Luxembourg’s prosperity was originally based on the iron and steel industry, which in the 1960s represented as much as 80 percent of the total value of exports. By the late 20th century, however, the country’s economic vigour stemmed chiefly from its involvement in international banking and financial services and in such noncommercial activities as hosting intra-European political activities. In the 21st century, information technology and electronic commerce also became important components of Luxembourg’s economy. The result of the country’s adaptability and cosmopolitanism is a very high standard of living; the Luxembourgers rank among the world’s leaders in standard of living and per capita income.

While it may be one of the smallest member states of the European Union, the Grand Duchy of Luxembourg holds significant appeal, and its strengths attract investors from around the globe. With its high standard of living, abundant business opportunities, and highly skilled workforce, let’s explore what exactly draws entrepreneurs to this country and keeps them there! Why is Luxembourg a valued economic partner for its European neighbors and the world.

With its business-friendly climate, stable economic and skilled, multilingual workforce, Grand Duchy of Luxembourg is an excellent location for companies targeting the European market。

1. International and openness

Luxembourg, known for its consistently open economy, central European location, and the most international population in the EU, is a renowned business hub offering excellent access to both European and global markets. Situated at the heart of a market with over 530 million consumers characterized by the free movement of goods, services, capital, and people, Luxembourg maintains strong ties with its European neighbors and is a valued economic partner on the international stage.

Its strategic positioning, coupled with highly developed air, rail, and road infrastructure, allows investors to seamlessly traverse Europe’s major economic centers. Furthermore, the Luxembourg economy is considered one of the most open in the world, ranking third according to the Open Markets Index 2017.

Additionally, Luxembourg is home to several EU institutions, including the Court of Justice of the European Union, the European Investment Bank, the European Court of Auditors, Eurostat, and various departments of the European Commission and European Parliament, further enhancing its status as a key player in European and global economic activity.

2. Political and Social Stability

Luxembourg enjoys a healthy economic environment, a stable political framework, and a government open to social dialogue. With one of the lowest public debt levels in Europe and a triple A rating from major ratings agencies, the country is resilient against economic downturns, reassuring business leaders looking for a robust environment to grow their companies.

3. Economic Strength

Despite the economic disruptions caused by the health crisis, Luxembourg’s unemployment rate is lower than neighboring European states. The country’s dynamic labour market and business-friendly environment make it an attractive destination for multinationals. Its financial sector is a key strength, ranking as the leading financial center in Europe and the 12th in the world, with a diverse range of activities in logistics, biotechnology, aerospace, ecotechnology, healthcare, and innovation. Many famous multinationals have already taken the leap and opted to set up business in the Grand Duchy: ArcelorMittal, GoodYear, DuPont de Nemours, Delphi, RTL Group, SES, Skype, PayPal, eBay, Amazon, and others.

4. A business-friendly environment

Luxembourg boasts a business-friendly administrative and tax framework that attracts international companies due to its comprehensive support system, forward-thinking approach, and accessible decision makers who are dedicated to fostering business growth. The country’s legal and administrative framework is tailored to promote economic expansion and adapt to market trends, with ongoing efforts to reduce bureaucracy to streamline interactions with public entities.

Moreover, Luxembourg offers one of the most competitive corporate income tax rates in Europe, with potential tax reduction measures, depreciation allowances, and tax credits available to companies. Additionally, the country boasts the lowest VAT rates in Europe, with a standard rate of 17%, an intermediary rate of 14%, a reduced rate of 8%, and a super-reduced rate of 3%.

5. Thriving start-ups and innovative products

Luxembourg has cultivated its start-up ecosystem in less than two decades, showcasing the country’s proactive and open-minded approach to entrepreneurship. Its embrace of innovation, public-private research partnerships, and proximity to Europe’s technological hubs make it an ideal testbed for the development and commercialization of new products and services. Additionally, its manageable size and diverse population make it a suitable location for product localization tailored to various EU markets.

6. Multicultural talent pool

Luxembourg possess the most international population in the EU, with a workforce that is distinguished by its multinational diversity, linguistic proficiency, and high level of education. This provides a significant advantage for companies targeting European and global markets, fostering a genuinely international mindset in businesses from the outset.

Over 47% of Luxembourg’s population is comprised of foreign nationals, reflecting the openness and multicultural nature of its labour market. While many positions are filled by cross-border workers, highly skilled professionals from around the world are also welcomed. EU citizens do not require work permits in Luxembourg, and while third-country nationals need a residence permit, the paperwork involved is minimal.

7. Reliable data hub

Luxembourg aspires to become a pioneering data economy, leveraging its entrepreneurial spirit and renowned capabilities in connectivity, data processing, and cybersecurity. The country fosters a comprehensive and supportive ecosystem where stakeholders collaborate to ensure the success of digital businesses.

The nation’s data ecosystem comprises essential components like a national cybersecurity center, data lakes, research institutions, and top-notch infrastructure, fostering innovation. While each component is individually strong, it is the unique integration of these strengths that stands out. They are seamlessly interconnected to provide an exceptional customer experience. Luxembourg encourages local companies to embrace digital transformation to adapt to evolving market trends, while foreign businesses find a conducive environment for entering the European market.

8. Logistics and supply chain hub

Luxembourg offers a range of advantages for exporting and importing goods and managing e-fulfilment activities. Home to a leading cargo airport and equipped with excellent road, rail and waterway infrastructure, the country is a competitive inter-continental logistics hub for value-added logistics activities. Facilitating digital logistics and digital supply chain management is a government priority.

9. Fantastic place to live

Luxembourg offers pleasant living conditions with abundant green spaces, a generous healthcare system, a rich cultural scene, a wide range of retail outlets, and well-developed infrastructure. The country is also known for its free public transport and was named the safest city in the world in 2019. Despite its high cost of living, especially in housing, Luxembourg ranks as the 12th most popular destination for expats out of 64 countries.

Luxembourg A truly cosmopolitan country with a long tradition of welcoming residents from abroad, it is a great place to live and raise a family, as well as to build an international career.