Economy of Luxembourg

Exports and Imports

Exports in 2023 amounted to $50 billion, with financial services, steel, and industrial products being the primary export categories.
Imports for the same period totaled $55 billion, consisting mainly of machinery, petroleum products, and consumer goods.
The trade deficit stood at $5 billion, underlining the importance of strategies to enhance export competitiveness and reduce import dependency. Efforts may include diversifying export markets and investing in innovation.

Infrastructure

Luxembourg boasts a modern infrastructure network, including well-maintained roads, bridges, and railways.
The country invests approximately $2 billion annually in infrastructure development projects to improve connectivity and facilitate the movement of goods and people.

Balance of Trade

Despite a trade deficit of $5 billion in 2023, Luxembourg maintains a competitive position in international trade due to its strong financial services sector and strategic location within Europe.
Initiatives to address the trade imbalance may involve promoting export-oriented industries, enhancing trade partnerships, and fostering innovation in key sectors.

Fiscal Policy

Government expenditure in critical sectors such as education, healthcare, and infrastructure amounted to $20 billion in 2023.
Taxation policies play a significant role in revenue generation, with a corporate tax rate of 24% and a value-added tax (VAT) rate of 17%. These taxes contribute to funding essential public services and infrastructure projects.

Monetary Policy

The Central Bank of Luxembourg manages monetary policy to ensure price stability and support sustainable economic growth.
Actions may include setting interest rates, regulating the money supply, and supervising financial institutions to maintain financial stability and mitigate systemic risks.

Trade Agreements

As a member of the European Union, Luxembourg benefits from trade agreements within the EU, promoting market access and facilitating trade with other member states.
Bilateral agreements with non-EU countries and participation in international trade organizations contribute to expanding export opportunities and diversifying trade relationships.

Environmental Regulations

Luxembourg implements stringent environmental regulations to protect natural resources and mitigate climate change impacts.
Policies focus on reducing carbon emissions, promoting renewable energy sources, and enhancing energy efficiency standards across industries. Investments in green technologies and sustainable practices contribute to Luxembourg's commitment to environmental stewardship.

Tax System in Luxembourg

Capital gains tax: Capital gains tax rates vary depending on the type of asset and holding period. For example, short-term capital gains (assets held for less than 6 months) may be taxed at a higher rate compared to long-term gains.
Luxembourg offers preferential tax treatment for certain types of investments, such as qualifying real estate investments, which may be subject to lower capital gains tax rates.
Tax exemptions may apply to specific types of capital gains, such as gains from the sale of primary residences or investments in certain government-approved sectors.
Corporate tax rate: The corporate tax rate in Luxembourg stands at 24%, which is relatively competitive compared to other European countries.
However, certain industries or companies may benefit from tax incentives or exemptions, leading to effective tax rates lower than the statutory rate.
Luxembourg offers favorable tax regimes for specific activities, such as intellectual property (IP) income, investment funds, and holding companies, which contribute to its attractiveness as a business destination.
Sales tax: Value Added Tax (VAT) is the primary form of sales tax in Luxembourg, levied at a standard rate of 17% on most goods and services.
Certain goods and services may be subject to reduced VAT rates, such as food, medical supplies, and books.
Luxembourg also applies a reduced VAT rate of 3% on certain categories of goods and services, such as essential goods for households, pharmaceutical products, and hotel accommodation.
Property tax: Property tax in Luxembourg varies based on property value, location, and type of property.
Residential properties are typically subject to annual property taxes based on their assessed value, which may vary depending on local tax regulations.
Commercial properties, including office buildings, retail spaces, and industrial properties, are also subject to property taxes based on their market value and usage.
Payroll tax: Payroll taxes in Luxembourg fund social security programs, healthcare, and other government initiatives.
Employers and employees contribute to payroll taxes, with rates varying depending on income levels and social security contributions.
Payroll taxes may also fund unemployment insurance, pension schemes, and other social welfare programs, providing a safety net for workers.
Tax deductions and credits: Luxembourg offers various tax deductions and credits to individuals and businesses to reduce their tax liabilities.
Common deductions include expenses related to education, healthcare, home mortgage interest, and charitable donations.
Businesses may benefit from tax credits for investments in research and development, job creation, and environmental sustainability initiatives.