Luxembourg offers a business climate favourable to foreign investment, with a very attractive tax system. According to UNCTAD's 2022 World Investment Report, FDI inflows were negative by USD 9 billion in 2021. In the same year, the total stock of FDI stood at USD 1 trillion, more than 10 times the country’s GDP. According to figures from OECD, half of the FDIs received by Luxembourg come from the countries of the European Union, although the main investor is Bermuda (13.5%), followed by the UK (13.1%), Ireland (12.1%) and the Netherlands (9.3%). In terms of sectors, financial and insurance activities attract more than four-fifths of all investments (81.6%), with manufacturing accounting for only 2.8%. Luxembourg is also among the world's largest investors, with an outward FDI stock of USD 1.27 trillion in 2021 (UNCTAD). According to the latest figures from OECD, in the first six months of 2022 FDI inflows to the country stood at USD 13.3 billion, compared to USD 11.3 billion in the same period one year earlier. Data by EY shows that the Grand Duchy is at first place for the number of investment projects per capita (number of projects per 100,000 inhabitants) with 3.94 projects per capita.
According to the World Economic Forum (WEF), the country ranks 13th on the 2022 Global Competitiveness Index. The government of Luxembourg has established some measures in order to make the country even more attractive to FDI, such as fiscal benefits, equipment and construction projects. The government focused on key innovative industries like logistics; ICT; health technologies, including biotechnology and biomedical research; clean energy technologies; space technology and financial services technologies. Luxembourg has long been considered a tax haven, though in recent years it has taken steps related to the process of harmonisation of financial standards both within the EU and at the international level. Furthermore, the “Multilateral Convention to Implement Tax Treaty Related Measures To Prevent Base Erosion and Profit Shifting” - which aims at combating tax avoidance by multinational companies - entered into force for Luxembourg in 2019. In 2021, the bill of law n. 7885 introduced a mandatory notification and pre-approval requirement for certain foreign direct investments made by non-EEA investors in a local entity operating in a sensitive sector in the territory of Luxembourg (e.g. transport, telecommunications services, electricity generation and distribution, gas conditioning and distribution, the treatment and distribution of water, healthcare activities, technologies relating to artificial intelligence, infrastructure and systems for the exchange, payment and settlement of financial instruments). Finally, the Grand Duchy ranks 10th out of 180 in the Corruption Perception Index.
|Foreign Direct Investment||2020||2021||2022|
|FDI Inward Flow (million USD)||9,839||25,123||-322,054|
|FDI Stock (million USD)||1,525,769||1,515,850||1,155,324|
|Number of Greenfield Investments*||25||34||41|
|Value of Greenfield Investments (million USD)||732||675||489|
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Luxembourg has many attractive assets for investors on its soil. Here are the main ones:
The main obstacles to investment in Luxembourg are:
In general, Luxembourg's tax legislation provides various incentives in the following areas: investment tax credit, risk capital, tax incentives for research and development (R&D) and intellectual property (IP), recruitment of the unemployed, audiovisual activities, vocational training.
1) the same formalities (registration/enrollment at the Companies' Trade Register, application for a VTA number, initial declaration at the Direct Taxes Administration, etc.)
2) the same obligations (obtaining an establishment authorization for commercial activities, crafts, industrial activities and liberal professions) as in the case of a creation of an enterprise in Luxembourg.
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Latest Update: September 2023