New law brings investors to the Grand Duchy

in Luxembourg, Tax, 12.04.2017

Luxembourg has recently published a new law, showing quick work in adapting to the EU’s immigration law legal framework. The new law is characteristic of a government that wishes to attract foreign investors and, specifically, high net-worth investors (HNWIs).

Previously, the criteria and conditions for residence permits were, at points, unclear or ambiguous, and did not always put clear investment thresholds for applicants to meet. With the new law, these cobwebs will be cleaned out and replaced by unambiguous language. It introduces residence permits for those who:

  1. invest at least €500,000 in an existing enterprise that has its legal seat in the Grand Duchy and that performs commercial, artisanal, or industrial activities; the investor must also commit to maintaining the same level of investment and employment for at least five years
  2. invest at least €500,000 in a newly established enterprise that has its legal seat in the Grand Duchy and that performs commercial, artisanal, or industrial activities; the investor must also commit to hiring at least five employees (in collaboration with ADEM) within a three year period following the creation of the new company
  3. invest at least €3 million in a financial/management structure that already exists or is going to be created with its legal seat in the Grand Duchy, and that meets Luxembourg’s substance requirements
  4. invest €20 million in the form of a deposit in a financial institution established in the Grand duchy; the investor must also commit to maintaining that investment for at least five years

The residence permit is granted for a period of three years and is subject to further extension.

Opening the gates for HNWIs is meant to help maintain Luxembourg’s attractiveness at an international level, while developing and diversifying its economy. With this law, Luxembourg aims to become a leader in an environment marked by competitiveness and by interdependence amongst national economies.


The new law is expected to usher in qualified investors, naturally with their families in tow—leading to the need for further development of national infrastructure: universities, nurseries, and so on. The influx should create local jobs to accommodate a growing country with more demands.

We can assume that the main populations targeted by the new law are largely investors and entrepreneurs from the likes of India, Russia, China, and Brazil. Investors from the Middle East must also be mentioned, although many have not waited for such new provisions before investing in Luxembourg’s financial and banking sector (e.g. BIL and KBL) or aviation sector (e.g. Cargolux), all of which currently operate under the leadership of investors from this region.

Many national chambers and organisations have shown interest in the new law too, which is why KPMG recently teamed up with the Indian Business Chamber of Luxembourg to host an informative event on the new residence permits. After speaking to different stakeholders and delegates, we are more confident than ever that interest in Luxembourg’s economy—and its sustainability—is still growing worldwide. It has become a much easier and clearer-cut process for foreign investors to invest in, and move to, the Grand Duchy, whether they are interested in wider European development or even international development.

A big splash

The existing tax law in Luxembourg already offers certain advantages that shall remain unchanged. For example, some specific regimes for new resident individuals, which offer a final tax of 20% on certain savings income, shall remain, as well as possible exemptions from long-term capital gains, exemptions of 50% on certain dividends, and the absence of wealth tax on natural persons.

These already-existing advantages, coupled with the new law, create a Luxembourg that will be very attractive for foreign investors. Two final points for the opportune would be the mention that Luxembourg’s relatively lenient succession rights regime remains intact, and that tax deductions on eligible philanthropic donations are also still enticing.

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