to discriminate against U.S. investments, companies, or representatives in expropriation.

There are no known instances of indirect expropriation or governmental action tantamount to expropriation, such as confiscatory tax regimes, that might warrant special investigation.

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).

As investment disputes are practically 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 34 in “Resolving Insolvency” in the World Bank’s 2019 Doing Business Index.

For three (3) years, under the sponsorship of now Economy Minister Franz Fayot, Luxembourg has been engaged in an effort to overhaul its bankruptcy and creditors laws. Covid has  delayed that process, however, the combination of the number of business failures due to Covid with some of the outdated debtor/creditor laws have increased pressure on reform.

At the end of 2019, the Luxembourg banking sector comprised 127 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. The CSSF has made major strides in oversight and enforcement of the financial sector rules, regulations and laws. Indeed, its size has grown to 1,000 staff, making it larger than the entire Luxembourg army.

Investment Incentives

Luxembourg is considered to have a very attractive tax profile 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. Until recently, the European Court of Justice has been increasingly stringent on individual tax treatment including a ruling specific to Luxembourg and its tax treatment of Apple. During 2020, the ECJ deemed to relax its approach in a case involving Amazon. The full impact of these decisions and their impact on judicial review of these arrangements has yet to be fully determined.

U.S. and foreign firms can 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 attempted to  improve the work visa process in past years, in response to 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 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.

Enforcement on the respect of data storage rules, such as the EU GDPR, rests with the Luxembourg data protection regulator CNPD.

Real Property

Secured interests in property in Luxembourg, both movable and real, are recognized and enforced through intangible  property and commercial 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.

Luxembourg ranks 31 out of 190 countries in the World Bank’s 2019 Doing Business Report for ease of Registering Property.

Luxembourg law allows the securitization through enforceable intangible debtor/creditor instruments 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, a fund, or an individual person. Securitization companies can benefit from EU directives and double tax avoidance 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, trade secrets, and copyrights are the principal forms of intellectual property rights (IPR) for which protection and enforcement are available in Luxembourg to companies, funds, and individuals.  Luxembourg has been proactive in developing its IPR standards and participates in all the major IPR treaties and conventions, including:

  • Berne 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 a member state of the World Intellectual Property Organization (WIPO).

Adequate steps have also been taken to implement and enforce the 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 ex-officio powers 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 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 and the train station (Gare), 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 IPR, ordinary law applies.  The merits of a counterfeit goods case are decided by judicial proceedings; thus, the ordinary law courts are responsible for deciding whether there are valid and sufficient grounds for a case.

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

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

In March 2018, the Luxembourg Government voted to approve the legislative measures necessary to bring Luxembourg’s new IIPR regime into force, which retroactively came into effect starting January 1, 2018.  The new regime is fully consistent with all recommendations made by the Organisation for Economic Cooperation (OECD) Forum on Harmful Tax Practices, including those set out in the OECD/G20 BEPS Project Action 5 Final Report published in October 2015.  Under the regime, eligible net income from qualifying IPR assets benefits from an 80% exemption on income taxes. Consequently, a corporate taxpayer based in Luxembourg City with eligible net income would be taxed on such income at an overall (i.e. corporate income taxes plus municipal business tax) effective tax rate of 5.202 percent.  Qualifying IPR assets also benefit from a full exemption from Luxembourg’s net wealth tax.

Luxembourg is not included in USTR’s 2020 Special 301 Report or 2019 Notorious Markets List.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at .

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 can 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 had become more selective in their lending practices pre-COVID.  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.

Luxembourg continues to be recognized as a model for fighting money-laundering activities within its banking system through the enactment of strict regulations and monitoring of fund sources. Indeed, the number of enforcements reflects the degree to which the government remains committed to fighting money-laundering.  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 in Banque Internationale a Luxembourg (BIL), formerly Dexia, in 2008.  Now, in response to COVID, the government has adopted initiatives to assure both liquidity and solvency of banks.

At the end of 2018, 127 credit institutions were operating, with total assets of EUR 900 billion during the first quarter of 2020 (USD 1,060 billion), and approximately 26,000 employees.

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

Due to the U.S. FATCA reporting requirements, local retail bank Raiffeisen refuses U.S. citizens as clients.  However, two banks have offered to serve U.S. citizen customers despite the additional reporting requirements: 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. The CSSF continues close supervision and oversight of virtual currencies.

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 an original proponent of the euro currency and adopted it immediately at inception as part of the 1999 “Eurozone” that replaced their former domestic currencies.  The European Central Bank is the authority in charge of the euro currency. Pre-COVID, Luxembourg had taken steps to move toward a “cashless” economy.

