Luxembourg, a country in Western Europe, is bordered by Belgium, Germany, and France. It's a founding member of the European Union.
Luxembourg has stable, high-income, highly diversified market economy. Main industries of Luxembourg are banking and financial services (accounting for a quarter of GDP),production of steel and chemicals, information technology and telecommunications, and tourism.
Banking sector is the largest sector in the Luxembourg economy. Luxembourg is the most important private banking centre of the Eurozone.
Luxembourg joined the Euro Area on 1 January 1999.
|Nominal GDP (2016)||Nominal GDP per Capita (2016)||Real GDP Growth (2016)|
|54.2 bln EUR (+0.04%)||92 900 EUR (+0.01%)||4.2 % (2015: 4.8 %)|
According to Eurostat, nominal GDP of Luxembourg in 2016 was 54.2 bln EUR.
Luxembourg outperforms the European Union in terms of real GDP growth with the average annual differential coming to 1.8% over the past 10 years (2006 - 2016). In 2016 real GDP growth was 4.2% which was above the Euro Area average (1.8%) and above the European Union average (1.9%). Real GDP growth in 2017 - 2022 are IMF's estimates.
Chart 1. Real GDP Growth in Luxembourg. Source: Eurostat, International Monetary Fund.
In 2016, nominal GDP per capita in Luxembourg was 92 900 EUR.
Luxembourg has an above-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, exceeded that of the European Union by 149.6% over the past 10 years (2006 - 2016). GDP per capita at PPP in 2017 - 2022 are IMF's estimates.
Chart 2. GDP Per Capita at Purchasing Power Parity in Luxembourg; European Union = 100.
|CPI, MoM (Sep 2017)||CPI, YoY (Sep 2017)||CPI, Year Average (2016)|
|0.0 % (Aug 2017: 1.4 %)||2.0 % (Aug 2017: 2.3 %)||0.0 % (2015: 0.1 %)|
According to Eurostat, inflation rate in Luxembourg in 2016 expressed as annual percentages of average consumer prices was 0.0% which was below the Euro Area average (0.2%) and below the European Union average (0.3%). Inflation rates in 2017 - 2022 are IMF's estimates.
Chart 3. Inflation Rate in Luxembourg. Source: Eurostat, International Monetary Fund.
|Unemployment Rate (2016)|
|6.3 % (2015: 6.4 %)|
|Government Bond Yield (Sep 2017)|
|0.55 % (Aug 2017: 0.57 %)|
Chart 4. Government bond yield of Luxembourg. Source: Eurostat.
|AAA (highest credit quality), outlook stable||Aaa (prime), outlook stable|
Withholding taxes are imposed at source of income and are often applied to dividends, interest, royalties, rent and similar payments. The rates of withholding tax are often reduced by double taxation agreements.
Withholding tax rates applied on payments of interest and dividends in Luxembourg are shown in Table 1.
|Natural person, resident||0.0 %||10.0 %|
|Natural person, non-resident||15.0 %||0.0 %|
Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.
Luxembourg signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 1 January 2013 the date of coming into force is given in brackets):
There are also several agreements between Luxembourg and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 1 January 2013 of signing the agreement is given in brackets):
There are 3 ways for jusrisdictions to exchange information on tax matters:
Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.
Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.
Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.
Luxembourg signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.
Luxembourg has signed bilateral agreements with 58 jurisdictions to automatically receive information:
Luxembourg has signed bilateral agreements with 70 jurisdictions to automatically send information:
Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).
|FATCA Status in Luxembourg|
|IGA in effect since 28 March 2014, Model 1|
Luxembourg has FATCA agreement with the U.S. in effect since 28 March 2014 (Intergovernmental Agreement Model 1). Financial institutions operating in Luxembourg are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Luxembourg financial accounts hold in U.S. financial institutions will be reported to Luxembourg authorities.
|Financial Market Development|
|5.0 (max 7.0), 15th out of 138 countries|
|6.1 (max 7.0), 9th out of 138 countries|
According to World Economic Forum's Global Competitiveness Report 2017-2018, financial market development in Luxembourg is scored 5.0 out of maximum 7.0 and ranked 15th out of 138 analysed economies, trustworthiness and confidence of financial market is scored 4.9 (30th place).
