Investment Climate Statements for 2016 - Luxembourg

Executive Summary

Luxembourg, the only Grand Duchy in the world, is a landlocked country in northwestern Europe surrounded by Belgium, France, and Germany. While the second-smallest European Union (EU) Member State (after Malta) with a population of only 560,000, Luxembourg is the richest country in the EU on a Gross Domestic Product (GDP) per capita basis. Over the past decade, Luxembourg’s economy has evolved and flourished significantly, through sectorial diversification and greater openness in both regulations and foreign direct investment opportunities. Diversification of the economy away from the historically-dominant financial industry (including banking and investment fund services) – after the decline of steel and iron-ore which made the fortunes of the country over a century ago - began in earnest in 2004. Key “future” (innovative) industries were selected and supported as economic growth vectors: logistics; information and communications technology (ICT); health technologies (including biotechnology and biomedical research); clean or “green” energy technologies (solar, wind, and alternative energy sources); and more recently, space technologies (focusing on satellite development and asteroid mining) and FinTech, the digitization of financial services, combining Luxembourg’s niche expertise in both finance and technology.

Luxembourg remains a financial powerhouse thanks to the exponential growth of the investment fund sector through the launch and development of cross-border funds, Undertakings for Collective Investments in Transferable Securities (UCITS), in the 1990s. Luxembourg is the world’s second-largest investment fund asset domicile, after the United States, with nearly $4 trillion of assets in custody in financial institutions.

  • The above dynamic sectors have fueled and sustained Luxembourg’s strong GDP growth rate (over 3%, or double the EU average) and 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.
  • Luxembourg is consistently ranked as one of the world’s most open and transparent economies and has no restrictions on foreign-ownership.
  • Luxembourg is consistently ranked as one of the world’s most competitive and least-corrupt economies.
  • Luxembourg has successfully combatted money-laundering and terrorist-financing, as well as tax evasion, through major fiscal reforms over the past decade. These reforms, culminating in 2015 with the elimination of banking secrecy (for non-resident account holders), the implementation of the bilateral Financial Account Tax Compliance Act (FATCA) agreement to comply with that U.S. law, and the automatic exchange of financial account information, have been lauded by the Organization for Economic Cooperation and Development (OECD) and have served to counter Luxembourg’s historic “tax haven” image.
  • The Government of Luxembourg (GoL) is actively seeking logistics companies to expand the new logistics hub at Findel Airport, integrated into the Luxair Cargo Center, the leading air cargo hub in Europe, and connected via railway and trucking routes to the new multimodal logistics platform center in Bettembourg, near the French border. Luxembourg is home to Europe’s leading all-cargo airline, Cargolux, and is currently expanding its air passenger terminal to accommodate more flights and the accompanying increase in usage (over two and a half million passengers per year, close to the current capacity of three million). Luxembourg is also prospecting for ICT companies to use the existing high-security, state-of-the-art datacenters, affording high-speed internet connectivity to major international data hubs (Paris, Frankfurt, Amsterdam). U.S. biomedical research and biotechnology firms are already actively invested and working in the growing BioBank, co-founded with U.S. institutes of biomedical research in Phoenix, AZ and Seattle, WA in 2008. 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.
  • However, as Luxembourg continues to modernize its regulatory framework – reducing bureaucracy and streamlining processes for work visas and new company registrations – issues of the size of the domestic market, government centralization, and labor market rigidities.

1. Openness To, and Restrictions Upon, Foreign Investment

Attitude toward 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 historically-strong bilateral relationship between the two countries. Commensurate with its open-mindedness shaped over decades by its small size and successful integration of immigrants, Luxembourg has maintained a very favorable and welcoming attitude toward FDI. Successive Luxembourg governments have furthered a pro-business attitude and flexibility with respect to business development and innovation - a unique model in Europe. Luxembourg has also increased its support in the form of incentives for new ventures, including capital investment subsidies, financing of equipment, and aid to start-up entities, through the state lending agency, SNCI. As a result, Luxembourg has attracted new investment in medium, light, and high-tech industries, especially in the areas of Health Technologies and Research and Development (R&D), and most recently in Space technology (satellites), and Financial Technology (“FinTech”). Luxembourg remains the most promising location for business investment in Europe, along with Switzerland, with the advantage of being a member of the European Union (EU).

