At a Glance
AT THE HEART OF EUROPE
POLITICAL - EUROPEAN UNION CAPITAL
European Commission | European Court of Auditors | European Court of Justice | European Investment Bank | European Investment Fund | European Parliament| European Stability Mechanism
ECONOMIC - INTERNATIONAL AND INNOVATIVE
international financial center | European broadcast and digital media, e-commerce, trusted data and logistics hub
GEOGRAPHIC- SHORT ROUTES
within 1 hour by air to London, Paris, Frankfurt, Zurich, Amsterdam, Geneva, Munich | 70% of Europe’s GDP within a day’s drive | outstanding connections to international markets
A TRUSTED INTERNATIONAL PARTNER
….AND FOUNDING MEMBER OF MAJOR INTERNATIONAL ORGANIZATIONS
BENELUX | Council of Europe | European Union | NATO | OECD | United Nations | WTO
GATEWAY TO EUROPE
Located at the crossroads of Europe’s three most important economies - France, Germany and the Benelux countries - Luxembourg is the gateway of choice to a market of more than 500 million consumers, with 70% of the EU’s GDP generated within a day’s drive. This geographical advantage has enabled Luxembourg to become a significant European hub for multimodal logistics, video and data content storage, distribution and delivery, as well as global financial products.
Large markets and major business centers are close by: Paris is just two hours away by high-speed train. By air, London, Zurich and Amsterdam are within an hour, while Frankfurt is a mere 30-minute flight. Closer to home, the country and the neighboring areas of France, Germany and Belgium form ‘Greater Luxembourg Region’ with a population of 11 million that looks toward the grand duchy as its anchor and economic engine. The region is home to a rich source of skills, with over 40% of Luxembourg’s workforce commuting daily into the country.
International and regional road, rail, air and telecommunications infrastructure are first-class and a strategic government policy priority. Freight airlines link Luxembourg’s international airport with 100 destinations on all continents. The country has one of Europe’s highest broadband internet usage rates, and enjoys state-of-the-art backbone connections with the rest of the world thanks to substantial private and public investment.
PROVEN TRACK RECORD
In addition to home-grown industry leaders such as global steelmaker ArcelorMittal, European media giant RTL Group and international satellite services provider SES, many global players including e-commerce leaders Amazon.com and Rakuten, payment services provider PayPal, internet telephony leader Skype and automotive components manufacturer Delphi have chosen Luxembourg to establish their European headquarters and provide shared services.
Its role as one of three main capitals of the European Union add to the country’s strategic weight and international appeal. The grand duchy is home to major EU institutions including the European Court of Justice, the European Investment Bank, the European Court of Auditors as well as several divisions and administrative services of the European Commission and the secretariat of the European Parliament.
DRIVING DISTANCE TO MAIN EUROPEAN BUSINESS CENTERS
GREATER LUXEMBOURG REGION: ONE OF THE MOST DYNAMIC REGIONS IN THE EU
CONVINCING TRACK RECORD
For more than three decades, Luxembourg’s economy has consistently outperformed its European partners, with above-average growth fueled by strong international competitiveness, a fertile ground for technological and financial innovation, and a highly attractive environment for international businesses to locate key corporate functions and top talent.
Thanks to timely and shrewd government policies and innovative business development, GDP and employment growth have continued through the economic and financial adjustments that had become necessary following global financial turmoil. Today the country continues to boast the highest per capita income in the OECD, while the financial sector and the domestic banking system are among the strongest by international yardsticks. With public finances in a structural surplus by EU measures, Luxembourg is among the very few EU countries that still enjoy the highest AAA credit rating from all three global agencies.
REWARDING LEGAL, REGULATORY AND TAX CLIMATE
Luxembourg’s legal, regulatory and tax regimes are key reasons for locating corporate headquarter functions. The country offers a flexible corporate legal system and tax rules that benefit both businesses and individuals.
Various tax exemptions, deductions and credits to promote investment and innovation can significantly impact the effective tax rate.
According to a recent report by the World Bank and PwC on total tax burden, which compares total business taxes and pre-tax profits in 189 countries, Luxembourg ranks next to lowest in the EU. Luxembourg also ranks top in Europe and 15th worldwide for average tax liabilities and time required to file tax returns.
