Luxembourg: Investing in Luxembourg
Luxembourg offers a business climate favourable to foreign investment, with a very attractive tax system. According to UNCTAD's World Investment Report 2024, FDI inflows were negative by USD 62.8 billion in 2023. At the end of the same period, the total stock of FDI stood at USD 1.18 trillion, more than 14 times the country’s GDP. According to figures from the Central Bank, the main investing countries in terms of stock at the end of 2023 were the United States (21.7%), the United Kingdom (10.3%), the Cayman Islands (8.5%), the Netherlands (7.0%), and Ireland (6.2%). In terms of sectors, financial and insurance activities attract more than four-fifths of all investments, with manufacturing accounting for a marginal share. According to the latest figures from the OECD, in the first six months of 2024, FDI inflows to the country were negative by nearly USD 3 billion, compared to a negative inflow of USD 54.7 billion recorded in the same period one year earlier.
The government of Luxembourg has established some measures to make the country even more attractive to FDI, such as fiscal benefits, equipment, and construction projects. The government focused on key innovative industries like logistics; ICT; and health technologies, including biotechnology and biomedical research; clean energy technologies; space technology, and financial services technologies. Luxembourg has long been considered a tax haven, though in recent years it has taken steps related to the process of harmonization of financial standards both within the EU and at the international level. Furthermore, the “Multilateral Convention to Implement Tax Treaty Related Measures To Prevent Base Erosion and Profit Shifting” - which aims at combating tax avoidance by multinational companies - entered into force for Luxembourg in 2019. On 1 September 2023, the Luxembourg Act of 14 July 2023 entered into force, establishing a national screening mechanism for foreign direct investments that are likely to affect security or public order. The Act imposes regulations on non-EU/EEA investors seeking to invest in Luxembourg-based entities operating in critical sectors such as energy, health, defence, finance, telecoms, data, media, and agri-food industries within Luxembourg. To comply with the Regulation, the Act mandates a prior notification process and screening procedure, along with enforcement mechanisms in instances of non-compliance with the prior notification obligation or screening decisions. Finally, the Grand Duchy ranks 20th among the 133 economies on the Global Innovation Index 2024 and 5th out of 184 countries on the latest Index of Economic Freedom. According to the World Economic Forum (WEF), the country ranks 23rd on the Global Competitiveness Index 2024.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 9,839 | 25,123 | -322,054 |
FDI Stock (million USD) | 1,525,769 | 1,515,850 | 1,155,324 |
Number of Greenfield Investments* | 25 | 34 | 41 |
Value of Greenfield Investments (million USD) | 732 | 675 | 489 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Luxembourg | OECD | United States | Germany |
Index of Transaction Transparency* | 6.0 | 6.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 5.0 | 5.3 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 4.0 | 7.3 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
Luxembourg has many attractive assets for investors on its soil. Here are the main ones:
The main obstacles to investment in Luxembourg are:
In general, Luxembourg's tax legislation provides various incentives in the following areas: investment tax credit, risk capital, tax incentives for research and development (R&D) and intellectual property (IP), recruitment of the unemployed, audiovisual activities, vocational training.
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Latest Update: May 2025