LUXEMBOURG - THE ECONOMIC AND SOCIAL FRAMEWORKChaptER 1 LUXEMBOURG - THE ECONOMIC AND SOCIAL FRAMEWORK Doing Business in Luxembourg version 11/11/2006 1.3. A strategic crossroads for

ChaptER 1LUXEMBOURG - THE ECONOMIC AND SOCIAL FRAMEWORK

D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6

1.1. Luxembourg: an open and dynamic economy in the heart of Europe

1.2. A leading location for business

1.3. A strategic crossroads for business and significant potential for economic development

1.4. A multicultural environment and a high quality workforce

1.5. Attractive economic and tax policies

1.6. An economy with modern infrastructure

1.7. High quality of life

LUXEMBOURG - THE ECONOMIC AND SOCIAL FRAMEWORKChaptER 1

Luxe

mbo

urg

-the

eco

nom

ican

dso

cialf

ram

ewor

k

D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 �

1.1. Luxembourg: an open and dynamic economy in the heart of Europe

Luxembourg,oneofthesmallestEuropeanUnionMemberStates,islocatedbetweenGermany,FranceandBelgium.Ithasanareaof2,586 squarekilometresandapproximately460,000 inhabitants.Due to the country’s strategicgeographical location, its continuousdevelopmentofexternalrelationsanditsintegrationintolargereconomicbodies,Luxembourg’seconomyandlocalmarketconsiderablyexceedthecountry’sactualsize.

LuxembourghaslongbeenanactiveplayerinEuropeandevelopment.ItwasoneofthefoundingmembersoftheEuropeanCoalandSteelCommunity(ECSC)in1951andtheEuropeanEconomicCommunity(EEC)in1957.ThecreationoftheCommonMarketwashighlybeneficialforthedevelopmentofLuxembourg’sforeigntrade.Luxembourg’seconomyisexternallyfocusedandmorethan85%ofitsproductionisexported.ThecountrystronglysupportedtheintroductionoftheeuroandtheenlargementoftheEuropeanUnion.

LuxembourgisnowacknowledgedtobeareliableeconomicandpoliticalpartneratEuropeanandinternationallevel.Itformsanintegralpartofoneofthelargesteconomicandmonetaryareasintheworld.Inaddition,Luxembourgplaysadrivingroleinthedevelopmentofthe“GrandeRégion”cross-borderareaformedbyLuxembourgandneighbouringregionsinGermany,FranceandBelgium.

Thecountry’smainadvantagesareitsstrategiclocationinEurope,thequalityofitstransport,logisticsandtelecommunicationsinfrastruc-ture,theavailabilityofaqualifiedmultilingualworkforce,politicalandsocialstability,anattractivelegalandtaxframework,amulticulturalenvironment,anopen-mindedandinternationaloutlookandanexcellentqualityoflife.

QualityproductsandservicesareofferedbyeconomicplayersinLuxembourgwhocantakeadvantageofoutstandingskillsandaninnova-tivespiritbasedonanindustrialcultureandprovenexperienceintheserviceprovidermarket,particularlyforfinancialservices.

1.2. A leading location for business

Luxembourg’sGDPhasgrownbyanaverageofapproximately5%involumeoverthepast25years.Itseconomyhasperformedbetterthanthoseofneighbouringcountriesandithasseendynamicperformanceincertaingrowthareas.

Luxembourg’swealthoriginatedwiththediscoveryofironoreinthesouthofthecountryandtheresultingdevelopmentofapowerfulironandsteelindustryatworldwidelevel.Foralmostacentury,theironandsteelindustryplayedadrivingroleinthecountry’seconomyandplacedLuxembourgattheforefrontofindustrialisedcountrieswithahighstandardofliving.

BoththeLuxembourgauthoritiesandprivateoperatorswereawareofthedangerofrelyingsolelyontheironandsteelindustryandtheyendeavouredtomakethecountry’seconomymorebalanced.ThemeasurestakenwerebasedontheconstructionofEuropeaneconomiccooperation,anaggressivepolicyaimedateconomicdiversificationbyoffering incentives for investmentand thedevelopmentofaninternationalfinancialsector.

Thesemeasureswerehighlysuccessful.Industrialbusinessesofallsizesindiversesectors,usingmoderntechnologies,joinedthetradi-tionalheavyindustries,mainlyasaresultofaninfluxofforeigncapital.

ThediversificationofLuxembourg’seconomyisillustratedbythepresenceofawiderangeofbusinesssectors,particularlyintheareasofchemical,plasticsandsyntheticmaterials,mechanicalconstructionandindustrialmachinery,theprocessingofferrousandnon-ferrousmetals,thecarindustry,precisioninstruments,electronicsupplies,theglassindustryandwoodprocessing.

Withinnotmuchmorethanasingledecade,startinginthemid-1970s,Luxembourg’seconomymovedfromanindustrialeconomylargelydominatedbytheironandsteelindustrytoaserviceeconomydominatedbyfinancialservices.

Inadditiontoreasonsspecifictothecountry’slocation,Luxembourg’sinternationalfinancialsectorgrewinitiallyduetoexternalfactors.Thesecountry-specificandexternalfactorshavebothcontributedtothegrowthofaninternationalfinancialcentreincorporatingdifferentbankingcultures.

Luxembourgisnowhometooneofthetenleadingfinancialsectorsintheworld.Withapproximately150highlyexperiencedandskilledbankinginstitutions,asuccessfulinvestmentfundindustry,adynamicinsurancesector,skilledworkersandspecializedcompanies,Luxem-bourgnowhasafullrangeofdiversifiedandinnovativefinancialservices.

AsaresultoftheapproachadoptedbytheLuxembourgauthoritiesandthedynamicbehaviourofitseconomicplayers,thecountryhassucceededinworkingitswaytothetopoftheinvestmentfundindustry,andnowranksamongworldleadersintermsofassetsundermanagement.

Luxembourg’saimoffurtherdiversifyingmarketserviceshasledtothecreationanddevelopmentofbusinessesinthefieldsofinsuranceandreinsurance, transport,commerce, tourism,telecommunications,e-commerce,audiovisualandcompanyservices.ThesekeysectorshavegrowndynamicallyinLuxembourgandhavealsocontributedtoexpandinginternationaltradingrelations.

NumerousmultinationalcompanieshavechosentosetupbusinessinLuxembourgandhaveinstalledlargeproductionandresearchanddevelopmentfacilities.Morerecently,majorinternationalgroupsspecializingine-commerceandinformationtechnologieshaveestab-lishedtheirEuropeanoreventheirworldwideheadquartersinLuxembourg.



1.3. A strategic crossroads for business and significant potential for economic development

Luxembourg’sprivilegedlocationinEurope,halfwaybetweenLondonandParisandhalfwaybetweenParisandFrankfurt,hasallowedittoaccess largereconomicmarketsrelativelyeasilybydevelopingandexpandingforeignrelations,byhavingahigh-quality logisticscentreandbyattractingnumerousforeigninvestorswishingtoselltheirgoodsandservicesintheEuropeanmarketwithits450millioninhabitants.

Inaddition,economic integrationandthecountry’scentralgeographical locationexplainwhymanyforeignindustrialandcommercialgroupshavesetupbusinessorbasedtheirheadquartersinLuxembourginordertopenetratetheEuropeanand/orworldmarket.Givenitsmanyadvantages,LuxembourgistheidealgatewaytoaccessthenewlyenlargedEuropeanmarket.

Luxembourg’sthreeneighbouringcountries,Germany,BelgiumandFrance,areitsmaintradingpartners.InadditiontotheadvantagelinkedtoLuxembourg’sgeographicalproximitytothesemarkets,itshouldbenotedthatLuxembourg’spopulationhasanexcellentknowl-edgeofbothGermanandFrench-speakingcultures.Thecountry’slocalmarketextendsconsiderablybeyonditsbordersduetothefactthatitisbasedintheGrandeRégionarea,oneofthemostdynamicareasinEurope.CompaniesbasedinLuxembourgtargetconsumersbasedinthemarketsofWalloniainBelgium,Rheinland-PfalzandSaarlandinGermany,andLorraineinFrance,i.e.,atotalofapproximately11millionpotentialconsumers.

Asaresult,significantbusinessopportunitiesanddevelopmentpotentialareavailabletoentrepreneursorcompanyfounders.

TradewithotherEUcountriesbenefitsfromLuxembourg’sstrategiclocationintheEuropeanUnion,itsproximitytootherEuropeancapitalcitiesandmajorbusinesscentres,andthepresenceofnumerousEuropeaninstitutions.

LuxembourghasalsodevelopedinternationaltradingrelationswiththeAmericasandAsia,aswellaswiththeMiddleEast,whichhavecontributedtothediversificationofitsexportmarketsandtheoriginsofitsimports.

Luxembourghasasignificanttradesurplus,withitsannualsurplusrepresentingmorethan10%ofitsGDP.Thisperformanceismainlyduetotheexportofservices.

Overall,Luxembourghassucceeded inestablishing itselfasahub for international trade,notonly in thefinancialsectorbutalso forindustrialactivitiesandthesaleofgoodsandservices.

1.4. A multicultural environment and a high quality workforce

AmongLuxembourg’sassetsduetoitscentrallocation,historyandculturalheritagearemultilingualismandaninternationalandmulti-culturalmindsetwhichdominatesthecountry’seconomy.Luxembourgcanrelyonitsextensiveexperience,whichisamajoradvantageintheglobaleconomy.Atpresent,40%ofthecountry’sresidentpopulationareforeigners,andtheactivepopulationisdominatedbynon-nationalswhorepresentmorethan65%ofthetotalinternalworkforce.

MostofLuxembourg’snativeworkersspeakatleastthreelanguagesfluently(French,German,English)inadditiontoLuxembourgish,thecountry’sownlanguage.Inviewofthemulticulturalenvironment,manyforeignworkersalsospeakotherlanguages,whichisanobviousadvantageinestablishinganddevelopingtradingrelationswithforeignpartners.

Thehighlevelofspecialisation,highadded-valuebusinessactivities,skillsdevelopedoverseveralcenturies,anditsinnovationandresearchcapacityhaveledtothepresenceandavailabilityofahighlyqualifiedworkforce.Inordertomaintainandindeedfurtherdevelopthework-force’sskills,capacitiesandqualifications,Luxembourginvestsheavilyineducation,trainingandresearch.TheUniversityofLuxembourg,theLuxembourgSchoolofFinanceandmanyothertrainingandresearchinstitutionscontributetothedevelopmentofhumancapital.

Luxe

mbo

urg

-the

eco

nom

ican

dso

cialf

ram

ewor

k


Luxe

mbo

urg

-the

eco

nom

ican

dso

cialf

ram

ewor

k


1.5. Attractive economic and tax policies

InadditiontoLuxembourg’snaturalandtraditionaladvantages,awiderangeofpositivebenefitsareofferedduetomeasurestakenbythecountry’sgovernment.Althoughthesebenefitsarenowlesssignificantwithinthecontextofthecountry’sintegrationintoEurope,theLuxembourgauthoritiesarecontinuingtheireffortstoofferalegalenvironmentthatisfavourableforthedevelopmentofLuxembourg’seconomy.Inthiscontext,themeasuresaimedatimprovingcompanies’competitivenessandreducingtheirproductioncostsarecrucial.

Throughoutitshistory,andsignificantlymorethanothercountries,Luxembourg’seconomicpolicyhasfavouredthedevelopmentofnewbusinessactivitiesbymeansofaliberal,modern,flexible,favourableandinnovativelegalenvironment.

Thisenvironmenthasencouragedeconomicplayerstodevelopdynamicandeffectiveeconomicstructures.Othergovernmentmeasures,suchasgrantingminingconcessions,ensuringbankingsecrecy,grantingconcessionsfortheuseofradiofrequenciesandorbitalpositions,etc.,haveledtothestrengtheningofthesestructures.

Inacountrysufferingfromachronicmanpowershortage,ithasalwaysbeenvitaltoconstantlymoderniseworkfacilitiesandtoolsandtousethemostadvancedtechnologieswithaviewtoincreasingproductivity.Significantinvestmentsintechnicalcapitalhaveledtooneofthehighestlevelsofproductivityintheworld.Inaddition,labourcostshavebeeninfluencedpositivelybylevelsofsocialsecuritycontribu-tionspayablebyemployersthatarehighlycompetitivewiththoseinneighbouringcountries.

Howcompaniesandindividualsaretaxedisanobvioussignificantcompetitivefactor.Luxembourg’sattractivelevelsoftaxcontributetofurthersupportinginternaldemandandcompanies’intentionstoinvest.

Taxation,bothdirectandindirect,isasignificantinstrumentforasmalleconomy,whichneedstoconstantlyensurethatitoffersbetterconditions than its potential competitors, observedevelopmentsabroadattentively and react instantly.The country’snationaldebt ismarginal.

Atpresent,thetotaltaxliabilityforcompaniesinLuxembourgstandsat30.60%.Corporationtaxatarateof22%(taxoncompanyprofits)ispaidinadditiontothecommunaltradetax(7.5%onaverage)andthesolidaritytax(5%).Asaresultoftaxrebatesforinvestmentsandotherformsoftaxrelief,mostindustrialormanufacturingcompaniesaretaxedatanoveralleffectiverateofapproximately15%onaverage.

Astaxonindividualsisalsoveryfavourable(withamaximummarginalrateof39.90%),levelsofnetsalariesandpurchasingpowerareveryhighcomparedwiththerestoftheworld.Wealthtaxhasbeenabolished.

Thelevelofmaximumtaxratesisamajorpsychologicalfactorinattractinghighlyqualifiedmanpower.

Asregardsindirecttaxation,thestandardrateofvalueaddedtax(VAT)is15%,thelowestintheEuropeanUnion.Moreover,aspecialreducedrateof3%appliestoessentialconsumergoodsorspecificservices(togetherwithareducedrateof6%andanintermediaryrateof12%).

Moreover,thelevelofexcisedutyisrelativelylowcomparedwithotherEuropeancountries.Thishasapositiveimpactonfinalsalepricesandcompanies’profitmargins,inparticularintheretailtrade.


Luxe

mbo

urg

-the

eco

nom

ican

dso

cialf

ram

ewor

k


Total tax liability for capital companies

40,9

39,9

38,7

37,3

36,1

35

35

34,934

32

31,5

30,4

30

28

28

28

27,5

26

26

25

25

24,119

19

17,5

15

15

12,5

10

0 5 10 15 20 25 30 35 40 45

Japan

United States

Germany

Italy

Canada (Ontario)

Malta

SpainFrance

Belgium

Greece

Netherlands

Luxembourg

United Kingdom

Denmark

Norway

Sweden

Portugal

Finland

Czech Republic

Austria

Slovenia

SwitzerlandPoland

Slovakia

Hungary

Latvia

Lithuania

Ireland

Cyprus


Luxe

mbo

urg

-the

eco

nom

ican

dso

cialf

ram

ewor

k


Normal VAT rate

25

25

25

22

22

21

21

21

20

20

20

19,6

19

19

19

19

18

18

18

18

17,5

16

16

15

15

0 5 10 15 20 25 30

Denmark

Sweden

Hungary

Finland

Poland

Belgium

Ireland

Portugal

Italy

Austria

Slovenia

France

Greece

Netherlands

Slovakia

Czech Republic

Estonia

Latvia

Lithuania

Malta

United Kingdom

Germany

Spain

Cyprus

Luxembourg

1.6. An economy with modern infrastructure

Modern infrastructureandaneffectivecommunicationsnetworkarecrucial forLuxembourg,a trade-focusedeconomyanda leadinglogisticscentreinEurope,inordertoincreasetheadvantageofitsstrategiclocationatthecentreofEurope.

Alarge-scaleinternationalcommunicationsnetwork(roads,air,railwaysandnavigableroutes)takesadvantageofLuxembourg’scentrallocation,andconnectsthecountrynotonlytolargeneighbouringindustrialareas(theRuhr,theParisarea,thePortofAntwerp)butalsotomoreremotemarkets.

AsLuxembourgfocusesoninternationaltrade,economicplayersneedtobeofferedcompetitivepricesforcommunicationsandtrans-port.

WithoneofthehighestlevelsofpublicinvestmentinEurope(approximately12%oftotalStatespending),includingasubstantialpartallocatedtopublicinfrastructure,internationalconnectionsareadaptedtotherequirementsofsocio-economicstructures.

1.7. High quality of life

Luxembourgoffersapleasant livingenvironment,combiningtheadvantagesofaEuropeancapitalcity,amulticulturalsocietyandaninternationalcrossroadswiththeadvantagesofapeacefulandwelcomingenvironmentwithpicturesquescenery.

Luxembourgranksamongtheworld’swealthiestcountries1asregardslivingstandardsmeasuredintermsofgrossdomesticproductperinhabitant.Inregionalstatistics,Luxembourgregularlyranksamongthetopthreeregionsbasedonthisindicator.

ThepresenceofseveralEuropeanUnioninstitutionsmakesthecityofLuxembourgoneofthecapitalcitiesofEurope.Aninternationalbusinesssectorandthepresenceofasizeableforeignpopulationencouragecontactsbetweencitizensfromdifferentcountriesaswellasbusinesscontactsatinternationallevel.

LuxembourghasalivelyculturallifeandaneventscalendarworthyofaEuropeancapital.ThewealthofitsnaturalenvironmentandthediversityofitsscenerymakeLuxembourganoutstandingdestinationfortourists.Thecountry’sappealisbasedonthecharmofitscapitalcity,whichismorethanathousandyearsold,itsricharchitecturalheritage,theinterestingsmalltownsspreadacrossthecountryandthebeautyofitsnaturalscenery.

1 Inthiscontext,thestatisticsneedtobeseeninperspective.Luxembourg’sGDPisnotentirelygeneratedbythelocalpopulationbutalsobyapproxi-mately40%ofnon-residentworkerswhoarenotincludedinthepopulationstatistics.


Luxe

mbo

urg

-the

eco

nom

ican

dso

cialf

ram

ewor

k

D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 1 0

Luxembourg at a glance

• Area:2,586sqkm

• Population:459,000inhabitants(including40%offoreigners)

• StrategiclocationinanenlargedEuropeandatthecentreoftheGrandeRégionarea

• Externallyfocusedcountry

• Internationalandmulticulturalenvironment

• HighGDPgrowthpotential

• Stablemacroeconomicfundamentals

• Population’shighpurchasingpower

• Diversifiedindustry,hightechnologies,innovativeproductsandservices

• Internationalfinancialcentre

• Leadinglogisticscentre

• Intenseresearchandinnovationactivities

• Competitivelevelsofsocialsecuritycontributions

• Qualifiedworkforce

• Economycentredonmoderninfrastructure

• Highrateofpublicinvestment

• High-performancecommunicationnetwork

• Competitivecommunicationandtransportrates

• Multilingualpopulation

• Internationalcrossroads

• Europeancapital

• Exceptionalqualityoflife

• Safeandfriendlycountry


ChaptER 2BUSINESS PERMITS IN LUXEMBOURG

2.1. Business permits

2.2. Conditions under which business permits are granted

2.3. Required qualifications for trade and liberal professions

2.4. Other formalities related to starting a business or a regulated profession

D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 1 �

Busin

ess

perm

itsin

Lux

embo

urg

BUSINESS PERMITS IN LUXEMBOURG ChaptER 2

Luxembourg’sCommercialCode(CodedeCommerce)describesanypersonwhocarriesoutcommercialtransactions,eitherasamainorasanancillaryactivity,asatrader(commerçant).Acommercialtransactionisunderstoodtobeatransactioninthecontextofthecirculationofwealthwiththeintentionofmakingaprofit.Itisaseriesofactsinvolvingintermediaries(retailers,wholesalers,etc.),andpossiblyalsoinvolvingprocessing,betweenthetwoextremes:theproduceroftherawmaterialandtheendconsumer.Thisdistinguishesacommercialtransactionfromconsumptionandfromtransactionswithnocommercialmotive.

Variouseconomicsectorsare involved,suchasmanufacturing,wholesaling,retailing,banking,transportandotherserviceswithcom-mercialemphasis.ThefollowingdescriptionofthepermitsrequiredtosetupabusinessinLuxembourggivesacomprehensiveoverlookoftheactivitieswhoseactorsarereflectedinthecompositionoftheChamberofCommerceofLuxembourgor“CCL”whereastheinforma-tionrelatingtoskilledcrafttrades(artisanat)giveninthisbrochureismoreconcise(formorepreciseinformationonthatbehalfgotowww.cdm.lu,thewebsiteoftheChamberofSkilledTrade).

AnyLuxembourgnationalorforeignnationalmaybeatrader,exceptintheeventofdisqualificationorinthecasesofincompatibilityprovidedforbylaw.

UnderLuxembourglaw,thecapacityof“trader”hasthreefundamentalconsequences:

- disputesbetweentradersarehandledinaccordancewithaspecialprocedurebeforetheCommercialCourt(TribunaldeCommerce),

- onlytradersmaybedeclaredbankrupt.Adeclarationofbankruptcyentailstradersbeingdeprivedoftherighttoadministeroralienatetheirpropertyaswellasacollectiveprocedureforliquidationoftheirenterprisebyjudicialmeans,

- asetofspecialprovisionsapplytotraders’economicactivities:rulesrelatingtoevidence,advertising,accounts,competition,etc.

Tradersmayperformtheiractivitiesinoneoftwodistinctforms:assoletraders,whichismostsuitableforsmallventures,andasbusinesscompanies,ofwhichtherearesixdifferentforms.UnderLuxembourgstatutesbothpartnershipsandcorporationsareregardedascom-panies(sociétés),i.e.separatelegalentitiesfromitsmemberscreatedinordertomakeaprofit.Inaddition,foreigncompaniesmaycreateabranchinLuxembourgwithoutitsownseparatelegalpersonality,orevenarrangefororderstobecollectedbyaforeignrepresentativesenttoLuxembourgonatemporarybasiswithouthavinganyofficialaddressinthecountry.

2.1. Business permits

Luxembourg’s1868ConstitutionandtheprinciplesonwhichitisbasedguaranteefreedomoftradeandindustryandthefreedomforeveryLuxembourgnationaltosetupabusiness.UndertheTreatyonEuropeanUnion,thisrightisalsograntedtonationalsofEuropeanUnionMemberStatesandnationalsofEuropeanEconomicAreacountries.

Nonetheless,theconditionsforentryintovariouscommercialactivities,thatofskilledcraftsman(artisan),trader(commercant)andmanu-facturer(industriel)havebeenlaiddownbyLuxembourglaw.Althoughindependentintellectualactivitiesarenotconsidered“commercial”activities,Luxembourglegislatorshavehoweverconsidereditappropriatetoregulateentryintocertainliberalprofessions.

2.1.1. For which commercial activities and professions is a business permit required?

TheActof28December1988(generallyreferredtoastheActorthelawgoverningthesettingupofabusiness),asamended,whichregulatestheskilledcraftsman,thetraderandthemanufactureraswellascertainliberalprofessions,istheframeworkfortheperform-anceofalltheseactivitiesandthepracticeoftheseprofessions.UnderthisAct,entryissubjecttopriorgovernmentalauthorisationinwriting,providedthattheactivitiesinquestionareperformedfromaLuxembourgestablishmentonapermanentbasis.Thetreatyfound-ingtheEuropeanCommunitylaysthegeneralprincipleoffreedomtosetupbusinesswithintheCommonMarketandtheprincipleofthefreeprovisionofservices.UnderEuropeanlaw,adistinctionismadeonthebasisofaconceptoftime.AEUnationalwhopursuesabusinessactivityonacontinousbasisinaMemberStateotherthanhisStateoforigincomesundertheprovisionofthelawofestablish-mentwhereastheconceptofthefreeprovisionofservicesisbasedonactivityperformedonastrictlyoccasionalbasis.ItisclearthatLuxembourglegislatorswishedtoregulateentryintotradeandcertainliberalprofessionsifperformedontheterritoryofLuxembourginapermanentandregularmanner.

Luxembourglegislatorssignificantlychangedthelawin2004,thoughconfirmingthattheywouldmaintaintherequirementsforentryintobusinessandmakesuchentrysubjecttopriorauthorisationunderstrictconditions.Thiswasachoicesharedbytherepresentativesofemployers’associations.Thelegislatorsthusalsowishedtomakeitclearthattheydidnotintendtojointhosewhowerecallingforliberalisationatanypriceorbeinfluencedbythosecallingforprotectionismatallcosts.

Thelawappliesfirsttoskilledcrafttrades,adetailedlistofwhichiscontainedintheRegulationof4February2005whichalsosetsoutthefieldsofactivitiesofthebusinessescovered.

Asregardsmanufacturers,Luxembourglegislatorshavesofarrefrainedfromgivingaprecisedefinitionoftheseeconomicplayers.How-ever,thereisnodoubtthatmanufacturingencompassesalleconomicactivitiesinvolvedinproducingandtransformingwealth,exceptfarming.Thoughitcannotbeconfusedwiththeskilledcrafttradesinthatitusescollectivehumanlabourandtechnicalcapitalwhere,bycontrast,theskilledcrafttradesstillperformmainlymanualactivitieswithoutautomation.


Busin

ess

perm

itsin

Lux

embo

urg


Commercialactivitiesinanarrowersense,i.e.trade,includetheretailcommercialsector,thewholesalesector,andalltheintermediariesinvolvedinthecirculationofwealthbetweenproducersandconsumers,includingtheprovisionofbusinessservices,providedthattheyareperformedinordertomakeaprofit.Itwouldbehardtoimagineanactivity-evenrightatthelimitsoftrade-thatisnotcoveredbythelawgoverningsettingupabusiness.Itshouldhoweverbenotedthatcompanies,whichonlyholdstakesinothercompanies,i.e.“holdingcompanies”,donotperformcommercialtransactionsandabusinesspermitisthereforenotrequired.

Notwithstandingtheabove,Luxembourglegislatorshaveregularlyspecifiedcertaincommercialactivitieswhich,duetothesignificanceandtypeofactivitiesperformed,needaspecialframework,eitherwithinthelawgoverningsettingupabusinessorunderaspeciallaw.Thisistrueinteraliafortravelagents,estateagentsandtransport(haulage)contractors,undercertainconditions.

UndertheActof3June1994governingrelationshipsbetweenindependentsalesagentsandtheirprincipals,independentsalesagentsaresimplytraderssubjecttoordinarylawasregardssettingupabusiness.Salesrepresentativeswhoareemployeesdonotneedaspecificpermit.Theymusthoweverperformtheiractivityundertheauspicesofthebusinesspermitissuedtotheiremployer.Itisthereforeadvis-ableforsuchrepresentativestohaveprooffromtheiremployerthattheyareauthorisedtoactinthiswayandproofofthefactthattheyhavebeenhired.

Lastly,theprovisionofthoseintellectualservices,i.e.liberalprofessions,thattheLuxemburgishlegislatorcontemplatesasbeingrelativelyclosetobusinessalsorequireabusinesspermitbeforehand.The lawgoverningsettingupabusinessgivesanexhaustive listofsuchprofessions.Theadministrativeauthorities(governmentalagencies)maynotthereforecreatenewprofessionsthemselves,asthisrightisreservedforthelegislators.Thus,intellectualserviceswhicharenotincludedinthislistand,duetothenatureofsaidservices,arenotcoveredbytheconceptofcommercialservices,maybeprovidedwithoutanypriorauthorisation.

2.1.2. What about occasional activities?

NationalsofEuropeanUnionMemberStatesorEuropeanEconomicAreacountrieswho,withouthavingsetupabusinessinLuxembourg,comehereoccasionallytocollectordersorofferbusinessservices,arenotrequiredtoobtainapermitfromtheLuxembourgauthorities.

Skilledcrafttradesmenor-womenandmanufacturersarehoweverrequiredtoprovetotheMinistryofMiddleClasses(MinistèredesClassesMoyennes)thattheyarelegallyauthorisedtopracticetheirbusinessintheircountryoforigin.Theministrywillissuethemwithacertificatecalledan“adhoccertificate”undertheActgoverningsettingupabusiness.

Foreigners,nationalsofcountriesthatarenotEuropeanUnionMemberStatesorEuropeanEconomicAreacountries,peoplewhoarestate-lessorwhohavenospecificnationalitywhocomehereoccasionallyandtemporarilytocollectordersorprovideservicesthatfallwithinthescopeofthebusinessesreferredtointhelawgoverningsettingupabusinessarerequiredtohaveabusinesspermit.

2.1.3. What is the procedure for obtaining a business permit?

ApplicantsshouldsendanapplicationforabusinesspermittotheMinistryofMiddleClasseswhichisresponsibleforallmattersrelatingtotrade,manufacturing,theskilledcrafttradesandtheliberalprofessionsthatfallwithinthescopeofthelaw.Decisionsaremadefollowingtheconsultationofanadministrativecommitteeinchargeofexaminingwhethertheconditionsasregardsqualificationsandprofessionalgoodstandinghavebeenmet.

ApplicationsshouldbemadeonaformwhichmaybeobtainedfromtheMinistry,fromtheChamberofCommerce’s“BusinessInforma-tionCenter”(EspaceEnterprises)ordownloadedfromwww.mcm.public.lu.StampdutyofEUR24ispayableoneachapplication.ThetaxstamprequiredmaybeobtainedfromtheRegistrationandDomainsAuthority(Administrationdel’Enregistrement)orthe“BusinessInformationCenter”(EspaceEntreprises).ThesumofEUR24mayalsobetransferredtotheRegistrationAuthority’spostalchequeaccountatCCPIBANLU471111008792620000,specifying“Administrativefeeforbusinesspermit”(droitdechancelleriepourautorisationdecommerce).Inthiscase,acopyofthetransferordershouldbeenclosed.

AnaffidavitasregardsanypreviousperformanceasacompanyagentinaLuxembourgcompanyortheholdingofshares/interestsinadomesticcompanyduringthelastthreeyearsprecedingtherequestmustbeenclosedwiththeapplication.TheformprovidedforthispurposemaybeobtainedfromtheMinistry, fromtheChamberofCommerce’s“Business InformationCenter” (EspaceEnterprises)ordownloadedfromwww.mcm.public.lu.

ApplicantswhodonotliveinLuxembourgorwhohavelivedthereforlessthanfiveyearsmustsubmitarecentcertificateofnon-bank-ruptcyandacopyoftheirpersonalcriminalrecord(extraitducasierjudiciaire).Thecertificateofnon-bankruptcyisaswornstatement(declarationsousserment)givenunderoathbeforeanotarypublic.Applicantsmaychoosethenotary.

Iftheapplicationisbeingmadeonbehalfofacompany,thecompany’scharter(statuts)ordraftcharter(projetdesstatuts)shouldbeenclosed.IthastobestressedthatinLuxembourgtheMemorandumofAssociation(ArticlesofIncorporation)andtheArticlesofAssocia-tion(orby-laws)areconsolidatedinasingledocument,called«lesstatuts»,hereinafterthecharter.Asaconsequence,thewholecharterisfiled,andnodocumentremainsprivate.

Iftheapplicationisbeingmadeonbehalfofabranch,acopyoftheparentcompany’schartershouldbeenclosedalongwithacopyofthedecisiontoappointthepersoninchargeofmanagingthebranch.Iftheapplicationisbeingmadeinaperson’sownname(soletrader),acopyoftheapplicant’sidentitypapersshouldbeenclosed.


Busin

ess

perm

itsin

Lux

embo

urg


Applicantsmust enclosedocuments as evidenceof any requiredprofessional qualifications.Otherwise, applicantswhoworkor haveworkedinthepastinLuxembourgmaygiveproofoftheprofessionalexperiencerequiredbymeansofacertificateofregistrationwithLuxembourg’ssocialsecurityauthority.ApplicantswhohaveworkedabroadshouldsubmitanECcertificaterelatingtotheseactivities,tobeissuedeitherbyaChamberofCommerceforabusinessactivity,orbytherelevantnationalauthority.Ifdegreequalificationsorsimilararetobesubmitted,certifiedcopiesshouldbeenclosed.DocumentsshouldbesubmittedinGermanorFrench.

BusinesspermitsmaybecollectedfromtheSocialSecurityCentre(CentreCommundelaSecuritéSociale)(www.ccss.lu).Businesspermitsforpubliccompaniesaresentbypost.Permitsareissuedintheformofacardwhichmustbeshownonrequest.

Thenatureofthebusinessandthegovernmentalauthorisationnumbermustbeshownonthecompany’sstationary,theire-mails,web-sites,estimates,invoices,sitehoardings,andinshopfrontsandwindowsofbusinesspremises.

IntheeventtheMinistryrefusestograntapermitorthepermitiswithdrawn,anappealmaybelodgedwiththeAdministrativeCourtwithinonemonthasfromnotificationofthedecision.

Anewpermitisrequiredintheeventofchangestoorextensionsoftheobjectsofthecompanytowhichthepermitwasissuedandchangesintheagentsofthecompanywherethepermitwasgrantedonthebasisoftheirqualifications.Ifthelatterleavethecompany,aprovisionalpermit,validforsixmonths,maybegrantedtoenablethecompanytohireaqualifiedpersonwhomeetsthelegalcondi-tions.

TherelevantMinistryshouldbenotifiedofanychangesinacompany’snameorlegalformaswellasanychangeinthebusinesshead-quarter’slocationwithinonemonthatthelatest.

Authorisationtoopenabranchisgrantedonapplication,butwithcertainrestrictionsfortheskilledcrafttradessector.

2.1.4. What activities are covered by a business permit?

Businesspermits for commercial undertakingsallow“trade” (commerce) tobe carriedout, except for permits for specially regulatedcommercialactivitieswherethenameofthespecificactivityisgivenonthepermit.Thisisalsothecasefortheskilledcrafttradesandmanufacturingwherethepermitstatesexactlywhichactivityhasbeenauthorised.

Abusinesspermitspecifying“trade”isgrantedforallgeneralcommercialactivities,thatisactivitieswhich,intheviewofthelegislators,donotrequirespecificskillsbutonlydetailedknowledgeofcompanymanagement.Theexistenceofvariouslinesofbusinessisthusnotimportantfortherequirementsofgrantingabusinesspermit,exceptforspeciallyregulatedactivities.Theholderofabusinesspermitfortradeingeneralmaythereforeperformallbusinessactivitiesatthesameregulatorylevel:ashoesalesmanmaythusalsosellbooksorcarsandviceversa.Theonlyactivitiesexcludedarethosesubjecttoadditionalconditionsorthosegovernedbyaspeciallaw.Individualpermitsarethusrequiredforeachoftheseactivities(seeSection2.3.2.below).

Abusinesspermitisstrictlypersonal.Therefore,fortherequirementsofsettingupabusiness,theactivitiessubjecttoauthorisationmustbeperformedundertheresponsibilityofthepersonwhohasbeendulyauthorisedtodothis,thatisthepersonwhosequalificationswerethebasisforthebusinesspermit,i.e.the“qualifiedmanager”.Thesoletradermustthereforeholdabusinesspermitissuedinhisname.Ifitisacompany,itisgenerallyamemberoftheboard(director)oranofficerwhoholdsthequalification,i.e.the“qualifiedmanager”.

The“qualifiedmanager”thusdefinedisthereforeresponsibleforpersonallyandregularlymanagingthecompanyonaday-to-daybasisfromafixedplaceofbusiness,asregardsthecompany’sbusinesspurpose.Asaresult,the“qualifiedmanager”hastobeabletofulfiltheseobligations.Thefactthatthisperson’seffectiveresidenceisdistantfromthebusinesswouldthushaveadamagingeffectonthebusinesspermit.Thepermanentpresenceofanotherparty,evenifsuchpersonisauthorisedtocommitthecompany,cannotmakeupfortheabsenceofthis“qualifiedmanager”.

Intheory,apermitisgrantedforanindefiniteperiodoftime.However,itwillbecomeinvalideitherifitisnotusedformorethantwoyearsasfromthedateitwasgrantedorifactivityisterminatedvoluntarilyduringthesameperiod.Anapplicationforapermitmayberejectedandpermitsmaybewithdrawnifthereareseriousgroundstodoso.

Abusinesspermitgrantedtoatraderortoaskilledcrafttradesmanorwomanincludestherighttoperformtheactivitiesthathavebeenauthorisedatfairsandmarkets.However,businesspermitsarerequiredfortraderswhowishtolimittheiractivitiessolelytofairsandmarketsandwhothereforewillnotnecessarilyhaveapermanentestablishmentinLuxembourg.ItshouldbestressedthatpeddlinggoodsisprohibitedinLuxembourg,thatisthesaleorofferofgoodssolddoor-to-door,exceptfordoor-to-doorsalesofcertainfoodproductsbybakers,drinkpeddlers,grocersandmilkproductsalesmenorwomen.Solicitingordersfromindividualsinthiswayisalsoprohibited.Peddlingfoodisthereforelimitedtoonlyfairsandmarkets,subjecttotheabove.

Furthermore,abusinesspermitgrantedtoaskilledcrafttradesmanor-womanalsoincludestherighttotradeinrelatedproducts.Fortraders,thebusinesspermitalsoincludesthepossibilityofcarryingoutthenormaloperationsincludedinsalesonthearticlesthatarethesubjectoftheauthorisedtrading,suchasassuringthemaintenanceofthegoodssold,withtheexceptionofrepairsnormallyperformedbyskilledcrafttradesmenor-women.


Busin

ess

perm

itsin

Lux

embo

urg


2.2. Conditions under which business permits are granted

Applicantsforbusinesspermitsmustprovideguaranteesoftheirprofessionalgoodstandingandmusthavecertainqualificationswhichwilldependonthetypeofactivitytobeperformed.

Commercialcompanieshavetoapplyforbusinesspermitsinthesamewayasindividuals,withtherelevantconditionshavingtobemetinthepersonofa“qualifiedmanager”(companyagent).Theprovisionsalsoapplytobranchesofforeigncompanies.

2.2.1. What are the requirements as regards good standing?

Theprofessionalgoodstanding(honorabilité)ofapplicantsisassessedonthebasisoftheircriminalrecordandinformationobtainedfromanadministrativeinvestigation.Whatisrequiredisnotthehighestlevelofgoodstandingpossiblebutgoodstandingcloselylinkedtobusinessconduct,suchthatonlybreachesofbusinessconductwillbepenalised.Forexample,thegoodstandingoffraudulentbankruptsorindividualswhoknowinglywritebadchequeswouldbeaffected.

UnderLuxembourgstatutes,goodstandingisrequiredoftheindividualorentitywhoorwhichmakestheapplication.Ifitisacompany,the“qualifiedmanager”ofthecompanywillhavetomeettheconditionsimposedonthosewhowishtotradeontheirownaccount.

Theauthoritiescouldalsorequiretheconditionrelatingtogoodstandingtobefulfilledbytheholderofthemajorityofthecompany’sshares/interestsorindividualscapableofexertingsignificantinfluenceonthemanagementofthecompany.Thus,well-knowndishonestbusinessmenor-womenwouldnotbeabletouseoneoftheiremployeesasafront,whiletheywouldholdtherealpowerbehindthescenes,eitherbyhavingamajorityofsharesorbybeingmembersoftheBoardofDirectorsortheBoardofOfficers,orbothatthesametime,therebyleavingtheso-called“qualifiedmanager”withnopower.

Furthermore,applicantsinvolvedinabankruptcyorcourt-orderedliquidationwithouttheirgoodstandingbeingaffectedmaybegrantedanewbusinesspermitprovidedthattheyundergointensivetrainingincompanymanagementprovidedbytherelevantprofessionalbody.

