Luxembourg: The domicile of choice for financial services - Alfi

your guide
luxembourg: the domicile of choice
for financial services

“The Luxembourg Government whole-heartedly supports
the financial industry in its efforts to cater for the long term saving
needs of investors through safe and well regulated products.”
Jean-Claude Juncker
Prime Minister
“Establishing ArcelorMittal’s corporate headquarter in Luxembourg
after the merger has proven to be an excellent decision. The advantages
of Luxembourg lie not only in the presence of its successful financial
centre and well educated international workforce, but also in the closeness
and reactivity of its government and administrations, straightforward
and flexible financial and fiscal regulation, multilingual environment,
and high quality of life for our employees.”
Lakshmi N. Mittal
Chairman and Chief Executive Officer, ArcelorMittal
“BBH has its largest international office in Luxembourg and
it is a center of excellence for our Investor Services business.
The combination of language capabilities and favourable business climate
make this central European location ideal for growing any franchise.”
Susan Livingston
BBH and Co. Partner, Fund and Asset Management Division, Chairman BBH (Luxembourg) SA
and Honorary Consul General to Luxembourg for Massachusetts.
Cover photo: Mudam Luxembourg,
Musée d’Art Moderne Grand-Duc Jean,
I.M. Pei, Architect Design.
Photo: Christian Aschman

table of contents
I. Contacts 4
II. Sights on Luxembourg 6
III. A Business-Friendly Environment 8
Financial and Political Stability 8
1. Financial and Fiscal Stability 8
2. Political Stability 8
3. Country Risk
Tax 11
1. Personal Income Tax 11
2. Tax on Companies 11
3. Value Added Tax (VAT) – Application of the EU VAT Package 11
4. Double Taxation Treaties 11
Business Infrastructure 12
1. Luxembourg government access and support 12
2. Office Space 13
3. Transport 13
4. Telecommunications and Internet 14
Immigration 15
1. Entry and residence requirements for EU, EEA and Swiss nationals
and their family members 15
2. Entry and residence requirements for non-European nationals 15
Labour, Healthcare and Pensions 17
1. Labour Market 17
2. Healthcare 17
3. Pensions 17
IV. High Standard of Living 19
A Cosmopolitan Environment 19
Standard of Living 19
UNESCO World Heritage 22
V. Focus on the Luxembourg Fund Industry 23
Luxembourg Financial Sector 23
Investment Funds in Luxembourg 23
Association of the Luxembourg Fund Industry 24
VI. A great place to live and work 27
3

I. contacts
ALFI (Association of the
Luxembourg Fund Industry)
François Drazdik /
Pierre Oberlé
59, boulevard Royal
L-2449 Luxembourg
Tel: +352 22 30 26 1
Fax: +352 22 30 93
info@alfi.lu
www.alfi.lu
Ministry of Economy and Foreign Trade
(Ministère de l’Economie et du Commerce
Extérieur)
Mr Jean-Claude Knebeler / Mr Loïc Bertoli
19-21, boulevard Royal
L-2449 Luxembourg
Tel: (+352) 24 78 24 78
Fax: (+352) 46 04 48
info@eco.public.lu
Ministry of Foreign Affairs –
Immigration Directorate
(Ministère des Affaires Etrangères –
Direction de l’Immigration)
B.P. 752
L-2017 Luxembourg
Tel: (+352) 24 78 40 40
Fax: (+352) 22 16 08
www.mae.lu
Financial Sector Supervisory Authority
(Commission de Surveillance du Secteur
Financier – CSSF)
Ms Danièle Berna-Ost
110, route d’Arlon
L-2991 Luxembourg
Tel: (+352) 26 25 1 1
Fax: (+352) 26 25 1 601
direction@cssf.lu
www.cssf.lu
Insurance Sector Supervisory Authority
(Commissariat aux Assurances)
7, boulevard Royal
L-2449 Luxembourg
Tel: (+352) 22 69 11 1
Fax: (+352) 22 69 10
commassu@commassu.lu
www.commassu.lu
4

Luxembourg Stock Exchange
(Bourse de Luxembourg)
Mr Hubert Grignon Dumoulin
11, avenue de la Porte-Neuve
L-2227 Luxembourg
B.P. 165
Tel: (+352) 47 79 36 1
Fax: (+352) 47 32 98
info@bourse.lu
www.bourse.lu
Luxembourg for Finance
Mr Jean-Jacques Picard
59, boulevard Royal
L-2019 Luxembourg
Tel: (+352) 27 20 21 1
Fax: (+352) 27 20 21 399
www.lff.lu
Chamber of Commerce
(Chambre de Commerce)
International Department
L-2981 Luxembourg
Tel: (+352) 42 39 39 1
Fax: (+352) 43 83 26
international@cc.lu
www.cc.lu
Institut de Formation Bancaire Luxembourg
(IFBL)
Customer Service
L-1615 Luxembourg
Tel: (+352) 46 50 16 1
Fax: (+352) 46 50 19
customer@ifbl.lu
www.ifbl.lu
Insurance Companies Association
(Association des Compagnies d’Assurances)
B.P. 29
L-8005 Bertrange
75, rue de Mamer
L-8081 Bertrange
Tel: (+352) 44 21 44 1
Fax: (+352) 44 02 89
aca@aca.lu
www.aca.lu
Luxembourg for Business
19-21, boulevard Royal
L- 2449 Luxembourg,
Grand Duchy of Luxembourg
Tel: (+352) 24 78 41 16
Fax: (+352) 22 34 85
info@luxembourgforbusiness.lu
The Luxembourg Bankers’ Association
(Association des Banques et Banquiers
Luxembourg – ABBL)
Mr Philippe von Restorff
59, boulevard Royal
L-2449 Luxembourg
B.P. 13
L-2010 Luxembourg
Tel: (+352) 46 36 601
Fax: (+352) 46 09 21
mail@abbl.lu
www.abbl.lu
Fondation de Luxembourg
Mrs. Tonika Hirdman
59, boulevard Royal
L-2449 Luxembourg
Tel: (+352) 27 47 48 1
Fax: (+352) 47 48 279
secr@fdlux.lu
www.fdlux.lu
5