Thanks to the competitiveness of its economy and its central European location, many international firms find it effective to locate European headquarters or holding companies in Luxembourg. The country's openness to foreign cultures, the high quality of life and consumer purchasing power, as well as the highly-qualified workforce, are competitive advantages. Approximately 46 percent of Luxembourg residents and over 60 percent of the workforce are composed of foreigners (non-Luxembourgers), mainly from EU countries (Italy, Portugal), and especially from neighboring countries (160,000 cross-border workers daily from Belgium, France and Germany).

There is no overall economic or industrial strategy that has discriminatory effects on foreign investors. There are no limits on foreign ownership or control (for example, all the banks are wholly-owned subsidiaries of their parent entities). General screening of foreign investment exists in line with that of domestic investment, with routine and non-discriminatory screening mechanisms. There are no major sectors/matters in Luxembourg in which foreign investors are denied national treatment (equivalent to domestic firms). While Luxembourg has sought to simplify administrative procedures, it still takes an average of six months for a company to register, even with the support of the Luxembourg Chamber of Commerce, which requires all commercial enterprises to become members by registering.

Other Investment Policy Reviews

The World Bank's Doing Business 2015 Economic Profile provides additional detail on Luxembourg's investment climate.

Laws/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). 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, like in other European countries, on EU-wide legislation. Monetary judgments are usually made in local currency (euro).

There is no government or authority interference in the court system that could affect foreign investors. Website:

Business Registration

The registration process for a new business in Luxembourg is now clearly summarized on the following webpage:

A new business must be registered with the Registry of Commerce (Registre du Commerce) Website: Foreign companies can use the site (after translating from the original French language via Google Translate), 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. The required minimum capitalization of a new company is 12,500 euro, which must be deposited in a bank account in the company’s name. After receiving a certificate from the Registry of Commerce, companies must register with and pay annual dues to the Luxembourg Chamber of Commerce (legally-mandated), 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.

There are many “micro” companies of fewer than ten employees (often with just one principal), and small- and medium-sized (SMEs) enterprises are generally understood as having fewer than 50 (small) and 100 (medium) employees. All companies, including foreign-owned ones, receive the same level of service.

Industrial Strategy

For the past few years, Luxembourg for Business, an agency created specifically to promote Luxembourg as an attractive location for economic activity, has acted as the investment promotion agency to facilitate foreign investment. The services are available to all investors, regardless of the amount of investment or number of employees. This agency works in close tandem with the Ministry of Economy and Foreign Trade and helps support trade missions abroad to recruit foreign investors. Programs are on the site:

For over a decade, Luxembourg has followed a diversification strategy to reduce its economic dependence on the historically-dominant financial sector. This diversification, focused on “new” and innovative sectors of activity, has yielded strong economic growth from the logistics, information and communications technology (ICT), health technologies, “green” energy, and now space technology and satellites. The GoL also strongly supports manufacturing to increase job growth via incentives for plant openings and hiring.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is no overall economic or industrial strategy that has discriminatory effects on foreign investors. There are no limits on foreign ownership or control (for example, all the banks are wholly-owned subsidiaries of their parent entities). General screening of foreign investment exists in line with that of domestic investment, with routine and non-discriminatory screening mechanisms. There are no major sectors/matters in Luxembourg in which foreign investors are denied national treatment (equivalent to domestic firms). Bureaucratic procedures, including those for licenses and permits, are sufficiently streamlined and transparent.

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity.

Privatization Program

Foreign investors are allowed to participate equally in ongoing privatization programs, and the bidding process is transparent with no barriers erected against foreign investors at the time of the initial investment or after the investment is made. Moreover, there are no laws or regulations specifically authorizing private firms to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control, and there are no other practices by private firms to force local ownership or restrict foreign investment, participation in, or control of domestic enterprises. Potential conflicts of interest (GoL officials sitting on boards of directors, for example) do not impact freedom of investment in the private sector.

