European Union Capital
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Founding member of major international organisations
BENELUX | Council of Europe | European Union | NATO | OECD | United Nations | WTO
- An open, diversified, stable economy
- Top GDP performance
- Sound macroeconomic fundamentals
- State-of-the-art infrastructures
- Excellent connectivity to markets in the EU and worldwide
- Central location within reach of 60 % of total EU market in less than a day
Distance from capital to
- France: 10 km (Paris 380 km)
- Germany: 20 km (Frankfurt 250 km)
- Belgium: 15 km (Brussels 200 km)
- And just about one hour by plane to: London, Zurich, Munich, Amsterdam, Paris, Frankfurt
An open, diversified and reliable partner
For more than two decades, Luxembourg’s economy has consistently punched above its weight, with strong growth and trade surpluses, low unemployment and inflation in a stable, innovative environment for business and consumers alike, repeatedly out-performing neighbouring countries.
Thanks to fast and flexible action by Luxembourg’s Government and the private sector, stability has been maintained throughout the global economic and financial crisis. The country boasts the highest per capita income in the OECD, growth in employment in the financial sector and a domestic banking system that remains well capitalised by international standards. Luxembourg, is one of the few European countries to receive a maximum score (triple A) simultaneously from the three rating agencies (Moody's, Standard & Poor's and Fitch).
A rewarding tax climate
Luxembourg’s legal and tax environment is a principal attraction for companies looking for a location for their headquarters. The country has developed favourable tax rules for both corporations and individuals.
Companies in Luxembourg are subject to a 29.22% corporate income tax rate. In Luxembourg City, the maximum effective overall tax rate is 28%.
According to a recent report by the World Bank and PwC on total tax rates, which compared business taxes and pre-tax profits, Luxembourg ranked lowest in the EU. Luxembourg ranks 15th out of 189 economies worldwide and is the best in Europe for average tax liabilities and time required to file tax returns.
Comparison of the Total Tax Rates across the EU
Source: World Bank Group and PwC, Paying Taxes 2014: The global picture
A favourable tax regime
Taxation in Luxembourg of foreign-source income is eased through numerous double taxation treaties. If no treaty applies, a foreign tax credit is available under domestic law.
Luxembourg’s double tax treaty network
Luxembourg does not impose any withholding tax on the payment of interest, except for very specific cases. There is no withholding tax on royalties paid to resident or non-resident companies related to patents, trademarks and know-how. Furthermore, there is no withholding tax on liquidation proceeds.
The country has a favourable tax regime for income, gains or net worth related to the substantial holding of shareholdings. Under the participation exemption regime, there is an exemption from Luxembourg corporate income tax on dividends received from qualifying entities in the European Union or treaty-related countries (under certain conditions). Likewise, capital gains derived from the sale of qualifying participations can be exempt. In certain cases, the amounts received upon the partial or total liquidation of a subsidiary may also benefit from the participation exemption.
Luxembourg encourages operational companies to invest in their production assets. A 7% tax credit is granted on qualifying investments acquired over a year (and 3% on the amount of the investment exceeding €150 000). For investment in ecological equipment and projects, these rates are increased by a further 1%. In addition, a tax credit of 13% is granted for additional investments made during the tax year. These tax credits reduce the corporate income tax and if unused may be carried forward for 10 years.
Special tax treatment for income from IP rights
A tax scheme to foster innovation and intellectual property management includes an 80% exemption of income from the use, exploitation and/or disposal of qualifying IP rights, bringing the effective tax rate down to 5.76%. Three situations are covered:
- The remuneration for exploitation of IP rights;
- The use of IP rights by a company for its own activity;
- The disposal of IP rights.
The exemption regime applies to income from patents, trademarks, designs, models, software copyrights and domain names. Moreover, these IP rights are fully exempt from net worth tax.
Attractive labour costs
An employee in Luxembourg would cost less to the employer and get a higher salary than in other EU countries due to low personal income tax and social security charges. Yet, high social security benefits allow most Luxembourg employees not to require additional private health insurance.
A recent PwC survey showed a married couple with two children could expect to receive 71% of their gross salary at a total cost of 114% to the employer. This compares to 62%/119% in Germany and 71%/191% in France.
A reliable business environment
Luxembourg’s strong performance, even during economic downturns, is founded on shrewd policies. Diversification has been a major priority since the 1960s, when the country began to move away from its reliance on the steel industry into high-tech manufacturing and banking. Today’s economy is a balanced blend of financial services, high value-added manufacturing, retail, e-commerce, communications and logistics services, with a focus on exporting goods and services throughout the European Union and beyond.
Stability is another key feature. The Government fosters close relationships with industry and business to identify, understand and answer challenges. Luxembourg’s well-established “tripartite” system brings together the Government, employers and unions to discuss important issues and reach consensus. Employer-employee dialogue is institutionalised as part of the “Luxembourg model”, with an emphasis on negotiation and compromise rather than costly disruptions.