II. sights on luxembourg
The Grand Duchy of Luxembourg offers a
cosmopolitan, multicultural and international
business environment in the heart of Europe.
Newsweek ranked Luxembourg as the 5th best
country in the world in its first-ever ranking, on the
basis of education, health, quality of life, economic
competitiveness and political environment. 1
Our resident population of over 500,000 includes
a large number of people from other countries –
a full 40% of the total population, representing
no fewer than 173 nationalities. In addition, every
day more than 140,000 people cross the borders
of neighbouring France, Germany and Belgium
to work in Luxembourg. Luxembourg has three
official languages – Luxembourgish, French and
German – but English is widely spoken, as are
many other languages such as Portuguese,
Italian and Spanish.
Competitive advantages including our international
reputation, tax efficiency and businessoriented
environment have attracted financial
institutions and professionals from all over the
world. Today, Luxembourg hosts nearly
150 banks and is the world’s second largest
investment-fund centre after the United States,
with fund assets under management totalling
over EUR 2 trillion at 30 June 2010. We are
also the leading centre for cross-border fund
registrations, with UCITS funds registered for
distribution in over 50 countries worldwide.
Photo: Olivier Minaire
1
Source: Newsweek, “The Best Countries in the World”, August 23 & 30, 2010

Luxembourg is conveniently located at the
crossroads of European motorway and rail
networks, and our attractive, modern airport
offers easy connections to destinations across
Europe and around the world.
We are a founding member of a large number of
European and international organisations, among
them the European Union, the United Nations,
the Council of Europe, the Organisation for
Economic Cooperation and Development
(OECD) and NATO. Luxembourg also hosts
the headquarters of European Union institutions
such as the European Court of Justice,
the European Parliament and the European
Investment Bank.
Last but not least, Luxembourg has a long
history of welcoming people from other
countries, with a strong economy ensuring a
high standard of living. Following the industrialisation
of the mining basin in the early
20th century, which attracted thousands of
foreign workers, the 1980s saw a successful
transition to new areas of activity, leading to
the development of what is now one of the
world’s most important financial centres.
Combining innovative flair and professional
expertise, Luxembourg is the ideal location to
set up or expand your business in the financial
sector.

III. a business friendly environment
Financial and
Political Stability
3. Country Risk
1. Financial and Fiscal Stability
Indices. 3
Luxembourg is a highly stable EU Member
State with sound public finances, relatively
low government debt and low public deficits,
which are the best guarantee of fiscal stability.
According to Fitch Ratings, Luxembourg’s
current public finances place it among the
strongest of all triple-A rated sovereign issuers. 1
Standard & Poor’s summarizes the economic
strengths of Luxembourg as follows: 2
Pronounced political stability and a consensus
on prudent management of public finances.
Strong, albeit gradually weakening public
sector balance sheet, with the general
government in a net asset position.
Very high levels of wealth.
2. Political Stability
Luxembourg is a parliamentary representative
democracy with a constitutional monarch and
a stable government. It is a founding member
of the EU, NATO, the OECD, the United
Nations and the Benelux Union, reflecting
a political consensus in favour of economic,
political, and military integration.
According to Fitch Ratings, Luxembourg is
among the leaders on measures of development
and governance, with the highest per-capita
GDP and one of the top rankings in Human
Development and Corruption Perceptions
Country risk (also known as political risk)
refers to the risk of investing in a country,
associated with the possibility of changes in the
local business environment adversely affecting
operating profits or the value of assets.
Financial factors such as currency controls,
devaluation and regulatory changes entail
operational risks, as do security factors such
as riots, civil war and other disturbances.
In a recent country-risk survey published by
Euromoney, Luxembourg topped the list of the
world’s least risky countries with a score of
99.88 out of 100. 4
1
Source: Fitch Ratings Ltd., Credit Analysis, Luxembourg, 2009.
2
Source: Standard & Poor’s, Ratings Direct, 2009, Luxembourg.
3
Source: Fitch Ratings Ltd., Credit Analysis, Luxembourg, 2009.
4
Source: Euromoney Online, Country Risk Survey, 2009.
8