Screening of 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 environmentally-friendly light 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, in which high wage costs will not put Luxembourg at a disadvantage. 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. The government may grant support for funding specific projects for small and medium-sized companies; located in development areas; research, development, and innovative investment focusing on new products, services or processes; and environmental protection or the efficient use of energy. Financial support may take the form of capital grants and medium and long-term loans by the National Credit and Investment Corporation (SNCI).

Competition Law

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

2. Conversion and Transfer Policies

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

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

All this said, since the implementation of the bilateral agreement for Luxembourg’s compliance with the U.S. Foreign Account Tax Compliance Act (FATCA) in 2015, some banks have been refusing to open an individual bank account for an American (mainly due to the complexity and volume of the necessary paperwork mandated to be shared with the IRS.)

Remittance Policies

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

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

3. Expropriation and Compensation

The laws governing expropriation of property are quite complex, and the process can be arduous and lengthy, depending on the property. The Ministry of the Interior, along with the Ministry of Justice, sets forth the specific regulations according to each type of case. There have been no known expropriations in the recent past or policy shifts which would indicate such actions in the near future. There are no tendencies by the Luxembourg government to discriminate against U.S. investments, companies, or representatives in expropriation.

Instances of indirect expropriation or governmental action tantamount to expropriation, such as confiscatory tax regimes, that might warrant special investigation, are non-existent.

4. Dispute Settlement

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

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

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.


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.

Investment Disputes

Investment disputes involving U.S. or other foreign investors in Luxembourg are extremely uncommon.

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

International Arbitration

The government accepts international arbitration of investment disputes between foreign investors and the state, and the courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes among private parties, and there is a domestic arbitration body within the host economy, the Centre de Médiation (Mediation Center).

Luxembourg is a member state to the convention known as International Centre for Settlement of Investment Disputes (ICSID Convention).

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).

Duration of Dispute Resolution – Local Courts

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

5. Performance Requirements and Investment Incentives


Luxembourg has been a World Trade Organization (WTO) member since 1995 and has not notified the WTO of any measures that are not consistent with its Trade Related Investment Measures (TRIMs) obligations.

The government does not maintain any measures that U.S. business allege are inconsistent with the WTO TRIMs obligations.

Investment Incentives

Luxembourg is considered to be a very attractive tax location for conducting business: low effective corporate tax rates (currently 21 percent with additional incentives just passed in the 2016 budget package); the lowest VAT (value-added tax) rate in Europe at 17 percent; relatively low personal tax burden, compared to the neighboring countries for high-income individuals (although the maximum rate on annual incomes about 200,000 euros was just raised to 42% from 38.9% ); and a variety of tax incentives (investment tax credits, new business tax credit, audiovisual certificates for film productions, venture capital investment certificates, small business incentives, regional and national incentives, research and development incentives, environmental incentives).

Research and Development

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

Performance Requirements

The host government does not mandate local employment. The work visa process has been much improved in past years, reflecting input from companies, embassies, and applicants themselves. 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 a par with other western European countries, once all pertinent information has been supplied to the authorities and the local district of residence (commune).

Luxembourg has been making job creation a priority for the past several years and has thus provided additional performance incentives to manufacturing companies to retain employees (job schemes with cost-sharing between the companies and the government to avoid lay-offs and unemployment payments) and create new positions.

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

Data Storage

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. These 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.

