Luxembourg is an international financial centre recognised for its high level of expertise.
Luxembourg has become a leader in cross-border issues and holding and financing activities.
Luxembourg developed into the largest investment fund hub because of the existence of this ecosystem and the fact that Luxembourg has become a centre of excellence on cross-border issues.
Luxembourg’s responsiveness to the needs of international investors and its legal framework in order to ensure it remains state-of-the-art as well as an efficient bureaucracy are elements that attract the international business community.
These elements have allowed Luxembourg to become one of Europe’s leading financial centres.
Multinational companies choose to locate in Luxembourg because of the presence of financial intermediaries which can provide them with financial services. For a number of business and legal reasons, companies manage their holding and financing activities by creating sub-entities, often one for each transaction. That multiplies the number of individual companies and adds to the perception of thousands of companies being registered in one location. Some of these entities are subject of advance tax decisions (“tax rulings”).
In Luxembourg, the tax administration sets out in these decisions how it intends to apply the existing tax legislation to a specific situation in order to provide legal certainty and predictability for both parties, the taxpayer, and the state.
The tax rates are not freely negotiated, but are the result of the application of existing national and international rules, as well as of the relevant double taxation treaties.
Luxembourg believes that it is not acceptable that companies take advantage of the international legal framework to avoid all taxation and it requires a coordinated effort by the international community to avoid non taxation situations.
Luxembourg will contribute to tackling some of these issues by adopting a revised parent-subsidiary directive earlier this year and, at national level, introduced a number of law changes. Luxembourg has embraced transparency and last week laid the final act in the process of abolishing tax secrecy. In the same spirit, Luxembourg’s government can be counted on to contribute to resolving the issue of non-taxation of corporate actors. We have embarked on this road well before the publication of the ICIJ’s articles.
Finally, the country’s economy is indeed very diversified. While financial services play an important role (25% of GDP), other sectors such as steel production, logistics and car components are very well developed.