EU institutions and agencies headquartered in Luxembourg include the EU Court of Justice, the
European Investment Bank, the European Parliament and Secretariat of the European Commission.
More information is available on the homepage of the Central Service for Statistics and
Economic Studies (STATEC – www.statec.lu).
Luxembourg’s gross domestic product (GDP) per capita compared within other eurozone
countries and the United Kingdom. 1
Government Debt and Deficits in the eurozone and the United Kingdom 2
1
Source: European Commission, Eurostat, 2009.
2
Source: European Commission, Eurostat, 2009.
9

Source: Eurostat
Investment Agreements
Within the framework of the Economic Union between Luxembourg and Belgium
(Union économique Belgo-Luxembourgeoise or UEBL), Luxembourg has signed agreements
to promote and mutually protect investments in and from a number of third countries.
The aim is to consolidate investment flows and offer investors maximum protection with
provisions for adequate compensation in the event of nationalizations, free movement
of capital and most-favoured nation status to ensure equal treatment of investors.
The agreements also provide an extensive legal framework for the settlement of disputes
relating to investments.
To date, UEBL has signed agreements with more than 50 countries.
10

Tax
1. Personal Income Tax
Personal taxation and social-security regimes
for people working in Luxembourg are very
competitive compared with those in other
European countries. The marginal tax rate at
30 June 2010 was 38.95% and social-security
contributions are largely capped.
For further information, visit the website
of the Luxembourg Direct Tax Authorities
www.impotsdirects.public.lu
Luxembourg paying agents withhold tax on
interest income at a flat rate of 10%.
2. Tax on Companies
Over recent years Luxembourg has attracted
a number of large international companies
and financial institutions, reflecting the appeal
of its infrastructure, its multicultural workforce,
competitive taxation and business-friendly
environment. Company taxation includes
corporate profit tax, valued added (sales) tax
and social security contributions for employees.
3. Value Added Tax (VAT) –
Application of the EU VAT Package
Luxembourg VAT rates are currently the
lowest in the EU, which has encouraged
e-businesses to move their European operations
to Luxembourg to gain an edge in pricing.
For further information, please consult the
website of the Luxembourg Indirect Tax
Authorities: www.aed.public.lu
4. Double Taxation Treaties
Luxembourg has signed, and continues to sign
and apply, a large number of treaties with EU
and non-EU countries to avoid double taxation
of individuals and companies resident for tax
in another country.
The complete list of the double taxation
treaties signed by the Luxembourg government
is available at www.impotsdirects.public.lu
Luxembourg tax authorities are also available
for consultations on demand with investors.
Labour Costs
2008 annual gross salary of €100,000 – Married / 2 children
Switzerland Luxembourg Ireland UK Germany Netherlands France Belgium
Total cost for
employers
106 111 111 110 111 107 149 132
Minus tax/social
security employers
6 11 11 10 11 7 49 32
Gross salary (t=100) 100 100 100 100 100 100 100 100
Minus tax/social
security employees
25 28 30 33 35 43 29 48
Net employees 75 72 70 67 65 57 71 52
Ratio Net Cost (%) 71 64 63 61 59 53 48 39
Source: ALFI, Luxembourg Where Else, 2010
11

Business Infrastructure 1. Luxembourg government access
and support
The Luxembourg government has consistently
pursued pro-active economic development
policies. Easy access to decision-makers such as
cabinet members and senior civil servants is a key
pillar of growth in the Luxembourg economy.
Luxembourg’s international network of trade
and investment offices promotes its place as a
premium location for companies and financial
institutions eager to expand into Europe. Its
business-friendly environment has attracted the
European headquarters of many global companies,
among them Amazon, eBay, DuPont
Teijin Films, Fanuc (robotics and CNC),
Goodyear, Guardian and Rakuten. There are also
a number of multinational companies with global
headquarters in Luxembourg, among them
ArcelorMittal, SES, Delphi (powertrain systems)
and Cargolux. Legislation is in many cases drawn
up in consultation with the industries concerned.
This applies in particular to the financial sector in
areas such as investor protection and prevention
of money laundering.
Photo: Olivier Minaire
12

2. Office Space
Steady growth in demand for office space has
spurred construction and many high-quality
buildings are now available, including new
offices featuring state-of-the-art equipment and
energy-efficient, environment-friendly design.
3. Transport
Luxembourg has efficient road, rail and air
transport facilities and services. The road
network has been significantly upgraded in
recent years with 147 km of motorways
connecting the capital to three major European
cities: Paris, Brussels and Frankfurt. With the
advent of high-speed rail (TGV) services in 2007,
Luxembourg is only 2 hours and 15 minutes
from Paris.
Luxembourg city airport offers flights to over
50 European cities. Several flights a day serve
Europe’s major business centres and cities
such as London, Frankfurt, Paris, Zurich,
Amsterdam and Berlin.
13

