Luxembourg Business Services Overview
Setting up a Business in Luxembourg
Lying in the centre of Western Europe between Belgium, France and Germany,
the Grand Duchy of Luxembourg covers an area of 2,586 square kilometres. It is
one of the smallest Countries in Europe, but the countryside varies greatly,
from the hilly Ardennes in the North, to a mineral rich and beautiful forest and
farmlands in the South.
The Grand Duchy is an independent State and a founder member of the European
Union. The location of the Duchy at the heart of the European Community provides
easy access to some of Europe's largest financial and industrial centres, such
as Paris, Frankfurt, Köln, Amsterdam, Brussels and Strasbourg.
Traditionally, the country has followed an open economic policy promoting
international trade which has attracted foreign capital investment in the Duchy
evidenced by a number of significant treaties signed by Luxembourg with its
neighbours, such as the Belgian-Luxembourg Union (1921) (implementing common
trade between the two countries) and the Benelux economic co-operation treaty
(1958) (signed with the Netherlands and Belgium), leading towards more
advantageous economical unification.
Luxembourg's reputation is as a trustworthy political and economic partner.
The economic policy of Luxembourg is characterised by the highly professional
and dynamic spirit of the country.
Historically, the economy has been largely influenced by the steel industry.
In the early 1970s the government made significant efforts to diversify the
economy in order to avoid the risk of over-reliance on this one industrial
sector and diversify and attract foreign multinationals. As a result of this
reform, the economy of the country has been growing rapidly and nowadays relies
on a much broader broad range of industries such as chemistry, plastics and
synthetic materials, mechanics, machine construction, processing of ferrous, non
ferrous metals, supplying parts to the automotive industry, precision
instruments, as well as a burgeoning glass industry. All these industries
improve the competitiveness of Luxembourg on the international market.
The most significant part of the Grand Duchy’s economy is its flourishing
financial sector which comprise of more than 200 banks, 1,900 investment funds
and 20,000 holding companies. The largest banks are Dexia-Bil, Fortis BGL,
Kredietbank Luxembourg and a subsidiary of Belgian KBC. Luxembourg is considered
to be one of the most important financial centres in Europe that offers the
entire spectrum of financial services in both corporate and private banking. It
is the third largest investment fund centre in the world.
A highly competitive tax regime, strict banking secrecy laws and
international business environment have also made Luxembourg one of the leading
locations for corporate headquarters and a highly suitable jurisdiction for
holding companies. These holding companies are often very advantageous from a
structural, administrative, financial and fiscal point of view. Insurance,
private pension funds, securitisation and venture capital investment vehicles
also represent a large part of the financial sector and as a result have
increasingly become a main source of employment.
As a result of its continuous economical growth, Luxembourg residents have
very favourable standards of living, with the one of the highest GDP (Gross
Domestic Product) per inhabitant (approximately EUR 50 800 per inhabitant) and
the highest social welfare per head. There is low inflation, low unemployment
and a balanced budget.
The country is a representative democracy in the form of a constitutional
monarchy headed by the Grand Duke Henri. The role of the Duke, however, is
largely ceremonial. In practice the country is governed by the Cabinet of
Ministers who exercise the executive power and by the Parliament which
represents the legislative power in Luxembourg. The Cabinet of Ministers
includes the Prime Minister, who serves as head of government. The Prime
Minister is the leader of the political party or coalition of parties having the
most seats in Parliament, known as the Chamber of Deputies. The members of the
Chamber of Deputies are elected to a 5-year term. A second body, the Council of
State (Conseil d'Etat), is composed of 21 ordinary citizens appointed by the
Grand Duke, which advises the Chamber of Deputies in the drafting of
legislation. However, the Council’s opinions have no binding effect.
The Grand Duchy is administratively divided into three districts, which are
in turn divided into Cantons, Communes and Municipalities. Communes are
administrative authorities possessing legal personality and administrating their
patrimony. A Communal Council (Conseil Communal) is directly elected by the
inhabitants. A Commune is administered by the mayor and the alderman (Collège
des bourgmestres et échevins) chosen from the Communal councillors.
The legal system of the Grand Duchy is mainly based on the Roman law. The
Luxembourg Constitution provides with the constitutional provisions of the Grand
Duchy, the fundamental rights of individual citizens and the organization of
public bodies. It is superior to the ordinary law and to executive regulations,
which have to be conformed to the Constitution.
The Luxembourg legislation consists of laws, codes and regulations. Many laws
are based on French or Belgian legislation. An increasing amount of legislation
has its source in European Union regulations, directives and decisions.
The main individually compiled codes are the Civil Code, Commercial Code,
Penal Code, Criminal Procedure and Civil Procedure Codes. Current legislation
for Luxembourg is first published in the official gazette –
The population of the Grand Duchy is of approximately 449,000. The
Luxembourgers are generally fluent in French, German and English in addition to
their mother tongue, Luxembourgish. French is frequently used as the
administrative and business language, although German and English are also quite
common in business circles.
This multilingualism is also a direct result of the relative small size of
the country as well as its association with both France and Germany. When going
abroad (which literally is not very far) the Luxembourgers have to speak other
languages, simply because their own is not understood elsewhere. It is hardly
surprising therefore that many Luxembourgers speak several languages. For those
wishing to work in the business areas of Luxembourg it is an essential to speak
at least one foreign language.
The Luxembourgers are known for their politeness and intelligence. In
addition to their multilingual skills the Luxembourg people have other
professional qualities such as punctuality, perseverance, practical approach to
business and a capacity for work. Cosmopolitism and diversity of cultures may
also be considered to be the main characteristics of the Luxembourgers.
On other hand, Luxembourgers are careful and prudent. They take time before
they trust people and approach getting to know you in a deliberate, measured
manner, which cannot be rushed.