INVESTMENT CLIMATE OF LUXEMBOURG

CHRISTIAN C. VANESSA

LuxembourgLuxembourg is a tiny European country, bordered by Belgium,

France and Germany. • Capital: Luxembourg City

• Population: 556 726 (2016) World Bank

• Currency: Euro• King: Henri, Grand Duke of

Luxembourg• Official languages: German,

French, Luxembourgish• GDP 2015 estimate

Total-$57.9 billion (71st) Per capita - $103,187 (3rd)

- HDI (2014) 0.892 (very high) · 19th

Luxembourg Economy

Over the past five years, Luxembourg’s economy has

evolved significantly, through greater sectorial diversification

and openness in both regulations and foreign direct

investment opportunitiesFor decades, international businesses have chosen Luxembourg to base their operations. The pro-business environment and supporting policies implemented by the Luxembourg government have greatly benefited the international popularity of Luxembourg as an investment location.

Luxembourg Attractions

●Solid workforce●Stable political climate●Transparent and firm regulatory framework●Exceptional quality of

life●Minimum taxation

The country has a strong and stable economy, and its GDP per capita consistently ranks among the highest in the world. Luxembourg is widely known for its major international financial centre. There are no major sectors in Luxembourg in which foreign investors are denied national treatment. Bureaucratic procedures, including those for licenses and permits, are sufficiently streamlined and transparent. Foreign investors are allowed to participate equally in ongoing privatization programs, and the bidding process is transparent with no barriers erected against foreign investors at the time of the initial investment or after the investment is made.

FDI The Luxembourg government actively seeks foreign investment, and there are no special procedures for the approval of foreign direct investment. The government particularly encourages friendly industries, such as communications, finance, and information technology, as a way to diversify the economy and provide new employment in industries with high value added. Responsibility for attracting foreign investment lies with the Board of Economic Development. According to the board, Luxembourg offers a full range of tailored investment incentives for new ventures.

Luxembourg is a very attractive tax location for conducting business: low effective corporate tax rates (currently 21%); the lowest VAT (value-added tax) rate in Europe at 17%

Doing business in Luxembourg statistics (2015)

Globally, Luxembourg stands at 80 in the ranking of 189 economies on the ease of starting a business. Luxembourg eased business start-up by speeding up the delivery of the business license. According to data collected by Doing Business, starting a business there requires 6 procedures, takes 18 days, costs 2.00% of income per capita and requires paid-in minimum capital of 22.60% of income per capita

Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevantregulations.

Top Investment sectors

• Biotechnology / Health Technologies: The biotechnology sector enjoys special tax rates in Luxembourg. Many US biomedical firms and research institutions have announced major investment plans in Luxembourg.

• E-Commerce: Luxembourg has a well educated and multi lingual workforce, which is an attractive factor for investors who intent to set up headquarters in the EU. “LuxConnect” which is intended to improve bandwidth connectivity and availability.

• Logistics: Luxembourg has a good network of rail, road network. Besides, it also has good air connectivity to all major cities in the EU.

Merits of the economy

• Advantageous geographical location in Europe

• Open and safe country• Easy communication with public

authorities• A business-friendly regulatory

framework• Great political and social stability• A highly skilled and multilingual

international workforce• Excellent infrastructures• A high quality of life

Major Setbacks• The main hindrance to investment

in Luxembourg is in the high cost of living and high level of consumer demands. there are sometimes tax disadvantages associated with investing in Luxembourg funds.

• INVESTORS should also look closely at the charges associated with a Luxembourg investment. Often they are higher than the charges back at home. Time should be spent carefully studying the cost, as the difference can be over 5 percent.

References Doing Business Economy Profile 2015 : Luxembourg Available at: https://openknowledge.worldbank.org/bitstream/handle/10986/23291/Doing0business0iciency000Luxembourg.pdf?sequence=1&isAllowed=y. [Accessed 08 March 2016]Invest in Luxembourg City | Invest in EU. 2016. Invest in Luxembourg City | Invest in EU. [ONLINE] Available at: http://www.investineu.com/content/invest-luxembourg-city. [Accessed 08 March 2016].Luxembourg: country overview — EUbusiness.com | EU news, business and politics. 2016. Luxembourg: country overview — EUbusiness.com | EU news, business and politics. [ONLINE] Available at: http://www.eubusiness.com/europe/luxembourg. [Accessed 08 March 2016].Luxembourg's Attraction to Investors - The Secret Is Out - NYTimes.com. 2016. Luxembourg's Attraction to Investors - The Secret Is Out - NYTimes.com. [ONLINE] Available at: http://www.nytimes.com/1995/04/08/your-money/08iht-lux.html. [Accessed 08 March 201610 reasons to invest in Luxembourg - Luxembourg. 2016. 10 reasons to invest in Luxembourg - Luxembourg. [ONLINE] Available at: http://www.luxembourg.public.lu/en/investir/10-raisons-investir/index.html. [Accessed 08 March 2016].

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