III. a business friendly environment
4. Telecommunications and Internet
The telecommunications industry in
Luxembourg is deregulated and extensive
deployment of electronic networks has allowed
healthy competition between operators,
with modern fibre optic and cable connections
available throughout the country.
A central position in Europe, a stable
economy and low taxes make Luxembourg
the ideal gateway to European telecommunications
markets. Several providers connect
Luxembourg to major European data hubs
and over 10 regulated data centre operators
are based in Luxembourg.
Internet Data Interchange – Top Ten
Luxembourg ranks 2nd worldwide in the
International Telecommunications Union ICT
Development Index and 8th in the Global
Broadband Quality Study 2009 by the
University of Oxford and the University
of Oviedo. 1
1
Source: ITU, Global Report, 2009
14

Immigration
The new immigration law that came into
force in 2008 significantly simplified procedures
with regard to entry, residence and
working requirements for non-nationals in
Luxembourg.
Entry and residence requirements for citizens
of the European Union (EU), the European
Economic Area (EEA) and Switzerland (1)
differ from those for citizens of other countries
(2).
1. Entry and residence requirements for
EU, EEA and Swiss nationals and their
family members
EU, EEA and Swiss nationals are allowed to
enter and stay in Luxembourg for a period
of up to three months on simple presentation
of a national identity card or valid passport.
Any of their family members who are not EU
nationals have the right to enter and stay for
a period of up to three months on presentation
of a valid passport and visa where required.
EU, EEA and Swiss nationals can stay for
more than three months if they can show that
they are self-employed or employed, students,
or provide evidence of sufficient resources for
themselves and their family members as well
as of adequate health insurance. They must
register at the local town hall within three
months of their arrival in Luxembourg and are
immediately issued with a document confirming
registration.
Family members of EU, EEA and Swiss nationals
who are not EU nationals must apply for a
residence card at the local town hall. The card
is issued by the Immigration Directorate of the
Ministry of Foreign Affairs.
EU, EEA and Swiss nationals as well as any of
their family members who are non-EU nationals
have free access to the labour market.
However, the restrictions provided for in the
Accession Treaty mean that nationals of
Bulgaria and Romania, as well as any family
members who are third-country nationals, still
need to obtain a work permit during the first
year after accessing labour market.
2. Entry and residence requirements for
non-European nationals
2.1. Entry
Non-EU nationals entering Luxembourg
must meet the conditions defined in the rules
governing the Schengen Area.
The Schengen Area comprises 25 EU Member
States, 1 Switzerland, Norway and Iceland. Ireland
and the United Kingdom are currently the only
EU Member States to have negotiated an opt-out.
The Schengen Area operates very much like a
single country for international travel purposes,
with border controls for people coming
in and out, but no internal border controls.
Non-EU nationals must have a valid passport
and, in some cases, a visa. A complete list of
the countries whose citizens need a visa may
be found on the website of the Ministry of
Foreign Affairs (www.mae.lu), together with
information about required documents.
Non-EU nationals may be refused entry on the
grounds of records in the Schengen Information
System (SIS), if they have previously been
refused entry or if they are a threat to public
security or health. They must show the reasons
for their visit and evidence of sufficient
resources for their stay and return, as well as
of adequate health insurance.
These conditions apply regardless of the length
of their stay.
1
Bulgaria, Cyprus, and Romania have not yet implemented the Schengen Agreement into national law, but are required
to do so.
15

2.2. Staying for less than three months
Non-EU nationals staying in Luxembourg for
less than three months must meet the entry
conditions outlined above. Within three days
of their arrival in Luxembourg, they must
declare themselves at the town hall of the place
they plan to live or at the hotel where they are
staying.
Non-EU nationals staying in Luxembourg for
less than three months are in general not
entitled to work unless they have a permit.
However, this is not required for periods
of less than three months in some cases,
such as where the purpose is to visit business
partners, develop contacts, negotiate contracts
or to attend trade fairs or board meetings.
2.3 Staying for more than three months
Non-EU nationals wishing to stay in Luxembourg
for more than three months must apply to the
Immigration Directorate of the Ministry of
Foreign Affairs for an authorisation to stay
(before entering the country) and fulfil conditions
for one of the types of authorisation
provided for by law. These concern salaried
employees (including sub-categories such
as transferred and highly skilled workers),
independent/self-employed professionals,
sports people, school and university students,
trainees and volunteers, researchers and family
members, with provision also made for
personal and exceptional reasons as well
as long-term residence.
On receiving authorisation to stay, applicants
who do not need a visa must enter Luxembourg
within 90 days and those that do require a visa
must apply for one within 90 days.
When they arrive in Luxembourg, they must
apply for a residence permit, a procedure
involving in particular registration at the town
hall and a medical examination.
Recent changes to immigration law did away
with the separate work permit previously
required for non-European nationals wishing
to work in Luxembourg. Non-EU nationals
with a residence permit can travel inside the
Schengen Area for three months out of every
six, but do not have free access to the labour
markets of other Schengen member states.
The family members of a resident may also
apply for residence permits (family reunification)
provided that the resident previously
obtained a residence permit valid for at least
one year, has resided in Luxembourg for at
least 12 months and will be eligible to apply
for a permanent residence permit in the near
future.
These conditions do not apply to residents
who have obtained residence permits as highly
skilled workers, which require a minimum
of five years of higher education or specialised
professional experience, as researchers
or as transferred employees. If the resident
is a single parent, his or her children are also
exempted.
Family members who may apply for an
authorisation to stay include, among others,
spouses, civil partners (in cases where such
partnerships are legally recognized) and
unmarried children under 18 years of age.
For further information, please visit the
following websites:
Ministry of Foreign Affairs (www.mae.lu)
Citizens Advice Bureau in Luxembourg
City – Bierger Center (www.vdl.lu)
Citizens Advice Bureau in Esch-sur-Alzette –
Bierger Center (www.esch.lu)
The Law of 29 August 2008 on Freedom
of Movement and Immigration, available
at www.legilux.lu
The online portal De Guichet offers a
one-stop service for citizens and companies to
carry out administrative formalities (procedures,
online forms, downloadable forms and
advice). Accessible at www.guichet.lu
16