6. Protection of Property Rights

Real Property

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

Intellectual Property Rights

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

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

The country is a signatory of the European Patent Convention, which was set up 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 TRIPS agreement (Trade-Related aspects of Intellectual Property Rights). The regulation stipulating the measures to prohibit the release for free circulation, export, re-export or entry for the suspension of counterfeit and pirated goods states that the authority competent to receive applications must be a customs authority. In Luxembourg, this is the Litigation and Research Department (Division des Contentieux et Recherches) of the Directorate of Customs and Excise (Direction des Douanes et Accises). The merits of a case are decided by judicial proceedings, thus the ordinary law courts are responsible for deciding whether there are grounds for a case. A number of provisions within the agreement deal with different intellectual property rights and allow for the possibility of confiscating, or even destroying, counterfeit goods and the tools or implements used for their production. The Luxembourg customs authorities may impose measures for a period of six months, which may be renewed at the request of the rights-holder.

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

In an effort to become the prime location for Europe's knowledge-based economy, a new IP tax regime was implemented in Luxembourg in 2008, providing for a very competitive tax rate applicable to a broad range of IP income generated by taxpayers. The level of IP protections and enforcements is thus excellent and benefits from the attractiveness of this fiscal framework. During the past year, no new laws have been enacted. An update of the 2008 law was made in 2013.

The hallmark of the Luxembourg IP tax regime is an 80 percent exemption on royalties and capital gains derived from many types of IP. Companies benefiting from the new regime are subject to an effective tax rate as low as 5.72 percent on qualifying net IP income (i.e. gross revenue from the IP less directly related expenses, depreciation, and write-downs).

The customs office tracks the seizures of counterfeit goods, but this is a negligent portion of the customs work, notably at Findel Airport. There are no public statistics on such seizures.

Luxembourg is not listed in the USTR's Special 301 report or the notorious market report.

Customs officers, part of the Police force of Luxembourg, have every right to seize (but not necessarily destroy) goods, however, most cases are related to lack of open customs declaration by the owner (importing products above the maximum allowable amount for tax-free treatment within the EU), and not to counterfeit goods.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at

Resources for Rights Holders

Political-Economic Section:

Office phone: +352 46 01 23

English-Speaking Attorneys in Luxembourg:

AMCHAM contact:
Paul-Michael Schonenberg, Chairman & CEO

Office phone: +352 43 17 56


Given that there is no or negligible production or sale of counterfeit goods in Luxembourg, there is no risk of labor rights violations, including child labor, forced labor, or dangerous working conditions.

7. Transparency of the Regulatory System

The GoL uses transparent policies and effective laws to foster competition and establish clear rules of the game. The legal system is quite welcoming with respect to Foreign Direct Investment (FDI). Tax, labor, environment, health and safety, and other laws and policies in no way distort or impede investment. Bureaucratic procedures, including those for licenses and permits, are sufficiently streamlined and transparent, and there is far less red tape than in larger European countries. Luxembourg government websites offer clear and detailed information, previously only in French and German, but now increasingly in English, except for that of the Ministry of Foreign Affairs (MFA), which has limited detail. Various relocation companies in Luxembourg provide assistance with filing the required paperwork.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations; all procedures are managed by government entities. Proposed laws and regulations are published in draft form for public comment in the Memorial, the government's official journal. In addition, the legal, regulatory, and accounting systems are transparent and consistent with international norms. Regarding the accounting standards, large companies in Luxembourg use the international accounting standards International Financial Reporting System (IFRS), which closely parallels the U.S. GAAP (General Accounting Principles). There has been an attempt to harmonize these standards further over the past years; however the standards have not been fixed over the long term.

There are no private sector and/or government efforts per se to restrict foreign participation in industry standard-setting consortia or organizations; however the national regulations agency is a public entity.

8. Efficient Capital Markets and Portfolio Investment

Luxembourg government policies, which reflect the European Union's free movement of capital framework, facilitate the free flow of financial resources to support the product and factor markets. Credit is allocated on market terms, and foreign investors are able to get credit on the local market, thanks to the sophisticated and extremely developed international financial sector, depending of course on the banks' individual lending policies. With the financial crisis, banks everywhere have become more selective in their lending practices. The private sector has access to a variety of credit instruments, including those issued by the National Public Investment Agency (SNCI), and there is an effective regulatory system established to encourage and facilitate portfolio investment. In recent years, Luxembourg has been recognized as a model of fighting money-laundering activities within its banking system through the enactment of strict regulations and monitoring of fund sources.

