Synopsis "Luxembourg: Investment Climate Statement 2015"
Luxembourg, officially the Grand Duchy of Luxembourg, is a landlocked country in Western Europe. Over the past five years, Luxembourg's economy has evolved significantly, through greater sectorial diversification and openness in both regulations and foreign direct investment opportunities. Diversification of the economy away from the historically-dominant financial sector (including both banking and investment fund services) began in earnest a decade ago, in 2004, when key future industries were selected as economic growth vectors: logistics; information and communications technology (ICT); health technologies (including biotechnology and biomedical research); clean or "green" technologies (solar, wind, and alternative energy sources); and more recently, space technologies (focusing on satellite development).Subsequently and partly as a bi-product of the world financial crisis that started in 2008, Luxembourg came under fire from other European Union (EU) Member States, as well as international organizations such as the Organization for Economic Cooperation and Development (OECD) for being a so-called tax haven, mainly due to historic banking secrecy laws.With the advent of the U.S. Foreign Account Tax Compliance Act (FATCA) and the EU-mandated Automatic Exchange of Information Law for bank savings accounts, replacing the previous automatic withholding of taxes on savings, Luxembourg was pressured into reform toward greater openness - which has in fact created opportunities for increased foreign direct investment, as they move away from a non-transparent image. The Luxembourg investment climate is more conducive than before to U.S. investment, and plenty of opportunities exist for U.S. businesses in the key growth sectors mentioned above.The Government of Luxembourg (GoL) is actively seeking out logistics companies to expand the new logistics hub at Findel Airport - integrated into the Luxair Cargo Center, the leading air cargo hub in Europe with Cargolux, Luxembourg's all-freight airline - and also ICT companies to use the new state-of-the-art Data Centers, affording high-speed internet connectivity to major international data hubs (Paris, Frankfurt, Amsterdam). U.S. biomedical research and biotechnology firms are already actively invested and working in the growing Bio Bank (Integrated Bio Bank of Luxembourg, IBBL), co-founded with U.S. institutes in Phoenix, AZ and Seattle, WA in 2008. Luxembourg has positioned itself as "the gateway to Europe" to establish European company headquarter operations by virtue of its central European location and advanced road and railway connectivity.However, as Luxembourg continues to modernize its regulatory framework - reducing bureaucracy and streamlining processes for work visas and new company registrations - issues of size of market (small market at 520,000 population) and continued European-legacy inefficiencies (government centralization; high costs and rigidity of labor market; and generous social benefits) will endure for some time to come.