Labour, Healthcare
and Pensions
1. Labour Market
The Grand Duchy’s demographics are reflected
in labour-market structures, with people from
other countries accounting for more than
70% of the working population. Immigrants
(foreign residents) make up part of this total,
while commuters from neighbouring countries
also represent a large proportion. Benefiting
from its central geographical position,
Luxembourg has been able to round out its
multilingual workforce with personnel from
the UK, Ireland, Belgium, France, Germany
and other countries, who together make up a
dynamic expatriate community.
The financial sector employs over 42,000 people,
not counting the employees of service providers
such as auditors and lawyers.
2. Healthcare
In Luxembourg, all workers are automatically
covered by one of the country’s health insurance
funds. Depending on the nature of the
treatment, this covers between 80 and 100%
of the fees charged by doctors and dentists.
All doctors operate within the framework of
the national healthcare system and must charge
regulated fees to patients holding a European
health insurance card or an equivalent certificate
of insurance.
Patients generally pay medical fees and then
apply for reimbursement at a health insurance
centre, presenting the doctor’s bill and proof
of payment.
Health insurance also covers children and
spouses / partners.
3. Pensions
Luxembourg has a three-pillar pension system:
The state pension system applies to all persons
working in Luxembourg. In addition, there
are several types of occupational retirement
vehicles, such as complementary pension
schemes set up by an employer. Finally,
individual pension vehicles are available and
benefit from a special tax regime.
The legal retirement age in Luxembourg is 65,
although employees can – subject to certain
conditions – qualify for an early pension at the
age of 57. In principle, an employee must have
been registered with the Luxembourg social
security authority for at least 120 months to
receive his or her full old-age pension.
For employees who are citizens of EU and
EEA member countries (the latter including
Liechtenstein, Iceland, and Norway), as well
as for Swiss nationals, the Luxembourg social
security authority in principle accepts the
insurance periods to which an employee is
entitled under foreign legal provisions. Note
that this is not applicable to non EU-nationals
unless Luxembourg has signed bilateral conventions
with a third country (“treaty country”)
providing for specific provisions in this respect.
Both employers and employees contribute 8%
into the state pension fund. The employee’s
share is deducted from his or her monthly gross
salary.
Luxembourg pensions are calculated on the basis
of a 40-year pay-in period. For each year beneath
this 40-year minimum, 1/40 of the minimum
pension is deducted. Employees can also choose
to participate in an optional state pension fund.
Luxembourg will also pay out the Luxembourg
state pension to a retiree residing in another
country without any reduction, modification
or suspension of the amount of the pension,
depending on the individual case.
For further information, please contact
www.cnap.lu, the national pension insurance
administration.
17

Current social security contribution rates (as at 1st July 2010)
Insurance
Max. liable for contribution
Categories per year per month Employee’s part Employer’s part
Health Insurance – Rate CNS
Health (rate on salary) € 102,226.98 € 8,624.04 2.95% 2.95%
Health (rate on bonus) 2.70% 2.70%
Health Care – Contribution
Rate Mutual Insurance 1 € 102,226.98 € 8,624.04 2.1% 2 0.88% to 2.01% 1
Pension € 102,226.98 € 8,624.04 8.00% 8.00%
Care insurance / / 1.40% /
Health at work € 102,226.98 € 8,624.04 / 0.11%
Accidents:
rates ranging from ... to ...
€ 102,226.98 € 8,624.04 / 0.45% to 6.00%
Total (without costs for sickness insurance on gratification) 12.35% to 14.45% 12.39% to 19.07%
1
The contribution rate for Mutual Insurance depends on the risk class to which the employer belongs to and which
depends on the rate of financial absenteeism of wage-earners in the company:
rate of financial
absenteeism
0% to <
0.75%
0.75% to <
1.75%
1.75% to <
2.75%
>_ 2.75%
contribution rate 0.88% 1.36% 1.77% 2.01%
The contribution rate in the amount of 2.1%
which is to be paid by “blue collar” workers, is
an extra premium.
It will be deducted from the salaries of
“blue collar” workers.
2
This percentage is not applicable to “white collar” workers.
18