Luxembourg's banking system is relatively sound and strong, and was shored up following the world financial crisis, thanks partly to the emergency investments made by GoL in the two major banks, BGL BNP Paribas (formerly Banque Generale du Luxembourg and then Fortis) and Dexia BIL, in 2008. As of September 2015, a total of 148 banks were operating, with total assets of EUR 738 billion (USD 812 billion, a decrease of 4 percent vs. 2010, most likely reflecting merger activity) and approximately 25,800 employees.

There are no cross-shareholding and stable shareholder arrangements used by private firms to restrict foreign investment through mergers and acquisitions. Also, measures to prevent hostile takeovers by foreign investors do not exist. A good example was the initially hostile takeover attempt in 2006 by Lakshmi Mittal of Arcelor, the country's largest employer (originally Arbed, the Luxembourg national steel company). The GoL was careful to stay out of the dispute until it became clear that Mittal would be able to force a merger via Arcelor shareholders, at which point the GoL exercised its position as shareholder to negotiate maintaining the headquarters in Luxembourg.

Money and Banking System, Hostile Takeovers

As Luxembourg is part of the Eurozone, the European Central Bank controls its monetary policy. The banking sector is healthy and has recovered fully from the 2008-2010 financial crisis, thanks in part to consolidations (acquisitions within country and from outside investors). While the abolition of banking secrecy starting in 2015 was foreseen as a deathknell for the private banking sub-sector, in fact this served to "cleanse" the sector by ridding it of shady customers hiding their assets in Luxembourg. Now banks are generally more transparent about their activities and clients, especially with the implementation of the automatic exchange on savings accounts mandated by the EU, as well as the U.S. FATCA law adopted via a bilateral agreement in 2014.

U.S. financial regulations do not restrict foreign banks’ ability to hold accounts for U.S. citizens. Anecdotal evidence since the implementation of FATCA shows that U.S. citizens have been constrained not just in Luxembourg but Europe-wide in their ability to open or maintain bank accounts at some institutions. According to the Embassy’s Consular Section, American citizens have been turned away by banks reportedly as a result of the additional reporting requirements associated with FATCA and other U.S. financial regulations, and there has been a significant uptick in dual citizens renouncing their U.S. citizenship. U.S. Citizens are encouraged to alert the nearest U.S. Embassy of any practices they encounter with regard to the provision of financial services.

There are no standard rules on hostile take-overs; the most prominent example in recent memory was Mittal Steel's hostile take-over of Arcelor, the world's largest steel company at the time, in 2006-2007. This was documented in the press on a daily basis, involving the highest levels of the Government of Luxembourg, which was a shareholder of Arcelor (and is still a shareholder after the take-over and rebranding of the company as ArcelorMittal.)

9. Competition from State-Owned Enterprises

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

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 has had to react to the competition created by new incoming players (Orange, Mobistar, Voxmobile, Vodafone) 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 similar fashion to a private company.

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

Finally, an important market which appears to have barriers to entry is freight air transport, due to the dominance of the majority state-owned Cargolux, Luxembourg's national all-freight airline based at Findel Airport. Cargolux, the largest U.S. customer in Luxembourg in terms of value, owing to their all-Boeing fleet of 24 747-freighter aircraft (including 13 of the new-generation 747-8F, of which Cargolux was a launch customer) received a capital increase from GoL in return for a larger share of the company. This was deemed a temporary measure at the time, but now with the comeback of the air freight sector, the government is looking to attract new private investors to help decrease its share in the airline.

OECD Guidelines on Corporate Governance of SOEs

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

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

The court processes are transparent and non-discriminatory.

Sovereign Wealth Funds

There is no Sovereign Wealth Fund (SWF) currently in place in Luxembourg. There is a special reserves fund, which could be considered to be a variation on a SWF, in which surplus funds have been set aside. Since the global economic crisis starting in late 2008, the government has begun dipping into this reserve fund for operational needs, while the intended policy of use is for special projects or initiatives.