The stability of the Government’s finances is just as important. Like taxes, public debt is low - in 2011 it numbered just 18% of total GDP, among the lowest in the European Union. Corporate taxes support investment and entrepreneurship, with top rates of 28% (2013), while effective rates can be as low as a single digit. Value-added tax at a standard rate of 15% (2013) is the lowest in the EU.
A strategic gateway to Europe
Located at the heart of Europe, with the continent’s three top industrialised nations as its neighbours, Luxembourg is the ideal gateway to a European market with 500-million-plus consumers. Thanks to this fortuitous geography, 80% of the European Union’s GDP can be served within less than a day. Taking full advantage of this opportunity, Luxembourg has established itself as a key hub for logistics, ICT, life sciences, clean technologies and IP.
Markets and decision-making centres are close by: It takes just over two hours to reach Paris by high-speed train; by plane, London and Milan are 90 minutes away, while Frankfurt is a mere 30-minute flight. Closer to home, the neighbouring countries form part of a “Greater Region” which looks to Luxembourg as an economic engine. The region is a rich source of skills with more than 150,000 commuters crossing into Luxembourg each day.
Global and regional road, rail, air and telecommunications infrastructure are all first rate and backed with generous government support. Cargo airlines serving Luxembourg airport fly to some 100 destinations on all continents. The country has one of Europe’s highest rates of broadband internet use and the “backbone” connections with the rest of the world are ensured state-of-the-art by substantial private and public investment.
In addition to home-grown global industry leaders ArcelorMittal, RTL Group and SES, many other varied businesses have chosen Luxembourg for their European headquarters, including internet telephony leader Skype, car components manufacturer Delphi, online retailer Amazon and glassmaker Guardian.
Luxembourg is one of the three administrative capitals of the European Union and home to major institutions, including the European Court of Justice, the European Investment Bank, the European Court of Auditors among other administrative departments of the European Commission and the European Parliament.
Distance to main European centres
Greater Region: One of the most dynamic regions of the EU
A skilled multilingual workforce
Its diminutive size has compelled Luxembourg to look outward, becoming expert at importing knowledge via long-term immigrants and cross-border commuters. Of the more than half-million people living in the country, 45.3% are non-Luxembourgish and of the 368,260 people working here, 44% are non-resident commuters. Overall, this adds up to two-thirds of the workforce originating from outside the country.
A study from 2010 by the national statistics office shows that 36% of commuters had completed higher education and 50% had completed further secondary education, both figures above those for the resident workforce. Resident foreigners are a mix of the highly educated and unskilled manual workers. Immigrants come from around the world and offer employers a range of languages and cultural background.
The public school system educates children to a level of fluency in French, German, English and Luxembourgish. A national public university was established in 2003, with a special focus on post-graduate educational programmes and public research centres. Extensive life-long learning programmes to enable employees to acquire new skills receive extensive support from government and industry.
A fairy-tale country
One of the world’s smallest countries, and one of its wealthiest. An ultra-modern global financial capital and a UNESCO World Heritage site. The world’s only Grand Duchy and an international paragon of political stability and personal safety.
Graced by stunning, modern architecture literally a stone’s throw from medieval castles and graceful ruins, Luxembourg’s reputation as a fairy-tale land is rooted in more than 1,000 years of history – yet its 21st-century quality of life is legendary and well-deserved, as recognised in its position at or near the top of the Better Life Index (OECD), the Best Quality of Life Worldwide Survey (ECA), the Global Innovation Survey (Insead), and the Global Competitiveness Index (IMD), among others.
Luxembourg leads in virtually every aspect of contemporary life. Healthcare? Affordable and high quality. Transportation? A soaring, world-class airport with easy connections throughout Europe and the world, a well-developed rail system, an urban bus system and bike paths that enable you to leave your car at home, and an upcoming tram in the capital.
In a country whose inhabitants work hard on a global scale, there’s plenty of local play. From the rocky outcrops of “Little Switzerland” and rolling Moselle valley vineyards, with hundreds of trails for hiking and biking, to first-class gyms, sports facilities and children’s parks - staying fit and enjoying the outdoors is a popular pastime for all seasons.
There is also a range of sporting activities on offer, including six golf courses in the country and a further 90 or so within easy reach. Cross-country skiing is everywhere while world-class downhill skiing in the Alps is within a reasonable drive.
Sharing its borders with France, Germany and Belgium, weekend (and longer) tourism is a constant temptation (not to mention easy and fast access to all of Europe for holiday getaways). Reverse tourism is well developed in a country with a wide array of quality hotels for tourists as well as business visitors.
So whether you are coming to Luxembourg for a weekend, a year or a lifetime, you will fall under its spell.
For families, Luxembourg offers some of the best-funded public schools in the world, and first-rate private and international schools for children of virtually all nationalities and linguistic backgrounds. The well-funded health system regularly scores highly in international comparison surveys and society is peaceful, with very low rates of crime and a high feeling of personal security. (According to Mercer, Luxembourg ranks among the safest cities in the world.)