IV. high standard of living
A Cosmopolitan
Environment
A defining characteristic of the Grand-Duchy
of Luxembourg is the diversity of its people
and the ease of integration into the community.
Luxembourg has witnessed strong population
growth since the end of the 19th century, with a
steady inflow of immigrants boosting the number
of inhabitants from around 200,000 in 1900 to
502,066 today. 1
With nearly 43% of the population born in
other countries, there are 200,000 foreign
residents out of a total population of half a
million. In Luxembourg City, the percentage
of foreign residents is nearly 64%. People from
more than 170 countries live together in
Luxembourg; main foreign communities are
the Portuguese and French, followed by
Italians, Belgians and Germans.
The high proportion of foreign residents has not
led to any intercultural tension, testifying to the
success of Luxembourg’s model for integration.
Luxembourg is a trilingual country with German,
French and Luxembourgish all official languages.
English is also widely spoken and is taught in
Luxembourg schools from an early age.
Standard of Living
The Grand Duchy of Luxembourg enjoys one
of the highest standards of living in the world.
1. Schools and Childcare
Primary and Secondary Schools
Luxembourg offers free education and requires
two years of preschool, six years of primary
school and seven years of secondary school. Any
child reaching the age of six before 1 September
must begin primary school that year.
Luxembourg’s state secondary schools teach
traditional subjects that prepare students for
higher education. Secondary school lasts seven
years and includes three years of specialisation.
International Schools in Luxembourg
The International School of Luxembourg (ISL)
provides teaching in English for students ranging
in age from 3 to 18 (www.islux.lu).
The European School is primarily for families of
European Community employees and has classes
in most EU languages (www.euroschool.lu).
Saint George International School caters to
children of all nationalities aged 2 to 11 who
want a comprehensive curriculum in English.
Ecole Française de Luxembourg (EFL) offers
teaching in French for children of all nationalities
from the age of 3.
Lycée Français Vauban provides a Frenchlanguage
education for students aged 12 to 18.
EFL and Lycée Vauban are both recognised by
the French Education Ministry.
Luxembourg University
Luxembourg University (www.uni.lu) was
created in 2003 and has three faculties.
Highly rated degree programmes include a
Master’s in Business and Finance awarded by
the Luxembourg School of Finance (LSF), part
of the Finance Department of the Faculty of
Law, Economics and Finance.
Childcare
Luxembourg offers a large number of public and
private day-care centres for babies and children.
1
Source: Statec, January 2010
19

Photo: Christian Aschman
2. Culture
Museums
The National Art and History Museum houses
archaeological collections (prehistory, protohistory,
the Gallo-Roman period and the Middle
Ages), art collections (ancient, modern, contemporary
and Luxembourgish) and is dedicated to
the decorative arts and folk art and traditions.
The National Museum of Natural History
offers visitors new insights into human beings
and their environment, science, natural history
and the wonders of our planet.
The Luxembourg City History Museum’s
permanent collections and temporary exhibitions
illustrate the capital’s history over more
than a thousand years.
The Luxembourg Casino holds contemporary art
exhibitions throughout the year, with a focus on
the diversity and complexity of current trends.
The Grand Duke Jean Modern Art Museum,
designed by the renowned architect I. M. Pei,
hosts all genres of contemporary art.
Music
The Luxembourg Philharmonic Orchestra has
been a pillar of the cultural life of Luxembourg
since its creation in 1933. It is now Luxembourg’s
national orchestra and has its own season at the
Philharmonie Luxembourg concert hall.
Another important venue is the Grand Théâtre
de la Ville de Luxembourg, which welcomes
and co-produces operas, musical theatre, dance
shows and plays from around the world.
The Philharmonie Luxembourg’s bold design –
the work of French architect Christian de
Portzamparc – provides an outstanding setting
for concerts. Seating 1,500, it plays a vital role in
stimulating Luxembourg’s already rich musical
life and involving the community at large.
The Rockhal, a complex managed by the publicsector
Centre for Amplified Music, is increasingly
a focus of pop-rock music for Luxembourg
and neighbouring areas, with room for over
7,000 people. Concert halls with seating for 5,400
offer a full programme of jazz, rock and pop.
Regular musical events also include the Blues
& Jazz Rallye and the Luxembourg festival.
Cinemas
Luxembourg has a large number of cinemas. Film
buffs can choose between small traditional cinemas
and a multiplex in Luxembourg-Kirchberg.
Contrary to the practice in countries such as France
and Germany, where most films are shown in
dubbed versions, almost all films in Luxembourg
are shown in their original language with
subtitles, reflecting the multilingual environment.
Sports
Outstanding sports facilities in Luxembourg
include the Coque centre located in the heart of
the Kirchberg distinct, which has several swimming
pools, one of them Olympic-sized (50 m). It
also has a spa and fitness and personal care area.
A recent addition in this area is the Les Thermes
spa and fitness centre, which opened its doors in
Strassen near Luxembourg City in 2009 and
features the latest premium equipment.
Special mention should also be made of the
renowned thermal baths at Mondorf-les-Bains,
which have the most modern facilities in Europe
and offer a wide range of made-to-measure
programmes.
Leisure activities available throughout the year
include tennis tournaments, archery, lawn
bowling and more.
Almost all towns in Luxembourg have both
indoor and outdoor tennis courts, and horse
riders enjoy access to high-quality facilities and
many riding clubs.
The country has a large number of wonderful
golf courses, including the Grand-Ducal Golf
21