Chart 5. Financial Market Development in Luxembourg. Source: WEF.
Soundness of banks is scored 6.1 bringing Luxembourg into the 9th place.
Chart 6. Soundness of Banks in Luxembourg. Source: WEF.
|Maximum Protected Amount|
|100 000 EUR|
Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.
From a depositor's point of view it is important to know:
All these details about deposit guarantee scheme in Luxembourg are summarised in Table 2.
|Scheme Participants||all credit institutions operating in Luxembourg, branches of non-EU banks, branches of Luxembourg banks abroad|
|Scheme Exemptions||branches of EU-banks (covered by their home countries)|
|Eligible Depositors||natural persons, small businesses with headquarters in EU|
|Covered Accounts||all cash deposits|
|Maximum Protected Amount||100 000 EUR|
|Paid In Currency||EUR|
Table 2. Deposit guarantee scheme in Luxembourg.
Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.
|Local Currency (Euro)||Foreign Currency|
|Aaa (prime)||Aaa (prime)|
Local currency (Euro) deposit ceiling for Luxembourg is set to Aaa (prime), foreign currency deposit ceiling is Aaa (prime).
|Average Deposit Rate (Aug 2017, EUR)|
|0.07 % (Jul 2017: 0.13 %)|
Chart 7. Deposit Rates in Luxembourg. Source: ECB.
|Number of Banks|
|Consolidated Assets (2016)|
|845.77 bln EUR (+4.26%)|
|Recent Changes (2016)|
|new banks: 3, closed banks: 6|
Currently there are 145 credit institutions operating in Luxembourg.
In 2016 consolidated banking assets in Luxembourg were 845.77 bln EUR. The consolidated banking assets' evolution is shown at Chart 8 below.
Chart 8. Consolidated banking assets in Luxembourg.
Recent structural changes (2013 - 2016) of the banking sector of Luxembourg are summarised in Table 3.
|Number of Opened Banks||7||9||2||3|
|Number of Closed Banks||1||9||6||6|
Table 3. Recent structural changes in the banking sector of Luxembourg.
The list of the most recently opened banks in Luxembourg is provided in Table 4.
|Bank of Communications Co., Limited Luxembourg Branch (new)||December 2016|
|UBS EUROPE SE, Luxembourg Branch (new)||December 2016|
|Rakuten Europe Bank S.A. (new)||January 2016|
|Agricultural Bank of China (Luxembourg) S.A. (new)||June 2015|
|Agricultural Bank of China, Luxembourg Branch (new)||June 2015|
|China Merchants Bank Co., Limited Luxembourg Branch (new)||December 2014|
|Bank of Communications (Luxembourg) S.A. (new)||October 2014|
|Novo Banco S.A., Succursale de Luxembourg (new)||August 2014|
|Banco BTG Pactual, Luxembourg Branch (new)||April 2014|
|Deutsche Postbank AG Zweigniederlassung Luxemburg (new)||April 2014|
Table 4. The most recently opened banks in Luxembourg.
All the credit institutions operating in Luxembourg can be classified into several categories. Table 5 summarises the number of banks in each category.
|Category||Number of Banks|
|Branches of foreign banks||46|
There are 46 branches of foreign banks from 14 different countries in Luxembourg. Table 6 shows 10 countries having the biggest number of branches in Luxembourg.
|Country of Origin||Number of Branches|
|1||Deutsche Bank Luxembourg S.A.|
|2||Societe Generale Bank & Trust S.A.|
|3||Banque et Caisse d’Epargne de l’Etat, Luxembourg|
|4||CACEIS Bank, Luxembourg branch|
|5||BGL BNP Paribas|
|6||UniCredit Luxembourg S.A.|
|7||Commerzbank Finance & Covered Bond S.A.|