2.2.2. What are the requirements as regards professional skills?

Basicqualificationsare requiredasa condition forentry intoall thebusinesses coveredby the lawgoverning settingupabusiness.However,therearesomeexceptionstothis:noqualificationsarerequiredformanufacturingactivities,exceptforindustrialconstructioncompanies.Noqualificationsarerequiredforpeopleworkingatfairsandownersofmachineswhohirethemoutprofessionally.

Skilledcraftsmenor-womenperformingaso-calledmaincraftmusthaveamastercraftsmandiploma(brevetdemaîtrise)orauniver-sitydegreeinengineeringforthatsector.Thisisalsothecaseforbusinessmenor-womeninindustrialconstruction.TheMinistry,afterconsultinganadministrativecommitteeandtheChamberofTrade(ChambredesMétiers),mayacknowledgethatanapplicantwithouttheabove-mentionedqualificationsmayhavesufficientprofessionalexperienceeitherforallorpartofatradeonthebasisofsupportingdocumentsacknowledgedastheequivalentofsuchqualifications.

Skilledcraftsmenor-womenperformingaso-calledsecondarycraftonlyneedacertificateofskills(certificatd’aptitudetechniqueetpra-tique)thatprovidesevidenceoftheirprofessionalskillsonthebasisofaperiodoftrainingortrainingcourseaslaiddownbyLuxembourgregulations.Thistrainingcoursemaynotlastlongerthanthreeyears.

Abusinesspermitspecifying«trade»(commerce)isgrantedforallgeneralbusinessactivitiesprovidedthattheapplicanthasin-depthknowledgeofcompanymanagement.Speciallyregulatedbusinessactivitiesrequire,inadditiontoknowledgeofbusinessadministration,specificprofessionalskillsand/oradditionalconditions.Liberalprofessionsgenerallyrequireauniversitydiploma.Detailsaretobefoundinchapter2.3.below.

2.3. Required qualifications for trade and liberal professions

2.3.1. Which qualifications are required to perform a general business activity?

Abusinesspermitspecifying“trade”(commerce)isgrantedforallgeneralbusinessactivitiesprovidedthattheapplicanthasin-depthknowledgeofcompanymanagement.

TheRegulationof27September2004laysdowntheconditionsfortraderstobequalifiedasregardscompanymanagement.Thesecondi-tionsarethefollowing,alternatively:

- havingcompletedaninitialtrainingcourse,

- havingcompletedanintensivetrainingcourse,

- havingsupportingdocuments(showingqualifications)acknowledgedastheequivalent,

- havingcompletedaperiodoftrainingnotexceedingthreeyears.


Busin

ess

perm

itsin

Lux

embo

urg


2.3.1.1. Initial training course

Havingcompletedaninitialtrainingcoursemeanshavingauniversitydegreeorhigherqualificationshowingthesuccessfulcompletionofacompletecycleofthreeyearsofstudiesineconomicsciencesorbusinessmanagementorinbusinesslaw.

2.3.1.2. Intensive training course

HavingcompletedanintensivetrainingcoursemeanshavingpassedafinalexaminationintheintensivetrainingcourseorganisedbytheChamberofCommerce.Attheendofthetrainingcourse,forwhichnopriorqualificationisrequired,traineesmustbeabletodothefollowing:

- beawareofthelegalconditionstobemetandtheprocedurestobecarriedouttosetupabusiness,

- haveanoverviewofthevariouslegalformsofbusinesses,

- identifyaclienteleandassessamarketintermsoffigures,

- developabusinessconcept,

- understandaccounting,

- analyseabalancesheetandaprofitandlossstatement,

- assessfinancialrequirements,

- identifyvarioussourcesoffinancing,

- haveabetterunderstandingoftaxmatters,

- calculateincometax,

- befamiliarwithrecruitmentprocedures,

- befamiliarwiththebasicaspectsofemploymentlaw.

Inordertobeabletotaketheexamination,traineesmusthaveattendedthetrainingcourses.

2.3.1.3. Equivalent qualifications

Isconsideredtheequivalentofthequalificationinbusinessmanagement:

- theproofofhavingpassedanexaminationafterabusinessmanagementtrainingcoursegiveninanEUMemberStatebyaninstitu-tionortrainingbodythatisrecognisedinthisMemberState,andwhoselengthandcontentissimilar,

- orhavingaLuxembourgishmastercraftsmandiploma(brevetdemaîtrise),

- oramastercraftsmandiplomaissuedbyatrainingbodythatisauthorisedinanEUMemberStateprovideditincludessimilartraininginbusinessmanagement,

- oralreadyhavingabusinesspermit.

2.3.1.4. Training on the job

ThecompletionofaperiodoftrainingonthejobisshownbyproofoftheeffectiveperformanceinanEUMemberStateofanactivitythatiscommercial:

- forthreeconsecutiveyearsineitheraself-employedcapacity(soletrader)orasamanager(companyexecutive)(dirigeant)ofanundertaking;

- fortwoconsecutiveyearsinaself-employedcapacityorasamanagerofanundertakingwhereapplicantscanprovethattheyhavereceived, for the relevantprofession, training forwhichacertificate recognisedby theNationalEducationMinistry (Ministèredel’EducationNationaleor“MEN”)isawarded;

- orforthreeconsecutiveyearsinanemployedcapacity,whereapplicantscanprovethattheyreceived,fortherelevantprofession,trainingforwhichacertificaterecognisedbyMENisawarded.

Anypersonwhohasheldthefollowingdutiesisconsideredashavingperformedtheactivityofamanager(companyexecutive):

- asamanagerofanundertakingoramanagerofabranchofanundertaking;

- asadeputytotheproprietororthemanagerofanundertakingwherethatpost involvesresponsibilityequivalenttothatof theaforementionedpersons;

- inamanagerialpostwithdutiesofacommercialand/ortechnicalnatureandwithresponsibilityforoneormoredepartmentsoftheundertaking.


Busin

ess

perm

itsin

Lux

embo

urg


Proofthattheconditionrelatingtoaperiodoftraininghasbeenmetmaybeprovidedasfollows:

- acertificateissuedbytherelevantauthorityorbodyinthecountryoforigin,

- membershipofaprofessionalpensionschemeforatleastthreeconsecutiveyears,

- orbyanemployee’scertificate,showingtheperiodofemployment,certifiedbytheSocialSecurityCentre(CentreCommundelaSecuritéSociale).

2.3.2. What skills are required to perform a regulated business activity or an activity subject to special requirements?

Certainbusinessactivitiesarespeciallyregulated.TheActof28December1988,asamended,containsa listofactivitiesforwhichaspecificprofessionalskilland/oradditionalconditionsarerequired,inadditiontoknowledgeofbusinessadministration.Otherbusinessactivitiesareregulatedbyspeciallaws.

Thesearemainlythefollowingones:

- estateagents(agentsimmobiliers),

- realestatemanagers-condominiummanagers(administrateursdebiens-syndics),

- realestatedevelopers(promoteursimmobiliers),

- largeretailpremises(grandessurfacescommerciales),

- licensedorunlicensedbars/pubsorrestaurantsoraccomodations(débitsdeboissonsalcooliquesounonalcooliques,restaurantsethôtels),

- transportofgoodswithamotorvehicleweighingmorethan3.5tonsandtransportofmorethan9people(transportdemarchandisesettransportdepersonnes),

- travelagents(agentsdevoyages),

- managementofprofessionaltrainingbodies(gestiond’organismesdeformationcontinue),

- interimrecruitment(entreprisedetravailintérimaire),

- securityandsurveillanceactivities(activitésdesurveillanceetdegardiennage),

- financialandinsurancesector(secteurfinancieretdesassurances).

2.3.2.1. Estate agents

Estateagentsarebusinessagentswhogenerallyactas intermediaries in legal transactions involving realproperty.Thisactivityasanintermediaryisgenerallycarriedoutasabroker,inthesensethatestateagentsbringtogethertwopeoplewithaviewtoenteringintoanagreementrelatingtothetransferofrealproperty.

Article10oftheActof28December1988,asamended,governingsettingupabusinesslaysdownadditionalconditionswhichpeoplewhowishtobecomeestateagentshavetomeet.

Theyhavetopassanaptitudetest.Onthedateofpublication, thedetailsof this teststillhadtobe laiddownby regulation. In themeantime,theChamberofCommerce’straininginstitute(InstitutdeFormationdelaChambredeCommerceor“IFCC”)givesclassesandorganisesexaminationsattheendoftrainingcoursesonthebasisofandinaccordancewiththeprovisionsofthelawgoverningsettingupabusiness,beforeamendment.

Lastly,estateagentshavetobeabletoshowthattheyareinsuredagainstthefinancialconsequencesofprofessionallegalliabilityforprofessionalcommitments.

2.3.2.2. Condominium managers - Real estate managers

Condominiummanagers(syndics)forjointly-ownedestate,asunderstoodintheActof16May1975onjointly-ownedestate,asamended,aretheagentsauthorisedtorepresentjointowners’association–thecondominium–whichisalegalentity.Forthedetailsofthelegalframeworkformanagingagents,pleaseconsulttheabove-mentionedlaw.

Thelawgoverningsettingupabusinesscontrolsnotonlythemanagerofacondominiumbutatthesametimetherealestatemanager(administrateurdebiens).Ifthelatteroperatesasanagentonapurelycontractualbasis,thecondominiummanager’spositionissimilartothatofalegaltrustee.Indoingso,thelegislatorswantedtoensurethatbothactorsaresubjecttoonesolebusinesspermit.

Onceagain,Article10oftheActof28December1988governingsettingupabusinesslaysdowntheadditionalconditionswhichpeoplewhowishtoenterthisprofessionhavetomeet.


Busin

ess

perm

itsin

Lux

embo

urg



Inaddition,condominiummanagershavetoshowthattheyhaveafinancialguaranteeofatleastEUR10,000thatcoverstheriskinrela-tiontotherepaymentoffunds,billsorsecuritiesentrustedtothem,providedbyacommitmentofadulyapprovedorauthorisedcollectiveguaranteebody,acreditinstitutionoraninsurancecompany.

Lastly,condominiummanagershavetobeabletoshowthattheyareinsuredagainstthefinancialconsequencesofprofessionallegalliabilityforprofessionalcommitments.

However,alltheseprovisionsdonotapplytothefollowing:

- toownerswho,onanon-professionalbasis,performtheactivityofcondominiummanagerasregardspropertytowhichtheyhavelegaltitleorindividualsoftheirchoicewhoreplacetheminthesedutiesonanon-professionalbasis;

- individualsactingonbehalfoftheirspouse,ofrelativesentitledtoinherit(parentsenordresuccessible)oronbehalfofprotectedadults(majeursprotégés)orminors,undertheconditionsandinaccordancewiththerulesprovidedforinTitlesXandXIoftheCivilCode;

- individualsperformingthedutiesofcondominiummanagerprovidedforbytheActof16May1975,asamended,governingthestatusofcondominiumswhichcontainnomorethanninelotsforuseashousing,ofwhichatleastoneoftheselotsbelongstotheproposedcondominiummanager.

2.3.2.3. Real estate developers

ThereisnolegaldefinitionofarealestatedeveloperinLuxembourg.However,itisacceptedthatanindividualorlegalentitywhoorwhichundertakestobuildorfindabuildingorpartofabuildingandwhoorwhich,forthispurpose,takestheinitiativeandtakescareofmostofthetransactionshouldbeconsideredasadeveloper.Inaddition,adistinctionismadebetweendeveloperswhoseservicesarelimitedtoactingasintermediariesbetweentheprofessionalsandthenewpropertyowner,ononesideanddeveloperswhoarealsoresponsiblefortheactualconstructionofthepropertyontheother.Itisthusimportanttostressthatitistheinitiativethatistakenbydeveloperswhichisthekeypointwhichdistinguishesthemfromarchitectsorcontractors,whoonlybecomeinvolvedattherequestofarealestatedeveloperorofafuturepropertyowner.

Onceagain,Article10oftheActof28December1988,asamended,governingsettingupabusinesslaysdowntheadditionalconditionswhichpeoplewhowishtoenterthisprofessionhavetomeet.


Lastly,propertydevelopershavetobeabletoshowthattheyareinsuredagainstthefinancialconsequencesofprofessionallegalliabilityforprofessionalcommitments.

2.3.2.4. Large retail premises

SpecialauthorisationbytheMinistryoftheMiddleClassesisrequiredforsingleorgroupedretailsalesareas,whetherspecialisedornot,exceedingasurfaceareaof400squaremetres.Salesareameanstheconstructedsurfacearea(surfacebâtie),measuredinsidetheoutsidewalls,excludinganyareasreservedforsanitaryinstallations,offices,productionareasandareasforstoringreservesprovidedthattheyareclearlyseparatedbyapermanentpartition(cloisonnementendur)andprovidedthattheareasforstoringreservesandproductionareasarenotaccessibletothepublic.

Thisspecialauthorisationismandatoryforthecreation,extension,takeover,transferorchangeofoneormoreofthemaincommerciallinesofbusinessofacommercialsurfaceareainwhichthesalesareaexceeds400squaremetres.Itisalsorequiredintheeventofthere-use,forretailtrade,ofasupermarketmadeavailablefollowinganauthorisationoftransfer.Forproposalsrelatingtotheextensionofanexistingcommercialsurfacearea,thelimitof400squaremetersreferstotheoverallsalesareaafterextension.

Specialauthorisationmayberefusediftheproposalrisksupsettingthebalanceinoneormoreofthemaincommerciallinesofbusinessinvolvedatnational,regionalorlocallevel.

Theauthorisationwillbecomeinvalidiftheproposalisnotcarriedoutorifthesitehasnotbeenstartedwithintwoyearsasfromthedateitwasgranted.Thelawspecifieswhatismeantbystartingasite.

Forproposalsrelatingtocreating,extending,takingoverortransferingasalesareaoflessthan2,000squaremetres,andtochangeoneorseveralmaincommerciallinesofbusiness,anordinaryapplicationmaybemadetotheMinistryofMiddleClasses.

Forproposalswherethesalesareaexceeds2,000squaremetres,theapplicantmustsubmitamarketsurvey,exceptinthecaseofatake-overwhichdoesnotentailanychangeinoneorseveralmaincommerciallinesofbusinessfordulyauthorisedsurfaceareas.


Busin

ess

perm

itsin

Lux

embo

urg


ALuxembourgregulationlaysdowntheformandcontentofanapplicationforspecialauthorisationandthemarketsurvey.

Asregardstheotherdetails,pleaseconsultArticle12oftheActof28December1988,asamended,governingsettingupabusiness.For more information, please contact the LuxembourgTradersAssociation (Confédération Luxembourgeoise du Commerce or “clc”)(www.clc.lu)ortheLuxembourgChamberofCommerce,BusinessCreationandDevelopmentDepartment(Départementcréationetdéve-loppementdesentreprises),LargeRetailPremisesService(Servicegrandessurfaces)(www.cc.lu).

2.3.2.5. Hotel, restaurant and pub / bar sector

Inordertooperateabar/pub,arestaurantorahotelinLuxembourgabusinesspermitissuedbytheMinistryofMiddleClassesisrequired,inaccordancewiththerequirementsoftheActof28December1988,asamended.Beforeissuingabusinesspermitforthissector,theministrywillcheckwhethertheapplicantmeetstheconditionsofgoodstandingandprofessionalqualifications.

Theprofessionalqualificationsrequiredvarydependingonwhethertheestablishmentinvolvedisabar/pub,abar/pubtogetherwithanestablishmentofferingaccommodationwithfewerthan10rooms,arestaurantorahotel.

a) Bars/pubssellingalcoholicandnon-alcoholicbeverages:hotelschooldiploma;aTechnicalandProfessionalCertificate(Certificated’AptitudeTechniqueetProfessionnelle,or“CATP”)forhotelstaff;CATPforwaiters;CATPforcooksorcaterers(traiteurs);universitydegreeplusthree-monthperiodoftraining;secondaryschoolleavingcertificateplussix-monthperiodoftraining;certificateshowingthattheapplicantpassedtheexaminationattheendoftheintensivetrainingforfuturetradersorganisedbytheChamberofCom-merce;certificateshowingthattheapplicantsuccessfullycompletedthetrainingcourseonbarworkorganisedbytheChamberofCommerce;anydiplomaacknowledgedastheequivalent.Iftheapplicanthasnodiplomasorcertificatesofanykind,professionalexperienceofoneyearinabarmaybeconsideredassufficienttoentertheprofession.

b) Bars/pubssellingalcoholicandnon-alcoholicbeverageswithanestablishmentofferingaccommodationwithfewerthan10rooms:hotelschooldiploma;CATPforhotelstaff;three-yearpracticalperiodoftraininginahotelorabarwithfewerthan10rooms;CATPforcooks;CATPforcaterers;CATPforwaitersinrestaurants;certificateshowingthattheapplicantpassedtheexaminationattheendoftheintensivetrainingcourseforfuturetradersorganisedbytheChamberofCommerce;certificateshowingthattheapplicantsuccessfullycompletedthetrainingcourseonbarworkorganisedbytheChamberofCommerce.

c) Restaurant:hotelschooldiploma;CATPforhotelstaff;CATPforwaitersplusone-yearperiodoftraining,CATPforcooksorcaterers;universitydegreeplusone-yearperiodoftraining;secondaryschoolleavingcertificateplustwo-yearperiodoftraining;anydiplomaacknowledgedastheequivalent.Iftheapplicanthasnodiplomasorcertificatesofanykind,professionalexperienceofthreeyearsinarestaurant(kitchen)maybeconsideredassufficienttoentertheprofession.

d) Hotel:hotelschooldiploma;CATPforhotelstaff;CATPforwaitersplustwo-yearperiodoftraining;CATPforcooksorcaterersplusone-yearperiodoftraining;universitydegreeplusone-yearperiodoftraining;anydiplomarecognisedasanequivalent.Iftheap-plicanthasnodiplomasorcertificatesofanykind,professionalexperienceofthreeyearsinahotelmaybeconsideredassufficienttoentertheprofession.

Inadditiontoabusinesspermit,inordertorunabar/pubsellingalcoholicbeverages,alicencetosellalcoholorservealcoholicbever-ages(concessiondecabaretage)isrequired(Actof29June1989,asamended).Thisspeciallicenceisgrantedbythelicensingdepart-ment(servicedecabaretage)oftheCustomsandExciseAuthority(AdministrationdesDouanesetAccises)(LuxembourgRegulationsof13January1994).Intheory,nonewbarmaybeopenedintowns(communes)wherethenumberofexistingbarshasreachedthepropor-tionofoneper500inhabitants,apartfromcertainexceptions.AsthisisthecaseformostofthetownsinLuxembourg,openinganewbarisonlypossibleonthebasisofanexistinglicence.However,alargenumberoflicencesthatarenotusedareownedbybrewers.

Intownswherethismaybenecessaryduetothetouristindustry,theFinanceMinistrymayauthorisetheopeningofabaroverandabovethestatedproportion.

AlicencetosellalcoholorservealcoholicbeverageswillonlybegrantedtonationalsfromcountriesotherthanEUMemberStatesoncondition that saidnationalscanprove that theyhave lived inLuxembourg forfiveconsecutiveyears. Inaddition,an individualwhowishestosetupabarsellingalcoholicbeveragesmustfirstmakethepriordeclarationtothetaxauthoritiesandpayanopeningtax(taxed’ouverture)tothetaxofficeofthetownwherethebaristobesetup.

Itshouldalsobestressedthatalicencetosellalcoholorservealcoholicbeveragesrelatestooperatingonebar,subjecttocertainexcep-tionsprovidedforbytheabove-mentionedlaw.Theholderofalicencetosellalcoholorservealcoholicbeveragesmaynotthereforerunasecondbaronthebasisofthisfirstlicence.Tobeabletodothis,thesecondbarwouldhavetoberunonthebasisofalicenceheldbyathirdpartywhowouldrunthebareitherinhisorhernameoronbehalfofthedeveloperofthissecondbarwhowouldbetheholderofthebusinesspermit.Speciallegislationintheareaoflicensing(cabaretage)alsoaffectstherighttosetupabusinessinthesensethataprovisionalpermitmaynotbegrantedintheeventofthedepartureofthequalifiedpersoninchargeofmanagingthebar.

TheActof15July1993relatingtobarssellingnon-alcoholicbeveragescontainssomespecificinformationaboutoperatingabarofthiskind(openinghours,entryofminorsetc.).

Forfurtherinformation,pleasecontactHORESCA–Hotel,RestaurantandPubOwners’Association(www.horesca.lu).

D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 � 0

Busin

ess

perm

itsin

Lux

embo

urg


2.3.2.6. Transport business

Thetransportbusinessisconsideredasageneralbusinessactivityprovidedthatthemaximumauthorisedmassofthevehicletransportinggoodsdoesnotexceed3.5tons.

Thisalsoapplies to the transportationofpassengersby roadprovided thatnomore thanninepassengerscanbe transported in thevehicle.

Transportationofgoodsbyroadwithvehiclesthatexceedthatmaximumweightof3.5tonsandthetransportationofpassengersbyroadwithvehiclesequippedfortransportingmorethanninepassengersaresubjecttocertainspecificconditionsprovidedforbytheActof30July2002transposingEuropeanCouncilDirective98/76/ECof1October1998.BusinesspermitsforcarriersareissuedbytheMinistryofMiddleClasses.

However,carriersofpassengerswhichonlyprovidetransportfornon-commercialpurposesorwhosemainactivityisdifferentfromacarrierofpassengersbyroadareexemptfromtheapplicationofallprovisionsgoverningestablishmentsprovidingtransportforpassengersbyroad,providedthattheirtransportactivityhaslittleeffectonthetransportmarket.

Apermittopracticetheprofessionofcarrierofpassengersbyroadautomaticallyincludesanauthorisationtoexercisethisprofessionbymeansoftaxis,ambulancesandrentalvehicles,subjecttocompliancewiththelegislationgoverningtheskilledcrafttrades,andcom-mercialactivityinvolvingvehiclerental.

Inordertopracticetheprofessionofcarrierofpassengersorgoodsbyroad,anapplicantmustmeetconditionsrelatingto:

a) goodstanding,

b) financialcapacity,

c) professionalcapacity.

Iftheapplicantisanindividualwhodoesnotmeettheconditionprovidedforunder(c)above,theMinistrymaynonethelessauthorisehimorhertopracticetheprofessionofcarrieronconditionthatheorsheappointsanotherpersonwhodoesmeettheconditionsprovidedforunder(a)and(c)above.

Iftheapplicantfortheprofessionisalegalentity,theindividualwhoeffectivelyandpermanentlyrunstheactivityasacarriermustmeettheconditionsprovidedforunder(a)and(c)above.

TheLuxembourgRegulationof13August2002implementingArticle3andArticle8oftheActof30July2002onsettingupbusinessasacarriercontainsfurtherinformationaboutfinancialcapacity.

Theconditionrelatingtofinancialcapacitymeanshavingthefinancialresourcesrequiredtoensurethecorrectstartofoperationsandthepropermanagementofthebusinessactivitythattheapplicantmustprovidebymeansofasecurityorguaranteeissuedbyabankingorfinancialinstitution.Thesecurityorguaranteeisissuedinfavourofthebodyofcreditorsintheeventofthecarrier’sbankruptcy.TheamountofthesecurityorguaranteeisEUR9,000forthefirstmotorvehicleandEUR5,000foreachadditionalvehicle.Thesecurityorguaranteeshouldbeforanunlimitedperiodoftime.

Goodscarrierswhose transportactivitiesonlyhaveasmalleffecton the transportmarketdue to theshortdistances travelled,usingvehicleswhosemaximumauthorisedmassisbetween3,5and6tonsdonotneedasecurityorguarantee.ThisisalsothecaseforcarrierswhichonlytransportgoodsinsideLuxemburg,regardlessofthemaximumauthorisedmassofthevehiclesused.

TheconditionrelatingtoprofessionalcapacitymeanshavingknowledgethatcorrespondstotheleveloftraininginthesubjectslistedintheLuxembourgRegulationof13August2002implementingArticle9oftheActof30July2002.

Theknowledgerequiredisgainedeitherbyattendingclassesorbyfiveyearsofpracticalexperiencewithacarrier,orbyacombinationofthetwo.Passinganexaminationshowsthatanindividualhastheknowledgerequired.Acertificatemustbeshownasproofofanindividu-al’sprofessionalcapacity.ThiscertificatemayalsohavebeenissuedbyanauthorityappointedforthispurposebyanEUMemberState.

Holdersofqualificationsobtainedinhighereducationortechnicaleducationinvolvingagoodknowledgeoftherelevantsubjectsareexemptfromtheseprovisions,eitherinwholeorinpart.CarrierswhichcanshowthattheyhavebeenauthorisedinanEUMemberStateundernationalregulationstopracticetheprofessionofcarrierofgoodsor,whereapplicable,ofcarrierofpassengersbyroadintheareaofnationalorinternationaltransportmusthoweveralsoprovideacertificateasproofoftheirprofessionalcapacity.

Asregardstheprofessionofcarriersofgoodsbywaterintheareaofnationalandinternationaltransport,theActof21April1993andtheMinistryofTransport,NavigationDepartment(MinistèredesTransports,ServicedelaNavigation)shouldbeconsulted.

AsregardscarriageofpassengersforpaymentontheMosellaRiver,theLuxembourgRegulationof30December1992andtheMinistryofTransport,NavigationDepartment(MinistèredesTransports,ServicedelaNavigation)shouldbeconsulted.

Asregardstransportbyair,theMinistryofTransport,CivilAviationDepartment(MinistèredesTransports,Directiondel’AviationCivile)shouldbeconsulted.


Busin

ess

perm

itsin

Lux

embo

urg


2.3.2.7. Travel agents

TheActof14June1994regulatingtheconditionsfortheperformanceofactivitiesinvolvingtheorganisationandsaleoftripsorholidaysappliestoallindividualswho,astheirmainactivityoronanancillarybasisandonahabitualbasis,takepartinorassistintransactionsconsistingoforganisingorsellingthefollowing,regardlessofhowtheyarepaidforthis:

- individualorgrouptripsorholidays,

- servicesthatmaybeprovidedinrelationtotripsorholidays,inparticularissuingtickets,reservingroomsinhotelsorinotherformsofaccommodationfortourists,issuingvouchersforaccommodationormeals,

- servicesrelatingtoreceivingtourists,inparticularlookingafterthecustomerandtheorganisationofvisits,conferencesorsimilarevents,

- packagetrips,holidaysandtours.A“package”ofservicesconsistsofthepriorcombinationofatleasttwotransactionsrelatingtotransport,accommodationorothertouristservicesthatarenotrelatedtotransportoraccommodationandthatrepresentasignificantproportionofthepackage,wherethisserviceexceeds24hoursorincludesanovernightstayandissoldorofferedforsaleataninclusiveprice,evenifthecustomerisinvoicedseparatelyforthevariouspartsofthepackage.

Thesetransactionsmayonlybecarriedoutbyindividualorlegalentitieswiththecapacityoftravelagents.TherelevantauthorisationisgivenbytheMinistryofMiddleClassesonthebasisoftheActof28December1988governingsettingupabusiness,asamended.Ap-plicantsmustthereforefirstmeettherequirementslaiddownbyLuxembourglawfortheperformanceofageneralbusinessactivity,i.e.in-depthknowledgeofcompanymanagement.

Inaddition,travelagentshavetoshowthattheyarecoveredbyasufficientfinancialguaranteefortheactivitiesplannedintheareaoftripsandpackageholidaysortours,tobeabletorepaythefundsreceivedfortheabove-mentionedservices,intheeventofbankruptcyorinsolvency,basedonthecommitmentofacollectiveguaranteebody,acreditinstitutionoracompanyinsuringloansandsecurities.Thisfinancialguaranteeshouldincludeanycostsofrepatriationandmust,inthiscase,beimmediatelyavailableinthenationalterritory.

TheLuxembourgRegulationof4November1997,whichlaysdowntheamount,thetermsandconditionsandtheuseofthefinancialguaranteeprovidedforinArticle6oftheActof14June1994,providesfurtherinformationinthisrespect.Insurancecompaniesaretheusualpartiesinvolved,withtheinsuranceinquestionbeingcalled“insuranceagainstthefinancialinsolvencyoftravelagencies”.

Travelagentsalsohavetoshowthattheyareinsuredagainstthefinancialconsequencesofprofessionallegalliability.

2.3.2.8. Landscape gardeners, horticulturalists, market gardeners, florists and nurserymen or -women

Landscapegardeners,horticulturalists,floristsandhorticulturalseedgrowers(nurserymenor-women)alsoneedabusinesspermitissuedbytheMinistryofMiddleClasses.Qualificationforsuchindividualsisbasedeitheronacertificateawardedfollowinganapprenticeshipissuedbyaprofessionalorganisationthatisrepresentativeofthesectorinquestion,oradiplomaorqualificationthatisacknowledgedas an equivalent.Young people can study at school for aTechnical and Professional Certificate (Certificate d’AptitudeTechnique etProfessionnelle,or“CATP”)forthefollowingprofessions:nurseryman-landscapegardener,horticulturalist-floristandmarketgardener.Ifapplicantshavenoapprenticeshipcertificateorqualificationacknowledgedasequivalent,theyhavetoshowthattheyhadafive-yearperiodoftraininginoneofthelinesofbusinessinquestion.

2.3.2.9. Manager of a vocational training body

AvocationaltrainingbodymeansanyserviceproviderwhichofferscontinuousprofessionaleducationinaccordancewiththeprovisionsoftheActof22June1999havingasitsaim,interalia,thesupportanddevelopmentofcontinuousvocationaltraining.Itincludesallactivitiesoftrainingorteaching,excludingteachingortraininginschools,whichhavethefollowingpurpose:

- adaptingthequalificationsofworkersandcompanyagents/managersbyimprovingtheirskillsandbringingthemuptodatewithtechniquesandtechnologiesusedinorganisation,productionormarketing,

- retrainingworkersandcompanyagents/managerswithaviewtohelpingthemgainentryintoadifferentprofessionalactivity,

- promotingworkersbytrainingtheminmoredemandingtasksorpositionsorinpositionswithmoreresponsibilityanddevelopingskillsandpotentialwhichisnotbeingusedorisonlybeingusedinpart.

AccordingtoArticle9oftheActof28December1988governingsettingupabusiness,asamended,theactivityconsistinginmanagingsuchatrainingbodyissubjecttoabusinesspermitissuedbytheMinistryofMiddleClasses,withtheconsentoftheEducationMinistry(Ministredel’EducationNationale).Asregardsthisconsultation,theLuxembourgRegulationof30December1999laysdowntheprofes-sionalqualificationsrequiredforapproval.

TheprofessionalqualificationsrequiredbymanagersofsuchavocationaltrainingbodyconsistofauniversitydegreeorpostgraduatequalificationoracertificateofcompletionofuniversityorpostgraduatestudiesissuedbyahighereducationinstitutionrecognisedbytheStatewherethebody’sheadofficeislocatedandshowingthesuccessfulcompletionofacompletecycleofthreeyearsofstudies.

D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 � �

Busin

ess

perm

itsin

Lux

embo

urg


Thesequalificationscanalsoconsistof thevalidationof theeffectiveperformance inanEUMemberStateofmanagingavocationaltrainingbody.

Inaddition,theActof8September1998governingrelationsbetweentheStateandthebodiesactinginthesocial,familyandthera-peutic areas, are subject toministerial approval from the Family and IntegrationMinistry (Ministèrede la Famille etde l’Intégration)(www.fm.etat.lu)ortheHealthMinistry(MinistèredelaSanté)(www.ms.etat.lu),accordingtotherespectiveskillsinvolved,theofferingofservicesofconsultation,help,assistance,guidance,trainingforsocialwork,eventleader(animation)orprofessionalorientationinthesocialorsocial-educationalfield.

2.3.2.10. Managers of childcare facilities

Managingacrèche,anursery,adaynursery,aserviceprovidingschoolmealsoraserviceofferinghelpwithhomeworkrequiresthepriorapprovaloftheFamilyandIntegrationMinistry(MinistredelaFamilleetdel’Intégration)(www.fm.etat.lu).Thefollowingareacceptedasprofessionalqualifications:diplomasorqualificationsasanassistantinspecialeducation(moniteurd’éducationdifférenciée),teacher,paediatricnurse,gradedteacher(éducateurgradué),primaryschoolteacheroranyotherdiplomaorqualificationpreparingtheholdersthereofforprofessionalworkwithchildren.Iftheperformanceofsuchanactivityneedstobeorganisedasabusiness,managersmustalsoapplyforabusinesspermitfromtheMinistryofMiddleClassesinaccordancewiththeActof28December1988.

2.3.2.11. Financial and insurance sector

Entryintotheprofessionalsectorofbanksandnon-bankingfinancialinstitutionsisgovernedbytheActof5April1993relatingtothefinancialsector,asamended.PleaseseeChapter7ofthisdocumentforfurtherinformation.

Thelawlaysdowntheconditionsbanksandnon-bankingfinancialinstitutionshavetomeettoobtainabusinesspermit.ThispermitisissuedbytheministerwithresponsibilityfortheCommissiondeSurveillanceduSecteurFinancieror“CSSF”(Luxembourgsupervisoryauthorityforthefinancialsector:www.cssf.lu)aftersaidauthorityhasexaminedtheapplication.

PermitstocarryoutinsurancetransactionsareissuedbytheFinanceMinistry(MinistèredesFinances)afterapreliminaryreviewoftheap-plicationbytheInsuranceCommission(CommissariatauxAssurances)(www.commassu.lu).TheLuxembourgRegulationof31December2001laysdowntheconditions,onthebasisoftheActof6December1991,underwhichinsurancecompaniesshouldsetupguaranteefundsandtechnical reserves, inparticular thesolvencymargin.This lawalsograntssupervisorypowerstothe InsuranceCommission,whichtakespartinthedevelopmentofregulationandisinchargeofthecoordinationanddevelopmentoftheinsuranceandreinsurancesectorinLuxemburg.

2.3.3. What skills are required to practice certain liberal professions?

Businesspermitsarecurrentlyrequiredforthefollowingliberalprofessions(professionslibérales):

- architects(achitectes),

- interiordesigners(architectesd’intérieur),

- landscapearchitects(architectespaysagistes),

- construction(civil)engineers(ingénieurs-conseils),

- specializedengineers(ingénieursd’uneautrespécialité),

- charteredaccountants(experts-comptables),

- surveyors(géomètres),

- advisersinindustrialproperty(conseillersenpropriétéintellectuelle),

- accountants(comptables),

- economicadvisers(conseillerséconomiques).

Fortheseprofessions,theprofessionalqualificationsrequired,ingeneral,areadiplomaordegreeawardedafterstudyingatauniversityorinhighereducation,inaparticularsubject,andshowingthesuccessfulcompletionofacycleofacertainlengthoftime,possiblycompletedbyaperiodoftrainingand/oranaptitudetest.

Tobeanaccountant,theprofessionalqualificationsrequiredareacertificateofcompletionofsecondarytechnicalstudiesorasatechni-cian(technicien),intheadministrativeandcommercialdivision,completedbyaperiodoftrainingandpassinganaptitudetest.

Ofcourse,lawyers,doctorsandcompanyauditorsalsopracticeliberalprofessions,buttheyarecoveredbyotherlawsthanthoserelatingtosettingupabusinessforwhichtheMinistryofMiddleClassesisresponsible.

Pharmacists inpharmaciesare tradersbutarenonetheless involved inpublichealthsuchthat they requireanauthorisation fromtheMinistryofHealth.TheMinistrywilldecideinaccordancewiththeActof31July1991whichlaysdowntheconditionsforauthorisationtopracticetheprofessionofpharmacist.


Busin

ess

perm

itsin

Lux

embo

urg


Architects,interiordesigners,landscapearchitects,constructionengineersandcharteredaccountantsmustberegisteredasmembersofthelocalGuildofArchitectsandConsulting(Civil)Engineers(Ordredesarchitectesetdesingénieurs-conseils)(www.oai.lu)ortheGuildofCharteredAccountants(Ordredesexperts-comptables)(www.oec.lu)respectively.Theseprofessions,organisedwithinaguild,maynotbecombinedwithanyotheractivitythatmayaffecttheprofessionalindependenceoftheindividualinvolved.Moreespecially,tradeactivitiesorskilledcraftactivitiesmaynotbeperformedatthesametimeasapersonpracticesoneoftheabove-mentionedprofessions.

Saidguildshavealsodrawnupspecialinternalrulesinordertoguaranteetheindependenceoftheirmembersactingwithinacompanystructure.Thus,themajorityofshares/interestsinsaidcompanystructuresmustbeheldbymembersoftheguildsinquestionorbyin-dividualswhoseactivitiesarecompatiblewiththeguild’srequirements,fromthestandpointofprofessionalethics.Thismajoritymaybeasimplemajorityoraqualifiedmajority(3/4).Inaddition,thecompany’smanagersmustbeprofessionalssubjecttothecodesofconductoftherespectiveguilds.IfthereisaBoardofDirectorsthemajorityofthepositionsonsuchboardsmustbeheldbysuchprofessionals.Therelevantguildsshouldthereforebeconsultedforthepreciseconditions.

2.3.3.1. Architects

Anarchitectisanindividualwhoseusualprofessioniscreatinganddesigningaworkofconstruction,townplanningortownandcountryplanning,drawingupplansforthework,andsummarisingandanalysingthevariousactivitiesinvolvedinthecreationofthework.Theprofessionofarchitectalsoincludesconsultingandexpertappraisals.

Thefollowingareconsideredarchitecturalprojectsinwhichanarchitectmaybeinvolved:residentialandadministrativebuildings,build-ingstobeusedforteaching,researchorformedicalpurposes,andanyordinarybuildingwithoutanyspecialtechnicalproblems.Thislasttypeofbuildingisreservedforconstructionengineers.

Tobeanarchitect,theprofessionalqualificationsrequiredareauniversitydegreeorcertificateofcompletionofstudiesatuniversitylevelissuedbyahighereducationinstitutionrecognisedbytheStateinwhichtheinstitution’sheadofficeislocatedandshowingthesuccessfulcompletionofacompletecycleoffouryearsofstudies,withoutprejudicetoEuropeanregulationsgoverningtheprofessionalqualificationsofarchitectswhoarenationalsofanEUMemberState.

Thisevidenceofqualificationtopracticethisprofessionmustbecompletedbyaperiodoftrainingwithaprofessionalinthislineofbusi-ness.Thisprofessionaltraining,whichshouldlastatleastayear,musttakeplaceafterthediplomas,certificatesorotherqualificationshavebeenobtained.

2.3.3.2. Interior designers

Theprofessionofindependentinteriordesignerconsistsofcreatingandcomposinginsideareas,drawingupplansforaworkofthiskind,andsummarisingandanalysingthevariousactivitiesinvolvedinthecreationofsuchwork.

Tobeaninteriordesigner,theprofessionalqualificationsrequiredareauniversitydegreeorcertificateofcompletionofstudiesatuniversitylevelissuedbyahighereducationinstitutionrecognisedbytheStateinwhichtheinstitution’sheadofficeislocatedandshowingthesuccessfulcompletionofacompletecycleofatleastthreeyearsofstudiesininteriordesign.

2.3.3.3. Landscape architects

Theprofessionoflandscapearchitectconsistsofseekingandprovidingfortheplanning,design,management,conservationandprotectionoftheenvironmentexcludingbuildings.