Club, the Kikuoka Country Club, the Golf de
Clervaux, the Christnach Golf and Country Club,
the Golf de Luxembourg and the Gaichel Golf Club.
Cyclists benefit from an extensive network of
bicycle paths and hiking is a popular activity,
reflecting the large number of attractive, wellmaintained
trails across Luxembourg. The
Grand Duchy also offers prime sites for rock
climbing near Berdorf in the Müllerthal area.
The Haute-Sûre and the Echternach Lakes are
important leisure destinations with scope for
activities that include swimming, sailing,
canoeing, pedal boating, surfboarding and
fishing.
A number of skating rinks are available and
snowfalls offer opportunities to take advantage
of cross-country skiing trails in the Ardennes in
the northern part of the country.
UNESCO World Heritage
UNESCO has placed more than 860 sites
of outstanding universal value on the world
heritage list. Three are in Luxembourg:
the fortress of Luxembourg and the
old city of Luxembourg, dating from the
10th century AD
the photographic exhibition “The Family of
Man” curated by Edward Steichen
the Dancing Procession of Echternach, the
last traditional dancing procession in Europe
and a candidate for UNESCO recognition
as Intangible Cultural Heritage.
Mercer Quality of Living Surveys
Recent Mercer surveys place the city of
Luxembourg among the top five cities
in the world. The table below compares
Luxembourg with its European competitors.
Rankings are based on a point scoring index
and cities are compared to New York as the base
city, with an index score of 100. The quality of
living survey covers 215 cities and is conducted
to help governments and major companies place
employees on international assignments.
The Quality of Living Survey of Mercer
Human Resource Consulting ranks 50 cities
around the world for personal safety, placing
Luxembourg ahead of Geneva, Zurich,
Helsinki and Bern, which together share
second place. The survey identified cities
with the highest personal safety ranking
compared with other countries, internal
stability, crime and effectiveness
of law enforcement. 1
Switzerland Germany Netherlands Ireland France UK Luxembourg Ranking
Quality of Living 107.47 105.58 105.70 103.60 102.40 101.60 104.60 4th
Cost of Living 107.20 80.97 85.70 87.40 95.10 92.70 82.10 2nd
Infrastructure 101.37 103.58 101.00 N/A 103.10 100.13 N/A N/A
1
Source: Mercer Studies, 2009
22

V. focus on the luxembourg fund industry
Luxembourg Financial
Sector
Rapid development since 1980 has made
the financial sector the key driver for
Luxembourg’s economy. An attractive legal
framework and a favourable tax regime
encouraged the arrival of holding companies,
followed by international banks and investment
funds, also known as undertakings for
collective investment (UCIs).
Luxembourg’s status as an international
financial centre has been the main factor behind
its impressive growth over the past three
decades. The country hosts nearly 150 banks,
mainly subsidiaries of European banks, and is
the world’s second-largest investment fund
centre and largest global distribution centre
for investment funds (75% of the world’s
cross-border funds, distributed in at least three
countries, are based in Luxembourg).
The main compartments of the financial sector
today are the management and distribution of
investment funds, private wealth management
and the interbank market. More recently, life
insurance and reinsurance industries have also
seen strong growth.
Investment Funds
in Luxembourg
Over the years, Luxembourg has grown to
become the second largest fund centre in the
world after the United States, with over
€ 2 trillion in assets under management at
30 June 2010.
Luxembourg has established a competitive
legal framework for UCITS (Undertakings
for Collective Investment in Transferable
Securities), funds “passported” within the EU,
and non-UCITS funds, to become the largest
global distribution centre for investment funds
in Europe and the world.
In 2007, new legislation introduced
Specialised Investment Funds (SIF), a
flexible non-UCITS vehicle that is subject
to lighter supervision by Luxembourg’s
Commission de Surveillance du Secteur
Financier (CSSF). To date, more than
1,000 SIFs have been set up.
Luxembourg law provides a framework for
so-called umbrella funds, with one or more
individual compartments under a single legal
structure. Each compartment invests in a
different asset class.
particular abolished the subscription tax
on Exchange Traded Funds (ETFs) and
Microfinance Investment Funds.
Funds qualify as taxable persons for VAT
purposes; case-by-case analysis is needed to
decide whether VAT registration is necessary.
Related services have grown along with the
fund industry. Today, more than 70 depositary
banks and approximately 200 management
companies have registered with the CSSF.
Auditors, law firms, tax advisors and other
professionals specialised in the field of investment
funds are well established in Luxembourg
and are constantly evolving to keep step with
new products.
Luxembourg funds are exempt from income
tax and net wealth tax, and do not levy
withholding tax on distributions unless the
EU Savings Tax Directive applies. Funds are
subject only to subscription tax of 0.01% to
0.05% of their net asset value, unless exempt
under special conditions. Luxembourg has in
23