10. Responsible Business Conduct

Generally speaking, there is a heightened awareness of responsible business conduct in Luxembourg, whether it is in the corporate sector or among the consuming public. In financial matters, this has been largely driven by the push for greater transparency and reporting in conformity with international standards, such as those of the OECD. While Luxembourg has always taken a lead role in ecological matters (for example; stringent trash sorting and recycling procedures), the global discussion on climate change, pushed to the forefront by the Paris Agreement on Climate Change and pressure from the EU in terms of concrete goals and directives, has made it more of a priority.

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

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

Luxembourg has not only implemented EU directives concerning emissions reduction, but also set forth major new energy policies to promote clean energies and energy conservation in consumer households. Ecological bonuses, Car-e and Car-e Plus programs that promote the purchase of low-CO2 emitting vehicles have been extended until July 2010. The Car-e bonus will be increased to EUR 1500 (USD 2160) for a car that emits less than 100 mg of CO2 per kilometer. The Cool bonus that promotes low-consuming freezers or fridges (A++ rating) is also extended for a year. In 2010, the energy pass becomes compulsory for existing dwellings (houses and residences) that change owner, tenant, or accommodation that undergoes substantial installation transformation ( website). New for 2016 in the tax code will be subsidies for zero-emitting vehicles (electric cars).

OECD Guidelines for Multinational Enterprises

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

Regarding OECD guidelines, large companies in Luxembourg appear to be following an OECD Millennium Report recommendation that companies contribute a percentage of turnover (gross sales) toward the corporate foundation, in order to increase initial endowment.

11. Political Violence

Luxembourg has consistently ranked among the overall safest or lowest risk countries and most politically stable in the world. There have been no recent serious incidents involving politically motivated damage to projects or installations. The environment is not growing increasingly politicized such that civil disturbances would be likely, with the possible exception of specialized non-governmental organizations (NGO's), particularly expressing opposition to the Transatlantic Trade and Investment Partnership (T-TIP) currently being negotiated between the EU and the U.S. Of note is that many of the demonstrations which occur in Luxembourg are not aimed at the Grand Duchy, but rather at the EU offices located within Luxembourg (for example, the European Court of Justice and the periodic European ministerial meetings). There are no known nascent insurrections, belligerent neighbors, or other politically motivated activities.

According to World Markets Research Centre of London, Luxembourg is rated consistently high as one of the least risky places to do business in the world. The risk ratings were all noted insignificant for the following aspects: political risk (existence of institutional permanence, internal and external political consensus); economic risk (existence of forward planning, a diverse and resilient economy); legal risk (existence of innovative legislation, transparency, independence and experience); tax risk (coherent and fair taxation system, low effective corporate and personal income tax rates below EU average); and operational risk (supportive attitudes toward foreign investment, high quality of infrastructure, existence of social peace with Tripartite system of negotiation process involving labor, employers and government, low bureaucracy and corruption).

12. Corruption

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 areas or sectors where corruption is pervasive, whether in government procurement, transfers, performance requirements, dispute settlement, regulatory system, or taxation. Giving or accepting a bribe, including between a local company and a public official, is a criminal act subject to the penal code. Senior government officials take anti-corruption efforts seriously. International, regional or local nongovernmental watchdog organizations do not operate in the country, given the low risk.

Luxembourg has laws, regulations, and penalties to combat corruption effectively, and they are enforced impartially with no disproportionate attention to foreign investors or any other group. The country ranks very favorably on the World Bank's corruption index (very low) and Luxembourg placed #9 in Transparency International's 2015 Corruption Perception Index. In particular, Luxembourg has made anti-money laundering and suppression of terrorism financing a priority, given its status as a leading world financial center. The government has taken the lead in freezing bank accounts suspected to be connected to terrorist networks, and in November 2004 extended the law against money-laundering and terrorist financing to additional professional groups (including auditors, accountants, attorneys, and notaries). Also, local police, who are responsible for combating corruption, work closely with neighboring countries' law enforcement officials, as well as with Interpol (international police network) and Europol (European police network).

