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» General Information
» Principal Advantages of the Financial Centre
» Business Sectors of Special Fiscal Interest
General Information
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» Introduction Founded in 963, Luxembourg became a Grand Duchy in 1815. The Grand Duchy is situated at the crossroads of Europe, in the triangle where the borders of Belgium, France and Germany meet, and is therefore an excellent base for the international investor. This well regarded financial center is well placed to meet the demands of an increasingly sophisticated market.
» Population Luxembourg has a population of 437.389 (July 2000 estimate) and cover an area of 2.589 km².
» Political structure Since 1867 Luxembourg has been a constitutional monarchy with the legislative power vested in a democratically elected parliament.
» Language Luxembourgish, German and French are the official languages. English is also widely spoken and is used daily in commercial transactions.
» Currency The Euro €. Click to open a Currency Converter in a new window.
» Exchange Control None.
» Type of law Civil.
» Principal Corporate Legislation Commercial Companies Act 1915, as amended. |
Principal Advantages of the Financial Centre
- Liberal exchange regulations
- Free circulation of capital
- Favourable tax legislation
- A pro-business government
- Political, economic and social stability
- A skilled, specialized, qualified and multilingual (including French, German, English, Portuguese and Luxembourgish) workforce
- High net spending power
- A growing life assurance and pension fund industry
- Home to over 200 credit institutions including the head quarters of the world's largest lending bank.
- A well accepted stock exchange with over 3000 listings
- Its central location within the European Union Tax Legislation
- No taxes on Luxembourg stock exchange transactions
- Attractive VAT rates (exemption for banking transactions and gold bullion transactions)
- No withholding company tax on interest income
- No direct taxation of capital gains on assets deposited by Luxembourg non-residents
- No tax on property owned in Luxembourg by non-residents in the event of the owner's death
- Attractive tax rates of collective investment funds
- No net worth tax for non-residents
Business Sectors of Special Fiscal Interest
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» Captive Insurance Companies These companies are subject to the full corporation tax rates and as such benefit from Luxembourg's double treaties. However, their taxable base is reduced to almost zero as they deduct a catastrophe provision. As long as this total accumulated provision has not reached 12.5 to 20 times (according to the risk category) of the average net premiums earned in the current and the last four financial years, all profit before taxes (including investment income) must be transferred into the provision. Under certain restriction the Insurance Commissariat may allow specific investment income to be distributed to shareholders.
» Investments funds Two types are to be distinguished: 1) Investment companies (Sociétés d' Investissement), or mutual funds; 2) "Fonds commun de placement" (FCP), which are quite similar to unit trusts.
Investment funds are exempt from corporate and wealth taxes but they are submitted to a registration duty of EUR 1,200 on formation, and to an annual "taxe d'abonnement" at a rate of 0.01% of net assets for cash funds and 0.05 % for all the others.
» Shipping Shipping companies in Luxembourg are subject to corporate tax but are exempt from municipal business tax. Ship-owning / - leasing companies can benefit from "investment tax credits" of 10 % of the amount invested in moveable tangible property, including ships and accelerated depreciation. Capital gains realised on the sale of vessels are tax free if they are used within two years to purchase a new vessel. Wages of the crew members who are non-resident in Luxembourg will be subject to a flat rate of income tax of 10 %, charged on 90 % of gross wages less EUR 868. The minimum wage is EUR 745 per month plus board and lodging.
» Film Industry A specific tax system exists to promote film production in Luxembourg. Certificates for audio-visual investment are granted for the expenditure incurred in Luxembourg. These certificates are traded by Luxembourg banks and are transferable. The holder of such a certificate can reduce his taxable income by up to 30%.
» The Future Luxembourg enjoys a rapidly growing life assurance industry. Its European Pension Fund Law is likely to stimulate fund investment when the EU presently harmonises laws regarding pension funds.
The country is likely to become well-known in patent and royalty business due to its excellent tax treaty network. |
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