Due to the wide range of economic opportunities available in Luxembourg, many foreign investors decide to establish a firm there. The stable economy in Luxembourg, which provides excellent opportunities for small, medium, and large firms to expand and grow from year to year, attracts investors. Additionally, Luxembourg is a founding member of several of the biggest organizations in the world, including the World Trade Organization (WTO) and the Organization for Economic Co-operation and Development (OECD).
Business advantages offered by Luxembourg
Luxembourg is a tiny nation with a lot of potential. Its economy is open and stable, and it also has a sound legal system that promotes foreign investment and gives foreign business owners the same rights as domestic ones. Its location in Europe is advantageous, but so is its participation in the creation and operation of the European Union. The following are the key factors that attract foreign investors to Luxembourg
- A strong GDP performance and a stable economy
- A great position in Europe with excellent connectivity
- A multilingual workforce and business environment: Luxembourgish, French, and German are its official languages
- An effective tax code and regulatory environment for investments
- Effective ICT, development, and transportation infrastructure
- A high standard of living.
Luxembourg business sectors are available for foreign investment
Many industries in Luxembourg are appealing to foreign business owners, and Luxembourg encourages foreign direct investments.
- The financial sector
- Logistics and shipping
- Automotive and aerospace
- High-tech and ICT (information and communication technology)
- development and research.
Investors frequently prefer to establish a business here due to the simple incorporation procedure. Each type of business must submit an application for a business permit to the Ministry of Economy’s General Directorate for SMEs and Entrepreneurship. The company is registered with the Luxembourg Trade and Companies Register once it has the relevant licenses to operate. Additional processes include renting or buying office space in Luxembourg, registering with the tax authorities, and registering with social security (if recruiting employees).
One of the nations with significant development potential is Luxembourg.
FDI in Luxembourg
Luxembourg is one of the most attractive European countries for foreign direct investment, ranking 72nd in the World Bank’s 2020 Doing Business report (FDI). This is partly because the government recently made several incentives available for FDI. Nearly USD 128 billion in foreign direct investment was registered in Luxembourg overall in 2019.
Legislation related to foreign investments in Luxembourg
Although there is no specific legislation governing these incentives and encouragements, the Board of Economic Development in Luxembourg has full authority and responsibility over them. This is how Luxembourg supports foreign investments. It is crucial to understand that there is no discrimination in Luxembourg when it comes to investment rights, both domestic and foreign investors are treated equally. As long as they abide by Luxembourg’s Company Act, foreign and local investors may establish limited liability corporations, general and limited partnerships, joint ventures, joint-stock companies, and cooperative enterprises.
Advantages of ready-made companies in Luxembourg
Luxembourg investors buy ready-made firms for a variety of reasons, including the fact that they are already registered with the authorities, have no debts, and are immediately usable. Vintage firms or shelf companies are extremely popular among entrepreneurs because they have no activity, are already registered, and exude a high level of confidence in front of financial institutions. People intending to buy from a vintage company can request due diligence procedures for better verification of the organization even if it has no debts or liabilities.
The protection offered by double tax treaties in Luxembourg
Despite its favorable tax structure, Luxembourg’s business environment is aided and protected by the double taxation agreements it has signed with other countries around the world. The purpose of the double tax treaties is to shield foreign investors from having to pay taxes on their income twice. With nations like Malta, Romania, Georgia, Mexico, Barbados, Spain, South Africa, Greece, Slovakia, Germany, Qatar, Taiwan, the Netherlands, the Czech Republic, Ireland, Indonesia, Austria, Vietnam, and China. Also, countries like Hungary, Lithuania, France, Turkey, Thailand, Macedonia, Israel, Sweden, the UK, the USA, Switzerland, Brazil, Belgium, and Luxembourg have signed double taxation agreements that cover capital gains, royalties, and dividends.