Tobealandscapearchitect,theprofessionalqualificationsrequiredareauniversitydegreeorcertificateofcompletionofstudiesatuni-versitylevelissuedbyahighereducationinstitutionrecognisedbytheStateinwhichtheinstitution’sheadofficeislocatedandshowingthesuccessfulcompletionofacompletecycleofatleastfouryearsofstudiesinlandscapearchitecture.

2.3.3.4. Construction (civil) engineers

Aconstruction(civil)engineer(ingénieur-conseil)isanindividualwhoseusualprofessionisdesigningaworkofconstructionthatistechni-calorinvolvestownandcountryplanning,drawingupplansandsummarisingtheactivitiesinvolvedinthecreationofsuchwork.

Tobeaconstructionengineer,theprofessionalqualificationsrequiredareauniversitydegreeorcertificateofcompletionofstudiesatuniversitylevelissuedbyahighereducationinstitutionrecognisedbytheStateinwhichtheinstitution’sheadofficeislocatedandshowingthesuccessfulcompletionofacompletecycleoffouryearsofstudiesortheequivalent.

Thisevidenceofqualificationtopracticethisprofessionmustbecompletedbyaperiodoftrainingwithaprofessionalinthislineofbusi-ness.Thisprofessionaltraining,whichshouldlastatleastayear,musttakeplaceafterthediplomas,certificatesorotherqualificationshavebeenobtained.


Busin

ess

perm

itsin

Lux

embo

urg


2.3.3.5. Specialized engineers

Aspecializedengineerinothersubjectsisanindividualwhoseusualprofessionisdesigningaworkinthetechnicalorscientificarea,drawingupplansandsummarisingtheactivitiesinvolvedinthecreationofsuchwork.Forexample,computerengineerswillbegivenpermitstopracticeintheirspeciality,andsoon.

Itshouldalsobestressedthat,inpractice,notallengineersarerequiredtoregisterwiththeGuildofArchitectsandConsulting(Civil)Engineers(OAI),butonlythosewhosespecialismissimilartoconstruction.Forexample,computerengineersmaypracticetheirprofessionoutsidetheprofessionalframeworkoftheOAI.Therefore,saidengineersmayalsopracticeatradeand/orskilledcraftactivity.

2.3.3.6. Surveyors

Tobeasurveyor,theprofessionalqualificationsrequiredareadiplomashowinguniversityeducationorhighertechnicaleducationsimilartouniversityinanEUMemberState,orrecognisedasequivalent,inoneofthefollowingspecialfields:geodesy,topography,cartography,photogrammetry,geomaticsorasimilarspecialism.ThisevidenceofqualificationtopracticethisprofessionmustbecompletedbyaperiodoftrainingofatleasttwoyearsinLuxemburgunderthesupervisionofanofficialsurveyor,includingatleastsixmonthswiththeLandRegistryandTopographyAuthority(AdministrationduCadastreetdelaTopographie).Thisprofessionaltrainingmusttakeplaceafterthediplomas,certificatesorotherqualificationshavebeenobtained.

2.3.3.7. Advisors in industrial property

Theprofessionofindustrialpropertyadvisor,practicedindependently,consistsofprovidingorientationandassistanceandrepresentingprincipalsinthefieldofindustrialproperty,inparticularregardingobtaining,maintaining,defendinganddisputingexclusiverightscreatedbypatents,trademarks,drawingsormodels.

Enteringtheprofessionofindustrialpropertyadvisorissubjecttoproofofthefollowingprofessionalqualifications:

- auniversitydegree,highereducationdiplomaoracertificateofcompletionofuniversityorhighereducationstudiesissuedbyahighereducationinstitutionrecognisedbytheStateinwhichtheinstitution’sheadofficeislocatedandshowingthesuccessfulcompletionofacompletecycleofatleastfouryearsofstudiesinalegal,scientificortechnicalarea.

- completinga12-monthperiodoftrainingwithanadvisorinindustrialpropertywhohasbeenapprovedbyLuxembourg’sIntellectualPropertyDepartment (ServicedelaPropriétéIntellectuelle)orwithanadvisorinindustrialpropertyapprovedinanotherMemberState,whereapplicable.

- passingtheEuropeanqualificationexaminationprovidedforinArticle134oftheConventiononthegrantofEuropeanpatentsof5October1973.

- passingacomplementarynationalexaminationrelatingtoLuxembourglawonpatentsforinventions,theUniformBeneluxLawonTradeMarksandUniformBeneluxLawondrawingsandmodels,includingtheadministrativeproceduresandformalitiesrelatedtotheapplicationoftheselaws.

IndividualswhomeettherequirementslaiddowninArticle3ofDirective89/48/ECof21December1988andwhohavepassedanapti-tudetestmayalsoentertheprofessionofindustrialpropertyadvisor.

2.3.3.8. Chartered accountants

Acharteredaccountantisanindividualwhoseusualprofessionconsistsoforganising,assessingandadjustingaccountingrecordsandaccountsofallkinds,drawingupbalancesheetsandanalysing,usingtechnicalaccountingprocedures, thepositionandoperationofcompaniesandbodiesasregardstheirvariouseconomicandfinancialaspects.

Theperformanceofthedutiesprovidedforisnotincompatiblewiththeperformanceofotheractivitiessuchaskeepingaccounts,provid-ingalegaladdressforcompanies(domiciliataire),performingallpayrollandcorporatesecretarialservices,advisingontaxmattersandcompletingtaxreturns,performingcontractualauditsofaccountsandperformingthedutiesofcompanyauditors.

Nopersonmaycarryout,evenonanancillarybasisoroccasionally,theactivitieslistedaboveorcallhimorherselfacharteredaccountantorasimilarnameunlessheorsheisauthorisedtodosoundertheconditionslaiddownbythelawgoverningsettingupabusiness.

Theforegoingprovisionsdonotprevent:

- businessenterprises,peopleintheskilledcrafttradesandindustrialists,theprofessionsandindividualsperformingtheiractivitiespursuanttoanemploymentcontractwithinsuchanenterprisefromcarryingoutallaccountingandtaxtransactionsrequiredbytheiremployer’senterprise;

- forcreditinstitutionssupervisedbytheCommissiondeSurveillanceduSecteurFinancieror“CSSF”(Luxembourgsupervisoryauthor-ityforthefinancialsector),lawyers,companyauditorsorcompaniesofwhichmorethan50%ofthecapitalisheldbytheindividualsorentitieslistedinthisparagraph,alldulyauthorisedtopracticetheirprofession,fromcarryingoutallaccountingandtaxtransactionsforfinancialholdingcompaniesandfinancecompaniesforwhichtheyprovidealegaladdress(domiciliaton)fortheiroperations;


Busin

ess

perm

itsin

Lux

embo

urg


- thestatutoryauditors(commissairesauxcomptes)referredtointheActof10August1915relatingtocommercialcompanies,asamended,fromperformingtheirduties.

Thename“fiduciary”mayonlybeusedtogetherwiththenameoftheactivitythatisperformed.

Tobeacharteredaccountant,theprofessionalqualificationsrequiredareauniversitydegree,highereducationdiplomaoracertificateofcompletionofuniversityorhighereducationstudiesissuedbyahighereducationinstitutionrecognisedbytheStateinwhichtheinsti-tution’sheadofficeislocatedandshowingthesuccessfulcompletionofacompletecycleofthreeyearsofstudiesineconomic,businessandfinancialsciencesorcertifyingthattheindividualhastheprofessionalqualificationsrequiredtopracticetheprofessionofcharteredaccountant.

Evidenceoftheabove-mentionedqualificationtopracticethisprofessionmustbecompletedbyathree-yearperiodoftraininginthelineofbusiness,includingatleastoneyearwithadulyestablishedcharteredaccountant.Thisprofessionaltrainingmusttakeplaceafterthediplomas,certificatesorotherqualificationshavebeenobtained.

Inadditiontoevidenceofqualificationandoftheperiodoftraining,proofofpassinganaptitudetestonLuxembourg’staxlaw,Lux-embourg’sbusinesslaw,companyaccounts,employmentlawandLuxembourgsocialsecurityandonthecodeofconductofcharteredaccountantsinLuxembourgmustalsobeprovided.Thetermsandconditionsoftheaptitudetestwillbelaiddownbyregulation.

2.3.3.9. Accountants

Theprofessionofaccountant,practicedonaself-employedbasis,consistsoforganisingaccountingservicesandgivingadviceonthesemattersonbehalfofthirdparties,opening,keeping,centralisingandclosingaccountingentriesrequiredtodrawupfinancialstatements,calculatingresultsanddrawingupannualfinancialstatementsintheformrequiredbytherelevantlegalprovisions.

However,accountantsarelimitedtoorganisingtheaccounts,drawingupbalancesheetsandfillingintaxreturnsforcompanieswhich,onthedatetheaccountswereclosed,didnotexceedthelimitofthetwofollowingcriteriafortwoconsecutivefinancialyears:

• balancesheettotal:EUR2,305million;

• netturnover:EUR4,610million.

Tobeanaccountant,theprofessionalqualificationsrequiredareadiplomaofcompletionofsecondarytechnicalstudiesorstudiesasatechnician, intheadministrativeandcommercialdivision, inaccordancewiththeActof4September1990,asamended,reformingtechnicalsecondaryeducationandcontinuousprofessionaleducation,orevidenceshowingthattheconcernedindividualhasequivalentdiplomas.

Evidenceoftheabove-mentionedqualificationtopracticethisprofessionmustbecompletedbyathree-yearperiodoftraininginthelineofbusiness,includingatleastoneyearwithanaccountant,acharteredaccountantoradulyestablishedcompanyauditor.Thisprofessionaltrainingmusttakeplaceaftertherequireddiplomashavebeenobtained.

2.3.3.10. Economic advisor

Abusinesspermitfortheactivityofeconomicadvisorconsistingintheprovision,onaprofessionalbasis,ofservicesandadviceinmicro-andmacro-economicsandincompanymanagementandtheprovisionofanyrelatedorcomplementaryserviceswillbegrantedbytheMinistryresponsibleforgrantingbusinesspermitstoindividualswhocanprovetheyhaveauniversitydegree,highereducationdiplomaoracertificateofcompletionofuniversityorhighereducationstudiesissuedbyahighereducationinstitutionrecognisedbytheStateinwhichtheinstitution’sheadofficeislocatedandshowingthesuccessfulcompletionofacompletecycleofthreeyearsofstudiesineco-nomic,businessorfinancialsciencesorincompanymanagementorinbusinesslaworcertifyingthattheindividualhastheprofessionalqualificationsrequiredtopracticetheprofessionofeconomicadvisor.

2.4. Other formalities related to starting a business or a regulated profession

2.4.1. Registration with the Trade and Companies Register

Any individualor legalentity,andanybranch,whoorwhichperformsacommercialormanufacturingactivitymust registerwith theRegistredeCommerceetdesSociétésor“RCSL”(TradeandCompaniesRegister)(www.rcsl.lu),dependingontheplaceofestablishment,withinonemonthafterincorporationorofstartingactivity.LiberalprofessionscarriedoutthroughacompanyvehicleconsideredbylawasofcommercialnaturearealsorequestedtoregisterwithRCSL.

Thetypeandnatureofregistrationislaiddownindetailbylaw.

Registrationgivesrisetothecollectionofataxwhoseamountvariesdependingonwhetheranindividualorlegalentityhasregistered,anddependingontheamountofacompany’scapital.

TheTradeandCompaniesRegister(RCSL)operatesundertheauthorityoftheJusticeMinister,whohasentrustedmanagementoftheRegistertoanEconomicInterestGroup(GIE)consistingoftheState,theChamberofCommerceandtheChamberofSkilledTrade.


Busin

ess

perm

itsin

Lux

embo

urg


2.4.2. Tax and social security obligations

Inorder to fulfil their taxobligations,companiesare requiredtoregisterwiththeRevenueService–DirectTaxes (AdministrationdesContributionsDirectes)(www.impotsdirects.public.lu)andwiththeRegistrationandDomainsService–IndirectTaxes(Administrationdel’EnregistrementetdesDomaines)(www.aed.public.lu).SeeChapter6ofthisdocumentforfurtherinformation.

The declaration of a new commercial venture is to be sent to the Social Security Centre (Centre Commun de la Sécurité Sociale)(www.ccss.lu).SeeChapter7ofthisdocumentforfurtherinformation.

Underthestatutesgoverningsocialsecurity,registrationwiththevarioussicknessandpensionfundsshouldbeasfollows:

- self-employedpersonsareregisteredwiththePensionFundfortheSkilledCraftTrades,TradersandIndustrialists(CaissedePensiondesArtisans,desCommerçantsetdesIndustriels)andwiththeSicknessFundfortheSelf-EmployedProfessions(CaissedeMaladiedesProfessionsIndépendantes);

- privatesectoremployeesareregisteredwiththePensionFundforPrivateSectorEmployees(CaissedePensiondesEmployésPrivés)andwiththeSicknessFundforPrivateSectorEmployees(CaissedeMaladiedesEmployésPrivés);

- workersaremembersoftheWorkers’SicknessFund(CaissedeMaladiedesOuvriers)andthePensionandInvalidityInsuranceInstitu-tion(Etablissementd’AssurancecontrelaVieillesseetl’Invalidité).

Inaddition, companieswith salariedemployeesmustbe registeredwith theAccident InsuranceAssociation (Associationd’AssurancecontrelesAccidents).

2.4.3. Operating licences

Apart from the aforementioned prerequisites, many businesses also require a special operating licence, which is issued following anenvironmentalimpactassessmentandclarificationofsafetyintheworkplaceandneighbourhoodprotection.Underthispartlypublicpro-cedure,whichisalsoknownastheCommodo-Incommodoprocedure,so-called“classifiedinstallations”,i.e.allindustrial,commercialor(skilled)crafttradesundertakings,bothpublicorprivate,allinstallations,allactivitiesorrelatedactivitiesandanyprocesswhoseexistence,operationorimplementationcouldinvolvedangersorrisks,requirepriorauthorisation.Theauthorisationprocedureissetoutbelow.

Otherlicencesregardingtheenvironmentarereferredtointhestatutesrelatingtowaste,theprotectionofwaterorofriversandstreams,protectionoftheatmosphereorlawsrelatingtotheprotectionofnature.


ChaptER 3RUNNING A BUSINESS AND PROTECTING THE ENVIRONMENT

3.1. Commodo-incommodo operating permits for classified establishments

3.2. Waste management

3.3. Water management

3.4. The protection of nature

3.5. Implementing the Kyoto Protocol

3.6. Maintaining food safety: the HACCP system


RUNNING A BUSINESS AND PROTECTING THE ENVIRONMENTChaptER 3

Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

Luxembourgviewsthesustainabledevelopmentofthenationaleconomyasveryimportant,whichmeansthatprotectionoftheenviron-mentisalsoconsideredasimportant.

Asaresult,companieswishingtosetupbusinessinLuxembourgarerequiredtoobtainspecialpermitsandfilepriordeclarationsdepend-ingonthetypeofactivitytheywishtoperform.Lawsontheprotectionoftheenvironmentprovide,interalia,forrulesthatapplytoes-tablishmentsthatareclassifiedfortheprotectionoftheenvironment(referredtoas“commodo-incommodo”rules),airpollutioncontrol,wastemanagementandtheprotectionofwaterandwatercourses.

Allenvironmentalrulestakeintoaccountboththeprotectionofnatureandtheneednottohindertheeconomicdevelopmentofcom-paniesinLuxembourg.Thestrictestproceduresrelatetoactivitiesthatarepotentiallyhazardousfortheenvironment(seethecommodo-incommodoprocedure)whileflexibilitymechanismsareprovidedforwhereauthorisedbyEuropeanorinternationallaw(seefinancingofflexibilitymechanismsprovidedforundertheKyotoProtocol).

Thischapterwillcoverthemainrulesthatapplytotheprotectionoftheenvironment.Theimplementationofregulatoryrequirementsinsomeareasisfacilitatedbythefactthattherearesomeapprovedorganisations,inparticularinrelationtowastemanagement.

3.1. Commodo-incommodo operating permits for classified establishments

InaccordancewiththeActonclassifiedestablishments,oftenreferredtoasthe“commodo-incommodo”act1,priorauthorisationmustbeobtainedbyallindustrial,commercialorskilledcrafttradesestablishmentsinthepublicorprivatesector,allfacilities,activitiesorrelatedactivitiesandallprocesseswhoseexistence,runningorimplementationmaycausedangersorriskstothefollowing:

- theprotectionofthesafety,healthorwelfareofthegeneralpublic,theneighbourhoodorthestaffintheseestablishments,

- thehealthandsafetyofemployeesintheworkplace,and

- thehumanandnaturalenvironment.

Luxembourg lawrelatingtoclassifiedestablishmentsaimsprimarilyatpreventingtheriskofpollutionbyplacingthedevelopmentofLuxembourgcompanieswithintheframeworkofsustainableeconomicdevelopmentwhichtakesintoaccounteconomic,ecologicalandlabour-relatedrequirementsandguaranteesthesafetyofemployeesandclassifiedestablishments.

Operatingpermitscoveraspectsrelatingtoemployeeandusersafetyandenvironmentalaspectsofestablishments.Theconstructionofaclassifiedestablishmentmayonlystartafteracommodo-incommodopermithasbeenissued.

Thecommodo-incommodopermitprocedureisrelativelycomplex,buttherestrictionslaiddowninthisprocedurecorrespondtothelevelsofriskandthedangersrepresentedbytheoperationofaclassifiedestablishment.ThestrictprocedureisevidenceoftheLuxembourgauthorities’seriousapproachtotheadministrativemanagementoftheenvironmentandprovidesaguaranteeasregardshealthandsafetyfortheinstallationssubjecttopermitrequirements.

3.1.1. What types of establishments are covered by commodo-incommodo permits?

Establishmentscoveredbycommodo-incommodopermitsaredividedintofourclasses2basedontheriskstheymayrepresent:

- class1establishmentsareauthorisedbytheMinistryforEmploymentandtheMinistryoftheEnvironment,

- class2establishmentsareauthorisedbythemayor(bourgmestre),

- class3establishmentsrequireapermitissuedbytheMinistersforEmploymentandtheEnvironment,whereasclass3Aestablish-mentsonlyrequireapermitissuedbytheMinisterforEmploymentandclass3BestablishmentsonlyrequireapermitissuedbytheMinisteroftheEnvironment,

- finally,class4establishmentsaresubjecttotheprovisionslaiddownbyLuxembourgregulations,whichalsospecifytherelevantauthoritybodyinthisrespect.

Whenseveralinstallationsformingpartofanestablishmentfallwithindifferentclasses,theinstallationswiththehighestlevelofriskbasedontheclassificationwilldeterminetheapplicablepermitprocedure.

3.1.2. Where should applications for commodo-incommodo permits be submitted?

TheActon classifiedestablishmentsprovides that theEnvironmentalDepartmentof theMinistryof theEnvironment (Administrationdel’Environnement),theEmploymentandMiningInspectorate(InspectionduTravailetdesMines)andlocalauthoritiesaretoprovideapplicantsforpermitswithstandardapplicationformswhichareadaptedinaccordancewiththescaleandtypeoftheplannedestablish-ment3.

1 Actof10June1999onclassifiedestablishments.2 Formoreinformation,pleaserefertoLuxembourgRegulationof16July1999onthelistingandclassificationofclassifiedestablishments.3 ThecompletelistofstandardformsisavailableonLuxembourg’senvironmentalwebsiteatthefollowingaddress: http://www.environnement.public.lu/guichet_virtuel/etabl_classes/index.html(onlyinFrench).



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

Threecopiesoftheapplicationformforclass1establishmentsshouldbesentbyrecordeddeliverywithreturnreceiptrequestedtotheEnvironmentalAuthority4,whichwillautomaticallypassonacopytotheEmploymentandMiningInspectorate5.

Anadditionalcopyshouldbeenclosedforeachneighbouringtown(commune)withinaradiusof200metresoftheestablishment.Whenanestablishmentrequiresapermitinaccordancewiththelawonwastepreventionandmanagementand/orthelawonwaterprotectionandmanagement,twoadditionalcopiesshouldbesubmittedtotheEnvironmentalAuthority.

Twocopiesoftheapplicationformforclass2establishmentsshouldbesentbyrecordeddeliverywithreturnreceiptrequestedtothemayorforthetownwheretheestablishmentisplanned.Anadditionalcopyshouldbeenclosedforeachneighbouringtownwithinaradiusof200metresoftheestablishment.

Threecopiesoftheapplicationformforclass3,3Aand3Bestablishmentsshouldbesentbyrecordeddeliverywithreturnreceiptre-questedtotherelevantauthoritythatistheEnvironmentalAuthorityforclass3and3BestablishmentsandtheEmploymentandMiningInspectorateforclass3Aestablishments.

Luxembourgregulationsshouldbeconsultedforinformationabouttherulesregardingclass4establishments.

3.1.3. What information should be contained in commodo-incommodo application forms?

Applicationformsshouldcontainthefollowinginformation:

- thefirstandlastnames,capacityandaddressoftheapplicantandtheoperator.Forcompaniesemployingsalariedstaff,theindustrialactivitycode(NACE)andnationalidentitynumbershouldbegiven,

- thetypeandlocationoftheestablishment,thepurposeofoperationsthere,theinstallationsandprocessestobeimplemented,theapproximatequantitiesofrawandancillarymaterialstobeusedandtheproductstobemanufacturedorstored,

- theapproximatenumberofemployeestobehiredandanassessmentoftheriskstotheirhealthandsafetybasedonthesubstancesandprocessesused,togetherwiththemeasuresplannedintermsofworkplacehealthandsafety,sanitationandergonomics,

- waterabstractions,waterdisposalintheairandinthesoil,noise,vibration,radiationemissionsfromtheestablishments,theproduc-tionandmanagementofwasteandotheroperatingresidueproductionandmanagement,productionandconsumptionofdifferenttypesofenergybytheestablishmentandalistofeffectsontheenvironment,

- ingeneral,themeasuresplannedtopreventorminimisethedisadvantagesandriskswhichtheestablishmentmaycauseforpersonsworkingintheestablishment,andforneighbours,thepublic,theenvironmentand,inparticular,thetechnologyplannedandothertechniquesaimedatpreventingemissionsfromtheestablishmentor,wherethisisnotpossible,reducingthemand,wherenecessary,measuresrelatingtopreventingandreclaimingwastegeneratedbytheestablishment,

- themeasuresplannedtomonitoremissionsintotheenvironment.Inaddition,class1establishmentsregulatedbyaLuxembourgregulationmustassesstheenvironmentalimpactbydrawingupariskassessmentreportandasafetyreport,

- anon-technicalsummaryofalloftheaboveinformation.

Thefollowingdocumentsmustbeenclosedwithapplicationsforpermits:

- amapoftheestablishmentonascaleof1:200ormoreprecise,unlessotherwisespecifiedbytherelevantauthorities,showingthelayoutofthepremisesandthelocationoftheinstallations,

- arecentextractfromaLandRegistrymapincludingtheplotsorpartsofplotslocatedwithinaradiusof200metresoftheestablish-ment,

- anextractfromatopographicalmaponascaleof1:10,000or1:20,000showingtheplannedlocationoftheestablishmentwhenitislocatedoutsideofamunicipality,

- administrativedocumentsthatshowthattheplannedestablishmentislocatedinanareaintendedforthispurposeinaccordancewiththeprovisionsofthelawontownandmunicipalityplanning,legislationonnationalplanningandlawsontheprotectionofnature.

3.1.4. How are applications for commodo-incommodo permits processed?

Therelevantauthorities,thatistheEnvironmentalAuthority,theEmploymentandMiningInspectorateorthemayor,mustinformtheap-plicantwithin30dayswhetherornottheapplicationiscomplete.Theauthoritieshave45daystoreplyforclass1establishments,whichrequireanenvironmentalimpactstudyorariskassessmentgovernedbyaLuxembourgregulation.

Iftheapplicationisincomplete,theapplicanthas180daystocompleteit.Ifnoreplyhasbeenreceivedwithinthisdeadline,theapplica-tionisconsideredtobenullandvoid.However,thisdeadlinemaybeextendedby90daysifthereisadulysubstantiatedrequestbytheapplicant.

4 EnvironmentalDepartmentoftheMinistryoftheEnvironment(Administrationdel’Environnement), 16rueEugèneRuppert,L-2453Luxembourg.Telephone:405656-1.Fax:485078.5 EmploymentandMiningInspectorate,3RuedesPrimeurs,L-2361Strassen.Telephone:478-1.Fax:491447.



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

Thesamedeadlinesfortheauthorities’replyapplyaftertheapplicanthascompletedtheapplication.However,iftheauthoritiesconsiderthattheapplicationisstillincomplete,theapplicantmaybringurgentproceedingsbeforetheAdministrativeCourt6.

3.1.5. What information is provided to the public within the scope of applications for commodo-incommodo permits?

Providingthepublicwithinformationandconsultingthepublicarekeyaspectsofthecommodo-incommodopermitapplicationproce-dure.

Noticesstatingthesubjectofthepermitapplicationforclass1and2establishmentsmustbedisplayedfor15daysinthetownwheretheplannedestablishmentistobelocatedbyapanelconsistingofthemayoranddeputymayors.

Noticesmustbedisplayedsimultaneouslyatthetownhallandattheplannedlocationwheretheymustbeclearlyvisible.Asfromthedateonwhichthesenoticesaredisplayed,theapplicationandtherelatedplansarefiledatthetownhallinthetownwherethefutureestablishmentisplannedtobelocatedandmaybeconsultedbyanyinterestedparties.Duringthisperiod,thepublicmayhaveaccesstotheapplication,includingtheriskassessment,iftherehasbeenone.

NoticeswillbedisplayedintheneighbouringtownscoveredbytheradiusshownontheLandRegistrymap.

Inaddition,intownswithmorethan5,000inhabitants,thepublicwillbeinformedofpermitapplicationsforclass1and2establishmentsbythepublicationofanexcerptfromtheapplicationinatleastfourdailynewspapersprintedandpublishedinLuxembourg.Thesameappliestoclass1establishmentsinothertowns.Applicantspaythecostsofpublication.

Uponexpiryofthis15-daydeadlinefordisplayingthenotice,themayororaspecialcommissionerappointedforthispurposewillcollectanywrittencommentsandcarryoutacommodo-incommodoenquiryinthetownwheretheestablishmentistobelocated,whichwillinvolvehearingallinterestedparties.Areportwillbedrawnuponthisenquiry.

3.1.6. Are the relevant authorities obliged to give a reply within a specific deadline?

Therelevantauthoritymustdrawuptheconditionsunderwhichtheestablishmentmaybedevelopedandoperatedandsendthemtotheapplicantwithinthefollowingdeadlines:

- within60daysfollowingtheexpiryofthedeadlinefordisplayingthenoticeforclass2establishmentsorwithin60daysstartingfromthedateonwhichtheapplicationfileisconsideredtobecompleteforclass3,3Aand3Bestablishments,

- within90daysstartingfromthedateonwhichthenotice issentbythe locality inquestiontotherelevantauthorityforclass1establishments.

3.1.7. What do commodo-incommodo permits contain?

Commodo-incommodopermitslaydownconditionsrelatingtothedevelopmentandoperationoftheestablishmentthatareconsiderednecessarytoprotecttheenvironmentandtoensurethesafetyofemployees.

Theconditionsrelatingtothedevelopmentandoperationoftheestablishmenttakeintoaccountthetechnologiesavailableinordertopreventtheapplicantcompanyfromincurringexcessivecosts.Excessivecostsareassessedbyreferringtoaverage-sizeandeconomicallysoundestablishmentsinthesameorasimilarfield.

Eachauthoritylaysdownconditionsrelatingtothedevelopmentandoperationoftheestablishmentforwhichitisresponsible:

- TheMinisteroftheEnvironmentlaysdownconditionsrelatingtothedevelopmentandoperationoftheestablishmentwithregardtothehumanandnaturalenvironment,suchastheprotectionofair,water,soil,plantsandwildlife,thepreventionofnoiseandvibration,rationalenergyuse,wastepreventionandmanagement.

- TheMinisterofEmploymentlaysdownconditionsrelatingtothedevelopmentandoperationoftheestablishmentwithregardtothesafetyofthepublicandneighbourhoodingeneral,andworkplacehealthandsafetyandergonomics.Whereapplicable,in-houseandexternalemergencyplansmaybedrawnup.

Thesepermitsmaybe limited toaspecificperiodof timeandmay includeadeadlinebywhich theestablishmentmusthavestartedoperations.

Whencommodo-incommodopermitsexpire,theymaybeextendedbytherelevantauthorityattheoperators’requestwithoutitbeingnecessarytorepeattheprocedure.

6 Additionalmoredetailedinformationregardingthecommodo-incommodopermitprocedureisavailableonLuxembourg’senvironmentalwebsiteatthefollowingaddress:

http://www.environnement.public.lu/etablissements_classes/procedures/index.html(onlyinFrench).



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

Permitsmayprovideforacceptanceofworkprocedurestotakeplacebeforetheestablishmentsstartoperatingandforregularinspectionswhichmaybecarriedout,infullorinpartandwherenecessary,bycompaniesororganisationsauthorisedforthispurposebytheMinisteroftheEnvironmentortheMinisterofEmployment.Thereportrelatingtoacceptanceofworkproceduresandinspectionsmustbeprovidedtotheauthoritythatissuedthepermit.

Permitsmaystipulateadistancetobeobservedbetweentherelevantestablishmentand,inparticular,otherestablishments,housingandwatercourses.Intheeventofacontradictionbetweentheprovisionscontainedinthepermitandthoseinthedevelopmentplanofthemunicipality,thestricterofthetwoprovisionswillapply.

Permitsmaystipulatethattheoperatormustappointoneormorepersonstoberesponsibleforsafetyandenvironmentalmatters.Permitsmayalsoprovidethatthecompanieswhich,dependingonthetypeofactivity,representariskmusttakeoutcivilliabilityinsuranceandprovideaguaranteefortherestorationofthesiteintheeventofanincidentoraccidentlinkedtooperationortheterminationofactivi-ties.

Theauthoritythatissuedthepermitmustbenotifiedoftheterminationofactivities.Itwillthenlaydownconditionsrelatingtodecontami-natingthesite,demolishingthebuildings,improvingthesub-soilandrestoringthesite.

3.2. Waste management

Wastemanagement,includingtheappropriatewasteprevention,reclamationanddisposalprocedures,hasbecomearealchallengeforsociety.Overthepast20years,afundamentalchangeintheperceptionofwastehasoccurredandwastepreventioninitiativeshavebeenintroduced.Selectivewastecollectionandrecyclingprojectsandstructureshavebeenimplemented.Disposalinfrastructureshavebeenbroughtuptotechnicalstandardsguaranteeingthebestprotectionoftheenvironment.

Atpresent,Luxembourgranksamongthecountrieswiththehighestrateofwasterecycling inEurope.Luxembourgisalsocreatinganetworkoflandfillsspecificallyintendedforinertwastebymeansofanindustry-focuseddevelopmentplan.

3.2.1. What rules apply to electrical and electronic waste?

Electronicwasteiswastefromappliancesthatuseelectroniccurrentsorelectromagneticfields.Theseincludemainlydomesticelectricalappliances(refrigerators,dryers,vacuumcleaners,etc.),computerequipment(computers,printers,etc.)andotherelectricaltoys,toolsandinstruments.

InaccordancewithEuropeanrequirements7,Luxembourglaw8hasimposedobligationsoncompaniesthatmanufactureandimportelectri-calandelectronicequipmentrelatingtotheprocessingandrecyclingofwastefromtheappliancestheysellinLuxembourg.

Manufacturersandimportersofelectricalandelectronicequipmentmust:

- implementsystemstoprocess,reclaimandrecyclewasteelectricalandelectronicequipment,

- financethecollection,processing,reclamationanddisposalofsuchwaste,

- regularlypassoninformationonthequantityofappliancesmadeavailableforsaleonthemarketandthewasteproducedbythesereused,reclaimedandrecycledappliancestotheEnvironmentalAuthority,

- fulfilobligationstoprovideinformationtoelectricalandelectronicequipmentusers.

Inordertofulfiltheseobligations,allmanufacturersand/orimportersmayeitherdrawuptheirownwastemanagementplansorappointabodyapprovedbytheMinistryoftheEnvironmenttofulfiltheseobligations.

Tothisend,allmanufacturersand/orimportersofelectricalorelectronicequipmentinLuxembourgmustbeinapositiontoprovethattheyguaranteethefinancingofthecollectionorprocessingofthiswastenolaterthan13August2005:

- eitherbyregisteringwiththeEnvironmentalAuthority,whichmeansdepositingabankguarantee(oracertificateissuedbyaninsur-anceprovider)andgivingexplanationsonhowthesemanufacturersand/orimportersintendtocollect,recycle,disposeofand/orreclaimwastefromelectricalorelectronicequipment,

- orbecomingamemberofabodythathasbeenapprovedbytheMinistryoftheEnvironment.

InLuxembourg,Ecotrel9istheonlyapprovedbodythatcanfulfiltheobligationsimposedonmanufacturersandimportersofelectricalandelectronicequipment.Ecotrelisanon-profitassociationwhoseroleistomanageandsupportcollection,recycling,processing,reclamationanddisposalofelectricalorelectronicequipmentwaste.

7 Directive2002/96/ECoftheEuropeanParliamentandtheCouncilof27January2003onwasteelectricalandelectronicequipment(WEEE),OJEU no.L37/24of13February2003).8 LuxembourgRegulationof18January2005onwasteelectricalandelectronicequipmentandtherestrictionsonuseofsomeoftheirhazardouscom-

ponents.9 EcotrelA.S.B.L.:Offices:7RueAlcidedeGasperi,L-1615Luxembourg-Kirchberg.Postaladdress:BP482L-2014Luxembourg.

Telephone+35226098–731.website:www.ecotrel.org



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

ThefollowingmaybecomemembersofEcotrel:

- allmanufacturersandimportersofelectricalandelectronicequipmentestablishedinLuxembourg,

- allforeignmanufacturersorsupplierswhichdonothaveanestablishmentinLuxembourgbutwhicharedirectlyresponsiblefortheobligationsoftheircustomersbasedinLuxembourg,

- professionalswhosellelectricalandelectronicequipmentremotelytocustomersbasedinLuxembourg(mail-ordersales,e-commerce,etc.).

The only condition imposed on companies based in Luxembourg is membership of the Luxembourg Confederation of Commerce(ConfédérationLuxembourgeoiseduCommerce)10(formembersoftheChamberofCommerce),ortheFederationofSkilledCraftTrades-men(FédérationdesArtisans)11(formembersoftheChamberofTradeandHandicraft(ChambredesMétiers).

3.2.2. What rules apply to packaging waste?

Luxembourghasspecificlawsonrecyclingandreclaimingpackaging12.

Packagingwastecomesfrompackagingusedtocontainorprotectgoodsrangingfromrawmaterialstofinishedgoods.Itconsequentlyincludespackagingindirectcontactwiththegoodssoldandpackagingusedforgroupingandtransport.Itisnecessarytodistinguishhouseholdpackagingfromnon-householdpackaging.Householdpackagingispackagingofproductsthataremainlyusedinthenormalactivityofhouseholds.Forexample,grocerybags,shoeboxes,perfumebottles,medicinepackaging, televisionor furniturepackaging,etc.Non-householdpackagingispackagingforproductsnormallyusedbyprofessionalssuchascementbags,25kilogrambagsofflour,woodenpallets,etc.

ThepersonwhopackagesgoodsinLuxembourgforsaleinthiscountryisresponsibleforthepackaging.Thisisthecase,forinstance,forwinegrowerswhobottlewineorgrocerswhopackagethegoodstheysellingrocerybags.WhengoodsarepackagedabroadandimportedtoLuxembourgforsaleinthiscountry,theimporterofthegoodsisresponsibleforthepackaging.Ontheotherhand,LuxembourgtraderswhosellgoodsmanufacturedbyLuxembourgmanufacturersarenotresponsibleforthepackagingofthegoodswhichtheysell.Inthiscase,thesuppliers(themanufacturersofthegoodsinquestion)areresponsibleforthepackaging.

Thepersonsresponsibleforpackagingmustrecycleatleast45%andreclaim55%ofthetotalweightofthepackagingorpackagingwasterespectivelyfromthegoodssoldinLuxembourg,withaminimumof15%perpackagingmaterial.Atthesametime,thepersonsresponsibleforpackagingareobligedtoinformtheircustomersofthesystemsimplementedtorecyclepackaginggeneratedbythesaleoftheirproducts.

Inordertoreachtheseobjectivesintermsofrecyclingandreclaimingpackagingwaste,systemsmustbesetupinorderto:

- reclaimand/orcollectusedpackagingand/orpackagingwastefromconsumers,fromanyotherendusersorfromwasteflowswithaviewtodirectingittothemostappropriatewastemanagementsolutions,

- reuseorreclaim,includingrecycling,packagingand/orpackagingwastecollected.

Inordertofulfiltheserequirements,allpersonsresponsibleforpackagingmaypersonallysatisfytheseobligationsorappointanapprovedbodytoperformthem.

InLuxembourg,Valorlux13istheonlyapprovedbodythatcanfulfiltherequirementsimposedonpersonsresponsibleforpackaging.Va-lorluxisanon-profitassociationwhichreceivedministerialapprovalinApril2000.Initsroleasanapprovedbody,Valorluxhasadoptedaglobalapproachtotheproblemofpackagingwasteonthebasisofsolidarity.Householdpackagingisrecycledandcountedbytypeofmaterialinordertoreachtheminimumquotasforallofitsmembers.Inordertocollectthispackaging,Valorluxusescollectionsystemsimplementedby townsandassociationsof towns, inparticular forglassandpaper/cardboard, andorganisesdoor-to-door collectionsystemsforothermaterials.

Inconcreteterms,thepersonsresponsibleforpackagingwhobecomemembersofValorluxdeclaretheweightofthevariousmaterialsusedforpackagingproductswhichtheysellinLuxembourgandpayafeeperkilogrambasedonthetypeofmaterialdeclared.Thissystemobviouslyenablescompliancewiththeregulationatthelowestcost.

ThefundscollectedbyValorluxareusedinpracticeto:

- financiallysupporttownsandassociationsbymakingafixedcontributionperton,inparticularforcollectedandrecycledglassandpaper/cardboard,

- financedoor-to-doorcollectionofplasticbottlesandcontainers,metalpackaginganddrinkcartonsusingbluebags.

10 LuxembourgConfederationofCommerce(ConfédérationLuxembourgeoiseduCommerce(CLC)).Offices:7RueAlcidedeGasperi,L-1615Luxembourg(BâtimentC,2eétage).POBox:B.P.482-L-2014Luxembourg.Telephone:439444-1.Fax:439450.E-mail:[email protected]

11 FederationofSkilledCraftTradesmen(FédérationdesArtisans).Offices:2CircuitdelaFoireInternationale,Luxembourg-Kirchberg.POBox:BP1604,L-1016Luxembourg.E-mail:[email protected]:424511–1.

12 LuxembourgRegulationof31October1998relatingtotheapplicationofECDirective94/62/EConpackagingandpackagingwaste.13 Valorlux:Telephone:370006-21-www.valorlux.lu



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

3.2.3. What is Luxembourg’s policy on inert waste?

InertwasteisthelargestcategoryofwasteinLuxembourg.Thequantityproducediscloselylinkedtotheeconomicdevelopmentoftheconstructionindustry.In2002,thequantityofinertwasteproducedwasestimatedatabout9.8milliontons,i.e.,22.4tonsperinhabit-ant.

