Luxembourg


ESSENTIAL FACTS

LOCATION: 49 45 N, 6 10 E
Luxembourg, the only Grand Duchy in the world still in existence, is located in Western Europe between France and Germany.

POPULATION: 480,222

CURRENCY: euro (EUR)

LANGUAGE: Luxembourgish (national language), German (administrative language), French (administrative language)

CLIMATE: Luxembourg has a modified continental climate with mild winters and cool summers.

EDUCATION: Everyone can read and write in Luxembourg.

PUBLIC HOLIDAYS: National Day (Birthday of Grand Duchess Charlotte) 23 June. Her real birthday was 23 January but the celebrations were moved to a warmer month.

HISTORY AND GOVERNMENT

HISTORY
Luxembourg was founded in 963 AD, became a grand duchy in 1815, gained more autonomy while losing most of its land in 1839, then became entirely independent in 1867. Luxembourg is part of the Benelux Customs Union and NATO, as well as one of the six founding countries of the European Economic Community.

POLITICAL SYSTEM
Luxembourg is a constitutional monarchy, with the Grand Duke Henri acting as chief of state and Heir Apparent Prince GUILLAUME as next in line to the throne. The head of government is called a Prime Minister; the Deputy Prime Minister is under him or her;
And the cabinet, or Council of Ministers, is recommended by the prime minister and appointed by the chief of state. As for the legislative branch, it is unicameral with a Chamber of Deputies (Chambre des Deputes). There is also a Council of State that serves as an advisory body to the Chamber of Deputies.

JUDICIAL SYSTEM
Luxembourg’s legal system is based on civil law system.

COMMERCE AND TRADE

COMMERCIAL ACTIVITY
Agriculture: Wine, grapes, barley, oats, potatoes, wheat, fruits; dairy products, livestock products
Industry: Banking and financial services, iron and steel, information technology, telecommunications, cargo transportation, food processing, chemicals, metal products, engineering, tires, glass, aluminum, tourism

TRADE PRACTICES
Exports: Machinery and equipment, steel products, chemicals, rubber products, glass to Germany, France, Italy, UK, Belgium, Spain and the Netherlands
Imports: Minerals, metals, foodstuffs, quality consumer goods from Belgium, Germany, China, France, UK and the Netherlands

BANKING, FINANCE AND INVESTMENT

FINANCIAL FACTS:
Fiscal year: Calendar year

STOCK MARKET
Market value of publicly traded shares: $79.4 billion (2006)

MEMBERSHIPS
ACCT, ADB (nonregional members), Australia Group, Benelux, CE, EAPC, EBRD, EIB, EMU, ESA, EU, FAO, IAEA, IBRD, ICAO, ICC, ICCt, ICRM, IDA, IEA, IFAD, IFC, IFRCS, ILO, IMF, IMO, Interpol, IOC, IOM, IPU, ISO, ITSO, ITU, ITUC, MIGA, NATO, NEA, NSG, OAS (observer), OECD, OIF, OPCW, OSCE, PCA, Schengen Convention, UN, UNCTAD, UNESCO, UNHCR, UNIDO, UNIFIL, UNRWA, UPU, WCL, WCO, WEU, WHO, WIPO, WMO, WTO, ZC

FOREIGN INVESTMENT
The Luxembourg government and business-related ministries offer a wide range of incentives, schemes and programs from which foreign investors can benefit greatly, including cash rebates, significant tax breaks and holidays, loan subsidies and other assistance for construction, manufacturing and environmentally friendly development projects.

IMMIGRATION
Schengen Treaty rules apply to all immigration issues. Residence permits can be obtained from the Ministry of Justice, and work permits are approved by the Ministry of Labour.

BUSINESS

BUSINESS ENTITIES
While practically any business is allowed in Luxembourg, those which take advantage of the offshore label and therefore have significant tax breaks are the SOPARFI (Societe a Participation Financiere) (a holding company, and very popular as it only is subject to low capital taxes), the Fond Commun de Placement, the SICAV (Societe d'Investissement a Capital Variable), the SICAF (Societe d'Investissement a Capital Fixte), the SICAR (Société d’Investissement en Capital à Risque) and the SPF (Societe de gestion du Patrimoine Familiale). The old company laws have recently been abolished, and each of the above company formations are subject to unique sets of tax rulings. All of these companies can be formed as a Societe Anonyme, or SA, which is like a stock company, or a Societee a Responsabilite Limitee, or SARL, which acts like a Limited Liability company.

TAXATION

PERSONAL TAXATION
Income tax is levied on a bell curve scale starting at 20 percent, rising to 26 percent and then after EUR15,000 settling at 22 percent. Income for non-residents are identified as income earned in Luxembourg, pension from Luxembourg, rents and leases in Luxembourg, and capital gains from Luxembourg companies.

CORPORATE TAXATION
Corporate Income Tax (Impot sur le Revenu des Collectivites) (IRC) was introduced during the German occupation in 1941 as Korperschaftssteure. Companies residing in Luxembourg must pay tax on their income (net worth based on starting and finishing assets) derived worldwide, although there are various incentives available.

All companies registered in Luxembourg are subject to a Municipal Business Tax on Profits (MBTP), which varies from 6 percent to as high as 10.5 percent depending on the business’ location.

OTHER TAXATION/DUTIES
There is a Fortune Tax of .5 percent levied on net worth as defined as one’s business net worth plus the Real Estate Unitary Value (based on the value of structures existing in 1941 under German occupation).