ALFI
ALFI (Association of the Luxembourg Fund
Industry) is the official representative body for
the Luxembourg investment fund industry.
The association’s mission is to “lead industry
efforts to make Luxembourg the most attractive
international centre”. To that end, ALFI brings
together the interests of over a thousand
Luxembourg-domiciled investment funds and
nearly 200 companies active in the Luxembourg
fund industry. These represent a wide variety of
service providers, including depositary banks,
fund administrators, transfer agents, distributors,
law firms, consultants, tax advisers,
auditors and accountants, specialist IT providers
and communications agencies.
ALFI recently launched a virtual Investor Centre
to provide investors with basic information
on investing, with particular reference to the
investment fund sector. The Investor Centre
offers information on a broad range of topics in
areas such as the different types of investment
available through funds and the rules and
safeguards covering the industry. The Investor
Centre is accessible via ALFI’s website www.alfi.lu
ALFI’s Mission Statement
Help members capitalise on industry trends
ALFI’s numerous Technical Committees
and Working Groups continuously analyse
global industry developments as well as legal
and regulatory changes in Luxembourg,
in the EU and beyond, and the threats and
opportunities these may constitute for the
Luxembourg fund sector.
Shape regulation
A modern and innovative legal and fiscal
environment is of key importance to defend and
improve the competitive position of Luxembourg
as a centre for the domiciliation, administration
and distribution of investment funds. Its
close contacts with the regulatory authority, the
government and the legislative body allow ALFI
to help shape regulation by bringing valuable
input when there is a need to adapt the
regulatory framework, to adopt a new European
Directive or to create a specific regulatory
framework for new products or services.
Encourage professionalism, integrity
and quality
Investor trust is key to successfully developing the
collective investment business. ALFI therefore
strives to encourage professional behaviour,
quality products and services, and the integrity
of all players involved by offering training
courses designed for novices and experts, by
developing codes of conduct, transparency and
good corporate governance, and by supporting
efforts to fight money laundering.
Promote the Luxembourg investment
fund industry
ALFI actively promotes the Luxembourg
investment fund centre, its products and
services by representing the sector in
economic and financial missions organised
by the Luxembourg government around
the world and by taking active part in
the principal meetings of the global fund
industry.
1
Source: MicroRate, Aug. 09
24

Ranking of Major Fund Promoters in Luxembourg by Cross-Border Registrations
Rank Promoter Domicile Countries of Sale
1 Franklin Templeton LU 50
2 HSBC Holdings LU 42
3 BlackRock LU 40
4 Schroder LU 38
5 BNP Paribas LU 33
6 Fil International LU 33
7 Société Générale LU 32
8 Barclays IE 30
9 JPMorgan Chase &Co LU 30
10 Invesco Ltd LU 29
11 Allianz Group LU 28
12 Deutsche Bank LU 28
13 Swiss & Global AM LU 28
14 UBS LU 28
15 Fortis Investments LU 27
16 Legg Mason IE 27
17 Pioneer Investments LU 26
18 BNY Mellon / WESTLB Mellon IE 25
19 Aberdeen Asset Management LU 24
20 Credit Agricole LU 24
21 Credit Suisse LU 24
22 ING GROEP LU 24
23 Henderson Group PLC LU 23
24 Lloyds TSB Group JE 23
25 Morgan Stanley LU 23
Source: Lipper Hindsight, 2009
Cross-Border Funds in Luxembourg since 2002
# x-border registrations
# x-border funds
70,000
60,000
50,000
40,000
30,000
20,000
26,966 3,750
26,030
4,529
28,427
4,875
5,170
36,411
5,907
43,304
6,625
49,266
7,366
56,492
7,219
56,076
7,165
56,175
7,346
57,136
7,441
58,553
8,000
7,000
6,000
5,000
4,000
3,000
2,000
10,000
1,000
0
2002 2003 2004 2005 2006 2007 2008 Q1-09 Q2-09 Q3-09 Q4-09
0
Luxembourg Ireland Other number of true x-border funds
Source: Lipper Hindsight, 2009
25

Authorisations by domicile
2.1%
2.5%
12.9%
0.9%
1.3%
4.1%
Situation
in 2008
Situation
in 2009
76.2%
Source: Lipper Hindsight, 2009
Cross-border fund groups 2003-2009
Source: Lipper Hindsight, 2009
Market shares of promoters by country of origin at 31 December 2009
others
Sources: CSSF / ALFI
26

VI. a great place to live and work
A prime location in the centre of Europe and
a dedicated workforce that is multilingual and
multicultural, with nearly 40% of the population
born abroad, have enabled Luxembourg
to win its place as a leading international
financial centre despite its small size.
Hospitable and open to the world,
Luxembourg enjoys a stable political and
economic environment, a vibrant mix of
cultures from around the world and high
standards of living.
For all of these reasons and more, we invite
you to discover Luxembourg and hope to share
with you, your business and your family all the
attractions that our uniquely dynamic country
has to offer.
We look forward to seeing you soon.

October 2010
alfi | association of the
luxembourg fund industry
B.P. 206
L - 2012 Luxembourg
Tel: +352 22 30 26 - 1
Fax: +352 22 30 93
info@alfi.lu
www.alfi.lu