Thetotalrecyclingrateamountsto42.5%butvarieslargelybasedonthetypeofinertwaste.Variousmeasuresarebeingintroducedtoincreasetherecyclingrate.

Evenso,quantitiesremainthatmustbedisposedof.Thepolicycontemplatedinvolvesestablishinganetworkofregionallandfillscoveringtheentirecountry.

Legislatorshavecreatedanobligatoryindustry-focusedmasterplanforlandfillsforinertwaste14.

3.2.4. What are the requirements in Luxembourg as regards pollution of the soil?

Strict requirements are aimedat preventingpolluting substances from contaminating the soil or sub-soil. For example, containers ofhazardoussubstancesmustbeplacedinwatertightretentiontanks.Similarly, landfillsmusthaveawatertightbasesystemtopreventleachatesfrompenetratingintothesoil.

Insomecases,enquiriesarenecessarytocheckwhetheragivensiteshowssignsofcontaminationand,ifso,thepotentialdangersformanandtheenvironment.Severalexamplesofthesecasesare:

- achangeoftheuseoflandonwhichactivitiesthatmaycontaminatethesoilwerecarriedout,

- adeclarationoftheterminationofactivitiesinaccordancewithlegislationonclassifiedestablishmentsbyacompanywhoseactivitiesmayhavecausedcontamination,

- avisibleimpactonprotectedelements,e.g.drinkingwater,

- anaccidentduringwhichcontaminatedsubstancesweredischarged.

Basedonthetypeandscopeofthecontaminationandtheimpactonmanandtheenvironment,measuresmaybeimposed,forexam-ple:

- theimplementationofacontaminationmonitoringsystem,

- securingacontaminatedsite,

- processingpollutedwatercomingfromcontaminatedsoil,

- on-sitedecontamination,

- excavationofcontaminatedsoilandpollutionabatementordischargeinlandfills.

TheActof17June1994onwastepreventionandmanagement,asamended,requiresadetailedsurveyofformerlandfillsandcontami-natedsitestobedrawnupforthepurposeofcreatingaplanninginstrument.Thisdetailedsurveyiscurrentlybeingdrawnup.

3.2.5. How can a permit be obtained to collect, carry, dispose of and reclaim waste on behalf of a third party?

Companieswhichcollect,carry,disposeofandreclaimwasteonbehalfoftheircustomersorwhichimportorexportwastemustobtainaspecialpermitissuedbytheMinisteroftheEnvironment15.

Settinguporoperatingafacilityorasiteusedfordisposaloperationsoroperationsleadingtoapossibilityforreclamation,andanysub-stantialchangesmadethereto,alsorequireapermitissuedbytheMinisteroftheEnvironment.

Wastetransfersaresubjecttoregulatoryprovisionsaimedatensuringtransparencyofwasteflowsandappropriatemonitoring.

Article10oftheActof17June1994relatingtowastepreventionandmanagement,asamended,requiresallestablishmentsorcompa-niesthatofferwastetransportationservicesinaprofessionalorcommercialcapacitytofirstobtainapermitissuedbytheMinisteroftheEnvironment.Thesameappliestocompaniesandestablishments,whichmonitorthedisposalorreclamationofwasteonbehalfofthirdparties(wholesalers,brokers,etc.).

Apermitisonlygrantediftheactivityplannedprovidesguaranteesofasufficientlevelofprotectionofthehealthofmanandoftheenvironment.Itmaycontainconditionsrelatinginparticulartotechnicalequipmentusedbytheapplicantortheoperator.

14 LuxembourgRegulationof9January2006introducingtherequirementforanindustry-focuseddevelopmentplanfor“landfillsforinertwaste”.15 Actof17June1994onwastepreventionandmanagement.



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

TherelatedapplicationsshouldbesubmittedtotheEnvironmentalAuthorityonaspecialform.

Inordertobeabletotrackwastefromtheplaceofmanufacturetotheplaceofdisposalorreclamation,monitoringandsupervisoryprocedureshavebeenintroducedbyEuropeanandLuxembourglaw.

CompaniessubjecttoperiodicinspectionsbyofficialsfromtheEnvironmentalandCivilProtectionAuthoritymustkeeparegisterspecifyingthequantity,type,origin,andwhereapplicable,frequencyofcollection,meansoftransportandmethodsofprocessingwaste.

Luxembourgappliestheprinciplethatpolluterspayforwaste.Therefore,wastedisposalcostsmustbepaidby:

- theholderofthewastewhotransferswastetoanauthorisedcollectororcompanyresponsibleforwastedisposal,

and/or

- theformerholdersormanufactureroftheproductsthatproducedthewaste.

Processingcostsforalltypesofwasteincludeallcostsincurredbytheimplementationandmanagementofthedisposalandreclamationinfrastructures.

Notificationproceduresvarydependingonthetypeofwaste.TheOECD’sgreen,orangeandredwastelistsapply.

Wasteonthegreenlistandintendedforreclamationmustbeaccompaniedbyaformcontainingthefollowinginformation:nameandad-dressoftheholder,standardcommercialdescriptionofthewaste,volumeofwaste,nameandaddressoftherecipient,operationsleadingtoapossibilityforreclamation,andtheplannedshippingdate.

Aprocedureforgivingpriornoticemustbecarriedoutforwasteonthegreenlistintendedforadisposaloperationandalsoforwasteontheorangeandredlistsornotonthelists,intendedforreclamationordisposal.

3.3. Water management

Thepreservationofwatercoursesandthemanagementofwastewaterisanimportantenvironmentalissue.Companiesaremainlyrequiredtoobtaintwotypesofpermits:apermitfordischargingwastewaterandapermitforconstructingbuildingsonornearwatercourses.

3.3.1. Discharging waste water

Inaddition,waterabstraction,abstractionofsolidorgaseoussubstances,dischargingwastewateranddischargingsolid,gaseousorliquidsubstancesinsurfaceorundergroundwateraresubjecttoauthorisationbytheMinisteroftheEnvironment16.

3.3.2. Watercourse permits

Watercoursepermits17arerequiredfortheconstructionofanybuildingonornearawatercoursewherethisbuildingnarrowsoraltersthewatercourse.

Applicationsforwatercoursepermits for thesebuildingsshouldbesenttotheWaterManagementDepartmentat theMinistryof theInterior18.

3.4. The protection of nature

Thelawontheprotectionofnature19providesforseveralpermitswhichmustbetakenintoaccountwhenconstructingormodifyinganestablishment.Ingeneral,thesepermitsrelatetothegreenareainthelocaldevelopmentplanortowatercourses.

Noconstructionisauthorisedinthegreenareaexceptbuildingsusedforfarming,gardening,marketgardening,forestryoperations,winegrowing,fishfarming,beekeeping,huntingorforastate-approvedpurpose.Permitsarestillrequiredforthesebuildings.

16 Actof29July1993onwaterprotectionandmanagement.17 Actof16May1929onflushing,servicingandimprovingwatercourses,asamended.18 TheWaterManagementDepartmentwassetuppursuanttotheActofMay28,2004relatingtothecreationoftheWaterManagementAuthorities.

Contact:Ministèredel’Intérieur,ServicedelaGestiond’Eau(WaterManagementDepartmentattheMinistryoftheInterior),51-53RuedeMerl,L-2146Luxembourg.Telephone:260286-1-Fax:260286-63–E-mail:[email protected]

19 Actof19January2004ontheprotectionofnatureandnaturalresources;amendingtheActof12June1937onthedevelopmentoftownsandotherlargebuilt-upareas,asamended;supplementingtheActof31May1999onthecreationofanenvironmentalprotectionfund,asamended.



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

Similarly,apermitisrequiredforanybuildingconstructedwithinlessthan30metresof:

- woodsandforestscoveringatleastonehectare,

- watercourseswhenconnectionstolocalconduitsarenotpossibleordonotexist,

- protectedareasinaccordancewiththeActontheprotectionofnatureandnaturalresources.

3.5. Implementing the Kyoto Protocol

Giventhepresentworryingchangesinclimateandfacedwiththesignificanceofassumptionsaboutglobalwarming,theinternationalcommunityhasdecidedtoadoptaprecautionaryapproachtoairpollution.Themostwell-knowninternationaldocumentsonthismatteraretheUnitedNationsFrameworkConventiononClimateChangesignedinRiodeJaneiroatthe“EarthSummit”on13June1992andtheKyotoProtocolof11December1997.

UndertheKyotoProtocol, theobjective is toreducegreenhousegasemissionsby5.2%between2008and2012comparedto1990emissionlevels.

TheEuropeanCommunityhasagreedtomakeaspecialefforttoreduceoverallgreenhousegasemissionsby8%withinthescopeoftheKyotoProtocol.ThisobjectiveagreedonatEuropeanlevelissharedbyEUMemberStateswhichmustallcontributetoreducinggreen-housegasemissionsinEurope.

Luxembourghaspledgedtoreduceitsemissionsby28%comparedwith1990.ThisisthelargestpercentagereductionagreedtobyacountryintheEuropeanUnion.ThescaleofthisundertakingisexplainedbyLuxembourg’sparticularsituationinrelationtocarbondioxideemissions.Luxembourgindustryhasbeenmarkedprimarilybyachangefromtraditionalmethodstoelectricalmethodsintheironandsteelindustry.ThischangehasresultedinasignificantdropingreenhousegasemissionsintheindustrialsectorandhasencouragedthegovernmenttoadoptambitiousobjectiveswithregardtoreducinggreenhousegasemissionswithinthescopeoftheimplementationoftheKyotoProtocol.TheActof23December2004implementedLuxembourg’sundertakingswithinthescopeoftheimplementationoftheKyotoProtocol.

Theobjectiveofreducinggreenhousegasemissionsby28%isambitiousbutdoesnotreducethedevelopmentcapacitiesofcompaniesbasedinLuxembourgoveralong-periodoftimeorcompanieswishingtosetupbusinessinthiscountry.

Therefore,theallocationplanforgreenhousegasquotasprovidesthat10%ofgreenhousegasemissionquotasarereservedforcompa-nieswishingtosetupbusinessinLuxembourganddevelopindustrialactivitiesinthecountry.AspecialfundhasalsobeencreatedtousetheflexibilitymechanismsprovidedforbytheKyotoProtocol.

TheActof23December2004wasdesignedentirelytoofferLuxembourgcompaniesasmuchflexibilityaspossibleandtoencouragesustainableeconomicdevelopment.

3.5.1. Which companies are affected by the reduction of greenhouse gas emissions?

Asfrom1January2005,companiesthatemitgreenhousegasesarerequiredtoobtainaministerialpermit.Thepermitrelatestocertaintypesgasemissionswithinthescopeofspecificactivities.

Thispermitrelatestothefollowinggasemissions:

- Carbondioxide(CO2)

- Methane(CH4)

- Nitrousoxide(N2O)

- Hydrofluorocarbons(HFC)

- Perflorohydrocarbons(PFC)

- Sulphurhexafluoride(SF6)



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

Greenhousegasemissionsresultingfromthefollowingactivitiesrequirepermits:

- Activitiesintheenergysector20,

- Productionandprocessingofferrousmetals21,

- Mineralindustry22,

- Certainotheractivities23.

3.5.2. How are applications for permits processed?

TheMinisteroftheEnvironmentissuesagreenhousegasemissionpermitforemissionsfromallorpartofaninstallationifitconsidersthattheoperatorcanmonitorandreporttheemissions.

AllpermitapplicationsshouldbesenttotheMinisteroftheEnvironmentandshouldcontain:

- adescriptionoftheinstallation,theactivitiesperformedthereandthetechnologiesused,

- adescriptionoftherawandancillarymaterialswhichmayleadtogreenhousegasemissions,

- adescriptionofthesourceofgreenhousegasemissions,

- adescriptionofthemeasuresplannedtomonitorandreportgreenhousegasemissions.

Greenhousegasemissionpermitsarereviewedregularlyandmaybeamendedorsupplementedwherenecessary.

Inaddition,operatorsmustinformtheMinisteroftheEnvironmentofanychangestothetype,operationorextensionoftheinstallationthatmayrequirethegreenhousegasemissionpermittoberevised.

3.5.3. How are greenhouse gas emission quotas allocated?

TheEnvironmentalAuthorityandrelevanteconomicsectorshavejointlypreparedadraftnationalplanspecifyingthetotalquantityofquotasthattheyintendtograntfortherelevantperiodandhowtheyproposeallocatingthequotas.

During the three-yearperiodstartingon1 January2005,quotasareallocated freeofcharge.During thefive-yearperiodstartingon1January2008,atleast90%ofthequotaswillbegrantedfreeofcharge.Theremaining10%willbereservedtoenablenewcompaniestosetupbusinessinLuxembourgandtodeveloptheiractivityinthiscountryonalong-termbasis.Ingeneral,whentheMinisteroftheEnvironmentmakesdecisionsregardingtheallocationofquotas, it takes intoaccounttheneedtograntquotastonewcompanies inLuxembourg.

Thequotasmaybetransferredbetween:

- personsintheEuropeanCommunity,

- personsintheEuropeanCommunityandpersonsinnon-ECcountrieswherethesequotasaremutuallyrecognisedinaccordancewiththeagreementsbetweentheEuropeanCommunityandthesecountries,subjecttonorestrictionsotherthanthosesetforthintherelevantActoradoptedinapplicationthereof.

TheEnvironmentalAuthoritymustbeimmediatelyinformedofanytransferofquotasinvolvinganoperatorbasedinLuxembourg.

3.5.4. What is the role of the Fund to Finance Kyoto Flexibility Mechanisms?

LuxembourghascreatedaspecialfundcalledtheFundtoFinanceKyotoFlexibilityMechanisms.TheFundprovidesfinancingfortheflex-ibilitymechanismsprovidedforbytheKyotoProtocol.

20 Combustioninstallationswithcombustioncalorificpowergreaterthan20MWemittingcarbondioxide(exceptforhazardousormunicipalwaste),petroleumrefineriesandcokeworksemittingcarbondioxide.

21 Installationsforfinishingroastingorsinteringmetallicminerals,includingsulphurmineralsemittingcarbondioxideincludingequipmentforcontinuouscastingwithacapacityofmorethan2.5tonsperhour.

22 Installationsformanufacturingclinkercementinrotatingfurnacesemittingcarbondioxidewithaproductioncapacityexceeding500tonsorlimeinrotatingfurnaceswithaproductioncapacityexceeding50tonsperdayorinothertypesoffurnaceswithaproductioncapacityexceeding50tonsperday,installationsforglassmaking,includinginstallationsintendedforfibreglassproductionwithafusioncapacityexceeding20tonsperdayandemit-tingcarbondioxide,installationsformanufacturingceramicproductsbyfiring,inparticulartiles,bricks,refractorystones,tiling,sandstoneorporcelainandproducingcarbondioxidewithproductioncapacityexceeding75tonsperdayand/orafurnacecapacityexceeding4m3andachargingdensityexceeding300kg/m3.

23 Industrialinstallationsformanufacturingpaperpulpfromwoodorotherfibrousmaterialsforpaperandcardboardwhoseproductioncapacityexceeds20tonsperday.



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

TheFundplaysaroleinfollowingareas:

- exchangesofemissionrights,

- jointimplementation(JI)ofprojectscarriedoutinOECDmembercountriesanddevelopingcountrieswiththeaimofobtainingemis-sionreductionunits,

- cleandevelopmentmechanism(CDM)projectsindevelopingcountrieswiththeaimofobtainingcertifiedemissionreductionunits,

- participationinmultilateralfundsmanagedbyinternationalorregionalorganisations,whosemainroleistosupportthesaidactivitiesfinancially,

- projectsandprogrammesaimedatreducinggreenhousegasemissionsatnationallevel.

TheFundtoFinanceKyotoFlexibilityMechanismsactseitherto:

- purchaseorsellemissioncredits,or

- financeorco-financeprogrammesorprojects.

ActionsbytheFundtoFinanceKyotoFlexibilityMechanismscantakeseveralforms:

- investments,

- studiesofinvestmentarrangements,

- feasibilityandprojecteligibilitystudies,or

- studiesofpotentialemissionreductions.

TheFundtoFinanceforKyotoFlexibilityMechanismsisfundedby:

- annualbudgetedfunding,

- incomefromsellingemissioncredits,

- donations.

3.5.5. How are emissions of greenhouse gases monitored?

TheEnvironmentalAuthoritymonitorsemissionsbasedonguidelinesdrawnupinaccordancewitharrangementsdecidedatEUlevel.TheseguidelinesarebasedontheprinciplesrelatingtomonitoringandreportinglaiddownbyaLuxembourgregulation.

Eachoperatorofaninstallationmustreporttheinstallation’semissionsduringthecalendaryearaftertheendoftherelevantyeartotheEnvironmentalAuthorityinaccordancewiththeguidelines.

TheEnvironmentalAuthoritydrawsupandkeepsaregisterinordertohaveaccuraterecordsofquotasissued,held,transferredorcan-celled.

3.5.6. What are the penalties for non-compliance with greenhouse gas emission laws?

TheMinisteroftheEnvironmentmaywithdrawgreenhousegasemissionpermitsfromoperatorsifthepermitswereissuedonthebasisofinformationknowntobeinaccurateoriftheyfailtocomplywithregulatoryprovisionsortomeetspecificconditionsstipulatedinsaidpermits.

Followingthewithdrawalofapermit,theMinisteroftheEnvironmentmaysuspendallorpartofaninstallation’soperationsonatempo-rarybasis,aftergivingformalnotice,ororderallorpartoftheinstallationtobeclosedandsealed.

Permitsmaybewithdrawninthefollowingcircumstances:

- unauthorisedgreenhousegasemissionsfromaninstallation,

- failuretoinformtheMinisteroftheEnvironmentofchangesinthetype,operationorextensionoftheinstallationthatmayrequirethegreenhousegasemissionpermittoberevised,

- failuretoreturnanumberofquotascontrolledinaccordancewithArticle16correspondingtothetotalemissionsforaninstallationduringthepreviouscalendaryear,notlaterthan30Aprilofeachyear,

- failuretoreportannuallytotheEnvironmentalAuthorityontheemissionsfromaninstallationforacalendaryear,

- transferofquotasforwhichadeclarationhasnotbeenacknowledgedasbeingsatisfactory.

Inaddition,anyoperatorwhofailstoreturnasufficientnumberofquotastocoveritsemissionsforthepreviousyearonApril30ofeachyearatthelatestisobligedtopayafineforexcessemissions.



Runn

ing

abu

sines

san

dpr

otec

ting

the

envi

ronm

ent

3.6. Maintaining food safety: the HACCP system

HACCPstandsforHazardAnalysisandCriticalControlPoint.ItwasappliedforthefirsttimeinthechemicalindustryintheUnitedStatesinthe1960sandsubsequentlyinthefoodindustry.Itsinitialobjectivewastoproducehealthyfood,freefromanycontamination,forNASA.

TheHACCPsystemisnowaninternationallyrecognisedmethodofhealthcontrolsinordertoensurethatfoodishealthythroughoutits“lifecycle”,i.e.,fromproductiontoconsumption.

AtEuropeanlevel,CouncilDirective93/43/ECof14June1993onthehygieneoffoodstuffspresentstheHACCPsystemasarequirementandanobligationforthefoodindustryinordertoensurethefreemovementoffoodstuffsandahighlevelofsafety.ThisisessentialinordertogainthetrustofEuropeanconsumers.ThisDirectiveof1993wasimplementedinLuxembourgbytheLuxembourgRegulationof27July1997relatingtothehygieneoffoodstuffs24.

InaccordancewithArticle3.2oftheLuxembourgRegulation:

“Companiesinthefoodindustrymustidentifyanyaspectoftheiractivitiesthatarecriticalforfoodsafetyandshallensurethatappropriatesafetyproceduresaredrawnup,implemented,observedandupdatedbasedonthefollowingprincipleswhichwereusedtodeveloptheHACCPsystem(HazardAnalysisandCriticalControlPoint):

- Analysethepotentialfoodrisksofanoperationcarriedoutwithinthescopeoftheactivitiesperformedbyacompanyinthefoodindustry.

- Highlightthelevelsandpointsoftheoperationwherefoodrisksmayarise.

- Establishwhichpointsamongthosewhichhavebeenhighlightedarecriticalforfoodsafety(criticalpoints).

- Defineandimplementefficientcontrolandmonitoringproceduresinrelationtothesecriticalpointsand

- Reviewtheanalysisoffoodrisks,criticalcontrolpointsandcontrolandmonitoringproceduresonaregularbasisandforeachchangeofoperationcarriedoutbyacompanyinthefoodindustry”.

24 ApplicableHACCPlegislation: -CouncilDirective93/43/EC-Source: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993L0043:EN:HTML -LuxembourgRegulationof27July1997. (http://www.etat.lu/legilux/DOCUMENTS_PDF/MEMORIAL/memorial/a/1997/a0550808.pdf)


ChaptER 4COMMERCIAL COMPANIES

4.1. What rules apply to all forms of companies when they are set up?

4.2. Forms of commercial companies

4.3. Other form of groups and partnerships

4.4. What are the main costs involved in setting up a company?


COMMERCIAL COMPANIESChaptER 4

Com

mer

cialc

ompa

nies

CompaniesinLuxembourgaregovernedbytheActof10August1915oncommercialcompanies,assubsequentlyamended(hereinafterthe“ActonCommercialCompanies”,or“LSC”)andonanancillarybasisbyArticles1832to1873oftheLuxembourgCivilCode(CodeCivil).

LuxembourglawinthisareaisbasedmainlyontheBelgianActof1913onthesamesubject.Forallquestionsofinterpretation,thereaderisadvisedtorefertoBelgianadministrativecommentariesandcaselaw1.

Operate as a sole trader or set up a company?Whenanindividualwhowishestocarryoutabusinessactivityhasdevelopedabusinessplanandfinallydecidedonit,heorshewillhavetomakeachoicewhichwilldeterminehowtheactivitywillbecarriedoutand,whereapplicable,itssuccess:shouldheorsheoperateasaself-employedsoletrader(commerçantennompropre)orsetupacompany2?Althoughofficialfiguresshowthatthereisconsiderableenthusiasmforcompanystructures,theyarenotrequiredforallbusinesses.(InJuly2006,theTradeandCompaniesRegisterhadmorethan86,000companiesonitslistsasagainstonlyapproximately7,000soletraders.)Inmakingthischoice,apersonwishingtosetupabusinessshouldbearthefollowingfactorsinmind.

• Limiting the promoter’s liabilityWhilesoletraders’liabilityfortheirbusiness’sdebtsincludesalltheirassets(professionalandprivate),intheory,theliabilityofacompany’sshareholdersislimitedtotheircontributionstoitscapital.However,inpractice,thisadvantageoftheformofacompanyoverbeingasoletraderissomewhattheoretical.Manycompanycreditors(inparticularbanksthathavegrantedloanstothecom-pany)requirecompanyshareholderstogiveapersonalguaranteeforthecompany’sdebts.Ifthecompanydefaults,thecompany’screditorscanthereforetakeactionagainsttheshareholders’personalassets.

Forvariousreasons,anindividualmaynotwishtobepubliclyknownasthepromoterofthebusiness.Clearly,operatingasasoletraderwouldnotbesuitableinthiscase:onthecontrary,theindividualwouldhavetobepubliclyknown.Thisisnotthecaseforcertainformsofcompanies,inparticularpubliccompanies(sociétésanonymes)and,toalesserextent,limitedliabilitycompanies(sociétésàresponsabilitélimitée).

• Structure and operation of a businessOnesignificantadvantageofacompanyisthatitprovidesalegalframeworkinsidewhichtheskillsandpowersofeachplayerinvolvedmaybedefined.ThankstotheconsiderableleewayallowedunderLuxembourglawgoverningthecontentsofabusinesscharter,thereisconsiderableroomformanoeuvreasregardstheorganisationofpowers.Acompanystructureisthusalmostuna-voidablewhereseveralindividualswishtosetupabusiness.Acompanystructureallowsthemtoappointoneorseveralmanagersandtodefinetheirpowers.Certainotherindividuals,whodonotwishtobesoactivewithinthecompany,aresimplyshareholderswhodohoweverretainarightofsupervisionoverthecompanybymeansofGeneralMeetingsoftheshareholdersinparticular.Incontrast,itisextremelydifficulttohaveasimilarleveloforganisationalstructuringifseveralindividualsrunthebusinesstogetherassoletraders.

• Transferring ownership of a businessAcompanystructuregenerallymakesiteasiertotransferownershipofabusinessbetweengenerationsortooneorseveralthirdparties.Insteadoftransferringownershipoftheentirebusiness,itiseasiertotransferequityinterestsinthecompany.Thisproceduremakesitpossibletograduallytransferequityinterestsoveraperiodoftime,inparticularinthecontextofthetransferofownershipofabusinessbyitsfoundertohisorherchildren.

• Operating costsCreatingacompanyinvolvessignificantcosts.Acompany’scertificateofincorporationusuallytakestheformofanotariseddeedentailingthepaymentoffees,registrationdutiesanddisclosurecosts.Italsooftentriggersthelevyingofacapitalduty(droitd’apport)of1%ofthetotalvalueoftheassetscontributedtothecompany.Incontrast,asoletraderdoesnotincurcostsofthiskind.

Inaddition,certainformshavetoberespectedasregardsacompany’soperation.NoticeshavetobesentoutforGeneralMeetingsoftheshareholdersormeetingsofthemanagementbody,minutesofmeetingsandregistersofshareholdershavetobekept,filingshavetobemadewiththeTradeandCompaniesRegister,etc.Theseformalitiesrequirerigourandtime.Managingtheactivitiesofasoletraderdoesnotincludetheseduties,suchthatthetraderscandevotethemselvesfullytotheirbusinessactivities.

2

1 Belgiancompanylawhaschangedsignificantlyinrecentyears,inparticularwiththeActsof7July1999and2August2002.ForinformationaboutLuxembourglaw,therefore,thereaderisadvisedtoconsultworksandcaselawdisclosedbeforethesechanges.

2 N.B.PleasenoteafundamentaldifferencebetweenLuxembourgcompanylaw(whichisacivillawcountry)andtheanglo-saxonconceptofcompany:underLuxembourgstatute,theword“company”refersbothtopartnershipsandcorporations,i.e.separatelegalentitiesfromitsmemberscreatedinordertomakeaprofit.Besides,Luxembourgcompaniescomeinprincipleintoexistenceonapurecontractualbasis,i.e.theyare“statutory”andnot“charter”companies.



Com

mer

cialc

ompa

nies

• Keeping accountsWhileLuxembourgpubliccompaniesandlimitedliabilitycompaniesarerequiredtokeeptheiraccountsinaccordancewithaspecificchartofaccounts(plancomptable)3,traderswhoareindividuals,partnerships(sociétésennomcollectif)andlimitedpartnerships(sociétésencommanditesimple)withanannualturnoveroflessthanEUR100,000(excludingVAT)arenotrequiredtousesaidchartofaccounts.Inotherwords,theyareauthorisedtokeepaccountsinalesssophisticatedform,whichthereforegeneratefewercosts.

• Social security

SincearecentreformoftheSocialInsuranceCode(Codedesassurancessociales),thedifferencesbetweensoletradersandindividu-alshavingsetupacompanyasregardssocialsecuritycoverandpaymentshavebeenreduced.Thus,thefollowingarecoveredbysocialsecurityasself-employedworkers(indépendants):traders,partnersorshareholdersofpartnerships,limitedpartnershipsandlimitedliabilitycompanieswhoholdmorethan25%oftheequityinterestsifthebusinesspermitwasgrantedtothemasindividualsanddirectors,ordinarypartnersorauthorisedrepresentativesofpubliccompaniesorcooperativecompanies(sociétéscoopératives)whohavebeengrantedresponsibilityfordailymanagementandonwhomthebusinesspermitisbased.

Itshouldbenotedthatindividualscoveredbysocialsecurityasself-employedworkersmayreceiveunemploymentbenefitsundercertainconditions.

• Tax

Whilesoletradersaretaxedonprofitsfromtheircommercialoperationsinanyevent,thisisnotthecaseforshareholdersofcom-paniesthatarenottaxtransparent4whoarefullytaxableontheirownaccount.Ifprofitsgeneratedbythecompanyaretaxedforthefirsttimeatthelevelofthecompany,theywillonlybetaxedasecondtimeattheleveloftheshareholderswhenprofitshaveeffectivelybeendistributedintheformofdividends.However,thisdoesnotleadtodoubletaxationorthepaymentofmoretaxthanthatleviedonasoletrader.

Apersonwishingtosetupabusinesswillhavetoconsiderallthesefactorsbeforedecidingwhethertosetupbusinessasasoletraderorintheformofacompany.Ifthepersondecidestosetupacompany,achoicewillhavetobemadebetweenthevarioustypesofcompaniesrecognisedunderLuxembourgcompanylaw.UnderLuxembourgcompanylaw,thankstoitsflexibilityandtheconsiderablescopeallowedforthecontentsofacompany’scharter,acorporateframeworkmaybeadaptedtomeetthespecificrequirementsofeachbusiness.

3

4

4.1. What rules apply to all forms of companies when they are set up?

UnderLuxembourglaw,foreignersandinparticularnationalsfromtheEuropeanEconomicAreaaretreatedinthesamewayasLuxem-bourgnationals.Inparticular,Luxembourgpartnersarenotrequiredtoparticipateinabusinesssetupbyforeigners,andcompanymergersandacquisitionsbyforeignersarenotsubjecttoanyspecialadministrativecontrols.

Thefollowingthreeformalitiesarerequiredwhenacompanyissetup:

- Articlesofincorporation5,

- registration,

- disclosure.

4.1.1. What form should the certificate of incorporation take?

Companychartersmustbedrawnupasfollows:forpartnerships,limitedpartnershipsandcooperativecompanies,atthefounders’choice:eitherasanotariseddeedorasaprivatedeed.Forpubliccompanies,Europeanpubliccompanies,partnershipslimitedbysharesandlimitedliabilitycompanies6:anotariseddeedmustbedrawnup.

Anyamendmenttothechartershallbemadeinthesamewayaswasrequiredfortheincorporationofthecompany7.Otherwisetheamendmentwillbenullandvoid.

3 Articles12and13oftheCommercialCode(CodedeCommerce).Theminimumstandardisedchartofaccountshadnotyetbeenagreedonthedateofpublication.

4 Publiccompanies(sociétésanonymes),limitedliabilitycompanies(sociétésàresponsabilitélimitée),andcooperativecompanies(sociétéscoopératives).5 IthastobestressedthatinLuxembourgtheMemorandumofAssociation(Charter)andtheArticlesofAssociation(orby-laws)areconsolidatedina

singledocument,called,“lesstatuts”,hereinafter,the“charter”.6 Article4oftheActonCommercialCompanies.7 Article11oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies

4.1.2. What registration formalities apply to the Articles of incorporation?

TheArticlesofincorporationshouldberegisteredwithin15daysbyanotaryorwithinthreemonthsbythepartieswiththeRegistrationandDomainsAuthority(Administrationdel’EnregistrementetdesDomaines)8.Thisauthoritywilllevythestampduty(droitd’apport)and,whereapplicable,transfertaxes(droitsdemutation).

4.1.3. Useful information about disclosure

4.1.3.1. What should be disclosed?

Thecharterandinformationabouttheappointmentofdirectorsandtheirremovalfromofficemustbedisclosedeitherinfullorinpart:

• infullforpubliccompanies,partnershipslimitedbyshares,cooperativecompaniesandlimitedliabilitycompanies,

• inpartforpartnershipsandlimitedpartnerships.

4.1.3.2. How should the relevant documents be disclosed?

Disclosuretakesplaceintwostages:

- first,thedocumentsarefiledwiththeTradeandCompaniesRegister(RegistredeCommerceetdesSociétés)duringthemonthinwhichthedocumentsarefinallydrawnup.Thisinvolveshandingoveracopyofthedocuments,dulyregisteredwiththeRegistrationandDomainsAuthority (Administrationde l’EnregistrementetdesDomaines),anda formprovidedby theTradeandCompaniesRegister(availableonitswebsite:www.rcsl.lu-onlyinFrench),

- second,disclosureinthe“Mémorial”(Luxembourgofficialgazette),partCentitled:“Listofcompaniesandassociations”withintwomonthsoffilingwiththeTradeandCompaniesRegister.TheTradeandCompaniesRegisterarrangesforthedisclosureoftherelevantdocumentsintheMémorial9.

4.1.3.3. What happens if the documents are not disclosed?

Thedocumentsandexcerptsfromthecertificatesareonlyvalidvis-à-visthirdpartiesfromthedayoftheirdisclosureintheMémorial,unlessthecompanyprovesthatthethirdpartieshadpriorknowledgethereof.Thirdpartiesmaynonethelessrelyoncertificatesorexcerptsthathavenotyetbeendisclosed10.

4.1.3.4. What language shall be used in company documents?

French,GermanorLuxembourgishmaybeusedtodrawupthesedocuments11.Inpractice,thedocumentsmayalsobedrawnupinanotherlanguage(inEnglishforexample),providedthattheyarefollowedbyatranslationintoFrenchorGerman12.

4.1.3.5. In what currency shall share capital be expressed?

Sharecapitalmaybeexpressedinaforeigncurrency,providedthattheamountconvertedintoeuroscorrespondstotheminimumamountrequiredunderLuxembourglaw13.

4.1.3.6. Are administrative checks made on whether companies have been set up properly?

Noadministrativeauthoritycheckswhethercompanieshavebeensetupproperly.Inprinciple,thisdutyisperformedbythenotarywhodrawsupthecertificateofincorporation.

8 SeetheTaxCode(CodeFiscal)Vol.5Title2Registrationduties(droitsd’enregistrement).9 Article9oftheActonCommercialCompanies.10 Article9§4oftheActonCommercialCompanies.11 Actof24February1984onlanguagestobeused,Orderof24PrairialYearXI.12 CertainentitiessuchasAssepsandSepcavs(differentkindsofpensionfunds)areallowedtouseEnglishhowever.13 TheEuropeancompanyisanexceptiontothisrule:itssharecapitalmustbeexpressedineuros(Article4ofECCouncilRegulationNo2157/2000of

8October2001relatingtothestatuteforaEuropeancompany).



Com

mer

cialc

ompa

nies

1 4

What is meant by “domiciliation”?14

Acompanyissaidtobe“domiciled”ifithasanofficeinthepremisesofathirdpartyinordertoperformanactivityinsaidpremises,inthecontextofitscompany’sobjects,andifthisthirdpartyprovidesanyserviceswhatsoeverrelatedtothisactivity.

UndertheActof31May1999onthedomiciliationofcompanies,onlyregisteredmembersofthefollowingregulatedprofessions,establishedinLuxembourg,maybedomiciliatoryagents:creditinstitutionsorotherfinancialsectorandinsurancesectorprofession-als,lawyers,independentauditors(réviseursd’entreprises)andcharteredaccountants(experts-comptables).However,thefollowingmayalsobe companydomiciliatoryagentsandmay thereforebe consideredasfinancial sectorprofessional:naturaland legalpersonswhoorwhichallowoneorseveralcompanies,inwhichthedomiciliatoryagentisnotashareholderhavingasignificantinfluenceonthemanagementofthebusiness,tosetupanofficeintheirpremisestoperformanactivityinthecontextoftheircompany’sobjectsandwhoorwhichprovideanyserviceswhatsoeverrelatedtothisactivity.

Awrittenagreementisrequiredfordomiciliation,calleda“domiciliationagreement”.

FailuretofulfilthisobligationisaseriousbreachoftheActonCommercialCompanies,whichmayleadthecompanytobedissolvedandliquidatedbyjudicialorder.

ApprovaltoactasadomiciliatoryagentforcompaniesissuedbyLuxembourg’sCommissiondeSurveillanceduSecteurFinancier(supervisoryauthorityforthefinancialsector)or“CSSF”issubjecttoprovidingproofofauniversityeducationinlaw,economicsorcompanymanagementandfinancialassetswithavalueofatleastEUR370,000.

4.1.4. Miscellaneous

Theincorporationofacompany,aswellassubsequentcapitalincreasesandthecreationofapermanenttriggeracapitaldutyof1%onthecapitalinvested15.Inprinciplethisrateisreducedto0.5%forfamilycompanies.BranchesofcompaniesdomiciledinanEUMemberStatearenotrequiredtopaythistax.

Anypersonwhohasmadecommitmentsofanykindinthenameofacompanywhichisintheprocessofformation(sociétéenformation)shallbepersonally,jointlyandseverallyliableifthecompanyfailstoratifysaidcommitmentswithintwomonthsfollowingitsincorporationorifthecompanyhasnotbeenformedwithintwoyearsfromthedatethecommitmentwasmade.Wherecommitmentsaretakenoverbythecompany,theyaredeemedtohavebeenenteredintobythecompanyfromthestart16.

4.2. Forms of commercial companies

TheActof10August1915oncommercialcompaniesasamendedprovidesforsixformsofcommercialcompanies,eachwithalegalpersonalityandforminganentityseparatefromthatoftheshareholders.

Thechoiceofoneofthesesixformsdependsbothonfinancialconsiderations(credibilityforexample)andlegalconsiderations(forexam-pletheextentofshareholders’liabilityorthetransferabilityofequityinterests).

Luxembourglawprovidesforthefollowingformsofcommercialcompanies:

- apartnership(sociétéennomcollectif),

- alimitedpartnership(sociétéencommanditesimple),

- apubliccompany(sociétéanonyme),

- apartnershiplimitedbyshares(sociétéencommanditeparactions)17,

- alimitedliabilitycompany(sociétéàresponsabilitélimitée),

- acooperativecompany(sociétécoopérative),

- Europeancompany(sociétéeuropéenne).

Themostwidelyusedformsofcompaniesarethepubliccompanyandthelimitedliabilitycompany.

Thecompany’snamemustbedifferentfromthatofanyotherexistingcompany18.

14 ThisisgovernedbytheActof31May1999onthedomiciliationofcompanies,asamended.1516 Article12bisoftheActonCommercialCompanies.17 Asthistypeofcompanyisalmostneverused,itisnotfurtherdescribedinthisbrochure.18 Forthepubliccompany:Article25oftheActonCommercialCompanies;forthepartnershiplimitedbyshares:Article186oftheActonCommercial

Companies;forallcommercialcompanies:Article2foftheActof23December1974onunfaircompetition,Article14oftheActof30July2002regu-latingcertaincommercialpractices,Article1382oftheCivilCode.



Com

mer

cialc

ompa

nies

4.2.1. A public company (société anonyme or “SA”)

4.2.1.1. Definition of a public company

Apubliccompanyisacompanywhichshallbedescribedbyaparticularcorporatedenomination(dénominationparticulière)orbythedesignationoftheobjectofitsundertakings.Itssharecapitalisdividedintosharesanditsshareholdersareonlyliableuptotheamountoftheircontributionstothecompany19.

Itmustbeformedbymeansofanotariseddeeddisclosedinfull20.

4.2.1.2. What type of structure is the company suitable for?

Inviewofthecomplexityofitsmanagementbodies,thistypeofcompanyisdesignedonlyforbusinessesofacertainsize.

4.2.1.3. How much share capital is required?

TheminimumamountofsharecapitalprovidedforbytheActonCommercialCompaniesisEUR30,986.60.Thesharecapitalmustbesubscribedforinfull,thatis,theremustbeafirmcommitmentbytheshareholderstopaythisamount.Atleastonequarteroftheamountofeachsharemustbepaidupwhenthecompanyisincorporated21.Contributionsofservicesarenotallowed22.

