Invest in Luxembourg City

Luxembourg City, which is also officially known as Grand Duchy of Luxembourg, is located in Western Europe. It is a landlocked country bordered by Germany, Belgium and France. It is the capital of Luxembourg and one of the best places for doing business. Besides being one of the favored locations for doing business, it has also been the “European capital of culture” twice. The city has many prestigious concert halls, museums, exhibitions and fairs which improve its culture score. Regardless of the global economic crisis, Luxembourg continues to remain attractive location for foreign direct investments in Europe. The capital city Luxembourg also has some important offices of reputed international organizations such as OECD, NATO and EU.

The location of the city makes it an ideal gateway to access more than 500 million consumers in European market.


The Luxembourg City economy spans across different sectors which include, rubber, chemical and other products. Besides the manufacturing sector, the services sector, which mainly includes banking and other financial exports, contributes a major part of the economic output. Tourism also forms one of the important sectors in the country’s economy.

Growth and FDI Figures:

Luxembourg City is expected to have a high growth rate as the economic ties of Luxembourg are greatly improved with its neighbors Belgium and Germany. Luxembourg City has a developed economy and the residents of the city have the highest GDP per capita according to WB and IMF.

FDI Investment Policy:

Luxembourg has always followed a pro active economic development policy.  Consecutive Luxembourg governments have consistently worked to attract foreign investments in light, medium and high tech industries. The Government has also taken efforts to attract Foreign Direct investments in services sector. To attract investments in Luxembourg, the government offers incentives, capital investment subsidies, deferred corporate tax payment schedules, financing of equipment and financial assistance through State lending agency to start ups.

Luxembourg offers political and economical stability, which is an important factor for foreign investors. Besides economical and political stability, Luxembourg has successfully maintained its fiscal stability with corresponding increases in productivity and growth in comparison to other EU cities. Luxembourg City has improved its fiscal conditions through tax reforms that were enacted in 2008. Luxembourg has recently enacted a reform known as the ‘Luxembourg Specialized Investment fund’. This fund is now accessible to every financial institution that intends to invest in Luxembourg. The Government of Luxembourg puts great emphasis on investments that are technology based and that help development of innovative products.

Market size:

Luxembourg City, which is also the capital of Luxembourg, has a total population of around half a million in an area of 2,586 square kilometers.

Investment Incentives:

Besides the encouraging climate for investment offered by Luxembourg, the government also offers lower official basic corporate tax that stands at 21%. Besides, the government has also abolished capital tax duty completely. The Luxembourg administration has recently introduced super reduced tax rates on Intellectual Property revenue. The tax rate has been reduced to a meager 6% on IP revenue, which is beneficial for investors who are involved in research and scientific projects. At 15%, Luxembourg also has one of the lowest VAT rates in Europe.

Luxembourg also offers different incentives to investors other than reduced tax rates. The incentives given to investors are general in nature, such as government guarantee on loans, loan at low or reduced rates, assistance in development of real estate for setting up industrial sites and buildings, cash grants for investments in high technology sector, research and development of innovative products, industries involved in manufacturing processes and services.

The Government also provides financial incentives to audio visual productions using location and production facilities in Luxembourg.

Key Investment sectors:

Biotechnology / Health Technologies:

The biotechnology sector enjoys special tax rates in Luxembourg. Many US biomedical firms and research institutions have announced major investment plans in Luxembourg. Some of the reputed biotechnology firms and research institutions include TGen and Institute for Systems Biology (ISB).

The Luxembourg Government has also announced a development fund of EUR 140million that would be provided in a span of five years. This fund will be specifically provided for development of a center which will do research in field of molecular medicine.  The government has taken steps to create unique opportunities for foreign investment in field of scientific research and technological excellence in area of preventive medicine.

The European Union has issued a directive on services which have attracted many non EU companies to establish their headquarters in Luxembourg.  Companies which are not located in any EU country have to pay an additional VAT levy to that country. However, if the company has headquartered in an EU member country, then the minimal VAT paid by the company where it is located is enough.


Luxembourg has a well educated and multi lingual workforce, which is an attractive factor for investors who intent to set up headquarters in the EU.  Besides, the Government has taken concrete steps to improve the infrastructure through an initiative called “LuxConnect” which is intended to improve bandwidth connectivity and availability.  All these factors present Luxembourg City as an center of excellence for e-commerce and IT companies.


Luxembourg has a good network of rail, road network. Besides, it also has good air connectivity to all major cities in the EU.


The Luxembourg Trade and Investment agency is a one stop shop for investors who want to set up their business in Luxembourg. Investors gain comprehensive information about investment laws, subsidies, grants and processes related to investing in this region.


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