Luxembourg
Executive Summary
Luxembourg is In and Of the European
Union
Luxembourg
is a constitutional monarchy, has a
land area of about 1,000 sq miles, a
population of 468,000, and is sandwiched
between Belgium, France and Germany.
With Belgium and the Netherlands, it
forms part of Benelux, which was a precursor
of the EU. Luxembourg was a founder-member
of the EU and hosts many of the EU's
financial institutions. Languages spoken
are French, German and English, with
Luxemburgish the everyday language of
Luxembourgers.
Economy Buoyant Based on Financial
Services
Luxembourg's
economy was dominated by steel production,
but since the Second World War the Government
has successfully encouraged development
of a diversified financial sector. Tourism
is also important. In Europe, Luxembourg
has the second most extensive banking
industry after London (220 banks). The
Luxembourg private banking industry
is possibly Europe's biggest. The Stock
Exchange specialises in collective investment
funds and many of the 4,000 Luxembourg-registered
funds are also listed there.
Luxembourg
is the richest country in the world
according to 2006 figures, with a GNP
per head at purchasing power parity
of US$71,400. GDP in 2006 was US$34.5bn.
Unemployment is low.
Luxembourg's Lowtax Specialisations
Luxembourg
is a high-tax country, but has specialised
types of 'holding' company which are
tax-exempt. There are 18,000 of these
- they are suited to holding international
investments, but are not allowed to
trade themselves. UCIs (collective investment
funds) are also taxed on a low basis.
The EU forced abolition of the holding
company regime from January 1, 2007,
although existing companies can continue
benefiting from their current tax regime
until December 31, 2010. Luxembourg
has launched a replacement, known as
the Family Private Assets Management
Company, or SPF. The EU's Savings Tax
Directive also threatened problems for
Luxembourg banks and UCIs, and the country
has applied a withholding tax to non-residents'
investment returns, since the Directive
came into force in July, 2005.
Plenty of Taxes in Luxembourg!
Income
Tax and Municipal Business Tax on Profits
give a 30% marginal corporation tax
rate; the rates for individuals are
higher, and they pay a wealth tax in
addition. The tax system is mostly based
on German originals, apart from VAT
which is of course an EU-inspired tax.
Immigration Controlled by Housing
and Work Permits
EU
citizens have freedom of movement in
Luxembourg of course, but other nationals
need residence and work permits.