4.2.1.4. What is the minimum or maximum number of shareholders?

Apubliccompanymusthaveatleastoneshareholder23.NoprovisionismadebytheActof10August1915oncommercialcompaniesasamendedforamaximumnumberofshareholders.

4.2.1.5. What are the main features of the company’s shares?

Thesharecapitalofapubliccompanyisdividedintosharesofequalvalue,withorwithoutindicationofthevaluethereof.ThevalueofasharemaynothoweverbelessthanEUR1.2424.Sharesmayberegisteredorbearershares25.However,theymustremainregistereduntiltheyhavebeenpaidupinfull26.

Furthermore,undercertainconditions,thecompanyisauthorisedtoissuefounder’ssecuritiesorinterests27,shareswithoutvotingrights28,redeemableshares29,aswellasseveralclassesofshares30.Thecompanyisalsoauthorisedtomakeapublicshareorbondissue31.

4.2.1.6. Are shares freely transferable?

Inprinciple,thecompany’ssharesarefreelytransferable.Thechartermaylaydownsomerestrictionsinthisrespect.

4.2.1.7. What is the company’s managing body?

Thepromotersofthecompanymaychoosebetweenaone-tierstructure(“structuremoniste”)andtwo-tierstructure(“structuredualiste”):

- one-tierstructure

Thecompanyismanagedbyaboardofdirectors(conseild’administration)withatleastthreememberswhosetermofofficemaynotexceedsixyears.Inapubliccompanywithasoleshareholderasinglepersonmayexercisethepowersoftheboardofdirectors.Theboardofdirectorshasthepowertotakeanyactionnecessaryorusefultorealisethecompany’sobjects,exceptthosereservedbylaworbythecharterforgeneralmeetingsoftheshareholders32.

19 Articles23to25oftheActonCommercialCompanies.20 Articles8and28oftheActonCommercialCompanies.21 Article26oftheActonCommercialCompanies.22 Article26-3oftheActonCommercialCompanies.23 Articles23and26oftheActonCommercialCompanies.Thelawof25thAugust2006relatingtotheEuropeancompanyprovidesforthepossibility

toincorporateapubliccompanywithasoleshareholder.Apubliccompanywhichisinitiallyincorporatedwithseveralshareholdersmayalsobecon-vertedduringitslifetoapubliccompanywithasoleshareholderintheeventallsharesarebeingheldbyoneshareholder.

24 Billno.5562willabolishsuchrequirementofamimimumparvalue.25 Article37oftheActonCommercialCompanies.26 Article43oftheActonCommercialCompanies.27 Article37oftheActonCommercialCompanies.28 Articles44etseq.oftheActonCommercialCompanies.29 Articles49-8etseq.oftheActonCommercialCompanies.30 Article68oftheActonCommercialCompanies.31 Articles79etseq.oftheActonCommercialCompanies.32 Articles51etseq.oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies

Theday-to-daymanagementofthecompanyandthepowertorepresentthecompanywithrespecttheretomaybedelegatedtooneormoredirectors,officers,managersoragentswhomaybutneednotbeshareholders,actingeitherindividuallyorjointly33.

- two-foldedorganisation:

Themanagementboard(“directoire”) is inchargeof themanagementof thecompany34,whereasthesupervisoryboard(“conseildesurveillance”)isresponsibleforthesupervisionofsaidmanagement.Thesupervisoryboardisprohibitedtocarryoutanyactofmanage-ment35.

Themembersofthesupervisoryboardareappointedbythegeneralmeetingofshareholders,whereasthemembersofthemanagementboardareappointedbythesupervisoryboard,unlessthecharterprovidestothecontrary.Thesamegoesfortheirremoval.

Thenumberofmembersofthemanagementboardiseitherdeterminedbythecharter,orbythesupervisoryboard.Themanagementboardmustbecomposedofatleasttwopersons.Inpubliccompanieswithonesingleshareholderbutwithatwo-foldedorganisationandinpubliccompanieswithatwo-foldedsystemwithasharecapitallessthan€500,000onesinglepersonmayexercisethepowersofthemanagementboard.

Thesupervisoryboardiscomposedofatleastthreemembers,unlessinapubliccompanywithonesingleshareholder,inwhichcaseonesinglepersonmayexercisethepowersofthesupervisoryboard.

4.2.1.8. What role is played by General Meetings of the shareholders?

Ageneralmeetingoftheshareholdersmustbeheldatleastoneayear(an“ordinaryGeneralMeetingoftheshareholders”)onadateprovidedforinthecharter36.Thechartercontainsprovisionsgoverningproceedingsandtheformalitiesnecessaryfortheadmissionthereto.Intheabsenceofcharterprovisions,decisionsaretakenatasimplemajorityofvotes.

Anextraordinarygeneralmeetingoftheshareholdersmustbeheldforthefollowingreasonsinparticular:

- toamendthecharter(toincreaseorreducethesharecapital,changethecompany’sobjects,etc.),

- tochangethecompany’snationality.

Extraordinarygeneralmeetingsofshareholderstakeplaceunderconditionsrelatingtoquorumsandmajoritiesthatarestricterthanthoseinwhichordinarygeneralmeetingsareheld.Thepresenceofanotaryisrequired.

Allshareholdersareentitledtoattendgeneralmeetings(whethertheyareordinaryorextraordinary)andtotakepartinvotes,withanumberofvotesequaltothenumberofsharestheyown37.

Incasethecompanyhasonlyoneshareholder,thelatterexercisesthepowersofthegeneralmeeting.

4.2.1.9. Who supervises a public company?

Thesupervisionofthecompanyisentrustedtooneorseveralstatutoryauditors(commissariesauxcomptes),whomaybutneednotbeshareholders38.

Apubliccompanymusthaveitsaccountsauditedbyoneorseveralcompanyauditors(réviseursd’entreprises)whoareindependentofthecompanywheresaidcompanyexceedsthelimitsoftwoofthefollowingthreecriteria:

- balancesheettotal:EUR3.125million,

- netturnover:EUR6.25million,

- averagenumberoffull-timeemployeesduringthefinancialyear:50.39

Forthesupervisionofthemanagementboardbythesupervisoryboard:pleaseseeabove.

4.2.1.10. What taxes must the company pay?

Thecompanyasataxableentityisliableforcorporationtax,wealthtaxandcommunaltradetax.

33 Article60oftheActonCommercialCompanies.34 Article60bis-2oftheActonCommercialCompanies.35 Article60bis-11oftheActonCommercialCompanies.36 Article70oftheActonCommercialCompanies.37 Article67oftheActonCommercialCompanies.However,exceptforshareswithoutvotingrightswhoundercertaincircumstancesdohaveavoting

right(Article44oftheActonCommercialCompanies).38 Articles61etseq.oftheActonCommercialCompanies.39 Articles215and256oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies

A European company

AnECregulation40introducedanewformofpubliccompanyintoLuxembourgcompanylaw:aEuropeancompany.Itmayonlybecreatedinsituationswherethereisaninternationalaspect,thatis:

- bythemergerofatleasttwopubliccompanieslocatedinatleasttwodifferentMemberStates,

- byconvertingaLuxembourgpubliccompanyintoaEuropeancompany,providedthatithasasubsidiaryinanotherMemberState,

- theincorporationofaEuropeanholdingcompanybypubliccompaniesorlimitedliabilitycompaniesiftwoofthemaregovernedbythelawsoftwodifferentMemberStates,

- bytheincorporationofaEuropeancompanysubsidiary,providedthatatleasttwoofthecompaniesinvolvedaregovernedbythelawsoftwodifferentMemberStates.

AEuropeancompanyisacompanywhosesharecapitalshallnotbelessthanEUR120,000.Itssharecapitalisdividedintoshares.Theliabilityoftheshareholdersislimitedtotheircontribution.

Subject to the provisions of the EC Regulation, a European company is treated like a public company (see above).TheAct of25August2006relatingtotheintroductionoftheEuropeancompanyhasadaptedtheActonCommercialCompaniesinordertomeettherequirementslaiddownfortheintroductionoftheEuropeancompany.AEuropeancompanyisfreetochoosebetweenaone-tierstructurewithonemanagementbody(aboardofdirectors,inchargeoftheentiremanagementofthecompany),oratwo-tierstructure,i.e.withtwomanagementbodies(amanagementboard,responsibleformanagementandasupervisoryboard,responsibleforthesupervisionofsaidmanagement).

Rulesrelatingtoshares,bondsandotherequity,aswellasrequirementsrelatingtothesharecapital(amendment,fullpaymentetc.)aretheonesapplicabletothepubliccompany(pleaseseeabove).40

41

4.2.2. A limited liability company (société à responsabilité limitée or “S.àR.L.”)

4.2.2.1. Definition of a limited liability company

Alimitedliabilitycompanyisoneinwhichtheshareholdersareonlyliableuptotheamountoftheircontributionstothecompanyandwhoseequityinterestsmayonlybeassignedinaccordancewiththeprovisionsofthelaw42.

Thecertificateofincorporationmusttaketheformofanotariseddeeddisclosedinfull.


Itisrecommendedinpracticeforbusinessesofanykindofanaveragesize.

4.2.2.3. How much capital is required?

ThecapitalmustbeatleastEUR12,394.68,fullysubscribedforandpaidupinfull43.

4.2.2.4. What is the minimum or maximum number of equity holders?

Theremustbeatleasttwo44andnomorethan4045equityholders.Unlessthecharterprovidesotherwise,thecompanywillnotbedis-solvedintheeventofthedeath,disqualification,bankruptcyorinsolvencyofoneoftheequityholders46.

4.2.2.5. What are the main features of the company’s equity interests?

Thecompany’scapitalisdividedintoequalequityinterestswithaparvaluewhichmaynotbelessthanEUR24.7947.Equityinterestsarealwaysregistered.Thecompanyisnotallowedtomakeapublicissueofequityinterestsorbonds48.

40 ECRegulationno.2157/2001of8October2001onthestatuteforaEuropeancompany.4142 Article189oftheActonCommercialCompanies.43 Articles182,183oftheActonCommercialCompanies.44 Seeaboveonthepossibilityofcreatingacompanywithasoleshareholder(sociétéàresponsabilitélimitéeunipersonnelle).45 Articles179and181oftheActonCommercialCompanies.46 Article202oftheActonCommercialCompanies.47 Billno.5562willabolishsuchrequirementofamimimumparvalue.48 Articles182to188oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies

4.2.2.6. Are equity interests freely transferable?

ThetransferofequityintereststopartieswhoarenotequityholdersissubjecttoverystrictconditionslaiddowninArticle189oftheActonCommercialCompanies.


Thecompanyismanagedbyoneorseveralagents,whomaybutneednotbeshareholders.Theyareappointedbytheshareholdersforaperiodoftimewhichmaybelimitedorunlimited.Eachagentmaytakeanyactionsthatarenecessaryorusefultorealisethecompany’sobjects,exceptforthosereservedforequityholdersbythelaworthecharter49.

4.2.2.8. What role is played by general meetings of the equity holders?

Incompanieswithmorethan25equityholders,ageneralmeetingoftheequityholdersmustbeheldatleastonceayear(an“ordinarygeneralmeetingoftheequityholders”)onadateprovidedforinthecharter.Incompanieswithfewerthan25equityholders,itisnotman-datorytoholdanordinarygeneralmeetingoftheequityholders.Inthiscase,eachequityholdermustreceivethetextoftheresolutionsordecisionstobetaken,expresslyformulated,andheorshevotesinwriting50.Unlessthecharterlaydownstricterprovisions,decisionsaretakenbyequityholdersrepresentingmorethanhalfthecapital51.

Anextraordinarygeneralmeetingoftheequityholdersmustbeheldforthefollowingreasonsinparticular:

- toamendthecharter(increaseorreductionofthecapital,changeofthecompany’sobjects,etc.),

- tochangethecompany’snationality.

Extraordinarygeneralmeetingstakeplaceunderconditionsrelatingtoquorumsandmajoritiesthatarestricterthanthoseinwhichordi-narygeneralmeetingareheldandtheminutesofsaidmeetingmustbesignedinthepresenceofanotary.

Allequityholdersareentitledtoattendgeneralmeetings(whethertheyareordinaryorextraordinary)andtotakepartinvoteswithanumberofvotesequaltothenumberofequityintereststheyown52.

4.2.2.9. Who is responsible for the supervision of the company?

Nointernalcontrolbodyisrequiredunlesstherearemorethan25equityholders,inwhichcasesupervisionmustbeentrustedtooneorseveralstatutoryauditors(commissairesauxcomptes),whomaybutneednotbeshareholders53.Thelimitedliabilitycompanymustarrangeforitsaccountstobeauditedbyoneorseveralcompanyauditors(réviseursd’entreprises)whoareindependentofthecompanywheresaidcompanyexceedsthelimitsoftwoofthefollowingthreecriteria:

- balancesheettotal:EUR3.125million,

- netturnover:EUR6.25million,

- averagenumberoffull-timeemployeesduringthefinancialyear:5054.


Thecompanyisliableforcorporationtax,wealthtaxandcommunaltradetax.

A limited liability company with a sole equity holder (société à responsabilité limitée unipersonnelle )

AnActof28December1992allowscompanieswithasoleequityholdertobecreatedthataregenerallysubjecttothesamerulesasalimitedliabilitycompany.Alimitedliabilitycompanycanalsobeconvertedduringitslifetoa“sociétéàresponsabilitéuniperson-nelle”intheeventoneorseveralequityholdersleavethecompanysuchthatthereisonlyoneequityholder55.

Asociétéàresponsabilitéunipersonnelleoperatesinexactlythesamewayasalimitedliabilitycompany,apartfromthefactthatthesoleequityholderexercisesthepowersgiventogeneralmeetingsofequityholders56.

5556

49 Article191bisoftheActonCommercialCompanies.5051 Article194oftheActonCommercialCompanies.52 Article195oftheActonCommercialCompanies.53 Article200oftheActonCommercialCompanies54 Articles204,215and256oftheActonCommercialCompanies.55 Article179oftheActonCommercialCompanies.56 Article200-2oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies

4.2.3. A partnership (société en nom collectif or “S.E.N.C.”)

4.2.3.1. Definition of a partnership

Apartnershipisformedbytwoorseveralpersons,naturalorlegalpersons,underabusinessname.Allthepartnersarepersonally,jointlyandseverallyliableforthepartnership’sdebts,withunlimitedliability57.

Itisformedbyaprivatedeedorbyanotariseddeed.Excerptsfromthecertificateofincorporationaredisclosed.


Thisformofcompanyistraditionallyusedinsmallandmedium-sizedfamilyenterprisesthatarecommercialorinvolveskilledcrafts.Itissubjecttosimpleruleswhicharenotexpensivetoimplement.Therearealmostnorestrictionsonthecontentsofthecharter.


Asthepartnersarejointlyandseveralliableforthepartnership’sdebts,withunlimitedliability,ontheirprivateassets,theActof10August1915oncommercialcompaniesasamendeddoesnotlaydownaminimumamountforthecapital.

4.2.3.4. What is the minimum or maximum number of partners?

Theremustbeatleasttwopartnerstocreatethecompany.Thelawdoesnotlaydownamaximumnumber.Inpracticehowever,thistypeofcompanyisnotsuitableforstructureswithalargenumberofpartners.

4.2.3.5. What are the main features of the equity interests?

Thelawdoesnotcontainanyprovisionsonthesubjectofequityinterests.

4.2.3.6. Are the equity interests transferable?

Inprinciple,equityinterestsmaynotbetransferred.Thechartermayprovideforexceptionstothisrule.


Thepartnershipismanagedbyamanager.

4.2.3.8. What is the company’s supervisory body?

Thelawdoesnotprovideforstatutoryauditors,independentauditors58orGeneralMeetingsofthepartners.


Fromataxstandpoint,thepartnershipassuchisnottaxed.Incometaxispaidbythepartnersinproportiontotheirinterestinthepart-nership’ssharecapital,independentlyofanyeffectivedistributionofprofits.

4.2.4. A limited partnership (société en commandite simple or “S.E.C.S.”)

4.2.4.1. Definition of a limited partnership

Alimitedpartnershipiscreatedunderabusinessnamebyoneorseveralpartnerswhoarejointlyandseverallyliable,withunlimitedli-ability(ordinarypartners)withoneorseveralotherpartners(silentpartners),whoareonlyliableuptotheamountoftheirstake(limitedpartners)59.

Itisformedbyaprivatedeedorbyanotariseddeed.Excerptsfromthecertificateofincorporationaredisclosed.


Thistypeofcompanyisusedforallkindsofbusiness.


Asordinarypartnersarejointlyandseveralliableforthepartnership’sdebts,withunlimitedliability,ontheirprivateassets,thelawdoesnotlaydownaminimumamountforthecapital.

57 Article14oftheActonCommercialCompanies.58 UnlessthepartnersareSAs,SARLsorSCAsornon-EuropeancompaniesbutcompanieswithaformthatiscomparabletothoselistedandtheSENCis

ofacertainsize(Articles204,215,256oftheActonCommercialCompanies).59 Article16oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies

4.2.4.4. What is the minimum or maximum number of partners?

Theremustbeatleastonelimitedpartnerandoneordinarypartner.Thelawdoesnotlaydownamaximumnumber.

4.2.4.5. What are the main features of the equity interests?

Thelawdoesnotcontainanyprovisionsonthesubjectofequityinterests.

4.2.4.6. Are the equity interests transferable?

Inprinciple,equityinterestsmaynotbetransferred.Thechartermayhoweverprovideforexceptionstothisrule.


Thepartnershipismanagedbyamanager.Limitedpartnersmaynottakeanyactofmanagementortheirliabilitywillbeunlimited.


Nosupervisorybodyisrequired60.


Fromataxstandpoint,thecompanyassuchisnottaxed.Incometaxispaidbythepartnersinproportiontotheirinterestinthecompany’ssharecapital,independentlyofanyeffectivedistributionofprofits.

4.2.4.10. Comment:

Thereisaderivativeformofalimitedpartnership:alimitedliabilitycompanyandcompany(“S.àR.L.etCie,SECS”).Thisformofcompany,whichisbasedonGermanlawandisacceptedinpractice,hastheadvantageoflimitingtheliabilityofordinarypartners.

4.2.5. A cooperative company (société coopérative or “S.C.”)61

4.2.5.1. Definition of a cooperative company

Acooperativecompanyisacompanywhichdoesnotexistunderabusinessnameandwhichismadeupofmemberswhosenumberandcontributionsarevariableandwhosesharesmaynotbetransferredtothirdparties.ThemembersfreelydeterminetheirliabilityintheCharter.Liabilitymaythereforebejointandseveralornot,unlimitedornot62.

Itisformedbyaprivatedeedorbyanotariseddeed.However,thecertificateofincorporationmustbedisclosedinfull.


Inpractice,thisformisusuallyusedbyagroupofprofessionalswhoareactiveinthesamesectorofactivityorsimilarsectorsofactivitytoenablethemtopoolsomeoftheiractivities,forexampletosetupacentralpurchasingorsalesgroup.


Thelawdoesnotprovideforaminimumamountofcapital.Thecertificateofincorporationmuststatehowthecapitalhasbeenformedandtheminimumamountrequiredforimmediatesubscription63.

4.2.5.4. What is the minimum or maximum number of members?

Theremustbeatleastsevenmembers.Thelawdoesnotprovideforamaximumnumber64.


Thecompanyismanagedbyoneorseveralmanagers,whomaybutneednotbemembers65.

60 Acompanyauditor(réviseurd’entreprises)isrequirediftheordinarypartnersareSAs,SARLsorSCAsornon-EuropeancompaniesbutwhoseformiscomparabletothoselistedandiftheSECSisofacertainsize(Articles204,215,256oftheActonCommercialCompanies).

61 On18August2006,ECRegulationno.1435/2003relatingtothestatuteforaEuropeancooperativesociety,whichistheEuropeanvariantofthetraditionalcooperativesociety,cameintoforce.Pleaserefertothetextoftheregulationformoredetailsaboutthistypeofcompany.

62 Articles113etseq.oftheActonCommercialCompanies.63 Article115oftheActonCommercialCompanies.64 Article114oftheActonCommercialCompanies.65 Article114oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies


Supervisionisentrustedtooneorseveralstatutoryauditors66.

4.2.5.7. Are shares transferable?

Sharesmaynotbetransferredtothirdparties67.However,membersmaywithdrawfromthecompanyunderconditionsandtermsthatmaybeprovidedforinthecharter68.


Thecompanyhastopaycorporationtax.

4.2.5.9. Comments:

Thecooperativecompanyistheonlytypeofcompanywhichissubjecttoadministrativecontrolasalegalentity,thatisthatoftheJusticeMinistry69.

TheActof10June1999introducedanewtypeofcooperativecompanyintotheActonCommercialCompanies,thatiscooperativecom-paniesorganisedlikepubliccompanies.Thistypeofcooperativecompanyisgovernedbothbytheprovisionsrelatingtocooperativecom-paniesingeneralandbytheprovisionsgoverningpubliccompanies,apartfromtheadaptationsprovidedforbytheActof10June1999.

SUMMARY OF THE FIVE FORMS OF COMMERCIAL COMPANIES

Partnership(sociétéen

nomcollectifor“S.e.n.c.”)

Limitedpartnership(sociétéen

commanditesimpleor“S.e.c.s.”)

Publiccompany(sociétéanonyme

or“S.A.”)

Limitedliabilitycompany(sociétéàresponsabilité

limitéeor“Sàr.l.”)

Cooperativecompany(société

coopérativeor“S.c.”)

CorrespondingtypeofcompanyunderGermanlaw

OffeneHandelsgesellschaft

(OHG)

Kommandit-gesellschaft(KG)

Aktiengesellschaft(AG)

Gesellschaftmitbeschränkter

Haftung(GmbH)

Genossenschaft

CorrespondingtypeofcompanyunderEnglishorUSlaw

Partnership LimitedPartnership PublicCompanyorCorporation

Limitedliabilitycompany

Cooperativecompany

Certificateofincorporation

Notariseddeedorprivatedeed

Notariseddeedorprivatedeed

Notariseddeed Notariseddeed Notariseddeedorprivatedeed

DisclosureofCharter

Excerpts Excerpts Infull Infull Infull

Minimumnumberofshareholders,equityholders,partnersormembers

2 2 2(1*) 2(1*) 7

Minimumcapital - - EUR30,986.69 EUR12,394.68 -

Liabilityofshareholders,equityholders,partnersormembers

Unlimited Unlimited Limited Limited AsstatedintheCharter

Transferabilityofsharesorequityinterests

Prohibited Prohibited Norestrictions Regulated Prohibited

Taxtreatment Companytaxtransparent

personalincometaxleviedonequity

holders

Companytaxtransparent

Personalincometaxleviedonequity

holders

Corporationtax Corporationtax Corporationtax

* seecompanywithasoleshareholder

66 Article114oftheActonCommercialCompanies.67 Article113oftheActonCommercialCompanies.68 Article120oftheActonCommercialCompanies.69 Article137oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies

4.3. Other form of groups and partnerships

Alongsidethesesixtypesofcommercialcompanies,thereareotherformsofassociationsandgroups,thatis:

- aholdingcompany(holding),

- aventurecapitalinvestmentvehicle(sociétéd’investissementencapitalrisqueor“SICAR”),

- abranch(succursale),

- aneconomic interestgrouping(groupementd’intérêtéconomique)andaEuropeaneconomic interestgrouping(groupementeu-ropéend’intérêtéconomique),

- anon-commercialcompany(sociétécivile),

- atemporarypartnership(associationmomentanée),

- ajointventure(associationenparticipation).

4.3.1. A holding company (holding)

4.3.1.1. Definition of a holding company

Companiescalled“holdingcompanies”arenotaspecialformofcompanybutordinarycompanieswithaspecificcompanyobject. Ingeneral,holdingcompaniestaketheformofpubliccompanies.Anyindustrialorcommercialactivitybysaidholdingcompaniesisstrictlyprohibited70.TheyaresubjecttopreferentialtaxtreatmentassetforthintheActof31July1929.

TheEuropeanCommissiondecidedon19July2006thatthetaxregimeoftheActof31July1929violatesECstateaidrules.Itisthusnolongerpossibletosetupholdingcompanies.ExistingholdingcompaniesmustcomplywithECrulesuntil31December2010atthelatest.TheLuxembourggovernmentannouncedtobringinabillinordertoabolishon1stJanuary2007thetaxregimesetoutintheActof31July1929.Itwillalsoprovideforthepracticalaspectsofthetransitionalperioduntil31stDecember2010.

4.3.1.2. What is the minimum share capital required?

Theminimumpaid-upsharecapitalissetatEUR24,000forholdingcompaniesincorporatedinaformotherthanthatofapubliccompanyorapartnershiplimitedbysharesforwhichtheminimumsharecapitalisEUR30,986.69(Article1oftheActof12July1977).

Thewayaholdingcompanyoperatesdependsonthecompanyformthathasbeenadopted.

4.3.1.3. What taxes does a holding company have to pay?

Holdingcompaniesdonothavetopaycorporationtax.However,theyareliableforacapitaldutyof1%onthetotalnetamountofcon-tributionsincapitalandanannualregistrationtaxof0.20%ontheeffectivevalueofthecapital.

4.3.1.4. Comment:

UndertheActof31May1999governingthedomiciliationofcompanies,thewordingoftheholdingcompany’sobjectsmustincludethatthecompanyhasrequestedtobeconsideredasaholdingcompanywithinthemeaningoftheActof31July1929onthetaxtreatmentoffinancialholdingcompanies.Furthermore,thecompanyorbusinessnamemustincludetheworld“holding”or“holdings”.

4.3.2. A venture capital investment vehicle (société d’investissement en capital à risque or “SICAR”)

ASICAR71isnotaspecialformofcompany.Itisaninvestmenttoolwhichisdefinedbyitsspecialobject,thatisinvestmentinsecuritiesrepresentingventurecapital.ASICARmaytaketheformofalimitedpartnership,apartnershiplimitedbyshares,acooperativecompanyorganisedintheformofapubliccompany,alimitedliabilitycompanyorapubliccompany.ThestatusofaSICARismoreflexiblethanundertheordinarylawgoverningcommercialcompaniessetoutinSections4.1.and4.2.above.

4.3.3. A branch (succursale)

Whatisabranch?

Theterm“branch”meansanysecondaryestablishment,anydependentcommercialfacility,anyofficewhatsoeverfromwhichoperationsareperformed,establishedinastableandpropermannerinafixedplace,wherethereisanemployeewhorepresentsthecompanythereanddealswiththepubliconthecompany’sbehalf.Abranchisnotalegalentitythatisseparatefromits“parentcompany”.

70 TheActof31July1929definesaholdingcompanyasfollows:“AnyLuxembourgcompanywhosesoleobjectistakingholdingsinanyformwhatso-everinotherLuxembourgorforeignenterprisesandthemanagementanddevelopmentoftheseholdings,suchthatithasnoindustrialactivityofitsownanddoesnothaveacommercialestablishmentthatisopentothepublicshallbeconsideredasaholdingcompany.”

71 Actof15June2004relatingtoventurecapitalinvestmentvehicles.



Com

mer

cialc

ompa

nies

AnyforeigncompanythatwishestocreateabranchinLuxembourgisrequiredtoregisterwiththeTradeandCompaniesRegisterusingthespecialapplicationformprovidedforthispurpose.

Asageneral rule,and inasimplifiedmanner forbranchescreated inLuxembourgbycompaniesgovernedby the lawofanotherEUMemberState,registrationwiththeTradeandCompaniesRegisterconsistsinfilingtwocopiesoftheapplicationforminquestionwiththeTradeandCompaniesRegister.Thisformmustbeaccompaniedbyacertificateofregistration(extrait)intendedfordisclosurewhichshouldcontainthefollowinginformation:

- theaddressofthebranch,

- anindicationofthebranch’sactivities,

- theregisterwithwhichitisregisteredandthecompany’sregistrationnumberwiththisregister,

- thenameandformofthecompany,

- thenameofthebranchifitisdifferentfromthatofthecompany,

- theappointment,terminationofdutiesandthenamesoftheindividualswhohavethepowertocommitthecompanyasregardsthirdparties,

- thepermanentrepresentativesfortheactivityofthebranchwithanindicationofthescopeoftheirpowers.

Itshouldbenotedthatthreecopiesofthedocumentintendedfordisclosure,dulyregisteredwiththecompaniesofficeattheRegistrationandDomainsAuthority,mustbefiledwiththeTradeandCompaniesRegister.

LuxembourgbranchesofforeigncompaniesthatarenotgovernedbythelawsofanECMemberStatemustalsofilethecompany’scer-tificateofincorporationandcharter(ifthecharteriscontainedinaseparateinstrument)andanyamendmentofthesedocumentswiththeTradeandCompaniesRegister,forthepurposeofdisclosure.ThisisnotrequiredforbranchesofcompaniesgovernedbythelawsofanotherECMemberState72.

Itshouldbenotedthat,underthesimplifiedprocedure,branchesarerequiredtofilethecompany’sfinancialstatementswiththeTradeandCompaniesRegisterandtoarrangetohavethemdisclosedbymeansofanotice,regardlessoftheoriginoftheforeigncompany:

4.3.4. An economic interest grouping (EIG) and a European economic interest grouping (EEIG)

4.3.4.1. Definition of an economic interest grouping

TheActof25March1991introducedthepossibilityofcreatinganeconomicinterestgrouping(EIG).Aneconomicinterestgroupingiscreatedbymeansofanagreement,eitherforalimitedoranunlimitedterm,betweentwoorseveralnaturalorlegalpersonsunderpublicorprivatelawhavingasitssoleaimthefacilitationofthedevelopmentoftheeconomicactivityofitsmembers,andtheimprovementorincreaseintheresultsofthisactivity.

Thegrouping’sactivitymustbeconnectedtothatofallitsmembersandmaynotbesecondaryinrelationtothemembers’activity.

Agroupinghasalegalpersonality.Itmaynotseektogenerateprofitsonitsownbehalf.

Themembersofagroupingarejointlyandseverallyliableforallthegrouping’sobligations.

Theagreementcreatingagroupingmustbedrawnupbynotariseddeedorprivatedeed,oritwillnullandvoid.Excerptsfromtheagree-mentaredisclosed.

AgroupingmustregisterwiththeTradeandCompaniesRegisterwithwhichacopyoftheagreementcreatingagroupingmustbefiled.

Agroupingmaynotmakepublicofferings.AnEIGmayissuebondsorotherdebtsecurities.

4.3.4.2. What is the grouping’s management body?

Agroupingismanagedbyoneorseveralmembersonbehalfofthegrouping.

4.3.4.3. What is the role of general meetings of the members?

AllthemembersofthegroupingformtheGeneralMeeting.

4.3.4.4. What taxes does a grouping have to pay?

Incomegeneratedbythegrouping’sactivityisonlytaxedatthelevelofitsmembers.

72 Articles160-2and160-6oftheActonCommercialCompanies.



Com

mer

cialc

ompa

nies

4.3.4.5. A European economic interest grouping (EEIG)73

AEuropeaneconomicinterestgrouping,registeredinLuxembourg,hasalegalpersonality.ItmustberegisteredwiththeTradeandCom-paniesRegisterconnectedtotheCourtofFirstInstance(Tribunald’Arrondissement)inwhosejurisdictionthegrouphasitsoffices.EveryestablishmentofagroupwhoseheadofficeislocatedinanotherMemberStatemustberegisteredwiththeTradeandCompaniesRegisterconnectedtotheCourtofFirstInstanceinwhosejurisdictionsaidestablishmentislocated.

Furthermore,acertainnumberoftheprovisionsoftheActof25March1991oneconomicinterestgroupingsalsoapplytoEEIGs.

4.3.5. A non-commercial company (société civile)

4.3.5.1. Definition of a non-commercial company

Anon-commercialcompany,governedbytheprovisionsofArticles1832etseq.oftheCivilCode,maybeformedbymeansofaprivatedeeddisclosedinfullintheMémorial.

Ithasan independent legalpersonalityandmaybeconverted intoacommercialcompanybyadecisionofaGeneralMeetingoftheshareholders,convenedespeciallyforthispurpose.

4.3.5.2. What structure is a non-commercial company suitable for?

Thistypeofcompanyisrecommendedinparticularforthejointpracticeofprofessionsandforthemanagementofrealestate.

4.3.6. A temporary partnership (association momentanée)

A temporarypartnership isapartnershipwithoutabusinessnamewhosepurpose is to carryoutoneor several specific commercialtransactions.

Thistypeofpartnershipdoesnotacquirealegalpersonality.Thepartnersmayagreewithoutrestrictiononthemethodsofoperationoftheirpartnership.Itsmembersarejointlyandseverallyboundtothirdpartieswithwhomtheyhavedonebusiness74.

Duetothesimplicityandflexibilityofrelationsbetweenpartners,temporarypartnershipsmaybefoundinveryvariedsectorsinwhichindividualswishtoworktogetherforalimitedtimeand/orforaspecificproject,forexampleinmajorprojectsinthecontextofpublicorprivatecontracts,orintheeventofinter-companycooperation,forexampleforajointresearchproject.

4.3.7. A joint venture (association en participation)

Ajointventureiswhereoneorseveralpersonsareinvolvedinoperationsthatoneorseveralotherpersonsmanageintheirownname.Ajointventuredoesnothavealegalpersonalityandpartnersmayorganisethemethodsinwhichtheirjointventureoperateswithoutanyrestrictions.Managersarejointlyandseverallyboundtothirdpartieswithwhomtheyhavedomebusiness75.

4.4. What are the main costs involved in setting up a company?

Thefoundersofacompanyhavetopaythefollowingcostsandexpenseswhentheysetitup:

1. Thefeesofthenotary76whereanotaryisrequiredorrequestedtoact.

2. Capitaldutyoncapitaltransferssetat1%ofthenominalcapital77.

3. FeesforfilingwiththeCompaniesRegisterandthecostofdisclosureintheMémorial.

4. Thefeesoflawyersorotheradvisorsespeciallyhired.

73 Asecondactdated25March1991laiddownthemeasurestobeappliedtoimplementECRegulationno.2137/85of25July1985ontheEuropeaneconomicinterestgrouping.

74 Article138oftheActonCommercialCompanies.75 Article139oftheActonCommercialCompanies.76 Thenotary’sfeesaregovernedbytheLuxembourgRegulationof24July1971,asamended,adjustingfeesthatnotariesmaycharge.77 0.5%forlimitedliabilitycompanies,partnerships,limitedpartnershipsandnon-commercialcompanies,providedthattheyarefamilycompaniesor

partnerships(Actof29December1971relatingtotaxesonraisingcapitalincommercialandnon-commercialcompanies.SeeSection4.7.2.4belowontheregistrationtaxoncapitaltransfers.



Com

mer

cialc

ompa

nies

TAXES AND COSTS OF SETTING UP A LUXEMBOURG COMPANY

Companycapital(inEUR)

Registrationtaxoncapitaltransfers1%1

Notary’sfees(basicprices,notincludingVAT)2

SpecialeditionoftheMémorial(approx.)3

Total

12,394.6824,789.3530,986.6949,578.7074,368.0699,157.41

123,946.76148,736.11173,525.47198,314.82223,104.17247,893.52495,787.05743,680.57991,574.10

1,239,467.622,478,935.25

12,394,676.24

123.95247.89309.87495.79743.68991.57

1,239.471,487.361,735.251,983.152,231.042,478.944,957.877,436.819,915.74

12,394.6824,789.35

123,946.76

123.95198.31210.71247.89297.47347.05396.63446.21495.79545.37594.94644.52892.42

1,016.361,140.311,264.261,760.043,743.19

247.89371.84371.84371.84371.84371.84371.84371.84371.84371.84371.84371.84396.63396.63421.42421.42446.21446.21

495.79818.05892.42

1,115.521,412.991,710.472,007.942,305.412,602.882,900.353,197.833,495.306,246.928,849.80

11,477.4714,080.3526,995.60

128,136.16

1 Registrationtaxoncapitaltransfersat0.5%for“familycompanies”(SARL,SENC,SECS).2 Otherchargesforvariousfees(lawyers,fiduciaries,domiciliation,administration,ancillaryservicesbythenotary)arelikely.3 ThecostvariesinrelationtothelengthoftheArticlesofAssociation.

TRADE AND COMPANIES REGISTER PRICE LIST (amounts expressed in euros, excluding VAT) Typeofapplication Registration Amendment Strikingoff ArticlesofInc. OtherLegalform

Publiccompany 132,39 68,48 13,70 132,39

Partnershiplimitedbyshares 132,39 68,48 13,70 132,39

Limitedliabilitycompany 132,39 68,48 13,70 132,39

Cooperativecompany 68,48 18,26 13,70 68,48

Limitedpartnership 18,26 13,70 13,70 18,26

Partnership 18,26 13,70 13,70 18,26

Branchofacommercialcompany 68,48 13,70 68,48132,3918,26

Branchofacommercialcompanygovernedbyforeignlaw 132,39 13,70 18,26

Economicinterestgrouping 18,26 13,70 13,70 13,70

Europeaneconomicinterestgrouping 18,26 13,70 13,70 13,70

Branchofaneconomicinterestgrouping 13,69 9,13 18,26

BranchofaEuropeaneconomicinterestgrouping 13,69 9,13 68,48

Non-profitmakingassociationorfoundation 18,26 13,70 13,70 132,39

Non-commercialcompany 68,48 18,26 13,70 18,26

Savings-pensionassociation(associationd’épargne-pension) 132,39 18,26 13,70 18,26

Agriculturalassociation(associationagricole) 18,26 113,70 13,70 13,70

Soletrader(commerçantpersonnephysique) 13,70 4,50 18,26

Branchofasoletrader(succursaled’uncommerçantpersonnephysique)

18,26 13,70

Branchofasoletraderwhoisestablishedabroad(succursaled’uncommerçantpersonnephysiqueétabliàl’étranger)

20 15 20

Publicinstitution(établissementpublic) 145 75 15 145

1 AssetforthintheLuxembourgRegulationof23January2003implementingtheActof19December2002relatingtotheTradeandCompaniesRegisterandcompanies’annualfinancialstatements,asamendedbytheLuxembourgRegulationof24March2004.


ChaptER 5STATE AID FOR BUSINESSES

5.1. How should business plans be drawn up?

5.2. What are the traditional means of financing in Luxembourg?

5.3. What government aid is offered to commercial companies and the skilled craft trades

(artisanat)?

5.4. What government aid is available for the tourism sector?

5.5. What government aid is offered to industrial companies and service providers?

5.6. Is there any tax relief on investment?

5.7. What government aid is provided for exports?

5.8. What government aid is available for continuing vocational training?

5.9. What government aid is available as regards protection of the environment?

5.10. What assistance is available for companies who hire job seekers?

5.11. Government financial aid for investments in the audiovisual field

5.12. Tax rebate for venture capital investment


STATE AID FOR BUSINESSESChaptER 5

Stat

eai

dfo

rbus

ines

ses

SustainableeconomicgrowthisoneofthemajorobjectivesoftheEuropeanUnion,theLuxembourggovernmentandthecountry’sprofes-sionalorganisations,inorderforEuropetobecomethemostcompetitiveanddynamiceconomyintheworldinaccordancewiththeLisbonStrategy.Manyareasneedtobedevelopedtoachievethisobjectiveandoneoftheminvolvespromotingentrepreneurshipandprovidingfinancialaidandpracticalassistanceincreatinganddevelopingundertakings.