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, is truly international and expanding rapidly.

An average 24-hour delay period is 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. 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 auspices 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% of bonds, 40% of stocks and 3% 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 private 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, Encevo, 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 does retain barriers to entry is freight air transport, due to the dominance of the majority state-owned Cargolux. It is the largest consumer of U.S. production in Luxembourg in terms of value, owing to its all-Boeing fleet of 27 747-freighter aircraft (including 14 of the new-generation 747-8F, of which Cargolux was a launch customer). It received a capital increase from the Luxembourg government in return for a larger state ownership share of the company.

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

Private enterprises can 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, 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, government officials 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.

Court processes with regard to SOEs are transparent and non-discriminatory.

Privatization Program

Foreign investors can 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 do not appear to have impacted freedom of investment in the private sector.

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. It currently lists over $320 billion of green bonds. LGX is a dedicated platform for issuers and investors focused on green instruments. With over 750 securities, denominated in 32 countries, this represents a 50% global market share for green bonds. In its offer, LuxSE 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 can do their work freely and often directly integrated into the review, oversight and supervisory process.

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 ( ).

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. The government also adopted measures to make all public transportation free.

In 2018, Luxembourg also presented an action plan for the implementation of the United Nations Guiding Principles on Business and Human Rights.

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 in the Ministry of Economy and composed of representatives from several ministries, business associations and trade unions. Contact information is here:

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. Recently, a mayor was implicated in abusing his office for personal purposes.  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.

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 of being 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 February 14, 2018, a new law implementing a substantial part of the fourth anti-money laundering (AML) directive was published in the Official Journal of Luxembourg.    Local police, responsible for combating corruption, also 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 December 2003 and ratified in November 2007).

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

Resources to Report Corruption

The Contacts at government agency or agencies are responsible for combating corruption are:

Director of Criminal and Judicial Affairs
Ministry of Justice
13 rue Erasme
L-1468 Luxembourg
Telephone: +352 247 84537

Contact at “watchdog” organization

Section Chief
Financial Sector Surveillance Commission (CSSF)
283, route d’Arlon L-1150 Luxembourg
+352 26 251 2217

Luxembourg has consistently ranked among the most politically stable and overall safest countries in the world.  There have been no recent 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,  many of the demonstrations which do 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 periodic European ministerial meetings).  There are no known nascent insurrections, belligerent neighbors, or other politically motivated activities.

In response to the May 25, 2020 death of George Floyd in the United States, there was a protest of approximately 1,500 people outside the U.S. Embassy. It was peaceful and without incident.

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 neighboring Belgium, France and Germany.  Foreign (non-Luxembourger) workers are treated by Luxembourg the same as nationals, including free COVID testing.  Work permit constraints have been 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 risen from 5 percent to 7.2 percent because of the COVID-19 pandemic.

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 neighboring France and Germany.

Luxembourg has a strong 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 (apart from civil servants).

Collective bargaining agreements are common in the public and private sectors. The country has a labor dispute resolution mechanism in place called office de la conciliation (conciliation office).

The U.S. International Development Finance Corporation (DFC) does not currently work in Luxembourg.  Luxembourg is a member of the Multilateral Investment Guarantee Agency (MIGA).

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $74,863 2019 $71,105 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $825,025 2019 $766,099 BEA data available at
Host country’s FDI in the United States ($M USD, stock positions) 2018 $353,596 2019 $297,052 BEA data available at
Total inbound stock of FDI as % host GDP N/A N/A 2019 180.6% UNCTAD data available at

* Source for Host Country Data: Luxembourg Statistics office STATEC

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 3,759,144 100% Total Outward 4,603,138 100%
United States 617,462 16% United Kingdom 732,974 16%
Bermuda 510,429 14% Ireland 731,335 16%
United Kingdom 495,524 13% The Netherlands 712,628 15%
Ireland 455,191 12% United States 616,835 13%
The Netherlands 352,738 9% Switzerland 392,154 9%
“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 4,790,703 100% All Countries 2,229,956 100% All Countries 2,560,747 100%
United States 1,201,425 25% United States 581,288 26% United States 620,137 24%
France 449,618 9% France 193,308 9% France 256,310 10%
United Kingdom 379,510 8% Germany 184,445 8% United Kingdom 252,917 10%
Germany 372,930 8% Ireland 159,709 7% Germany 188,485 7%
Netherlands 212,444 4% United Kingdom 126,593 6% Italy 146,147 6%

Economic Specialist
U.S. Embassy Luxembourg
22 Boulevard Emmanuel Servais
L-2535 Luxembourg, LUXEMBOURG

2020 Investment Climate Statements: Luxembourg
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