TOTAL TAX BURDEN ACROSS THE EU
Source: World Bank Group and PwC, Paying Taxes 2016
Taxation of foreign-source income is eased through numerous double taxation avoidance treaties. If no treaty applies, a foreign tax credit is available under domestic law.
LUXEMBOURG’S DOUBLE TAXATION AVOIDANCE TREATY NETWORK
Source: KPMG, 2015
Generally speaking, Luxembourg does not apply a withholding tax on interest payments, nor on royalties paid to resident or non-resident companies relating to intellectual property such as patents or trademarks. The same rule applies to liquidation proceeds.
The country applies an attractive rule for corporate income, capital gains and net worth taxes in the case of substantial shareholdings. Amounts received upon the partial or total liquidation of a subsidiary may also benefit from this participation exemption rule.
The Luxembourg tax code encourages operational companies to invest in productive assets and grants a variety of tax credits for investment in certain asset categories.
Income or capital gains derived from the exploitation or sale of intellectual property - patents, trademarks, copyright on software, designs and models as well as domain names - may, under certain conditions, be partially exempted from taxation. Moreover, such IP rights are fully exempt from the corporate net worth tax.
HIGHLY PRODUCTIVE, COMPETITIVE
A skilled and ambitious workforce, a longer working week than some of its neighbors and historically a near-absence of labor disruptions are factors in Luxembourg’s comparatively higher labor productivity in all sectors of the economy.
Low social security contributions paid by both workers and employers have a positive impact on the total cost of labor to employers and the net take-home pay of employees.
Strong GDP and employment growth have kept unemployment comparatively low, while high income levels and a dynamic working environment attract foreign talent. Currently foreigners make up some 70% of total employment, while more than 40% of the workforce commute daily into Luxembourg from neighboring countries.
No wonder Luxembourg ranks among the world’s most competitive countries, as documented by global surveys from Switzerland’s Institute for Management Development and the World Economic Forum.
CREATIVE, PREDICTABLE, TRUSTED
Luxembourg’s economic performance is built on creative but carefully calibrated diversification and innovation policies, with a strong emphasis on foreign investment and technology. Today’s economy is a balanced blend of international financial services and technology, high added-value manufacturing, e-commerce, media and internet services, communications and logistics, construction and tourism.
Government policies are designed and developed through exchanges with business and employee representatives in an environment of mutual trust, leading to solutions that avert disruption and enjoy support from the majority of stakeholders.
Even after the substantial efforts made during the financial crisis to stabilize the banking sector, the state’s financial position has moved back into structural surplus. The debt/GDP ratio is comfortably below 30%, and the country is among the few in the EU that still enjoy the highest AAA credit rating from all three global agencies. This makes Luxembourg a leading and trusted participant in European and global financial markets.
Its small size has compelled Luxembourg to look outward, welcoming valuable human talent via immigration and attracting commuter workers from neighboring regions. Some 70% of the total workforce consists of resident foreign nationals or cross-border commuters.
Non-native employees are a mix of highly educated scientific, technical, professional and administrative personnel as well as unskilled manual workers. Immigrants come mainly from EU countries (85%) and bring a broad range of language and cultural backgrounds. US immigration (1%) has substantially increased lately, driven by the development of internet and manufacturing companies as well as business and financial services.
The public school system instills a high level of fluency in French, German, English and Luxembourgish. A range of international private schools offer Montessori, French, UK and American education, while the English-language International Baccalaureate curriculum is also provided by several public schools. Two European Schools offering all EU member programs complement the highly diverse Luxembourg educational landscape.
More than 40% of Luxembourg high school graduates register for college education, with most undergraduate students entering universities abroad. The University of Luxembourg (uni.lu) focuses on science and technology, education and social sciences, economics and law. A strong focus on graduate studies at the university’s highly advanced interdisciplinary research centers has attracted leading international scientific figures and in turn has generated a strong business-university interaction and an increasing number of privately-funded chairs. The research centers include the Center for Security, Reliability and Trust (SnT), which focuses on software and internet security, and the Luxembourg Center for Systems Biomedicine (LCSB), specializing in neuro-degenerative diseases, as well as the Luxembourg School of Finance (LSF) and the Max Planck Institute Luxembourg (MPI). An extensive network of international inter-university cooperation agreements ensures rich exchanges of faculty and post-doc research talent.
