LUXEMBOURG IN FOCUS

1. There are 50,000 registered holding companies in Luxembourg, most of which have foreign parents.
2. The financial-services sector account for 36% of Luxembourg's economy and has made the population 550,000, the world's richest country on a per capita basis. The wealth is rooted in thousands of jobs for bankers, lawyers and auditors.
3. Luxembourg generates an estimated € 1.5 billion in annual corporate tax revenue.
4. There are 149 banks registered in Luxembourg. Origin: (7 banks), Cyprus (1 bank), Denmark (1 bank), France (15 banks), Germany (35 banks), Greece (1 bank), Italy (10 banks), Latrvia (1 bank), Luxembourg (5 banks), Portugal (2 banks), Spain (3 banks), Sweden (7 banks), Netherlands (3 banks), United Kingdom (9 banks)
5. The mutual-fund sector ranks second in size after the U.S.'s with $ 3.3 trillion in assets under management.
6. Luxembourg is a hub for cash flows. Using complex structures and the favorable tax regime, companies move hundreds of billions of euros a year in and out.
7. Over a decade, investments held by foreign businesses in Luxembourg quadrupled to $ 3.2 trillion, more per capita than in any other country (according to OECD data).
8. Luxembourg is also Europe's centre for e-commerce. EU rules allow online retailers based in Luxembourg to levy its sales tax, lower than other countries' for digital purchases around the Continent. The EU recently changed that rule, a move the government expects to cost it about € 700 million in annual tax revenue.
9. Luxembourg has adopted some of the changes demanded of it, most recently by agreeing to scap its banking-secrecy laws, only to carve out new tax-friendly niches such as tax-exempt holding structures for wealthy foreigners. Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP have invested in new office complexes, and several Chinese banks have recently made Luxembourg their Europeran base.
10. Luxembourg's success in preserving its allure as a tax home in the face of international pressure is a testament to its sway in Europe. As a Founding Member of the EU, Luxembourg has long acted as an arbiter between the Continent's two heavyweights, France and Germany. Its leaders played a centarl role in ushering in the Euro. It is home to institutions such as the European Court of Justice. Its long-time premier, Jean-Claude Juncker is now President of the European Commission. As Prime Minister from 1995 through last year, Mr. Juncker was a staunch defender of Luxembourg's tax system and the principle of tax competition within the EU.

Additional Note

Luxembourg has become the second largest investment fund centre worldwide with over € 2,800 billion in assets under management and the largest private banking centre in the eurozone with 300 billion euros. The inflow of capital from all over the world implies extremely liquid banks, which are also depositaries for global investment funds and hence important liquidity providers for their group. This liquidity in turn is used by parent companies to finance the economy in Germany, France, Italy, the rest of the EU or even the world.

Luxembourg investment funds also invest directly or via trading platforms such as stock markets in shares of local and global companies as well as in corporate and sovereign debt.

In March 2014 Luxembourg investment funds invested i.a.€ 868 billion in bonds and € 812 billion in equity.

Also, as a major financial centre for private equity, its funds invest directly in European companies. A crucial part is also played by venture capital when investing in young and promising start-ups worldwide (e.g. Skype, SurveyMonkeys, Linkedin, Twitter, Tesla, Genentech, Planetary Resources, etc.) Furthermore, Luxembourg is the leading microfinance fund centre internationally and its funds provide liquidity that ultimately helps micro entrepreneurs to set up and expand their small businesses in developing economies as well as in some of the EU Member States. With a 25.1% share of European assets, Luxembourg is also a growing financial centre for Socially Responsible Investment (SRI), therefore playing its part in fostering social aspects of the European economy.

Luxembourg is also a retail and commercial banking service provider for the 11.3 million inhabitants and 375,000 businesses of the entire Greater Region, composed of Luxembourg, the Länder of Rhineland Palatinate and Saarland in Germany, Wallonia in Belgium, and the Lorraine region in France.

The Luxembourg financial centre directly represents around 50,000 jobs for locals and for tens of thousands of the 160,000 daily commuters from Germany, France and Belgium, thereby significantly reducing the unemployment rates in these regions and contributing to the economy of the Greater Region through the spending power of these employees.

Finally, taxes are the revenues that allow the State to function and to invest in the economy and local and cross-border infrastructure projects. The financial centre contributes around one third of the Luxembourg State budget.

Looking ahead to the future, the European Commission has embarked on a project aimed at fostering long-term investments. The Luxembourg financial centre supports this project in particular and sustainable and long-term growth in general. This is the main challenge for the 2014-2019 Commission, the new European Parliament and the Council. And this is where Luxembourg’s banks and its investment fund industry can play their role in the economy and in society as a whole.

All in all, the success of Luxembourg resides not only in its specific competences in one or the other sector but in the diversity of its activities. Besides its highly diversified banking sector (private, depositary, retail, commercial and corporate banking) and its leading investment fund industry, Luxembourg plays an important role in insurance and reinsurance, international loans, bond listings, payment services and financial technology, Islamic finance, SRI and the Renminbi business. Moreover, Luxembourg is not only about finance and insurance, it also plays host to global industry leaders. Arcelor Mittal not only has its headquarters in Luxembourg, but also some of the world’s most advanced steel mills. Other businesses include global satellite leader SES, international radio and television group RTL, tyre producer Goodyear, US materials and services multinational Dupont de Nemours, US glassmaker Guardian, the large air-cargo company Cargolux as well as a host of SMEs including in the automotive components sector and some 200 SMEs in the clean tech sector.

This success is down to Luxembourg’s international orientation, its capacity to be creative, responsive and pragmatic in an open and stimulating environment. The Luxembourg financial centre has been continuously evolving and reinventing itself in order to adapt to the international environment. Aspects of its core business only 20 years ago have drastically diminished and other parts have developed at the same pace.

Whereas in the past banking secrecy was non-negotiable for a number of traditional mass affluent private banking clients, nowadays Luxembourg private banking is dominated by wealthier and tax-transparent clients who are primarily looking for expertise in multi-jurisdictional wealth management. Within the framework of the Savings Tax Directive, Luxembourg will introduce automatic information exchange from January 2015 and is a strong supporter of the practice at global level.

The activities of the financial centre have also evolved. While in the past private banking and Eurobonds were predominant, nowadays the financial centre is well diversified with a strong investment fund and asset management pillar, an international banking centre (retail and commercial banking, depositary banking, private banking, etc.), a globally relevant stock exchange and an internationally recognised insurance sector. This diversification makes Luxembourg as a whole more resilient to any exogenous hit to one of its activities.

In the wake of the 2008 financial crisis, many financial groups had to reorganise internationally. These changes have also impacted the Luxembourg banking centre, where the number of banks has decreased, giving way to fewer but larger entities via mergers and acquisitions. In the last few years, however, new banks from third countries have established their European hubs in Luxembourg, among which – but not exclusively – 3 of the 6 largest Chinese banks, including ICBC, the world’s largest bank. In addition, many international banking groups are today establishing their competence centres in Luxembourg, either in private banking, fund administration, the custodian business, treasury management or as booking centres for international loans.