InLuxembourg,obtainingaloanisoftendifficultandmaybecomeasignificantconcernforSMEsfollowingtheimplementationofBaselII.AsLuxembourgisasmallcountry,companiessetuptherearemainlySMEsandtheirshareholdersareoftennon-residents.Facedwithcreditratingsdeterminedatinternationallevel,itmaybedifficultforLuxembourgbusinessestoobtainlong-termloansfromcreditinstitu-tionsinfuture.

TheChamberofCommercehasafinancialtoolwhichcanprovideSMEswithdirectaidinthisrespect,i.e.,theMutual Insurance System for Security and Aid for Traders(Mutualité de Cautionnement et d’Aide aux Commerçants).Itsobjectiveistoprovideguar-anteesforSMEsthatare(orwillbe)membersoftheChamberofCommerceforinvestmentloansgrantedbyapprovedcreditinstitutionsinLuxembourg.

TheLuxembourggovernmentalsomakesawiderangeofformsofStateaidavailabletobusinesses.AmongtheformsofaidofferedbytheLuxembourggovernmentandtheEuropeanUnionarecapitalsubsidies,interestratesubsidiesontangibleandintangibleinvestments,mediumorlong-termloansgrantedbytheNationalCreditandInvestmentCorporation(SociétéNationaledeCréditetd’Investissementor“SNCI”),aidwithinvestmentsfortheprotectionoftheenvironment,innovation,researchanddevelopment,foodsafety,etc.

Theformalitiesrequiredtoreceivethisaidhavebeenkepttoastrictminimum.ApplicationsaremanagedmainlybytheMinistryoftheEconomy,theMinistryofMiddleClasses,TourismandHousing,theMinistryoftheEnvironment,theMinistryofFinanceandtheMinistryofAgriculture,inaspiritofefficiencyandflexibility.

For advice and assistance in relation to government aid for businesses:

Chambre de Commerce7 rue Alcide de Gasperi

L-2981 LuxembourgTelephone: 42 39 39 – 356

Fax: 43 83 [email protected]

5.1. How should business plans be drawn up?1

Irrespectiveoftheformofaidrequested,applicantsforfinancialaidmustalwaysdrawupabusinessplanwhichwillenablethemtopromotetheir ideasmoreefficiently.Abusinessplanisadocumentwhichdescribestheactivityplanned,setsobjectivesandspecifiesrequirementsintermsofequipment,humanresourcesandfinancing.Abusinessplanisthereforeakeydocumentwhenseekingfinancing.Itisimportantforapplicantstotakequestionsaskedbyallinvestorsintoaccount.Whatarethevariousaspectswhichmustabsolutelybeknown?Byaskingthesequestionsandprovidingtheanswers,applicantswillhaveagoodworkingbasisfordrawinguptheirbusinessplans.

Abusinessplanisalsoamanagementguideandareferencedocumentwhichenablesapplicantstomonitortheprogressoftheirprojects.Itshouldcontaintheobjectivesoftheprojectandthemeansofachievingthem,foratleastthenextthreeyears.Inthisway,applicantscanmakesurethatnoaspecthasbeenomittedinplansfortheproject.

5.1.1. Aspects of a business plan

Abusinessplanshouldincludethefollowing:

5.1.1.1. Presenting the project and the entrepreneur’s profile

Inthebusinessplan,theobjectivesoftheundertakingshouldbedefinedandtheapplicant’sprofessionalexperience,knowledgeandqualificationsshouldbeshowntobeassetsfortheproject.Thiswillenablethepersonreadingthebusinessplantounderstand,injustafewlines,theprojectandthebusinesssectorinwhichtheapplicantwishestoestablishtheenterprise.

5.1.1.2. Marketing

ThecommercialstrategyshouldbedefinedbydeterminingthemainthreatsandopportunitiesonthemarketthroughaSWOT(Strengths,Weaknesses,Opportunities,Threats)analysis.Thecorrecttargetingandpositioningoftheprojectallowtheapplicanttodeterminethemeansofcommunicationthatshouldbeusedtocreateawareness(mailshots,postercampaigns,distributingbrochures,canvassingse-lectedcustomersbytelephone,usingatelemarketingcompany,thepress,radio,TV,etc.).

1 www.businessplan.lu



Stat

eai

dfo

rbus

ines

ses

5.1.1.3. Financing

Thisthirdpointiscertainlythemostimportantsinceitprovidesinformationabouteconomicviabilityandinformspotentialinvestorsoftheexpectedreturnontheproject.Ideally,abusinessplanshouldcontainprovisionalfinancialstatementsfortheperiodfromyearNtoyearN+3,includingatleastaprovisionalincomestatement,thefinancingplanandaprovisionalbalancesheet.Theapplicantmayalsoencloseananalysisofturnover,netincomelevelandthelevelofcashflowintheformofgraphsandcommentsonthenetincomefore-casts.Finally,allofthesestatementsshouldbeaccompaniedbycommentsoneachlineintheformofshortnotes.Theseexplanatorynotesshouldbedraftedwithgreatcaresincetheywillmaketheproposedfiguresintelligible.Thiswillgiveinvestorsanadditionalguaranteeofthequalityoftheproject.

5.1.2. Key questions

Oncethebusinessplanhasbeendrawnup,itisnecessarytocheckthatthefollowingquestionshavebeenanswered.

5.1.2.1. The concept

- Inwhatwayistheconceptoriginalsothattheprojectisattractiveforfuturecustomersandissetapartfrompotentialcompetitors?

- Whatarethemediumandlong-termopportunitiesandobjectivesoftheconcept?

5.1.2.2. Team/Company

- Whatisthestatusofthecompany(self-employedtrader,limitedliabilitycompany,publiccompany,etc.)?

- Whoaretheshareholdersandwhataretheircontributions(inkindand/orincash)?

- Whataretheirprofessionalqualifications(curriculumvitae)?

- Howwilltheteamoperate(dutiesandsalaries)?

- Whataretheenterprise’sstrengthsandweaknesses?

5.1.2.3. Environment

- Whatistheaddedvalueoftheproduct/serviceoffered(innovativenature,lifespan,quality-priceratio,manufacturingorproductionprocess,etc.)?

- What is thepotentialmarket for theproduct/service (potentialcustomers,competitors,suppliers,potentialgrowthof themarket,targetmarketshare,salesforecasts,etc.)?

- Whoarethedirectandindirectcompetitors(name,marketshare,features,quality-priceratio,strengthsandweaknesses,experience,promotiontools,etc.)?

- Doanyseasonalfactorsneedtobeconsidered?

- Arethereanyadministrativerestrictionsthatmustbecompliedwith(“commodo-incommodo”procedure,foodsafety,etc.)?

5.1.2.4. Marketing plan

- Whatisthetargetmarket?

- WhatarethefourPsofthemarketingmixfortheproject:

- Product/servicepolicy:positioningonthemarket,advantagesoftheproduct/service(innovation,quality,packaging,profitcontrib-uted,etc.),

- Pricingpolicy:costprice,salesprice,longandshort-termpositioning,etc.,

- Distributionpolicy:canvassingcustomers;salespractice(distributionchannel,meansofsales,costs,etc.),

- Communicationpolicy:advertising/promotionresourcesused(mailshots,postercampaigns,press,promotions,merchandising,publicrelations,etc.).

5.1.2.5. Operations

- Whatlocationhasbeenchosenandwhatarethereasonsforthischoice?

- Whatarethefeaturesofthesite,building,installationsandequipment/tools?

- Whataretherental/purchasecosts?

- Whatarethestaffrequirementsfortheprojecttorunsmoothlyandthestaffingcosts(hiringplan)?



Stat

eai

dfo

rbus

ines

ses

5.1.2.6. Economic viability

- Howmuchinvestmentisrequiredtolaunchtheproject?

- Whatisthethree-yearfinancingplan?

- Whatistheplannedworkingcapital?

- Whatarethestrengthsandweaknessesoftheprovisionalfinancialstatementsoverthreeyears?

- Whatistheresultoftheanalysisoftheprofitabilitythreshold(whenwillitbepossibletoachievebreak-even)?

5.2. What are the traditional means of financing in Luxembourg?

Thetraditionalmeansofprojectfinancingareequityandloans.Withregardtoloans,itshouldbenotedthat,intheinterestsofsecurity,bankerswillcheckapplicants’solvency,theintendeduseoftheloan,theamountoftheloanrequestedandthetermoftheloan.

5.2.1. Loans

Financingbyequity,alsoreferredtoasself-financing,isthemostnaturalmethodformakinginvestments.However,traderswhodonothavesufficientequitywillautomaticallylookforapersonwhohasthenecessaryresourcesandtherequiredleveloftrustinsaidindividualstograntthemaloan.Creditinstitutionsareconsequentlyprivilegedpointsofcontact.

Itisthereforeimportanttopresentawell-constructedbusinessplanatameetingwithabank,i.e.,tohaveafinancingplanwithabalancesheetandaprofitandlossstatementshowingthecapacitytorepaycapitallentbythebank.Indeed,thebank’sprimaryconcernisnotthedesignoftheprojectitselfbutitscapacitytogenerateprofits.

Bybearinginmindthevariousaspectsthatformthebasisforabank’sdecisiontograntaloanornot,loanapplicantsmayincreasetheirchancesbytryingtorespondtothesevariouspoints.Inthiscontext,itisimportanttobeawareofthevariousformsofcreditthatexist.

5.2.1.1. Overdraft facilities

Thisisaformofcreditreferredtoasa“creditline”wherebybanksauthorizecustomerstohaveaccesstoacertainamountoffundsforafixedorindefiniteperiodoftime.

5.2.1.2. Discounted notes

Thisisaformofcreditwherebankspaytheamountofbillsofexchangepriortotheirduedateinreturnforwithholdingcostsandinterestpaymentsthatareproportionaltothevalueofthebillofexchange,theoutstandingtermandtherateofthediscountgranted.

5.2.1.3. Personal loans

Thisisaformofcreditgrantedtoindividualstoenablethemtocoverexceptionalexpenses.Apersonalloanseemstobeparticularlyap-propriatetopurchaseavehicleorfurniture,forexample.

5.2.1.4. Real estate loans

Realestateloansareloansgrantedbybankstoenabletheircustomerstofinancethebuildingofhouses,flats,commercialpremises,etc.

5.2.1.5. Supplier credit

Suppliersoftengranttheircustomerspaymenttimeofbetween60and90days.Thiscreditoftenmakesitpossibletofinanceallorsomeofacustomer’sinventoryandtherebyreducesworkingcapitalrequirements.

5.2.1.6. Medium and long-term loans

Banksmaygrantinvestorsmediumorlong-termloansdependingontheprojecttobefinanced.Thisistheusualmeansoffinancingforcompaniesthatdonothavetheequityrequiredtocarryouttheirplans.ItshouldbenotedthattheseinvestmentsmaybethesubjectoflowinterestrateequipmentloansgrantedbytheSNCIorofinterestratesubsidiesundertheMinistryofMiddleClassesframeworklaw(loi-cadreduMinistèredesclassesmoyennes).

5.2.1.7. Leasing

Leasingisatechniqueforfinancingcapitalgoodswherebytheleasingcompanypurchasesthegoodsandthenmakesthemavailable,forpayment,tothelesseewhichusesthemforfinancialpurposeswithoutowningthem.Theleasingcompanypurchasestheequipmentchosenbythelessee.Itdecidesonthetermoftheleasingagreementbasedontheexpectedlifeoftheequipmentandtheintensityofitsuse.Attheendoftheagreement,thelesseemayeitherreturntheequipment,leaseitagainforalowrentorpurchaseit.



Stat

eai

dfo

rbus

ines

ses

5.2.1.8. Factoring

Factoringmeansthefirmpurchaseofreceivablesgeneratedbythesupplyofgoodsorservices.Tradersareguaranteedagainsttheriskoftheircustomers’insolvency.Commercialreceivablesareturnedintocashbymeansoftheimmediatepaymentoftheinvoicesassigned.Inthisrespect,whenthefactoringcompanyreceivestheinvoices,itpaysthecompany,thatisitscustomer,anamountofupto80%ofthetotalamountoftheguaranteedreceivablesforexample.Theremaining20%ispaidwhenthedebtorspaytheirdebtsornolaterthan120daysafterpaymentwasdue.Tradersarefreedfromanyadministrativeworkafterasale.Factoringcompaniessendinvoicestotraders’debtorsandtakecareofcollection,andprovideapersonalizedreminderserviceandaccountingservices.

5.2.2. Guarantees

Whencustomerstakeoutloanswiththeirbanks,thebanksoftenaskforguarantees.Inprinciple,providingaguaranteeisnotinfactthedecisivefactorinwhetheraloanisgranted.Ifthebankisconvincedthataloanwillonlybepaidbackifguaranteesarecalled,itwillrejecttheloanapplicationinordertoavoidsubsequentproblems.Inbankingpractice,guaranteesmaybedividedintothreecategories:

- realsecurityinterests(sûretésréelles):theseareguaranteesintheformofpropertythatbelongstothedebtor(orathirdparty)whichishandedovertothecreditorasaguaranteeandwhichenablesthecreditortobepaidbackfromthepriceofthesaleofthispropertyinpriorityoverothercreditors.Realsecurityinterestsareinparticularpledgesofbusinessorsecuritiesandmortgages,

- personalsecurities(sûretéspersonnelles):theseconsistofaddingaseconddebtortothemaindebtor.Personalsecuritiesaresigna-turesguaranteeingbills(avals),deposits(caution)andfirstdemandguarantees(garantieàpremièredemande),

- moralguarantees(sûretésmorales):thevalueoftheseguaranteesdependssolelyonthehonestyandintegrityoftheindividualwhogivesit.Thesearepropertycommitments(engagementimmobilier)andundertakingsbyshareholdersorpartnersnottowithdraw.

Theformsofguaranteethatareusedmostfrequentlyaredescribedbelow.

5.2.2.1. Personal securities (aval, cautionnement)

Thesearepersonalsecurities.Asecurity(cautionnement)isanagreementwherebytheguarantorundertakestothecreditortofulfilanobligationifthecreditor’smaindebtorfailstodoso.

5.2.2.2. Mortgages (hypothèque)

Thesearerealsecurityinterests.Mortgagesareinremrightstoproperty.

5.2.2.3. Pledges (nantissement)

Pledgesareguaranteesonthebasisoflandormovables,agreementsunderwhichdebtors,orthirdpartiesontheirbehalf,transferanitemtothecreditorascollateralandguaranteeofthedebt.Thepledgeofsecuritiesisacommonpracticeinbanking.TherearealsocalledLombardcredits.

5.2.2.4. The Mutual Insurance System for Security and Aid for Traders (Mutualité de Cautionnement et d’Aide aux Commerçants) 2

Itcanoftenbedifficulttoobtainaloan.Creditinstitutionsusuallyaskforpersonalguaranteesorrealsecurityinterests.Inmanycases,theguaranteesavailableareinsufficient,theloanrequestedrisksbeingrefusedandthefutureoftheprojectstartstolookuncertain.TheMutualInsuranceSystemforSecurityandAidforTraderscanbeausefultoolinobtainingloansbyactingasguarantorwithregardtothebank.

TheMutualInsuranceSystemmayguaranteeprojectsprovidedthatapplicantshaverecognizedprofessionalqualificationsandthattheprojectshavearealchanceoffinancialviabilityandacertaineconomicinterest.

Torequestaguaranteeofthiskind,therelevantapplicationformshouldbedulyfilledinandsent,togetherwithabusinessplan,totheMutualInsuranceSystemforSecurityandAidforTraders.TheapplicationformtobeusedisavailableontheInternet(www.cc.lu/mcac.htm-inFrenchorGerman)orwillbesentonrequest(telephone:423939-339).TheMutualInsuranceSystemwillthenexaminetheprojectand,ifitapproves,theguaranteewillbefinalizedbysigninganagreementwiththebeneficiaryandbysigningaguaranteeagreementwiththecreditinstitution.

2 TheMutualInsuranceSystemforSecurityandAidforTraders(MutualitédeCautionnementetd’AideauxCommerçantsor“MCAC”),7rueAlcidedeGasperi,L-2981Luxembourg,Telephone:423939339,

www.cc.lu/mcac.htm(onlyinFrenchorGerman).



Stat

eai

dfo

rbus

ines

ses

5.3. What government aid is offered to commercial companies and the skilled craft trades (artisanat)?

5.3.1. Financial aid provided by the Ministry of Middle Classes (Ministère des Classes Moy-ennes)3

TheMinistryofMiddleClasseshascreatedaframeworkacttoprovidefinancialaidtoallnatural(private)andlegalpersons(limitedli-abilitycompanies,publiccompanies,etc.)thatoperateSMEs4andthathaveabusinesspermit,providedthattheymeetacertainnumberofconditionslaiddownbythisact5.

5.3.1.1. Financial aid for investment in tangible and intangible fixed assets

Financialaidforinvestmentintangibleandintangiblefixedassetsinvolves:

- naturalorlegalpersonsinvestingintangiblefixedassets(e.g.:realproperty,equipmentandtooling)tocreateanewbusiness,extendormodernizeanexistingbusinessorstartupabusinessinvolvingafundamentalchangeintheproductorproductionprocessofanexistingbusiness,

- naturalorlegalpersonswho/whichinvestinthetakeoverofabusinesswhichhasclosedorwouldhaveclosedwithoutthistake-over,

- investments inthetransferof technologybyacquiringpatentor licensingrights,know-howortechnicalknowledgewhich isnotpatented(intangiblefixedassets).

Themaximumgrossamountofaidthatmaybegrantedis7.5%oftheinvestmentforSMEsand15%forsmallbusinesses.

5.3.1.2. Financial aid for services provided by outside advisers

SMEsmayreceivefinancialaidforservicesprovidedbyoutsideadvisers.Thegrossamountofaidgrantedforthecostofeligibleoutsideservicesmaynotexceed30%ofsaidcost,withouthoweverexceedingtheamountofEUR 100,000.

Eligibleservicesbyoutsideadvisersarethosewhichareprovidedonanoccasionalbasisforspecificprojects,outsidetherecurringtasksofdailymanagement,andthatrequireknowledgeortechnicalorscientificknow-howforwhichthebusinessdoesnothavethematerialandhumanresourcesrequired.

Ongoingorregularactivitiesoractivitieswhicharerelatedtothebusiness’normaloperatingexpenses,suchaslegaladvisoryservices,accountingortaxservicesoradvertisingandmarketingoperationsarethereforeexcludedfromthisformofaid.

5.3.1.3. Financial aid for participating in a trade fair or an exhibition

FinancialaidmaybegrantedtoSMEstakingpartinatradefairoranexhibitiontohelpcovertheadditionalcostsarisingfromrenting,settingupandmanagingastand.Thegrossamountofthisaidmaynotexceed50%oftheeligiblecosts,withouthoweverexceedingtheamountofEUR 100,000.

However,thegrantingoffinancialaidforthesepromotionalactivitiesislimitedtothefirsttimethebusinessinquestiontakespartinatradefairoranexhibition.

5.3.1.4. Financial aid aimed at encouraging and supporting businesses in the field of the protection of the environment and the rational use of natural resources

a) Compliance with new mandatory Community standards

InvestmentsbySMEsaimedatcomplyingwithnewCommunitystandardsontheenvironmentmaybegrantedfinancialaidofagrossmaximumamountof15%oftheeligiblecostsforthreeyearsasfromtheadoptionofthesestandards.

b) Exceeding mandatory Community standards

AllbusinesseswhichhavemadeinvestmentswhichhaveenabledthemtoexceedtheCommunitystandardsapplicabletotheenvironmentoreligibleinvestmentsmadeintheabsenceofmandatoryCommunitystandardsmaybegrantedthemaximumgrossamountoffinancialaidof30%oftheeligibleinvestmentscosts.

c) Investments in the field of energy

Allbusinesseswhichhavemadeinvestmentsinenergysaving,renewablesourcesofenergyorthecombinedproductionofelectricityandheatmaybegrantedagrossmaximumamountoffinancialaidof40%oftheeligibleinvestmentcosts.

3 MinistryofMiddleClasses(MinistèredesClassesMoyennes),6avenueEmileReuter,L-2937Luxembourg,www.mcm.public.lu(onlyinFrench).4 DefinitionsintheLuxembourgRegulationof16March2005adaptingthedefinitionofmicro,smallandmedium-sizedenterprises.5 Actof30June2004creatingageneralframeworkforsystemsofaidinfavourofthesectorofthemiddleclasses,andtherelatedregulations.



Stat

eai

dfo

rbus

ines

ses

Thisaidmaybeincreasedby10%whentheinstallationofrenewableenergyinquestionmakesanentirecommunityofbeneficiariesself-sufficientinenergy.

Increases

Theaidprovidedforin(b)and(c)maybeincreasedasfollows:

1)bythegrossamountof5%whentheinvestmentismadeinaregionwhichiseligibleforregionalaid,

2)by10%whenthebeneficiaryisanSME.

Thesetwoincreases(1)and(2)maybecombined.

5.3.1.5. Financial aid granted when a business is relocated

WhenabusinessthathasbeensetupinanurbanareaorinanareadesignatedasaNatura2000areaandwhich,inaccordancewiththelaw,performsanactivitywhichentailssignificantlevelsofpollutionisrequiredtomovefromtheplacewhereithadbeensetuptoamoreappropriatearea,itmaybegrantedfinancialaidtocoversomeofthecostsincurredinthismove,providedthatboththefollowingconditionshavebeenmet:

a) therelocationmustbeduetoreasonsrelatedtoprotectingtheenvironmentandmustfollowanadministrativeorcourtdecisionorderingthebusinesstomove,

b) thebusinessmustcomplywiththestrictestenvironmentalstandardsapplicableinthenewlocation.

Businesseswhichmeettheaboveconditionsmayreceivefinancialaidforinvestmentamountingto30%oftheeligiblecosts.WhenthebusinessinvolvedisanSME,thismaybeincreasedby10%.

5.3.1.6. Financial aid for cleaning up polluted sites

Businesseswhichcleanuppollutedindustrialsiteswhentheyaresetupmayreceivegovernmentaidunderthefollowingconditions.

Whenthecompanythatcausedthepollutionhasnotbeenidentifiedorcannotbecalledontoact,thecompanythatcarriesoutremedia-tionworkmayreceivethefinancialaidprovidedforinthepreviousparagraph.

Whenthecompanythatcausedthepollutionhasbeenclearlyidentified,thecompanywhichcleansupthesitemustclaimpaymentfromthecompanythatcausedthepollutioninaccordancewiththerulesofordinarylaw.However,whenthesituationissuchthatitwouldbeunfairtoleavethecompanythatcleanedupthesitewaitingforpaymentbythecompanythatcausedthepollution,thegovernmentmayactundertheconditionssetoutinthepreviousparagraph,subjecttobeingsubrogatedtotherightsofthecompanythatreceivessaidaid.

Financialaidforcleaninguppollutedsitesmayamountto100%oftheeligiblecosts,plus15%ofthecostofthework.Theeligiblecostsarethecostoftheworklesstheincreaseinthevalueoftheland.Thetotalamountofaidgrantedmaynotunderanycircumstancesexceedtheactualexpensesincurredbythecompany.

5.3.1.7. Financial aid for innovation and for research and development

a) Fundamental research

Companieswhichcarryoutfundamentalresearchmaybegrantedgrossmaximumfinancialaidof75%oftheeligibleinvestmentcosts.Fundamentalresearchisaimedatincreasingspecifictechnicalknowledgeandisnotlinkedtoindustrialorcommercialobjectives.

b) Applied research

Companieswhichcarryoutappliedresearchmaybegrantedgrossmaximumfinancialaidof50%oftheeligibleinvestmentcosts.Suchaidmaybegrantedforplannedresearchorcriticalinvestigationsaimedatgainingnewknowledgethatcanbeusedtodevelopnewproducts,processesorservicesortomakeasignificantimprovementtoexistingproducts,processesorservices.

c) Pre-competitive development research

Allcompanieswhichcarryoutpre-competitivedevelopmentresearchmaybegrantedfinancialaidofamaximumof25%oftheeligiblecosts.Pre-competitivedevelopmentresearchmeansmakingtheresultsofappliedresearchconcreteinadrawing,diagramorsketchofnew,differentorimprovedproducts,processesorservices,tobesoldorused,includingthecreationofaprototypewhichcannotbeusedcommercially.



Stat

eai

dfo

rbus

ines

ses

Increases

Thefinancialaidprovidedforinpointsa,bandcmaybeincreasedinaccordancewiththefollowingconditions,providedthetotalgrossamountdoesnotexceed100%,75%and50%respectively:

• bythegrossamountof5%wheretheinvestmentismadeinaregionwhichiseligibleforregionalaid,

• by10%wherethebeneficiaryisasmallormedium-sizedenterprise,

• by10%wheretheinvestmentortheresearchinvolvescross-bordercollaborationwithatleastoneindependentpartnerinanotherEUMemberStateandthisinvestmentorresearchdoesnotfallwithinthescopeoftheEU’sframeworkprogrammeforresearchanddevelopment,

• by15%wheretheinvestmentortheresearchinvolvescross-bordercollaborationwithat leasttwoindependentpartners intwootherEUMemberStateswherethisinvestmentorresearchfallswithinthescopeoftheEU’sframeworkprogrammeforresearchanddevelopment,

• by25%where,inadditiontomeetingtheconditionsreferredtoatthepreviouspoint,theresultsoftheresearchordevelopmentinvolvedarewidelycirculated,

• by25%wherethefinancialaidisformonitoringtechnologicaldevelopmentorforfeasibilitystudiespriortoappliedresearchorpre-competitivedevelopmentresearch.

5.3.1.8. Financial aid for food safety

Skilledcrafttradeandcommercialenterpriseswhichinvestinequipmentusedforthemanufacture,processing,packing,storing,handling,tracing,saleorprovisiontoconsumersoffoodstuffsintendedforhumanconsumptionandanimalfeedstuffs,wheretheeffectofsuchinvestmentistoimprovehealthandsafetyconditionsandthequalityofthefoodstuffswithinthecompany,areeligibleforthefinancialaidprovidedforbythislaw.

Grossmaximumfinancialaidforinvestmentsamountsto40%and70%iftheenterpriseusestheservicesofanoutsideadviserinordertomakeprogressintheareaofhealthandsafetyandthequalityoffoodstuffs.However,thisaidmaynotexceedEUR100,000.

Conditions under which financial aid is granted

Governmentaidundertheschemessetupbylawtoprovidesuchaidwillbeintheformofcapitalsubsidiesorinterestratesubsidies.Subsidiesarenormallypaidattheendoftheinvestmentprogram,but,onrequest,oneorseveralinstalmentsmaybepaidduringtheproject.Aidgrantedonthebasisofaproposalorestimatewillonlybepaidwheninvoicesaresubmitted.

Applicationsforfinancialaidunderthislawshouldbemadewithintwoyearsasfromthedateofpaymentoftheexpenseforwhichaidisrequested.Inordertochecktheviabilityoftheprojectandtheseriousnessofitspromoters,theMinistryofMiddleClassesmayrequireabusinessplanorsimilardocumentstobesubmittedorspecificmeasurestobetaken.

AidprovidedundertheframeworkactoftheMinistryofMiddleClassesmaynotbecombinedwiththeaidprovidedforinthefollowingacts:

- theLawof27July1993,asamended,whosepurposeis

- economicdevelopmentanddiversification,

- theimprovementofthecountry’sgeneralstructureandregionalbalance,

- theLawof22December2000whosepurposeistheeconomicdevelopmentofcertainregionsinthecountry,

- theLawof22February2004whichsetsupasystemofaidforprotectingtheenvironment,therationaluseofenergyandenergyproductionfromrenewableresources.

De minimis rule

Asanexceptiontothethresholdslaiddownforamountspaidasfinancialaid,increasesinthepercentagesofaidmaybegrantedprovidedthatthegrossamountoffinancialaidpaidtotherecipientbusinessdoesnotexceedEUR100,000overathree-yearperiodasfromthedatethepreviousfinancialaidwithinvestmentwasgrantedtothisbusiness.

Formalities

ApplicationsshouldbesubmittedtotheMinistryofMiddleClasses6onaspecialformissuedbysaidMinistryorbytherelevantprofes-sionalChamber.

6 MinistryofMiddleClasses(MinistèredesClassesMoyennes),6avenueEmileReuter,L-2937Luxembourg,www.mcm.public.lu



Stat

eai

dfo

rbus

ines

ses

5.3.2. Start-up loans granted by the SNCI in order to help businesses to set up or take over an SME7

TheSNCI isapublicbanking institutionthatspecializes inthemediumand long-termfinancingof investmentsmadebyLuxembourgbusinesses.Itsfinancialresourcesarebasedonitscapitalandtheissuingofbondsandsavingscertificates.ItissubjecttotheregulationoftheCSSF.

ThefollowinginstrumentsareusedbytheSNCI(SociétéNationaledeCréditetd’Investissement):

- equipmentloans,

- start-uploans,

- mediumandlong-termloans,

- loansforinnovation,

- profit-sharingloansandholdings,

- financingofinvestmentabroadandexportcredit.

Start-uploansaregrantedforprojectsinvolvingcreatingortakingoverSMEsbystakeholderswhohavenevercreatedanenterprisebefore.Theaimofthistypeofloanistoincreasethecapitalofpersonswhocannotprovideguaranteesorsecurityinordertohelpthemsetuportakeoverbusinesses,inadditiontotheusualbankloansandfacilities.

Applicantsmustcontributeatleast15%ofthecapitaloftheeligiblebase,thatistheamountthatiseligibleforthecalculationofthestart-uploan,andmustalsosubmitabusinessplan8.Insomecases,applicantsmaybeadvisedorevenrequiredtoarrangeforasystemofguidancebyaqualifiedthirdparty.Onlyprojectswhereactivityhasnotyetstartedareeligible.

Coststakenintoconsiderationareinparticularland,realpropertyorpartsofrealpropertysolelyforprofessionaluse,machines,profes-sionalinstallationsorequipment,intangiblefixedassetssuchasmanufacturingandproductionlicences,saleslicences,software,start-upcostssuchasthecostof incorporation,publicationandstudy,thebusinessplan,thefinancingplan,goodwill, thecustomerbase,thetenant’srighttoalease(droitaubail),workingcapitalandinventories.

BeneficiariesmusthaveavalidbusinesspermitissuedbytheMinistryofMiddleClasses.Theamountofanystart-uploanmaynotbelessthanEUR10,000ormorethanEUR250,000andmaynotexceed40%oftheeligiblebase.Theinterestrateapplicabletostart-uploansistheSNCI’sannualinterestrateforlong-termloansappliedattimeofthesignatureoftheloanagreement,plus1.5percentagepointsperannum.

Loansaregivenfortermswhichgenerallydonotexceed10years.However,iftheprojectincludesasignificantproportionoffixedassets(>50%ofthetotalamount),thetermoftheloanmaybeextendedto14years.ApplicationsandabusinessplanshouldbesentdirectlytotheSNCI.

5.3.3. Equipment loans granted by the SNCI9

TheSNCImakesfundsavailabletointerestedpartiesthroughtheintermediaryofacommercialbank,ataninterestrateof2.5%,foratermof10yearsatthemost.

Beneficiaries

Anynaturalorlegalpersonswho/whichrunabusinessandhaveabusinesspermitissuedbytheMinistryofMiddleClassesandwhichmeetthecriteriaforsmallandmedium-sizedenterprisesmaybegrantedequipmentloans.

Eligible investments

Equipmentloansareintendedtofinancethepurchaseofdepreciabletangibleandintangibleassetsandlandusedsolelyforprofessionalpurposes.Equipmentloansarenotgrantedforthepurchaseofrealpropertyusedforpurposesotherthanprofessional,orforrollingstockandsuppliesofrawmaterialsorfinishedgoods.Equipmentloansmayalsobeusedtofinancethetakeoverofbusinesses.

Exceptforstart-upinvestments,whichmaybespreadoverthreeyears,theplannedinvestmentforwhichanequipmentloanisrequestedmustbeforanamountofatleastEUR12,500.

Equipmentloansmayalsobeusedtofinanceaproportionofthetotalinvestment,butthisproportionmaynotexceed60%.Forabusinessstartup,thisproportionmayriseto75%.Unlessanexceptionismadewhichisauthorizedbytherelevantministries,anequipmentloanforasingleinvestmentprojectmaynotexceedEUR2.5million.

Theletternotifyingthebeneficiaryofthedecisiontograntanequipmentloanwillincludethetermsandconditionsfortherepaymentoftheloan.Thismayincludeaninitialgraceperiodofamaximumoftwoyearsfortherepaymentoftheprincipal.

7 SNCI,7rueduSaint-Esprit,BP1207,L-1012Luxembourg,Telephone:461971-1,www.snci.lu8 Seepoint1ofthischapter.9 SNCI,7rueduSaint-Esprit,BP1207,L-1012Luxembourg,Telephone:461971-1,www.snci.lu



Stat

eai

dfo

rbus

ines

ses

Formalities

ApplicationsshouldbesubmittedtotheSociétéNationaledeCréditetd’Investissement,throughtheintermediaryofanapprovedbankinginstitution.

5.4. What government aid is available for the tourism sector?

5.4.1. Financial aid offered by the Ministry of Middle Classes

Seechapter5.3.1.

5.4.2. The Ministry of Tourism’s seventh five-year plan10

TheMinistryofTourism’sseventhfive-yearplancameintoforceon1January2003.Thisallowsthegovernmenttoprovidesubsidies,until31December2007,forplanstodevelopregionaltouristinfrastructuretobecarriedoutbytowns,associationsoftowns,touristoffices,associationsoftouristofficesandnon-profitorganizationsworkingtopromotetourism,andbyprivateinvestors,operatorsorownersofhotelsandprivatecampsites.

5.4.2.1. Hotels

Thebeneficiariesinthehotelsectorareownersoroperatorsofhotelswhoareinvestinginorderto:

- moderniseorrationalisetheirhotels,providedthattheyhavebeenopenedlegallyandarerunonasoundbasis,

- extendtheirhotels,whichwillhaveamaximumof75roomsafterextensionwork,

- buildnewhotelswithamaximumof75rooms.

Itshouldbenotedthatlandisnotincluded.

Asregardscapsoninvestments:

- thereisacapofEUR1,660,000onplanstomodernizeorrationalizehotels,but

- thereisnocaponinvestmentplannedtobuildorextendhotels.

Asregardstheamountofthesubsidy:

- maximumsubsidyof10%ofthecostoftheeligibleinvestments,

- undertheconditionthatthehotelmeetscriteriaasregardssize,fittingsandequipmentforhotelroomslaiddownbyLuxembourgregulation,anincreaseof5%ofthecostoftheeligibleinvestmentsispossibleforhotelswithfewerthan76rooms,forplannedextensionsandnewbuildingsinruralareas.

Otherincreasesof5%arepossibleforprojects:

- thatarehighlyspecializedinthefieldofsport,healthorconferencetourism,

- thatinvolvethefittingoutofpremisesforaccommodationwhichformpartofexistingrealpropertywithaculturalvalue,

- inwhichinvestmentsarebeingmadeespeciallyfordisabledpeople,andforinvestmentsmadeintheinterestsoftherationaluseofnaturalresources.

However,thetotalamountoffinancialaidgrantedmaynotexceed15%ofthecostsoftheeligibleinvestmentsandisgrantedeitherasacapitalsubsidy(financingbytheinvestor’sowncapital),orasinterestratesubsidies(financingbymediumandlong-termloans).

Formalities

ApplicationsforaidshouldbesubmittedtotheMinistryofTourismbeforethestartoftheinvestments.Afirmestimateandaplanforthefinancingoftheinvestmentshouldalsobesubmitted.Inthecaseofaplantobuildahotel,abusinessplanshouldbesentwiththeapplication.

5.4.2.2. Campsites

BeneficiariesinthecampingsectorareownersoroperatorsofcategoryIcampsitesandtheownersoroperatorsofcategoryIIandIIIcampsitesprovidedthatthecampsitewillmeetthestandardslaiddownforcategoryIcampsitesaftertheworkhasbeencarriedout.

10 MinistryofTourism(MinistèreduTourisme),6avenueEmileReuter,L-2937Luxembourg,Telephone:478-4756,www.mdt.public.lu



Stat

eai

dfo

rbus

ines

ses

Thefollowingareeligibleinvestments:

- modernization, rationalization,drainage, the rationaluseofnatural resourcesor integration into thenatural environmentof theinfrastructureofcampingenterprisesthathavebeenopenedlegallyandarerunonasoundbasis,providedthatatleast75%ofthecampingpitchesarereservedforshort-staytourists.Forcampsiteswhichonlyreserve50%and75%ofcampingpitchesforshort-staytourists,theamountusedtocalculatethesubsidieswillbeinproportiontothispercentage.

- creationofnewcampsitesortheextensionofexistingcampsiteswithatleast75%ofcampingpitchesreservedforshort-staytouristsaftertheworkhasbeencompleted.

Rates of subsidy

a)Regardingplansformodernization,rationalization,drainage,therationaluseofnaturalresourcesorintegrationintothenaturalenviron-mentoftheinfrastructureofcampingenterprises:

- maximumsubsidyof20%of theeligible investment forworkto integratethecampsite intothenaturalenvironment, tobuildabiologicalwastewatertreatmentplantortoconnectthecampsitetoawastewatertreatmentplant,andforinvestmentsmadeintheinterestsoftherationaluseofnaturalresourcesandforinvestmentsmadeespeciallyfordisabledpeople,

- maximumsubsidyof15%oftheeligibleinvestmentforworkinvolvingthemodernizationorextensionofsanitaryfacilitiesandforthecreation,extensionorimprovementofrecreationalfacilities,

- maximumsubsidyof10%oftheeligibleinvestmentforanyotherworkinvolvingmodernizationandrationalization.

Itshouldbenotedthatthemaximumsubsidyis15%ofthetotalinvestment.

b)Asregardsplanstocreatenewcampsitesorextendexistingcampsites:

- maximumsubsidyof15%oftheeligibleinvestment.

Financialaidisgrantedeitherasacapitalsubsidy((financinginadditiontotheinvestor’sowncapital),orasinterestratesubsidies(financ-ingbymediumandlong-termloans).Theeligibleinvestmentsmustbeinthegeneraleconomicinterest.

Formalities

Applications,togetherwithafinancingplanfortheinvestment,shouldbesubmittedtotheMinistryofTourismbeforetheinvestmentsaremadeandbeforeworkstarts.

5.5. What government aid is offered to industrial companies and service providers?

5.5.1. Financial aid for development and economic diversification11

ThepurposeoffinancialaidprovidedbytheMinistryoftheEconomyistoencourageinvestmentorresearchanddevelopmentaimedatpromotingthecreation,development,rationalization,conversionoradaptationofcompanies.

Beneficiaries

IndustrialcompaniesandserviceproviderswhichplayakeyroleintheeconomicdevelopmentofLuxembourgmayreceivethistypeoffinancialaid.

Theinvestmentorresearchanddevelopmentinvolvedmustmeettherelevantrequirementsasregardstownandcountryplanningregula-tionsandprotectionoftheenvironment.Inaddition,itmustbeinthegeneraleconomicinterestandpotentiallycontributetothedevelop-mentorstructuralimprovementoftheeconomy,toanimprovementinthegeographicalspreadofeconomicactivities,toanincreasedprotectionofthenaturalandhumanenvironmentortoamorerationaluseofenergy.