Three independent National Research Institutes, the Luxembourg Institute of Science and Technology (LIST), the Luxembourg Institute of Health (LIH) and the Luxembourg Institute of Socio-Economic Research (LISER), provide R&D and Innovation support to the business community. The R&D programs of the university and the research institutes are funded by National Research Fund (NRF) and EU grants as well as business collaboration projects.
Rapid development of the academic and research infrastructure has attracted a large number of international researchers over the past five years including young STEM workers. Many have found their way into a growing tech start-up community, nurtured by an increasing offering of workspace, incubator and accelerator resources (coaching, mentoring, angel investment and VCs). The growth of the tech start-up ecosystem has been supported by the immigration-friendly blue card program for highly qualified talent and corporate transferees. The National Agency for Innovation and Research (Luxinnovation) provides administrative and financial support for qualified start-ups.
A large number of tech events, pitching sessions, business plan contests, international conferences and business summits characterize the start-up ecosystem, transforming Luxembourg into a dynamic hub of Europe’s tech industry.
BRINGING IDEAS TO LIFE
Luxembourg began the new millennium with an ambitious program to earn recognition as a leader in the 21st century’s knowledge and technology society. The Cité des Sciences in Belval brings together university departments, the National Research Institutes, the National Innovation Agency and technology businesses in a single location.
Today, Luxembourg is ranked among the EU’s five most innovative member states, reflecting its growing role as Europe’s youngest tech hub.
NATIONAL RESEARCH PRIORITIES
The resources of the National Research Fund (NFR) have been increased to finance a broader range of projects, in line with the government’s goal for Luxembourg to spend 3% of GDP on research and talent recruitment by 2020.
Research focuses on materials and coating technologies, molecular biosciences, IT, financial technologies and Internet security, energy and circular technologies. A $200 million, five-year program with major US research institutions has just been completed in the field of molecular diagnostics, fostering the development of world-class research infrastructure including the Center for Systems Biomedicine (LCSB) and Integrated Biobank of Luxembourg (IBBL) devoted to achieving substantial advances in personalized medicine.
Public sector R&D investment has been matched by a strategy to stimulate private-sector innovation through a comprehensive set of legal, tax and financial incentives aimed at generating, managing and commercializing intellectual property rights:
- Start-up assistance for young innovative companies.
- R&D grants.
- Partial tax exemption on IP-related revenues and capital gains.
- Financial assistance for technology transfer activities such as consulting, cooperation with National Research Institutes and recruitment of highly qualified talent by SMEs.
- Financial support for service and business model innovation.
- Free consultation assistance to SMEs applying for government programs.
Capital expenditure can be partially funded by cash grants and low-interest loans. Businesses may also apply for state or local government-owned land in national or regional business parks. Start-ups or small new foreign businesses have access to facilities in one of several incubators.
Private-sector innovation programs focus on the following technologies:
Aerospace, Automotive, Clean and Circular, Fintech, Materials, ICT, Health.
Among the international companies that have taken advantage of the fertile soil for R&D and innovation in Luxembourg, many including Goodyear, Delphi and Guardian Industries have chosen Luxembourg for their European R&D and innovation functions.
A state-of-the-art IT services infrastructure and ultra-high bandwidth international connectivity provide support to government policies and private R&D innovation efforts. Internet security technology and awareness, driven by the needs of the country’s financial industry, are reflected in comprehensive countrywide public key electronic signature (LuxTrust) and cybersecurity promotion (securitymadein.lu) programs that are an integral part of the country’s high-value trusted infrastructure and services environment.
NOT A FAIRY-TALE LAND
Among the world’s smallest countries yet one of its wealthiest, an ultra-modern global financial capital in a UNESCO World Heritage site, the world’s only grand duchy and an international byword for political stability and personal safety…
Graced by stunning modern architecture literally a stone’s throw from medieval castles and elegant ruins, Luxembourg’s reputation as a fairy-tale land is rooted in more than 1,000 years of history. However, its 21st century quality of life is recognized in the country’s position at or near the top of rankings including the Better Life Index (OECD), the Best Quality of Life Worldwide Survey (ECA), the Global Innovation Survey (Insead), and the Global Competitiveness Index (IMD).