New laws on immigration and double nationality have opened new worlds for expatriates and their families. Since the reform in October 2008, the process for acquiring work and residence permits, and eventually citizenship, has been streamlined, with skilled talent now finding it easier to settle into an ever-more welcoming environment.
All these factors combined explain a common refrain among the world of Luxembourg expatriates: “I came with my family for two years. That was 15 years ago…”
Culture in Luxembourg
A great place to live means much more than statistics – clean air, green spaces, easy travel at home and abroad, good schools, congenial and multinational friends, safe parks, and rich and vibrant cultural life, all number among expatriates’ understandable demands.
With nearly half the country’s 549,680 residents coming from elsewhere – there are more than 100 nationalities - Luxembourg is one of the world’s premier melting pots, a rich blend of languages, cultures, traditions and histories. Officially, the country works in three languages: Luxembourgish, French and German. Unofficially, most people speak English as well.
Arriving in Luxembourg by plane, train or automobile and the impression is immediate: stunning forests and emerald countryside and farmland, charming historical plazas in medieval towns, and the capital city’s centre, split in half by the plunging, green Grund valley and park. Within walking distance are architectural masterpieces such as the Museum of Modern Art, designed by I.M. Pei, and the Philharmonic Hall, literally across the road from the spectacular towers and headquarters of various European Union institutions.
Luxembourg ranks among Europe’s top two countries for residents’ satisfaction – the fast pace of modern life and dynamic business activity has not eclipsed European loyalty to bon vivant tradition. Renowned for its many Michelin-starred restaurants, Luxembourg offers an impressive menu of cuisines and restaurants, pubs, cafés, specialty food stores and clubs. The country’s own first-rate wines, almost all consumed domestically, are among the wine world’s best-kept secrets.
Along with the conversations in all languages at cafés, children’s parks, plazas restaurants, stores, offices and theatres, it all adds to an infectious cosmopolitan feeling.
Lovers of the arts will not be disappointed. The world’s best musicians, bands and jazz artists, include Luxembourg on their concert schedule. Classical soloists and symphony orchestras routinely perform at the world-class Philharmonie, home of the country’s widely respected symphony orchestra, while international pop and rock superstars regularly appear at the Rockhal.
Add the country’s multiple festivals, many of them steeped in centuries of tradition, museums and robust film, theatre and dance venues, and the cliché “something for everyone” holds true.
In short, a quintessentially multicultural, multilingual, diverse cultural centre, Luxembourg is a European microcosm packed into a small, exceptional place.
If you are thinking of working and living in Luxembourg and you wonder what the quality of life is like here, then watch the testimonials below about expatriates that have chosen to call Luxembourg their home.
Bringing ideas to life
Luxembourg began the new millennium with an ambitious programme to become a recognised leader in the 21st century’s Knowledge and Technology Society.
The City of Sciences, whose construction is nearly complete, assembles university departments, the National Research Laboratory, and technology businesses in a single location.
At the same time, the National Research Fund’s resources have been increased to finance a multitude of projects. The public budgets dedicated to research in Luxembourg have increased from €28 million to €280 million between 2000 and 2012, and the Government’s goal is to spend 3% of GDP on research and talent recruitment by 2020.
Research is focused on materials, coating technologies, molecular biosciences, IT and communications security, and energy and environmental technologies. In 2008, a $200 million, 5-year cooperative programme with major US research institutions was launched in the field of molecular diagnostics and is intended to produce substantial advances in personalised medicine.
An equally ambitious programme to stimulate private-sector innovation has matched public sector R&D investment. A comprehensive set of legal, tax and financial incentives aimed at generating, managing and commercialising intellectual property rights are at the centre of this strategy.
- 80% of revenues or capital gains from IP are tax exempt; R&D grants reaching up to 75% of expenditure for SMEs; and start-up assistance of up to 1 million euros may be granted to innovative young companies;
- Technology transfer activities in consulting, cooperation with National Research Laboratories and transfer of highly qualified talent to SMEs receive financial assistance;
- Service and organisational innovation gets support, while SMEs enjoy free consulting to help them apply for government assistance programmes.
Capital expenditures can be relieved by cash grants and low interest loans. Public funding levels can reach up to 35% of capital expenditures for large companies, and more than 50% for start-ups. Investors may also apply to the Government or regional authorities for space in national or regional business parks. Start-ups may qualify for facilities in one of several incubators.
The following areas are the focus of private-sector innovation programmes:
- Automotive parts and equipment;
- Plastics and other new materials and coatings;
- Information and communications technologies;
- E-commerce and new media;
- Health technologies, particularly diagnostics;
- New energy sources and eco-technologies;
- Financial services, products and software.
International companies - among them Goodyear, Delphi Automotive, Guardian Industries and DuPont - have taken advantage of the fertile soil for R&D and innovation in Luxembourg.
A state-of-the-art IT infrastructure and ultra-broadband international connectivity support these R&D and Innovation Centres. Internet security, with a comprehensive countrywide electronic signature programme and security awareness initiatives, are an integral part of this high-value infrastructure and services environment.