5.5.1.1. Financial aid for SMEs

BeneficiariesofthistypeofaidareSMEswhichmeetallthefollowingconditions12:

- fewerthan250workers,

- turnoverofEUR50millionorlessoratotalannualbalancesheetofEUR43millionorless,

- theproportionofsharecapitalorvotingrightsheldeitherindividuallybyonecompanywhichisnotanSMEorjointlybyseveralaf-filiatedcompanieswhicharenotSMEsislessthan25%.

11 MinistryoftheEconomy(Ministèredel’Economie),DevelopmentandEconomicDiversificationDepartment(ServiceDéveloppementetdiversificationéconomiques),6BdRoyal,L-2914Luxembourg,Telephone:478-4318,www.eco.public.lu(onlyinFrench).

12 LuxembourgRegulationof16March2005adaptingthedefinitionofmicro,smallandmedium-sizedenterprises.



Stat

eai

dfo

rbus

ines

ses

ThetotalmaximumfinancialaidforSMEsmaynotexceed7.5%ofinvestmentcosts.However,therateofaidmaybeincreasedforsmallcompanieswhichmeetallthefollowingconditions(Actof21February1997):

- fewerthan50workers,

- turnoverofEUR10millionorlessorthetotalannualbalancesheetisEUR10millionorless,

- theproportionofsharecapitalorvotingrightsheldeitherindividuallybyonecompanywhichisnotanSMEorjointlybyseveralaf-filiatedcompanieswhicharenotSMEsislessthan25%.

5.5.1.2. Scheme offering incentives for Research and Development (R&D)

Thisschemeappliestoinvestmentsandfundamentalresearch,industrialresearchandpre-competitivedevelopmentactivitiesandrelatedactivitiesaslaiddownbylawandcarriedoutbycompaniesandresearchcentresthatfallwithinthescopeofapplicationofthelaw.

Theschemeappliestothefollowingpre-competitivedevelopmentactivities:

- investments,operations,programsorprojectsaimedatidentifying,defining,studying,designing,developing,perfectingortestingnew,amendedorimprovedproducts,services,techniquesorprocessesthatmayleadtosubsequentmarketingortoindustrialorcommercialapplication;

- pilotprojectsordemonstrationprojectscarriedoutwithaviewtotestingorconfirmingnewtheoreticalorpracticalknowledgeorresultsconnectedtonew,amendedorimprovedproducts,services,techniquesorprocesses;

- definitionor feasibility studies,monitoring technological development,gaining increasedknowledgeor circulatingknowledgeorknow-howintheformofthetransferoftechniques,patentsorotherintellectualpropertyrights,training,thetemporaryexchangeoremploymentofresearchers,providedthattheseresearchersworkfull-timeonR&Dincompaniesorresearchcentres.

Ingeneral,thefinancialaidprovidedmaynotexceed25%ofeligiblecosts.Aidisalsoprovidedforindustrialinvestments,operations,programsorresearchprojects.Aidforindustrialinvestments,operationsandR&Dmaybegrantedforupto50%oftheeligiblecosts.

Financialaidmaybe increasedto75%of thecostof the investmentsorof the fundamental researchcarriedoutbycompaniesandresearchcentresthatfallwithinthescopeofapplicationofthelaw.

Providedthatthemaximumrateoffinancialaidprovidedforinthethreepreviousindentsdoesnotexceed50%,75%and100%oftheeligiblecostsrespectively,therateofaidapplicabletopre-competitivedevelopmentresearch,industrialorfundamentalresearchmaybeincreasedby5%,10%,15%or25%inaccordancewiththerulesandundertheconditionslaiddownbylaw.

5.5.2. Economic development of certain regions of the country13

Thepurposeofthistypeofaidistopromoteoperationsinvolvingcreation,extension,modernization,adaptationanddiversificationwhichareintheinterestsofaspecificregion,whichplayakeyroleintheeconomicdevelopmentoftheregioninwhichtheytakeplaceorwhichcontributetoanimprovementinthegeographicalspreadofeconomicactivities.

Beneficiariesofthistypeofaidmaybeindustrialcompaniesandserviceproviders.

Operationswhichmeettheobjectivesofthelawmaybemadeintheformofinvestmentsintangibleorintangiblefixedassetsorintheformofcreatingjobslinkedtoaninvestment.

Inordertobeabletoreceivegovernmentaidunderthislaw,theinvestmentmustbemadewithinoneofthefollowingthreeregions:

- the“Southern”regionwherethetownsofBascharage,Bettembourg,Differdange,Dudelange,Esch-sur-Alzette,Mondercange,Pétan-ge,SanemandSchifflangearelocated,

- the“Northern”regionwherethetownsofClervaux,Hosingen,Kautenbach,Munshausen,WiltzandWilwerwiltzarelocated,

- the“Eastern”regionwherethetownsofEchternach,Grevenmacher,Mertert,MompachandRosportarelocated.

Thereisacapontheamountoffinancialaidofallkindsthatmaybeprovidedof10%ofthecostofinvestmentsintangibleorintangiblefixedassetsorjobcreation.

Thisrateisconsideredasa“netsubsidyequivalent”.Thenetsubsidyequivalentrepresentsthefinalbenefitthecompanyisexpectedtogainfromthefinancialaidforinvestmentinfixedassets.Itiscalculatedbydeductingthetaxpayableonthesubsidybymeansofdeprecia-tionofthefixedassetinquestionfromthenominalamountofthesubsidy.Wherethefinancialaidand/ortheinvestmentsis/arespreadovertime,thisamountisdiscounted.

Investmentsbysmallormedium-sizedenterpriseswithinoneoftheabove-mentionedregionsmayalsobenefitfromincreasedregionalaidofagrossamountof10%oftheeligiblecosts.

Inordertoreceiveregionalaid,atleast25%oftheeligiblecostsmustbefinancedbytheequityoftherecipientundertaking.

13 MinistryoftheEconomy(Ministèredel’Economie),DevelopmentandEconomicDiversificationDepartment,6BdRoyal,L-2914Luxembourg, Telephone:478-4318,www.eco.public.lu(onlyinFrench).



Stat

eai

dfo

rbus

ines

ses

5.5.2.1. Capital subsidies

Financialaidgrantedintheformofcapitalsubsidiesisintendedtocover:

- partofthepurchasepriceorcostpriceofinvestmentsinrealproperty,whetherconstructedornot,ininstallations,facilities,equip-mentortooling,

- partofthepayrollcostcalculatedoveraperiodof24monthsinrelationtothenetcreationofjobs,withthejobsinquestionhavingtocontinuetoexistforatleastfiveyears,

- partofthepurchasepriceforpatents,operatinglicences,technicalknowledge,whetherpatentedornotorofotherintangibleassetsofasimilarkind.

ForundertakingswhichdonotmeetthecriteriaforSMEs,theproportionof intangible investmentsmaynotexceed25%ofthetotalinvestmenteligibleforregionalaid.

5.5.2.2. Tax relief14

Taxpayerswhosetupnewcompaniesorstartnewmanufacturingprocesseswhichareacknowledgedasbeingespeciallyappropriateforcontributingtoregionaleconomicdevelopmentorimprovingthegeographicalspreadofeconomicactivitiesmaybegrantedtheexemp-tionofpartoftheprofitsgeneratedbytheirnewcompaniesormanufacturingprocesses,asregardsincometaxorcorporationtaxandcommunaltradetaxonprofits,fortenfinancialyearsofoperation,providedthatthegrantingofthisexemptionisunlikelytounderminetheprofitabilityofexistingcompanieswhichdonotreceivethisformoftaxrelief.

- Newcompaniesareconsideredashavingbeensetup,andnewmanufacturingprocessesasintroducedwhensettingupworkorintroductionhasstartedandistoendnolaterthanduringthethirdyearafteritstarted.If,forareasonwhichisbeyondthetaxpayer’scontrol,workisdelayed,therelevantministerialdepartmentsmaygrantadditionaltime.Theexemptionisgrantedasfrom1Januaryofthecalendaryearaftercommissioningandforthefollowingninefinancialyears.

- Theexemptionamountsto25%oftheprofitsgeneratedbynewcompaniesorbynewmanufacturingprocesses.Thesumsofthere-ductionsintaxcreatedbythepartialexemptionofprofitsfortenfinancialyearsofoperationmaynotexceedaspecificpercentageofinvestmentinland,constructions,installations,facilities,equipments,toolingandintheintangibleassetsassignedtoanewbusinessoranewmanufacturingprocess,oraspecificpercentageofthepayrollcostsover24monthsatthemostinrelationtothenumberofpermanentjobscreatedbythenewcompanyorbytheintroductionofthenewmanufacturingprocess.

- Inordertobeabletobenefitfromtheexemptionprovidedforbythislaw,companyoperatorsmustkeepdueandproperaccountingrecords. Ifanexistingcompany isextendedordiversified,profitsgeneratedbythenewmanufacturingprocessesmustbeshownclearlyintheaccounts.

- Exemptionsareonlygrantedatthetaxpayer’srequest.Therequestshouldbemadebeforetheplantosetupanewcompanyhasstartedtobeimplementedorbeforethenewmanufacturingprocesshasbeenintroduced.

5.5.3. Other aid given by the National Credit and Investment Corporation (Société Nationale de Crédit et d’Investissement or “SNCI”)15

5.5.3.1. Medium and long-term loans from the SNCI

TheNationalCreditandInvestmentCorporationgrantsmediumandlong-termloanstopromotethecreation,takeover,extension,conver-sion,adaptationandrationalizationofindustrialcompaniesandserviceproviders,providedthatsuchcompaniesplayakeyroleinthecountry’seconomicdevelopment.

ThebeneficiariesoftheseloansmaybecompanieshavingequityofatleastEUR25,000.Theamountoftheloansislimitedtotheamountofequity.Applicantsmaybeaskedtoprovidepersonalsecuritiesorrealsecurityinterests.

Thesemediumandlong-termloansareintendedtopartiallyfinancethepurchaseofdepreciabletangibleandintangibleassetsinaccord-ancewiththeusualeconomicandfinancialcriteriaandlandsolelyforbusinessuse.Anypartsofrealpropertythataretobeusedforotherpurposes,rollingstockandinventoriesofrawmaterialsorfinishedproductsareexcludedfromthistypeofloan.

Thetermofmedium-termloansisgenerallyfiveyearsandthatoflong-termloansisamaximumoftenyears.TheinvestmentplanforwhichaloanmayrequestmustamounttoatleastEUR100,000.Theminimumamountofmediumandlong-termloansmaynotbelessthanEUR25,000,andthemaximumamountmaynotexceedEUR10million.Theproportioncoveredvariesbetween25%and50%ofthetotalcostoftheinvestment.

14 IncometaxorcorporationtaxAuthority(AdministrationdesContributionsDirectes),45bdRoosevelt,L-2982Luxembourg, www.impotsdirects.public.lu(onlyinFrench)15 SNCI,7rueduStEsprit,L-1012Luxembourg,Telephone:461971-1,www.snci.lu



Stat

eai

dfo

rbus

ines

ses

5.5.3.2. Taking holdings

Inordertopromotethecreation,extension,conversion,adaptationandrationalizationofindustrialandcommercialcompaniesincorporat-edintheformoflimitedliabilitycompanies(sociétésàresponsabilitélimitée)orpubliccompanies(sociétésanonymes)underLuxembourglaw,havingtheirprincipalestablishmentinLuxembourg,theSNCImay:

- joinassociations,groups,researchorstudyassociationssetupforthepurposeofcreatingorrestructuringcompanies,

- contributesomeofthecapitalwhenacompanyissetuportakepartinanincreaseofcapital,

- purchaseaparticipationinacompany’scapital,

- subscribeforbondsthatmaybeconvertedintoshares.

TheSNCIonlytakesholdingsinprojectsthatareinthegeneraleconomicinterest.Unlessauthorizedtodosobythegovernment,theholdingmaynotexceed49%ofacompany’scapitalorbemorethan10%oftheSNCI’sequity.ThecompanyinvolvedmaynotbeincompetitionwithotherLuxembourgcompanies.

5.5.3.3. Profit-sharing loans

Theaimofprofit-sharingloansistopromotethecreation,extension,conversion,adaptationandrationalizationofindustrial,commercialandcraftcompaniesinthegeneraleconomicinterest.

Theamountofprofit-sharing loans isfixedonacase-by-casebasisby theSNCI’sBoardofDirectorsand isapprovedby the relevantministries.

Thetermofaloandependsonthefinancingplan,butmaynotexceedtenyears.

5.5.3.4. Loans for innovation

Theaimofthistypeofloanisthefinancingofcostsrelateddirectlytoacompany’sR&Dprogramortoaprojectthatisintendedtointro-duceanewproductorserviceortodevelopnewmanufacturingormarketingprocesses,providedthatthesecostsarelikelytogiverisetothecreationofdepreciablevalueoveraperiodofmorethanoneyearinaccordancewithcurrentlyacceptedeconomicandfinancialcriteria.

Beneficiariesmaybeindustrialcompaniesorserviceproviderswhichplayakeyroleineconomicdevelopment.

Loansforinnovationgenerallycover25%oftheeligibleamountofthecostoftheR&Dproject.TheamountisfixedinrelationtoanyinnovationsubsidygrantedbytheMinistryoftheEconomy.

ThetermoftheseloansisbetweenthreeandfiveyearsdependingonthenatureoftheR&Dprojectandinterestisfixedat2.5%peryear(from1July2003).Repaymentsaremadeonaquarterlybasis.Theremaybeagraceperiodofnotmorethantwoyearsandapplicantsmaybeaskedtoprovidepersonalsecuritiesorrealsecurityinterests.

Applicationsfortheseloans,togetherwithacompletebusinessplan,shouldbesubmittedtotheSNCI.

5.6. Is there any tax relief on investment?16

Article152bisoftheActof4December1967onincometaxorcorporationtax,providesfortaxrebates,forinvestmentsinacompanylocatedinLuxembourgthatistostaytherepermanently.Inaddition,theseinvestmentsmustbephysicallymadewithinLuxembourg.

5.6.1. Additional tax rebate of 10% on investments

Theinvestmentsinquestionarepurchasesofdepreciabletangiblegoodsotherthanbuildings17,livestockandmineralandfossilminesduringthefinancialyearofoperation.

Investments excluded:

1. goodsthataredepreciableoveraperiodoflessthanthreeyears,

2. goodsacquiredbythetransfer,forvaluableconsideration,ofallofacompany,anindependentpartofabusiness,orafractionofabusiness,

3. usedgoods,

4. individualgoodsacquiredfreeofcharge,

5. motorvehicles,withsomeexceptions.

16 IncometaxorcorporationtaxAuthority(AdministrationdesContributionsDirectes),45bdRoosevelt,L-2982Luxembourg,Telephone:40800-1, www.impotsdirects.public.lu(onlyinFrench).17 Exceptboats.



Stat

eai

dfo

rbus

ines

ses

Rateofthetaxrebateforadditionalinvestment:10%

Additionalinvestmentisdefinedasfollows:

Valueoftheinvestmentattheendoffinancialyear -Referencevalue(minimumofEUR1,850)18; +Depreciationapplied ----------------------------------------------------------- =Additionalinvestment

5.6.2. Tax rebate on overall investment

Theinvestmentsinquestion(madeduringthefinancialyearofoperation)arethefollowing:

- investmentsintangibledepreciablegoodsotherthanbuildings,livinglivestockandmineralandfossilmines,

- investmentsinsanitaryinstallationsandcentralheatingfacilitiesinhotels,including,however,onlythepartoftheinstallationsorfacilitiesrelatingtopremisesnormallyusedashotelroomsandrelatedpremises,

- investmentsin“social”typebuildings,

- investmentsinfixedassetsofanecologicaltypethathavebeenapprovedforspecialdepreciationreferredtoinArticle32bis.

Investments excluded:

- goodsthataredepreciableoveraperiodoflessthanthreeyears,

- goodsacquiredbythetransfer,forvaluableconsideration,ofallofacompany,anindependentpartofabusiness,orafractionofabusiness,

- usedgoods,

- motorvehicles,withsomeexceptions.

Pleasenote:If,duringthethree-yearperiod,theacquisitionpriceofallthegoodsreferredtointhefirstindentaboveexceedsEUR250,000,thebasesforthecalculationsoftherespectivetaxrebatesshouldbereducedbytheamountthatexceedsthethresholdofEUR250,000.Thegoodsreferredtoinindents2and3aboveshouldbeincludedinthecalculationofataxrebateifthisisanewbusiness(newly-createdbusinessandgoodsinvestedduringthefirstthreeyears).Thefollowingarenotconsideredasgoodsinvestedinthecontextofanewbusiness:

- theacquisitionofallofacompany,anindependentpartofabusinessorafractionofabusinessinexchangefortheallocationtothetransferorofadirectorindirectholdinginthenewly-createdbusiness,

- theacquisitionofallofacompany,anindependentpartofabusinessorafractionofabusinesswherethetransferorhasadirectorindirectholdinginthenewly-createdbusiness,

- usedgoodswhichhavebeenpreviouslyleasedunderconditionsgivingrisetotaxrebatesforthelessor.

Please note:

Leasing:beneficiaryofataxrebate:lessee-investor

Conditions: -additionaldepreciationschedule,

-purchasepriceorcostpricenotincludinginterestchargedbythelessortothelessee-investor,

-termused:usualtimeofuse,

-statementthatthelessorhasnotappliedfortaxreliefonthesegoods.

Baseforthecalculationofthetaxrebate:purchasepriceorcostpriceofgoodsacquiredduringafinancialyear.

Rates:6%onEUR150,000and2%on(Base–EUR150,000).

IntheeventofinvestmentinfixedassetsofanecologicaltypethathavebeenapprovedforspecialdepreciationreferredtoinArticle32bisLIR,thetaxrebatesof6%and2%areincreasedto8%and4%respectively.

Thetaxrebatethatistheresultoftheadditionofthetaxrebatesonadditionalinvestmentandonincomeisdeductedfromthetaxpayablefortheyearoftaxationduringwhichthefinancialyearinwhichtheinvestmentwasmadeended.Ifthereisinsufficienttax,theexcesspartofthetaxrebatemaybedeductedfromtaxforthefollowingtenyearsoftaxation.

18 1Referencevalue=arithmeticalaverageofthevalueofthesegoodsattheendoffivepreviousfinancialyears.



Stat

eai

dfo

rbus

ines

ses

5.7. What government aid is provided for exports?

5.7.1. “Office du Ducroire” – Aid for exporters19

Winningnewmarkets isoneof themainchallengesfacingcompanies.Exports toneighbouringmarkets,markets innewEUMemberStates,orothercountriesrepresentachanceforcompaniestoincreasetheiractivityandtheirturnover.However,exportingtoforeignmarketsisnotrisk-free.

The”OfficeduDucroire”istheretohelpLuxembourgcompaniesinthisoftendifficulttaskandsupportsthemwhereverpossible.Itcanhelpcompanieswiththeirsearchfornewexportmarketsintheformofthepartialrefundofexpenseslinkedtopromotion,exporttrainingandtheholdingoftradefairs.Companieswhichidentifynewcustomersabroadcanusethe“OfficeduDucroire”asasafetynettoprotectthemselvesagainstbadpayers,theinsolvencyoftheirexistingcustomersandpoliticalrisks.

Governmentsupportmaytaketheformofcreditinsurance,paymentofsomeoftheexpensesinvolvedinpromotion,exhibitionsandtrain-ingordirectparticipationinexportfinancing.

“Office du Ducroire: STATUS

The“OfficeduDucroire”wascreatedin1961andisapublicinstitutionhavinglegalpersonality.ItisundertheauthorityoftheMinistryofFinance.Thesecretariatofthe“OfficeduDucroire”isattachedtotheChamberofCommerce.The“OfficeduDucroire”iscurrentlygovernedbytheActof24July1995andbytwoLuxembourgregulationsof27July1997.

5.7.1.1. Credit insurance

Protection against bad payers

Whencompaniessellproductsorservices,theyexpecttobepaid.Cancompaniesbesurehoweverthattheyknowtheircustomerswellenoughandcantheyassesstheirsolvency?Despitetakingallnecessaryprecautions,companiesarenevercompletelysafefromabadpayerorfromthebankruptcyofloyalcustomerspreviouslyconsideredassound.

Since1961,the“OfficeduDucroire”,asaninstitution,hasinsuredtheexportsofLuxembourgcompanies.Notonlyexportssuchascon-sumergoods,capitalgoodsorindustrialinstallationsmaybeinsuredbutalsoagreementsofallkindssuchasserviceagreements,thesaleofintellectualgoods(e.g.licences)andknow-how,engineeringagreements,etc.Onlysalestocompaniesmaybecovered,assalestothepublicdonotfallwithinthescopeoftheinsuranceoffered.

Operation

Companiesgenerallysubscribepoliciesforallsalesoperationspayableoncreditinthecountryinquestion.(Deposits,pre-paymentsandpaymentsbyconfirmedletterofcreditareexcluded.)

Prevention and monitoring

Foreachdebtor,acreditlimitisfixedandthisdeterminesthemaximumsumcovered.The“OfficeduDucroire”assessesthesolvencyofcompanies’currentandfuturecustomersandmonitorsthemconstantly.Companiesareimmediatelyinformedofanysignofdefault.

Collection

Underthissystem,ifaninvoiceisnotpaidonthedateagreedwithacustomer,the“OfficeduDucroire”isresponsibleforcollectingpay-ment.Ittriestoreachanamicableagreementoritmayinstitutelegalproceedings.Ithaspartnerson-siteinthevariouscountriesinvolvedwhospeakthecustomer’slanguageandwhoarefamiliarwiththelegalsysteminthecountryinvolved.

Compensation

If,despiteallitsefforts,thedebtisnotpaidorisonlypaidinpart,the“OfficeduDucroire”willpaythecompanyinvolvedtheproportionoftheinvoicelaiddowninthepolicy.

How can companies sign up for this?

Applicationsforpoliciesshouldbesenttothe“OfficeduDucroire”.Theformtobeusedforthisapplicationisavailableonitswebsite(www.ducroire.lu-onlyinFrench)orcanbesentbymailonrequest(telephone:00-352423939-320).The”OfficeduDucroire”thenexaminestheapplicationand,ifitdecidestoaccepttheapplication,anofferofinsuranceissenttotheapplicant.

19 OfficeduDucroire,7rueAlcidedeGasperi,L-2981Luxembourg, Telephone:423939320,www.ducroire.lu(onlyinFrench).



Stat

eai

dfo

rbus

ines

ses

5.7.1.2. Financial aid with exports

Applicationsforfinancialaidwithexpensesrelatedtopromotion,exhibitionsandtrainingforexportsarehandledbyasub-committeecalled“Copel”(CommitteeforthepromotionofLuxembourgexports-Comitépourlapromotiondesexportationsluxembourgeoises)createdon29April2002byacooperationagreementbetweenthe“OfficeduDucroire”andtheState.ThefinancialaidthatmaybegrantedcomplieswithEUregulationsongovernmentaidasregardsexports,inparticularwiththe“Deminimisaidregulation”.

Financialsupportmayberequestedforthefollowing,withoutbeinglimitedtothislist:

- Designandtranslationofpromotionalmedia.

- Tradefairs,specializedexhibitionsabroad,seminarsandconferences.

- Exporttraining.

- Advertisingcosts.

- Advisoryservices,etc.

Thefollowingtypesofordinaryexpenseslinkedtoexportactivityarenoteligible:

- Travellingandaccommodationexpensesincurredduringprospecting.

- Thecostofprintingbrochures,etc.

Costsinternaltothecompanyarenotincluded.

What is the maximum amount of financial aid granted?

Iftherearenostipulationstothecontrary,themaximumamountoffinancialsupportgrantedmaynotexceed50%ofthecostsincurred,cappedatEUR100,000overthreeyears.Thefinancialsupportgranteddependsonbudgetaryavailability.

Design and translation of promotional media (brochures, website Internet, CD-Roms, etc.)

Financialsupportmaybeprovidedforthedesignandtranslationofhighqualitypromotionalmediapreparedbythirdpartyserviceprovid-ersandintendedforprospectingexportmarkets.

Itshouldbenotedthatthecostsofthedesignorpreparationofawebsiteforexportsmaybethesubjectofasinglefinancialcontributionlimitedto50%ofthecostsincurredwithacapofEUR5,000.

Trade fairs, specialized exhibitions abroad, seminars and conferences.

Financialaidforstandrentaliscappedasfollows:

- 50%ofsiterentalcostswithacapofEUR10,000perapplicantandperyearforthefirstthreetimesanapplicantattendsatradefairorspecializedexhibition,

- 25%ofsiterentalcostswithacapofEUR5,000perapplicantandperyearforthefourthandsubsequenttimesanapplicantattendsatradefairorspecializedexhibition.

Forcostslinkedtotradefairsotherthanstandrental,inparticularthecostofdesigningastand(conceptualelement),financialaidmaybegrantedasfollows:

- 50%ofcostsincurred,withacapofEUR10,000perapplicantandperyearforthefirstthreetimesanapplicantattendsatradefairorspecializedexhibition,

- 25%ofcostsincurred,withacapofEUR5,000perapplicantandperyearforthefourthandsubsequenttimesanapplicantattendsatradefairorspecializedexhibition.

Financialaidofamaximumof50%ofregistrationfeesmaybegrantedtoLuxembourgundertakingsattendingseminarsandconferenceswithadirectandindisputablelinkwiththepromotionofexternaltrade.

Export training

Financialaidofamaximumof50%maybegrantedforregistrationcostsfortrainingprogrammeswithadirectandindisputablelinkwiththepromotionofexternaltrade.

Advertising costs

Financialaidlimitedto20%ofthecostsincurredmaybegrantedforadvertisinginprofessionalandinternationalguides,reviews,cata-logues,CD-Romsandwebsites.



Stat

eai

dfo

rbus

ines

ses

Advisory services

Advisoryservicesprovidedbythirdparties(legal,tax,marketing,etc.)requiredtolaunch:

- anewproductorservice,

- anexistingproductonanewmarketareeligibleforaid,uptoamaximumof50%.

Who can receive financial aid?

Companiesthatarefinanciallysoundandthathavesufficientstockholder’sequitymaybegrantedfinancialaid.

Companiesinthetransportsectorandactivitieslinkedtotheproduction,processingormarketingoftheproductslistedinAnnex1oftheECTreatyarenoteligibleinaccordancewithArticle1ofthe“Deminimisaidregulation”.

Forcompaniesinthefinancialorrealestatesector,onlytheactivities,productsordistributioncircuitsthatareinnovatorywithinthestrictmeaningofthetermmayreceivefinancialaid.

How can this financial aid be requested?

Applicationsshouldbemadebeforeanycostsareincurred.Theapplicationformmaybedownloadedfromthe“OfficeduDucroire”’swebsiteatwww.ducroire.lu(inFrenchonly).Balancesheetsforthelasttwoyears,thecompany’sarticlesofassociationandthebusinesspermitshouldbeenclosedwiththeapplicationform.

How long does it take to get an answer?

TheCopelsub-committeemeetsonceamonthtodecideontheadmissibilityofapplications.IftheCopelsub-committeegivesitstechni-calagreement,theapplicationissenttothe“OfficeduDucroire”committeeforfinalapproval.Intheeventthiscommitteeapprovestheapplication,aletterofpromiseisissuedwhichisvalidforsixmonths.Iftherelevantcostshavenotbeenincurredwithinsixmonths,anextensionofsixmonthsmaybegrantedonrequest.Paymentismadesolelyonthebasisofpaidinvoices.

5.7.2. Export credits issued by the National Credit and Investment Corporation (Société Natio-nale de Crédit et d’Investissement or “SNCI”)20

Sectorswhichmaybegrantedthesecreditsmaybeindustrialcompanies,tradecraftcompaniesorserviceproviders.

EligibleexportcostsarethoseincurredinexportinggoodsmanufacturedorservicesprovidedbycompaniesestablishedinLuxembourg.Ifagroupofproductsorservicescontainingapartfromoutsidethecountryisexported,thecreditislimitedtotheLuxembourgpart.

ApplicationsshouldbesubmittedtotheNationalCreditandInvestmentCorporationthroughtheintermediaryoftheapprovedbankinginstitution.

5.8. What government aid is available for continuing vocational training?21

TheActof22June1999onsupportanddevelopmentofcontinuingvocationaltrainingisaimedatpromotinginterestincontinuingpro-fessionaleducationincompaniesonthebasisoftheprincipleofjointfinancingoftrainingcosts,whileimposingcompliancewithcertaincriteriaofqualitywithaviewtoimplementinganefficientandhigh-qualitytrainingpolicy.

AllundertakingslegallyestablishedinLuxembourgmayreceivethisaid.

FinancialaidmayonlybegrantedbytheStateif:

- atleasthalfthetimespentontrainingtakesplaceduringnormalworkinghours,

- thetotalcostoftrainingactivitiesexceeds0.5%ofthecompany’saggregateemploymentcosts,

- thecompanystructuresandplansitstrainingactivitiesintheformofatrainingreport(intheeventofannualinvestmentoflessthanEUR12,400orintheformofatrainingplan,tobeapprovedbytheMinistryofNationalEducation(Ministèredel’EducationNationale),andafinalreport(intheeventofannualinvestmentofmorethanEUR12,400),

- foritstrainingactivities,thecompanyusesbodiesthatarelawfullyestablishedunderthelawgoverningsettingupbusinesses.

FinancialaidmaybegrantedbytheStateinoneoftwoways,atthecompany’schoice:

- directaid:thesubsidyofthenetamountof10%ofthetotalcostofinvestmentincontinuingvocationaltrainingduringthefinancialyearofoperation,

20 SNCI,7rueduStEsprit,BP1207,L-1012Luxembourg,Telephone:461971-1,www.snci.lu21 MinistryofNationalEducationandProfessionalTraining(Ministèredel’EducationNationaleetdelaFormationProfessionnelle),29rueAldringen, L-2926Luxembourg,www.infpc.lu



Stat

eai

dfo

rbus

ines

ses

- incometaxorcorporationtaxrebate:thisamountsto10%ofthetotalcostoftheinvestmentincontinuingvocationaltrainingduringthefinancialyearofoperationandwillbedeductedfromincometaxorcorporationtaxowedfortheyearoftaxation.

Taxrebatesaregrantedonthebasisofarequesttobeenclosedwiththetaxreturnwithacertificateissuedbytheabove-mentionedMinistryasdocumentation.

5.9. What government aid is available as regards protection of the environment?

5.9.1. Ecological grant to encourage the production of electricity using wind power, hydraulic power, biomass and biogaz22

TheMinistryoftheEnvironment(Ministèredel’Environnement)givesecologicalgrantstoencouragetheproductionofelectricitywithinthecountryusingwindpower,hydraulicpower,biomassandbiogasandintendedtosupplytheelectricitynetworkofanetworkmanagerestablishedonnationalterritory.

Thegrantisforfacilitieswhicharesetupandareoperationalbetween1January2005and31December2007.Thegrantmaybegiventonaturalorlegalpersonsforaperiodofuptotenyears,withinthescopeofbudgetarylimits.

Thegrantisawardedperkilowatt-hour(kWh)suppliedtoanetworkmanager’selectricitynetworkandisfixedatEUR0.025perkWhwithinthefollowinglimits:

1. forinstallationsproducinghydraulicpowerorenergyfrombiomassorbiogas,themaximumelectricalpowerofasingleinstallationmaynotexceed3,000kW.

2. forwindpowerinstallations,themaximumelectricalpowerofasingleinstallationmaynotexceed5,000kW.

Applicationsforgrantsshouldbesentbefore1Marchoftheyearthatfollowstheyearofinvestment,totheMinistryoftheEnvironment.AstandardformisprovidedbytheEnvironmentalAuthority(Administrationdel’Environnement).

Grantsmustbereturnediftheyhavebeenobtainedonthebasisoffalsedeclarations,inaccurateinformationoriftheyshouldnothavebeenpaid.GrantsmaynotbecombinedwithfinancialaidgrantedundertheschemeprovidingaidfortheprotectionoftheenvironmentrunbytheMinistryoftheEconomyorbytheschemeprovidingaidfortheprotectionoftheenvironmentrunbytheMinistryofMiddleClasses.

5.9.2. System of financial aid for the protection of the environment, the rational use of energy and the production of energy from renewable sources23

TheMinistryoftheEconomycanprovidefinancialaidforoperationsinvolvedintheprotectionoftheenvironmentandtherationaluseofenergybyindustrialundertakingsorserviceproviders,wherethecompaniesinvolvedplayakeyroleineconomicdevelopment.

Financialaidmaybegranted,undercertainconditions,forinvestmentsaimedatproducingenergyfromso-calledrenewablesourcesbycompaniesinanysectorthatareincorporatedintheformofacommercialcompanyinLuxembourg.

Investments

Whereanundertakingmakesaninvestmentthatcontributestotheprotectionoftheenvironment,itmay,undercertainconditions,receiveinvestmentaidwhichmaynotexceed30%oftheeligiblecosts.

Companieswhichinvestinthefieldoftherationaluseofenergymayreceiveinvestmentaidwhichmaynotexceed40%oftheeligiblecosts.

Investmentsintheproductionofelectricalpowerfromrenewableenergysourcesmaygiverisetoinvestmentaidwhichmaynotexceed40%oftheeligiblecosts.

Acompanythatinvestsinafacilitythatproducesbothelectricityandheatmayreceiveinvestmentaidthatmaynotexceed40%oftheeligiblecosts,providedthatitshowseitherthattherateofconversionisparticularlyhighorthattheinvestmentenablesittoreduceitsconsumptionofprimaryenergy.

SMEswhichmakeoneofthesetypesofinvestmentmayreceiveanincreaseofagrossamountof10%.

Formalities

Applicationsforaidshouldbesubmittedbeforetheinvestmentinquestion,ifitisnottobetimebarred.Theabove-mentionedformsofaidmaynotbecombinedwiththeaidofferedtothemiddleclasssectorbytheMinistryofMiddleClasses.

22 EnvironmentalAuthority,Energysavingdepartment(Administrationdel’Environnement,Servicedeséconomiesd’énergies), Telephone:405656–537,

http://www.environnement.public.lu/energies_renouvelables/index.html(onlyinFrench).23 MinistryoftheEconomy(Ministèredel’Economie),6BdRoyal,L-2914Luxembourg,www.eco.public.lu(onlyinFrench).



Stat

eai

dfo

rbus

ines

ses

5.10. What assistance is available for companies who hire job seekers?24

5.10.1. Aid for hiring long-term and older job seekers.

Financialaidisavailablewhenolderunemployedworkersandthelong-termunemployedarehired.Thistakestheformoftherepaymentofsocialsecuritycontributionspaidbytheemployer:

- for2yearswhenanunemployedworkeragedover30whohasbeenregisteredunemployedfor12monthsishired,

- for3yearswhenanunemployedworkeragedover40whohasbeenregisteredunemployedfor3monthsishired,

- until retirementof thepersonwhen theunemployedpersonagedover45whohasbeen registeredunemployed for1month ishired.

5.10.2. The Ministry of Labour and Employment also provides financial aid for training

Financialaidfortrainingappliesto:

- periodsoftrainingandmoreparticularlytrainingtohelpyoungpeoplefindjobs,

- temporaryagreementsforyoungpeopletoactasauxiliaries,

- periodsoftrainingtohelpadultsfindjobs.

5.10.3. Income tax or corporation tax rebates when job seekers are hired

Lastly,incometaxorcorporationtaxrebateshavebeenintroducedforthehiringofjobseekers.Thisamount,to10%ofthejobseeker’sgrossmonthlyremuneration,maybedeductedduringthefirstmonthoftheemploymentcontractandrecordedfor36months inthe“ProfitsandLosses”accountunder“Operatingexpenses”.

5.11. Government financial aid for investments in the audiovisual field

TheLawof13December1988,asamended,createdatemporarytaxschemeonthebasisofaudiovisual investmentcertificates.ThisschemeisaimedatpromotingventurecapitalinvestmentsintheproductionofaudiovisualworkstobeproducedmainlyintheEuropeanUnionandespeciallyinLuxembourg.

Forthe1999to2015financialyears,thegovernmentmayissueaudiovisualinvestmentcertificatestoauthorizedcapitalcompaniesthatareresidentinLuxembourgandfullytaxablethere,whosemaincorporateobjectisaudiovisualproductionandwhicheffectivelyproduceaudiovisualworksundertheconditionslaiddowninArticle4oftheLawof21December1998.

Theaudiovisualworkswhichmaybegrantedtheschemeinvolvingaudiovisualinvestmentcertificatesmustmeetthefollowingcriteria:

- theymustcontributetothedevelopmentoftheaudiovisualproductionsectorinLuxembourg,takingintoaccountareasonablepro-portionalitybetweenthebenefitsgrantedandthelong-termeconomic,culturalandsocialeffectoftheproductionoftheseworks,

- theymustbedesignedtobeproducedmainlyintheEuropeanUnionandespeciallyinLuxembourg,

- theymustbedistributedorjointly-distributedbytheproductioncompany,inparticularbymeansofsaidcompanyorcompaniesef-fectivelyandpermanentlyholdingasignificantproportionoftherights,

- theymustofferreasonableprospectsofreturnsoninvestment.

Thefollowingareautomaticallyexcludedfromthisformofaidintroducedbytheact:

- pornographicworks,worksincitingviolenceorracism,praisingcrimesagainsthumanityand,generally,breachingpublicorderandpublicdecency,

- worksintendedorusedforadvertisingpurposes,

- programsofinformation,discussionofcurrentissuesandsportingbroadcasts.

Audiovisual investment certificates25

Audiovisualinvestmentcertificatesareonlyissuedundercertainconditions:

- theworksthatarethesubjectoftheapplicationmusthavebeencompleted,

24 MinistryofLabour(MinistèreduTravail),EmploymentAuthority(Administrationdel’Emploior“ADEM”),10rueBender,BP2208,L-1022Luxembourg,Telephone:478-5300,www.adem.public.lu(onlyinFrench).

25 NationalFundfortheSupportofAudiovisualProduction(FondsNationaldeSoutienàlaProductionAudiovisuelle),5rueLarge,L-1917Luxembourg,www.filmfund.lu(sitecurrentlynotavailable).



Stat

eai

dfo

rbus

ines

ses

- theamountoftheaudiovisual investmentcertificatesmaynotexceedthesumofthefinancialcontributionsbythecompanyap-plyingforthecertificatesandwhichareshowninthefinalfinancingplanfortheaudiovisualworkforwhichaidunderthisactisrequested.

Audiovisualinvestmentcertificatesareregisteredintheapplicant’snameandmayonlybeendorsedonce.Theymaynotbedividedupintoparts.

Theapplicationforaudiovisualinvestmentcertificatestobegrantedshouldbemadebythecompanythatistheapplicantwhichshouldspecifythemaximumamountforwhichthecertificate(s)is/arerequestedinitsnameand/orwhenapplicablethenameofoneorseveralreplacementbeneficiaries.

Themainbeneficiary,thereplacementbeneficiariesandtheendorseesoftheaudiovisualinvestmentcertificatesmayonlybelegalentitiesincorporatedintheformofcapitalcompanies.

Effect on tax

Taxpayersholdingaudiovisualinvestmentcertificatesattheendofataxyearmayobtain,onrequest,anincometaxorcorporationtaxrebate,calledan“Incometaxorcorporationtaxrebateforaudiovisualinvestment”,setat30%ofthenominalvalueofthecertificates.