Luxembourg is a leader in virtually every aspect of contemporary life. Healthcare? Affordable and high quality. Transportation? A gleaming, ultra-modern airport with easy connections throughout Europe and the world, a well-developed rail system, an urban public transport network and bike paths that let you leave the car at home.
The country’s inhabitants may be renowned for their productivity at work, but there are plenty of opportunities to play hard, too. From the hundreds of hiking and biking trails leading through the rocky outcrops of ‘Little Switzerland’ or the rolling Moselle valley vineyards, to first-class gyms, sports facilities and children’s parks, staying fit and enjoying the outdoors is popular year-round. The country has six golf courses and multiple tennis clubs, while cross-country skiing is available in the neighboring Ardennes, Eifel and Black Forest regions, and top-class downhill skiing is a half-day’s drive away in the Alps.
Those with cultural interests enjoy the many facilities for art, music and dance, as well as opportunities to develop children’s talent and skills.
Tourism is vibrant in a country with a wide range of quality hotels for leisure as well as business visitors. In a country that borders France, Germany and Belgium, weekend (and longer) trips are an ever-present attraction, and there’s fast and easy access to the whole of Europe for holiday getaways.
A FAMILY’S HAVEN
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-endowed public schools in the world, and first-rate private and international schools for children of all nationalities and linguistic backgrounds. The well-funded health system regularly scores highly in international rankings, while crime rates are low and personal security high. According to Mercer, Luxembourg is among the safest cities in the world.
New rules on immigration and double nationality have opened options for expatriates and their families. A recent reform has streamlined the process for acquiring work and residence permits, and eventually citizenship, making it easier for skilled talent to settle in a welcoming environment.
All these factors combined explain a common refrain among Luxembourg expatriates: “I came with my family for two years. That was 15 years ago…”
A CULTURAL HOTSPOT
A great place to live goes beyond statistics. Clean air, green spaces, easy travel at home and abroad, good schools, congenial and multinational friends, safe parks, and a rich and vibrant cultural life are all among the factors that make the expatriate experience both enjoyable and rewarding.
With nearly half the country’s residents coming from other countries - more than 170 nationalities are represented - Luxembourg is one of the world’s richest melting pots blending languages, cultures, traditions and histories. Officially, the country works in three official languages: Luxembourgish, French and German. But English is widely used in business and everyday life, not to mention Portuguese, which is spoken by about 20% of the resident population. The multiple languages heard in cafés, children’s parks, plazas, restaurants, stores, offices and theatres are a key element of Luxembourg’s infectious cosmopolitan ambience.
Arriving in Luxembourg by plane, train or automobile, the impression is immediate: stunning forests, emerald countryside and farmland, charming historic plazas in medieval towns, and a UNESCO-classified fortress in the center of the capital, perched atop the plunging Pétrusse and Alzette valleys with their riverside parks. Architectural masterpieces such as the Musée d’Art Moderne Grand-Duc Jean (Mudam) designed by I.M. Pei, and the (Philharmonie) concert hall by Christian de Portzemparc, which hosts the world’s most renowned symphonic orchestras as well as classical and jazz performers, are within walking distance.
Luxembourg ranks among Europe’s top countries for residents’ satisfaction – the fast pace of modern life and business has not dampened enthusiasm for bon vivant tradition. Renowned for its many Michelin-starred restaurants, Luxembourg offers an eclectic range of cuisines and styles at restaurants, pubs, cafés, brasseries, specialty food stores and clubs. The wines from the Moselle valley, almost all consumed domestically, are among the oenological world’s best-kept secrets.
US expats enjoy numerous activities organized by the American Chamber of Commerce in Luxembourg (Amcham), the Luxembourg American Chamber of Commerce (LACCNY), and the Luxembourg American Cultural Society (LACS).
Lovers of the arts will not be disappointed. The world’s leading musicians, bands and jazz artists include Luxembourg on their concert schedules. Classical soloists and symphony orchestras routinely perform at the Philharmonie, home of the country’s symphonic orchestra, while international pop and rock stars regularly appear at the Rockhal.
Add in the country’s many festivals, often steeped in centuries of tradition, museums and state-of-the-art film, theatre and dance venues, and Luxembourg truly offers something for every taste.
In short a quintessentially multicultural, multilingual, diverse center, Luxembourg is a European microcosm packed into a small, unique country.