UN Anticorruption Convention, OECD Convention on Combatting Bribery

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

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

Resources to Report Corruption

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

13. Bilateral Investment Agreements

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 U.S. also have an aviation treaty.

Other countries with which Luxembourg has bilateral agreements are:

Austria,Bahrain (aviation), Barbados (aviation), Belgium,Brazil,Bulgaria,Canada,Chile (aviation),China, Costa Rica (aviation), Croatia (aviation), Cyprus (aviation),Czech Republic, Denmark, Finland,France, Gabon (aviation), Gambia (aviation),Germany,Greece,Hong Kong (aviation),Hungary,Iceland,India (aviation),Indonesia,Iraq (aviation),Ireland,Israel (aviation), Italy,Japan,Jordan (aviation),Kenya (aviation),Kuwait (aviation),Lebanon (aviation),Macau (aviation), Malaysia,Malta,Mauritius,Mexico,Mongolia,Morocco,Nepal (aviation),The Netherlands,New Zealand (aviation),Norway,Philippines (aviation), Poland,Portugal,Romania

Russia,Singapore,Slovakia,Slovenia,South Africa,South Korea,Spain,Sweden, Switzerland, Syria (aviation),Thailand,Togo (aviation),Trinidad and Tobago,Tunisia,Turkey,Ukraine,United Kingdom,Uzbekistan,Vietnam

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

Bilateral Taxation Treaties

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

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

14. OPIC and Other Investment Insurance Programs

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

15. Labor

Luxembourg boasts a very stable, diverse, multilingual and qualified labor market, benefiting from the approximately 163,000 industrial and service employees who come to work in Luxembourg on a daily basis from the neighboring countries of Belgium, France and Germany. Foreign (non-Luxembourger) workers are treated the same as nationals. Work permit constraints were recently relaxed for non-EU applicants (including Americans), particularly for qualified persons for skilled positions.

Foreign investors often cite Luxembourg's labor relations as a primary reason for locating in the Grand Duchy. Unemployment in Luxembourg has stabilized at approximately 6 percent, higher than before 2009 due to the impact of the global economic downturn and increased layoffs by international corporations. However, this rate remains far below the EU average of 10-11 percent, and labor relations have been peaceful since the 1930s. Most industrial workers are organized by unions, linked to one of the major political parties. Luxembourg is proud of the system of representatives of business, unions, and government participating in a tripartite process in the conduct of major labor negotiations, which serves to avoid strikes, common in the neighboring countries of France and Germany.

Luxembourg has endeavored to cooperate with the private sector to avoid excessive layoffs by creating job-retention schemes, with cost-sharing between the government and the companies. This has not only avoided an increase in unemployment, it has channeled resources to a more positive framework than paying unemployment benefits to inactive workers.

16. 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 logistics (cargo) center at Findel Airport. This zone, modeled after other successful customs warehousing in premier trade regions such as Geneva, Switzerland, and Singapore, allows the warehousing and handling of high-value merchandise (art, cars, wines) in a secure location free of fiscal obligations. 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).

17. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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






Host Country Gross Domestic Product (GDP) ($M USD)





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)





Host country’s FDI in the United States ($M USD, stock positions)





Total inbound stock of FDI as % host GDP






*Provide sources of host country statistical data used

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



Total Outward



United States



United States



United Kingdom



The Netherlands



The Netherlands



United Kingdom















"0" reflects amounts rounded to +/- USD 500,000.

Source: IMF Coordinated Direct Investment Survey

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets

Top Five Partners (Millions, US Dollars)


Equity Securities

Total Debt Securities

All Countries



All Countries



All Countries



United States



United States



United States















United Kingdom






United Kingdom















United Kingdom



Source: IMF Coordinated Portfolio Investment Survey

18. Contact for More Information

Carla Rosen-Vacher
Economic and Commercial Specialist
U.S. Embassy Luxembourg
+352 46 01 23 x 2353