Therebateislimitedto30%ofthebeneficiarytaxpayer’staxableincome.Itisdeductedfromthecorporationtaxpayable,increasedbythecontributiontotheEmploymentFund,forthetaxyeartowhichtheaudiovisualinvestmentcertificatesapply.

If there is insufficient taxpayable toallowthe tax rebate tobeapplied in full, the tax rebate foraudiovisual investmentmaynotberefundedordeferred.

ProductioncompaniesthatwishtobenefitfromaudiovisualinvestmentcertificatesshouldsendanapplicationforapprovaltotheFilmFundLuxembourg(FondsNationaldeSoutienàlaProductionAudiovisuelle)forthispurpose,atleastsixweeksbeforetheaudiovisualproductionstarts.

TheFund’sBoardofDirectorswillexaminetheapplicationandsendittothemembersofthegovernmentwhoareresponsibleforfinance,theaudiovisualsectorandculture,whowilldecideonapprovalforarenewabletermoftwoyears.

5.12. Tax rebate for venture capital investment

TheLawof22December1993,asamended,whoseaimwastheencouragementofinvestmentintheinterestsofeconomicdevelopment,createdaspecialtaxschemeonthebasisofventurecapitalinvestmentcertificates.Thisschemeisaimedatpromotingventurecapitalinvestmentsincompaniesthatstartusingnewproductionprocessesortechnologies.

Conditions

- Thecompaniesinvolvedarethosewhichareseekingfundingtodevelopaproduct,tolaunchtheproductionstageorinitialmarket-ing.

- Theventurecapitalinvestmentistobeintheformofcontributionsincash.

- Thesharesorequityinterestsacquiredinexchangemustberegistered.

- ThetotalnominalvalueofalltheventurecapitalinvestmentcertificatesissuedfollowingagivenfinancingoperationtofinancetheuseofnewproductionprocessesortechnologiesmaynotbelessthanEUR100,000andmaynotexceedEUR5million.

- Thegrantingofthetaxrebate,asspecifiedbelow,maynotbecombinedwiththetaxrebateforaudiovisualinvestmentorwiththeprovisionofArticle11oftheLawof27July1993whosepurposewastheeconomicdevelopmentanddiversification,andtheim-provementofthegeneralstructureandregionalbalanceoftheeconomy.

Venture capital investment certificates

TheministrieswhichareresponsibleforFinanceandtheEconomy,decidingonthebasisofajointdecisionandaftercheckingthattheconditionshavebeenmet,issueventurecapitalinvestmentcertificatestoshareholdersandpartnersinproportiontotheircontributionintheformofcapitaland,whereapplicable,inproportiontotheissuepremiumtocompaniesusingnewproductionprocessesortechnolo-gies.Thecompaniesthatreceivesaidcontributionsmustbeincorporatedintheformofapubliccompany(sociétéanonyme)orlimitedliabilitycompany(sociétéàresponsabilitélimitée)underLuxembourglaw,mustberesidentandfullytaxablethere.

ApplicationstoreceiveventurecapitalinvestmentcertificatesshouldbesubmittedtotheMinistryofFinancesbeforetheventurecapitalhasbeencontributed.They should contain thenames, companynamesandaddressesof thebeneficiariesof the certificatesand thenominalvalueoftheircontributions.Asregardsthecompanyusingthenewproductionprocessesortechnologies,applicationsshouldcontainadescriptionoftheeconomic,technicalandlabour-relatedaspectsoftheoverallprojectandshouldshowthenewnatureoftheproductionprocessortechnologytobeintroduced,thevariouscomponentsoftheinvestmentortheexpensesrelatingtosaidtechnologyorproductionprocess,aswellasanestimateofcosts,thefinancingplanfortheproject,completiontime,theexpectedeffectintermsofaddedvalueandabusinessplan.



Stat

eai

dfo

rbus

ines

ses

Procedure

Taxpayersholdingventurecapitalinvestmentcertificatesattheendofataxyearmayobtain,onrequest,anincometaxorcorporationtaxrebate,calledan“Incometaxorcorporationtaxrebateforventurecapitalinvestment”,setat30%ofthenominalvalueofthecer-tificates.

Therebateislimitedto30%ofthebeneficiarytaxpayer’staxableincome.Itisdeductedfromthecorporationtaxpayable,increasedbythecontributiontotheEmploymentFund,forthetaxyeartowhichtheventurecapitalinvestmentcertificatesapply.Forindividuals,thetaxrebateapplieswithinthescopeoftaxationbyassessment.

Ifthetaxpayableisinsufficientforthetaxrebatetobeappliedinfull,thetaxrebatemaynotberefundedordeferred.Ifvariousallocationsarepossible,thetaxrebateforventurecapitalinvestmentwilltakepriority.


ChaptER 6TAXATION IN LUXEMBOURG

6.1. What is taxable income?

6.2. How is company income taxed?

6.3. How are directors’ fees (tantièmes) taxed?

6.4. Who is liable for the communal trade tax?

6.5. What measures have been taken to avoid international double taxation?

6.6. How are assets taxed?

6.7. How is value added tax (VAT) levied?

6.8. What is excise duty?

6.9. Other taxes and duties



TAXATION IN LUXEMBOURGChaptER 6

Taxa

tion

inL

uxem

bour

g

InLuxembourg,theoveralltaxburdenonlegalentitieshasbeenreducedseveraltimesoverthelastfewyearsandisrelativelylow,at30.38%1.Theuseof taxplanningmeasures,withnumerous toolsavailablesuchas taxexemptions,deductionsandrebatesmakes itpossibletosignificantlyreducethefinaltaxburden.Ifthe46doubletaxationtreatiesithasenteredintoarealsotakenintoaccount,Luxembourgoffersaparticularlyattractivetaxframeworkforcompanies2.

Withamarginaltaxrateof38%,incometaxonindividualsislowerinLuxembourgthaninmostneighbouringcountries.

ThestructureofLuxembourg’staxsystemiscomparabletotheGermansystem.Luxembourglawthereforealsoincludesthecommunaltradetax(taxecommercialecommunaleorGewerbesteuer),wealthtax(impôtsurlafortune3orVermögensteuer),aswellasagenerallawontaxsimilartothe“Abgabenordnung”.Incometaxinitscurrentformwasintroducedin19674aspartofamajorreformofLuxem-bourg’staxsystem.

RegistrationdutiesandotherrelateddutiesaresimilartothoseleviedinFrance.Asregardsindirecttaxation,LuxembourgappliesvalueaddedtaxonthebasisoflegislationinaccordancewithECdirectives.

Forcustomsduties,asanEUMemberState,LuxembourgappliesECcustomstariffsandEUregulationsintheareaofcustomslegisla-tionandthecommonagriculturalpolicy.PursuanttotheTreatyofEconomicUnionbetweenBelgiumandLuxembourgsignedin1921,LuxembourgandBelgiumformasingleterritoryforcustomsandexcisedutyandtherelevantBelgianlegislationhasbeenadoptedinLuxembourg.

LuxembourgtaxprovisionsarepublishedintheLuxembourgTaxCode(Codefiscalluxembourgeois)whichalsocontainsexperts’com-mentariesinthisarea.

Luxembourg’sIncomeTaxAuthority(AdministrationdesContributionsDirectes5)isresponsibleforincometax,tradetaxandwealthtaxinparticular.

TheRegistrationandDomainsAuthority(Administrationdel’EnregistrementetdesDomaines6)collectsstampduties,registrationduties,mortgagetaxes,inheritancetaxandtaxesontransfersduetoadeath,registrationtaxandvalueaddedtax.TheRegistrationAuthorityisalsoinchargeofthecollectionofcertaintaxesrelatingtotheprotectionofintellectualpropertyandthecollectionofcourtfeesandfinesimposedbythecriminalcourts.

TheCustomsandExciseAuthority(AdministrationdesDouanesetAccises7)isresponsibleforcollectingcustomsduties,taxesonmotorvehicles,roadusechargesfortheuseofcertainroadsbyheavycommercialvehicles,taxespayableonlicensedpremises,andexcisedutyonethylalcohol,alcoholicbeverages,manufacturedtobaccoandpetroleumproducts.

6.1. What is taxable income?

6.1.1. How are individuals’ incomes taxed?

6.1.1.1. Persons liable to income tax8

- All individualshavingtheirtaxdomicile9ortheirusualresidence10inLuxembourgareliabletoincometaxontheirworldwidein-come11,and

- non-residentsareliabletoincometaxontheirincomeinLuxembourgasdefinedinArticle156oftheActonIncomeTax12.

1 29.63%forcompanieshavingtheirregisteredofficewithintheterritoryoftheCityofLuxembourg.2 Seepoint4.1.5.2ofthischapter.3 Wealthtaxforindividualswasabolishedasfrom2006(theActof23December2005introducedawithholdingtaxexemptingthetaxpayerfrom

furthertaxation(retenueàlasourcelibératoire)onsuchamountsoncertaintypesofinterestgeneratedbysavingsthroughinvestmentinsecurities(épargnemobilière)andabolishedwealthtaxforindividuals).

4 TheActof4December1967onincometax.5 IncomeTaxAuthority(AdministrationdesContributionsDirectes)

45BdRoosevelt,L-2982Luxembourg.Telephone:408001,Fax:473329,http://www.impotsdirects.public.lu/6 RegistrationandDomainsAuthority(Administrationdel’EnregistrementetdesDomaines)

B.P.31,L-2010Luxembourg.Tel.:44905-1,Fax:454298,http://www.aed.public.lu/(onlyinFrench).7 CustomsandExciseAuthority(AdministrationdesDouanesetAccises)

26PlacedelaGare,L-1616Luxembourg.Tel.:290191-1,Fax:498790,http://www.do.etat.lu/(onlyinFrench).8 Article2oftheActonIncomeTax.9 ConceptdefinedinSection13oftheSteueranpassungsgesetz,TaxCodeVolume1.10 ConceptdefinedinSection14oftheSteueranpassungsgesetz11 Subjecttotheapplicationofdoubletaxationtreaties(seepoint4.3.below).12 Subjecttotheapplicationofdoubletaxationtreaties(seepoint4.3.below).



Taxa

tion

inL

uxem

bour

g

6.1.1.2. Taxable income

Taxableincomeisdeterminedasfollows:

TOTALOFEIGHTCATEGORIESOFNETINCOME

- SPECIALDEDUCTIONSFOREACHTYPEOFINCOME

= ADJUSTEDNETINCOME

- SPECIALEXPENDITURE

= TAXABLEINCOME

- DEDUCTIONSFROMTAXABLEINCOME

= ADJUSTEDINCOME

- EXCEPTIONALINCOME13

= INCOMETOBETAXEDINACCORDANCEWITHTHETAXSCHEDULE

6.1.1.3. Categories of taxable income

- Commercialprofits

- Profitsfromfarmingandforestry

- Profitsfromthepracticeofaprofession

- Incomefromsalariedemployment

- Netincomefrompensionsorannuities

- Netincomefromsecurities

- Netincomefromrentalofproperty

- Miscellaneousnetincome14

TheActonIncomeTaxlaysdowna particular method of calculating taxable income in each category by deducting the re-lated expenditure and deductions for each category from the income for said category15.

Inprinciple,expenditureincurreddirectlyforthepurposeofacquiring,ensuringandretainingincome,called“business expenses”,isdeductible.Forcertaincategoriesofincome,afixedamountisautomaticallydeductedforbusinessexpenses.Iftherealcostsincurredbythetaxpayerexceedthisamount,thetaxpayermaychoosetohavetheactualamountofexpenditurededucted.

6.1.1.4. Special expenditure

6.1.1.4.1. Special expenditure covered by the deduction of a fixed amount (EUR 480)16:

A: Annuitiesandpermanentexpensespayableonthebasisofaspecialobligation.

B: Annuitiesandpermanentexpensespaidtoaspousedivorcedbymutualagreementorfollowingacourtdecisioninthecontextofadivorcewhichbecamefinalafter1January1998(maximum:EUR20,400peryear).

C: Interest expense(economicrelationship:purchaseofmoveableproperty,car,landforbuilding,sharesetc.)(maximum:EUR672peryear).

Thisamountisincreasedbythesameamountforaspouseandforeachchildthatispartofthetaxpayer’shouseholdduringthetaxyearinquestion.

D: Contributionspaidonapersonalbasistoaninsurancecompanyforinsuranceagainstaccidentsoronthebasisofnon-mandatoryinsurancewithaLuxembourgsocialsecurityinstitution(e.g.extendedinsurance).

E: Specialexpenditurethatisdeductibleuptothemaximumlimitsforinsurance premiums(maximum:EUR672peryear).

13 Article130oftheActonIncomeTax:Exceptionalincomeisessentiallyprofitsfromthesaleorterminationofacompany,anagriculturaloperationtaxedseparately,atpreferentialratesandthecapitalgainrealisedonthesaleofthetaxpayer’shome.Exceptionalincomeistaxedseparately,atpref-erentialrates.

14 Article99oftheActonIncomeTax:thisismainlyincomefromspeculativeactivityandsales.15 Seethetableshowingfixeddeductions,othertypesofdeductionsandexemptionsattheendofthischapter.16 Article113oftheActonIncomeTax.



Taxa

tion

inL

uxem

bour

g


E.1a). Premiumspaidforinsurancesuchaslifeassurance,andinsurancecoveringdeath,accidents,disability,illnessorcivilliabilityfromapprovedinsurancecompanies(exception:increaseinthemaximumdeductibleplusapossibleadditionalincrease(surmajoration)forasingledeathinsurancepremiumpaidasthebalanceowedonapolicytakenoutforthepurchaseorconstructionofapersonalhomeortheacquisitionofprofessionalequipment).

E.1b). Contributionspaidtorecognisedmutualassistancecompanies(sociétésdesecoursmutuels)whoseaimistocovertherisksofillness,accidents,inabilitytowork,disability,unemployment,oldageordeath.

F. Contributionspaidtosavings and loans associationsonthebasisofahome-buyer’ssavingsscheme(maximum:EUR672).


G. Annualamountsdeductibleforaretirement and benefits scheme(contratdeprévoyancevieillesse)arefixedinrelationtothecontributor’sageandvarybetweenEUR1,500andEUR3,200.

ProvidedthesevariousspecialexpensesdonotexceedEUR 480,thefixedamountofEUR480isautomaticallydeducted.

6.1.1.4.2. Special deductible expenses outside the fixed amount deductible

A. Social security contributions

A.1. ContributionsthataremandatoryunderthelawpaidbyemployeestoaLuxembourgorforeignsocialsecurityinstitution(insured’sshare):fullydeductible.

A.2. Contributionsthataremandatoryunderthelawpaidbynon-employeestoaLuxembourgorforeignsocialsecurityinstitu-tion(pensionandsicknessfund,familyallowancesfund).

A.3. Personalcontributionsfromemployees’salariesifthereisasupplementarypensionscheme17uptoEUR1,200.

B. Gifts and donations:onlygiftsanddonationstocertainapprovedbodiesinLuxembourg18aboveacumulativeminimumannualamountofEUR120.Theamountdeductibleislimitedto10%oftotalnetincomeandtoEUR500,000.

C. Operating lossesthatoccurredduringoperatingyearsthatendedafter31December1990maybecarriedforwardindefinitely.

6.1.1.5. Deductions from taxable income

Deductionsforexceptionalcharges

- Ordinarytreatment:

Onrequest,deductionsmaybemadefromtheincomeofresidenttaxpayersforunavoidableexceptionalchargeswhichsignificantlyreducetheirabilitytopay.Theseare,forexample,costsrelatedtoillnessordisability,supportingrelativesinneed,etc.Thedeductioniscalculatedonthebasisofincomeandthecategoryoftax19.

- Deductionsoffixedamounts

On request, the amount of the deduction for exceptional charges is calculated on a fixed basis for certain excep-tional charges:

- afixedamountisdeductedforexceptionalchargesrelatingtodisability(betweenEUR150andEUR735peryeardependingontherateofreductionoftheperson’sabilitytowork)

- afixedamountisdeductedforexpensesfordomestichelp,assistanceandcareduetoaneedforlong-termcareandchildcarecosts(maximum:EUR3,600peryear)

- afixedamountisdeductedforspecialfoods(EUR327.22orEUR490.83peryeardependingonthenatureoftheillness)

Deductionfromtaxableincomeforchildrenthatarenotpartofthetaxpayer’shousehold(maximum:EUR3,480peryear)

Soleparentdeduction: EUR1,920/year

Compensatorydeductionforemployees: EUR600

(doubledforjointtaxation)

Extra-professionaldeduction(forjointtaxation): EUR4,500

Deductionforpension: EUR600

Deductionfordependentpartnerwithlowincome20 EUR9,780

17 IntroducedinaccordancewiththeActof8June1999relatingtosupplementarypensionschemesoraforeignscheme.18 Forthelistofapprovedbodies:http://www.impotsdirects.public.lu/az/l/libera_dons/index.html#liste(onlyinFrench).19 Formoredetails,pleaseseeArticle127oftheActonIncomeTax.20 IntroducedbytheActof9July2004relatingtothelegaleffectsofcertainpartnerships(Article127quateroftheActonIncomeTax).



Taxa

tion

inL

uxem

bour

g

6.1.1.6. Types of income that are exempt from income tax21

1. Certainallowancesandbenefits:

1.1. specialallowancesusuallygrantedtoemployeesseparatelyfromordinaryremunerationforsalariedemploymentandduetobusinessexpensesbornebyemployees,

1.2. benefitsinkindprovidedonthebasisofsalariedemployment,providedthattheresultisasavingonbusinessexpensesfortheemployee.

2. Foremployees,contributionspaidbyemployersonthebasisofalegalobligationtoemployees’socialsecurityorfamilyallowanceinstitutionsandfunds,inasmuchasthesecontributionsarepaidbyemployers.

3. Allowancespaidonthebirthofachildandfamilyallowances.

4. Benefitsinkindgrantedbyasocialsecuritybody.

5. Benefits in cashgrantedon thebasisof insuranceagainst illnessby theAssociationof InsuranceagainstAccidents (Associationd’AssurancecontrelesAccidents),oraslong-termcareinsurance,aswellasthecorrespondingbenefitspaidbyforeignpublicsocialsecuritybodies,exceptforcertainfinancialbenefits.

6. Withinlimitsrelatingtomaximumamountsandundercertainconditions,compensationforimproperterminationofanemploymentcontract.

7. Within limitsrelatingtomaximumamountsandundercertainconditions,voluntaryseverancepaymentsmadeinthecaseoftheclosureinwholeorinpartofacompanyorasignificantfallinacompany’sactivity.

8. Additionalpaymentsforovertime(maximum:EUR1,800)andfornightwork,workingonSundaysandpublicholidays.

9. - ThefirstEUR1,500peryearofincomefromsecurities(doubledinthecaseofjointtaxation)22.

- Halfthedividendspaidbyaresident,fullytaxablecapitalcompany,acapitalcompanywhichisaresidentofaStatewithwhichLuxembourghassignedadoubletaxationtreatyandwhichisfullyliabletotaxcorrespondingtocorporationtaxorbyacompany,thatisaresidentofanEUMemberStateandiscoveredbyArticle2ofDirective90/435/EECof23July1990onthecommonsystemoftaxationapplicableinthecaseofparentcompaniesandsubsidiariesindifferentMemberStates.

10. Capitalreceivedunderalifeassurancepolicy.

11. 50%oftheamountofmonthlylifeannuitiesfromapersonalpensionplan.

12. Giftsgivenbyemployerstotheiremployeeswithincertainlimitsandundercertainconditions(inparticularbasedontheemployee’sseniority).

13. Allowancesgrantedbyemployerstotheiremployeesforproposalsforimprovements(maximum:EUR250).

14. Withincertainlimitsandundercertainconditions,cashbenefitsintheformofmealvouchersallocatedtoemployeesbyemployerswherethereisnocompanycanteen.

Capitalgainsmadeonthesaleofpersonalpropertymorethansixmonthsafterithadbeenpurchased(exceptforthesaleofsignificantholdings).

6.1.1.7. Taxation of married couples

Marriedcouplesaretaxedjointlywiththeirminorchildrenordependentchildrenlivinginthesamehousehold.Inordertoreducetherateofincreaseinthetaxduetothehigheramountsinvolved,thesplittingtechniqueisappliedtomarriedcoupleswhichconsistsofcalculatingthetaxpayableasfollows:

- dividingthehousehold’stotalincomebytwo,then

- applyingtherateusedforsinglepersonstothishalf,thatiscategory1(seebelow),andlastly

- multiplyingtheamountoftaxthusobtainedbytwo.

Individualswhohaveenteredintoapartnership23donotbenefitfromthetaxtreatmentsetoutabove24.Theyaretreatedassingleper-sons.

6.1.1.8. Rates of tax on individuals’ income

Individuals’ incomeistaxedonthebasisofaprogressive tax schedulewith17incomebrackets,eachwithataxrateofbetween0% and 38%25.Itisapplieddifferentlydependingonthetaxcategorytowhichthetaxpayerbelongs26.InLuxembourg,therearethreetaxcategorieswhicharedesignedtotaketaxpayers’familyresponsibilitiesintoaccount.

21 Pleasenote:forthecompletelistofexemptformsofincome,pleaseseeArticle115oftheActonIncomeTax.22 Billno.5504:Asfrom2006,thisexemptionwillbelimitedtoincomefromsecuritiestaxedonthebasisofataxpayer’sreturns.23 PartnershipwithinthemeaningoftheActof9July2004relatingtothelegaleffectsofcertainpartnerships.24 However,oneofthemmaybenefit,undercertainconditions,fromadeductionofEUR9,780(Article127quateroftheActonIncomeTax).25 Article118oftheActonIncomeTax.26 Seepoint4.1.1.10below.



Taxa

tion

inL

uxem

bour

g

TheminimumamountofincomethatisexemptisEUR9,850forsinglepersonsandEUR19,550formarriedcouples.Atableshowingtheaveragerateoftaxforthevarioustaxcategoriesistobefoundattheendofthischapter.

Thetaxcorrespondingtoexceptionalincome27iscalculatedonthebasisofthetypeofexceptionalincomebyapplyingtheincomeaverag-ingsystemorthesystemoftaxationathalftheoverallrate.

6.1.1.9. Tax categories

There are three tax categories in Luxembourg’s tax system which are used to calculate tax. Residents are distinguished from non-residents.

- Individuals residing in Luxembourg

Category 1

Individualswhoareunder65,single,separatedordivorcedandhavenochildren.

Category 1a

- widowsorwidowers,whetherornottheyhavechildren,

- individualswhoareover65,

- individualswhoaresingle,separated,divorcedandwhohavechildren.

Category 2

- marriedcouplestaxedjointly,

- individualswhohavebeenwidowed,separatedordivorcedforlessthanthreeyears.

- Non-residents

Non-residentswhoaretaxablebyassessmentaresubjecttotherateforcategory1,butthetaxratemaynotbelessthan15%,increasedbythetaxintendedfortheemploymentfund,thatisatotalrateof15.375%.

Inprinciple,non-residentsaretaxableincategory1,butArticle157bisoftheActonIncomeTaxmadeseveralchangestothis.

Category 1a

- marriedcoupleswhoarenotdefactoseparatedwithprofessionalincomethatistaxableinLuxembourg,

- widowsandwidowers,andorindividualsover65,

- individualswhobenefitfromataxrebateforchildren.

Category 2 (Splitting)

- reservedformarriedcoupleswhoarenotdefactoseparated,

- splittingwithjointtaxation,

1. iftheyhavethesameusualresidenceandtaxresidence,and

2. ifmorethan50%ofthehousehold’stotalprofessionalincomecomesfromLuxembourg.

Comment:unlessalltheseconditionsaremet,spousesaretaxedseparately.

Category 1

Everyoneelse.

Taxpayersintaxcategories1aand2benefit,whereapplicable,fromataxrebateforeachchildinthehousehold.

Non-residents taxpayerswhoare taxable inLuxembourgonat least90%of their totalprofessional incomefromwithinLuxembourgandabroadmay,onrequest,betaxedinLuxembourgontheirincomewhichistaxableinLuxembourg.ThetaxrateusedistheonethatwouldapplytothemiftheywereresidentsofLuxembourgandiftheirincomeinLuxembourgandtheirforeignprofessionalincomeweretaxable28.

27 Essentiallycapitalgainsonsales.28 Article157teroftheActonIncomeTax.



Taxa

tion

inL

uxem

bour

g

6.1.1.10. Collection of tax

Taxpayersmakequarterlyadvancepaymentsof taxbymeansofanannual taxationsystemon thebasisof tax returns29,and,whereapplicable,taxisdeductedasandwhentaxpayersreceivecertaintypesofincome(remunerationofsalariedemployment,pensionsandannuities,incomefromsecuritiesandincomefromsavingsthroughinvestmentsinsecurities).

Advancespaidandamountsdeductedaresetoffagainsttheamountoftaxpayablethathasbeencalculatedbyassessment(exceptforwithholdingtaxonincomefromsavingsthroughinvestmentsinsecurities,whichexemptsthetaxpayerfrompayingfurthertaxonsuchamounts).

Excessamountspaidasadvancesordeductedarereturned.Amountsdeductedfromsalariesandpensionsareadjustedonthebasisofanannualdetailedaccountifthecriteriafortaxationbyassessmentarenotmet.

Iftaxpayersfailtopaytaxwhendue,theywillbechargedlatepaymentinterestof0.6%permonth.

6.1.1.11. Carry-forward of losses

Lossesfromacommercialcompany,afarmoraforestryholding,orfromthepracticeofaprofessionthataroseduringoperatingfinancialyearsendedafter31December1990maybecarriedforwardindefinitelyandoffsetagainstprofitsinsubsequentfinancialyears.

6.1.1.12. Taxation of salaries

Incometaxcollectedbymeansofdeducting tax from salariesiscollectedby30:

- employersforemployeeswhoreceiveincomefromsalariedemploymentthatisnotindependent,

- byan independent fund for retirementandpensions for individualswhoreceiveanannuityorapension in relationwith formersalariedemployment.

Taxisdeductedbyemployersorpensionfundsonbehalfofemployeesorpensionersinaccordancewiththetaxschedule31andtakingintoaccountamountsdeductedonamonthlyordailybasiswhicharecalculatedonthebasisofthegeneralratesofincometaxapplicabletoindividuals.Deductiblefixedamountsarealsotakenintoaccount,suchasbusinessexpensesofEUR93632peryearforemployeesandEUR300forindividualsreceivingannuities,forspecialexpenditureofEUR480peryear,thecompensatorydeductionforemployeesofEUR600andtheretirementdeductionforpensionersofEUR600peryear.Itshouldbenotedthatemployersarepersonallyresponsibleforthetaxdeducted.

Thecompensatorydeductionforemployeesisonlytakenintoconsiderationonceforallthesalarythathasbeenpaidtotaxpayers.Itmaynotexceedthedifferencebetweenthesumofthissalaryandthatoftherelatedbusinessexpensesandspecialexpenditure.Subjecttocertainlimitations,thedeductionisdoubledforspouseswhoarejointlytaxableandwhoeachreceiveincomefromsalariedemployment.

Theretirementdeductionisonlytakenintoconsiderationonceforallthepensionsandannuitiesthathavebeenpaidtothetaxpayer.Itmaynotexceedthedifferencebetweenthesumofthisincomeandthatoftherelatedbusinessexpensesandspecialexpenditure.

Subjecttocertainlimitations,theretirementdeductionisdoubledforspouseswhoaretaxablejointlyandwhoeachreceiveincomefrompensionsorannuities.

6.1.2. How is the contribution to the employment fund calculated?

Incometaxonindividualsisincreasedby2.5%forthecontributiontotheemploymentfund33.

6.1.3. How are dividends, interest and similar income taxed?

Taxondividendsandsimilar income34paidbyaLuxembourgcompany(exceptaholdingcompanyundertheActof1929)toresidentindividuals35 is deductedby theLuxembourgcompany thatpays thedividendsorsimilar incomeonbehalfof thebeneficiaryof thedividends36.

Therateoftaxdeductedis20%ofgrossincome.

Notaxisdeductedfrominterest.

29 Taxreturnsmaybefilledinonlineathttp://www.impotsdirects.public.lu/formulaires/index.html30 Article136oftheActonIncomeTax.31 Maybeconsultedathttp://www.etat.lu/memorial/memorial/b/2002/b0020401.pdf(onlyinFrench).32 EUR396fortravellingexpensesandEUR540forbusinessexpensesforsalariedemployment.33 Actof30June1976onthecreationofanunemploymentfund,assubsequentlyamendedtoemploymentfund.34 Article97oftheActonIncomeTax:sharesofprofitsandotherincomepaid,inanyformwhatsoever,onshares,sharesincapital,founder’ssharesor

otherholdingsofanykindincompaniesliabletocorporationtax.35 Forpaymentstoindividualswhoarenon-resident,seeSection4.3below.36 Article146oftheActonIncomeTax.



Taxa

tion

inL

uxem

bour

g

Aprogressivetaxschedule37isappliedtodividends,interestandsimilarincomebyassessment.Article115,15oftheActonIncomeTaxprovidesforanexemptionofEUR1,500perspouse.Inaddition,50%ofdividendspaidbyaresidentthatisafullytaxablecapitalcom-pany,acapitalcompanywhichisaresidentofanotherStatewithwhichLuxembourghasenteredintoadoubletaxationtreatyandcapitalcompaniesthatareresidentintheEuropeanUnionisexempt38.

Thetaxdeductedissetoffagainstthetaxpayable.

6.1.4. What tax is payable on interest generated by savings through investments in securities39?

InterestgeneratedbycertainsecuritiespaidtoindividualswhoareresidentinLuxembourgthroughtheintermediaryofapayingagent(aneconomicoperatorwhopaysinterestfortheimmediateprofitofthebeneficiary)locatedinLuxembourgissubjectto a withholding tax of 10% which exempts the taxpayer from paying further tax on such amounts.

Theinterestinquestionisinterestpaidorrecordedinanaccountonreceivablesofanykindandaccruedorcapitalisedinterestobtainedfromthesale,repaymentorredemptionofreceivablesofanykind.However,interestaccruedbefore1July2005andinterestonbondsissuedbefore1March2001doesnotfallwithinthescopeoftheActof23December2005.Asaresult,thisinterestisnotsubjecttowith-holdingtaxbutistaxableinaccordancewiththemethodssetoutin6.1.3.above.

Thiswithholdingtaxexemptsthetaxpayerfrompayingfurthertaxonsuchamountssuchthattheinterestdoesnotneedtobereportedbytaxpayersintheirtaxreturnsandwillnolongerbesubjecttotaxationbyassessment40.

PayingagentspaythetaxthatisdeductedtotheStatewithoutnamingthebeneficiariesoftheincome.Thewithholdingtaxof10%,whichexemptsthetaxpayerfrompayingfurthertaxonsuchamounts,isdeducteddirectlybythepayingagentestablishedinLuxembourgeverytimeincomeisallocated.

Interestwhichisonlycreditedonceayearonsavingsdeposits,sightdeposits,timedepositsordepositsatnoticeandwhichdoesnotexceedtheamountofEUR250perpersonandperpayingagentisexemptfromwithholdingtax.

Incomefromsavingspaidtoeffectivebeneficiarieswhoareindividualshavingtheirtaxresidenceinoneofthe24otherEUMemberStatesissubjecttotaxationinaccordancewiththeActof21June2005transposingEUCouncilDirective2003/48/ECof3June2003onthetaxationofsavingsincomeintheformofinterestpaymentsintoLuxembourglaw.

Therateapplicabletothenon-residentbeneficiariesreferredtoaboveamountsto15%forthefirstthreeyearsasfrom1July2005.Ithasbeenincreasedto20%forthethreefollowingyearsandwillamountto35%asfrom1July2011.

TABLE: TAX ON INDIVIDUALS’ INCOME

Excerpt from the tax schedule applicable in 2005

Comment:Theamountsoftaxshownincludethecontributiontotheemploymentfund(2.5%).

Taxab l eincomeineuros(1)

Taxcategory1 Taxcategory1a Taxcategory2

0child 1child 2children 0child 1child 2children

Amountineuros

Aver-agerate%

Amountineuros

Aver-agerate%

Amountineuros

Aver-agerate%

Amountineuros

Aver-agerate%

Amountineuros

Aver-agerate%

Amountineuros

Aver-agerate%

Amountineuros

Aver-agerate%

12,500 248 2% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0%

18,700 1,144 6% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0%

24,900 2,515 10% 990 4% 68 0% 0 0% 486 2% 0 0% 0 0%

31,100 4,364 14% 3,098 10% 2,175 7% 1,253 4% 1,259 4% 336 1% 0 0%

37,300 6,672 18% 5,512 15% 4,590 12% 3,667 10% 2,269 6% 1,347 4% 424 1%

43,500 9,087 21% 7,927 18% 7,005 16% 6,082 14% 3,518 8% 2,595 6% 1,673 4%

49,700 11,502 23% 10,342 21% 9,420 19% 8,497 17% 5,004 10% 4,082 8% 3,159 6%

55,900 13,916 25% 12,757 23% 11,835 21% 10,912 20% 6,728 12% 5,806 10% 4,883 9%

62,100 16,331 26% 15,172 24% 14,250 23% 13,327 21% 8,696 14% 7,774 13% 6,851 11%

68,300 18,746 27% 17,587 26% 16,664 24% 15,742 23% 10,904 16% 9,981 15% 9,059 13%

74,500 21,161 28% 20,002 27% 19,079 26% 18,157 24% 13,305 18% 12,382 17% 11,460 15%

(1) Taxableincomeadjustedafterdeductions(forthecalculationofadjustedtaxableincome,seepoint4.1.1.2).

3738 Article11515(a)oftheActonIncomeTax.39 Actof23December2005introducingawithholdingtaxthatexemptsthetaxpayerfrompayingfurthertaxonsuchamountsoncertainformsofinter-

estgeneratedbysavingsthroughinvestmentsinsecurities,andRelibiMinisterialCircularno.1of24January2006.40 Unlesstheincomeistaxableforthetaxpayerascommercialprofits,profitsfromfarmingandforestryorprofitsfromthepracticeofaprofession.This

interestshouldbereportedwithinthescopeofcalculatingprofitsandtheamountwithheldwillbesetoffagainsttheamountoftaxpayable.



Taxa

tion

inL

uxem

bour

g

Fixed deductions, rebates, exemptions, etc.41

Individuals

Article of the Act on Income Tax

Description Amount in euros /2005

Section of the tax return

98Lux.Reg. Fixedrentalvalue-firstbracketofunitvalue 3,800 7.Incomefromleasedproperty

98Lux.Reg. Fixedrentalvalue–deductibleinterestonliabilities–thefirstfiveyears

1,500 7.Incomefromleasedpropertyline10

98Lux.Reg. Fixedrentalvalue-deductibleinterestonliabilities–thenextfiveyears

1,125 7.Incomefromleasedpropertyline10

98Lux.Reg. Fixedrentalvalue-deductibleinterestonliabilities–thefollowingyears

750 7.Incomefromleasedpropertyline10

99 Taxthresholdformiscellaneousincome max.500 8.Misc.netincome

99bis Taxthresholdforspeculativeprofits max.500 6.Incomefromsecurities

107bis Travelexpenses<4kilometres-Deductionofafixedamount(33/month)

396/year 4.Netincomefromsalariedemploymentlines9and10.

105bis Travellingexpensesofbetween4and30kilometres–fixeddeduction/unitofdistance(8.25/kilometres/month)

99/year/trip 4.Netincomefromsalariedemploymentlines9and10.

105bis Travelexpenses>30kilometres-limitoffixeddeduction(>30unitsofdistance)

2,970/year 4.Netincomefromsalariedemploymentlines9and10.

107 Businessexpenses-Salariedemployment(45/month)

540/spouse 4.Netincomefromsalariedemploymentline7

107 Businessexpenses-Pensionorannuity(25/month)

300/spouse 5.Netincomefrompensionsorannuitiesline21

107 Businessexpenses-Securities(2/month) 25/spouse 6.Incomefromsecurities

107Lux.Reg. Businessexpenses–Fixedamountforrentalofbuildingsconstructedatleast15yearsago

35%ofgrossrent,max.2,700/year

7.Incomefromleasedproperty

109 Maximumdeductibleforspecialexpenditure-Interestexpense

672/spouse/child VI.Specialexpenditureline66

109 Maximumdeductibleforgifts,max.10%ofnetincomeor

max.500,000 VI.Specialexpenditureline79

109bis Maximumdeductibleforinstalmentsofannuitypaidtoadivorcedspouse

max.20,400/di-vorcedspouse

VI.Specialexpenditureline65

111 Maximumdeductibleforinsurancecontributionsandpremiums(notsocialsecurity)

max.672/spouse/child

VI.Specialexpenditurelines69and70

111 Maximumdeductibleforcontributionstorecognisedmutualassistancecompanies(e.g.:CMCM(1))



111 Maximumdeductibleforcontributionstoahome-buyer’ssavingsscheme(e.g.:BHW(2))



111bis Maximumdeductibleforpaymentstoapersonalpensionplan

from1,500to3,200(dependingonsub-scriber’sage)


41 Fixedamounts,deductions,etc.2005.

(1) NameofaLuxembourgmutualassistancecompanyTranslator.(2) NameofaLuxembourgsavingsandloanassociationTranslator.



Taxa

tion

inL

uxem

bour

g




112(2) Minimumamountofdonations 120 VI.Specialexpenditureline79

113 Deductionofafixedamountforspecialexpenditure

480 VI.Specialexpenditure

115(1) Exempt:incomeofLuxembourgdiplomaticstaff ifandonlyiftaxedintheStatewherestaffareworking

4.Netincomefromsalariedemployment

115(3) Exempt:benefitsinkindprovidedonthebasisofsalariedemployment–savingsonbusinessexpenses

e.g.:specialworkclothes

4.Netincomefromsalariedemployment

115(4) Exempt:mandatorysocialsecuritycontributionspaidbyemployers

115(5) Exempt:allowancespaidonthebirthofachildandfamilyallowances

115(9) Exempt:employees’severancepay-compensa-tionforimproperterminationofanemploymentcontract

max.12,500or6xaverageor1/5th

115(10) Exempt:Voluntaryseverancepayforredundancyforeconomicreasons

max.12,500/year

115(11) Exempt:maximumforadditionstosalarypaidforovertime,etc.

max.1,800/year 4.Netincomefromsalariedemploymentline6

115(13) Exempt:giftsgivenbyemployerstoemployees–uninterruptedemploymentfor25years

max.2,250


max.3,400


max.4,500

115(13) Exempt:giftsgivenbyemployerstoemployees–pensionedoffafteruninterruptedemploymentfor35years

max.1,120

115(13) Exempt:giftsgivenbyemployerstoemployees–following25thanniversary

max.1,120

115(14) Exempt:netamountoflifeannuitiescreatedforvaluableconsiderationinexchangeforacounter-serviceorasanindemnity–alsoformonthlylifeannuitiesfromapersonalpensionplan

50%

115(15) Exempt:firstbracketofnetincomesfromsecurities

1,500/spouse 6.Incomefromsecurities

115(15a) Exempt:incomefromcapitalpaidbyacapitalcompanyundercertainconditions

50%

115(17) Exempt:surrenderofanindividuallife,disabilityordeathinsurancepolicy

100%

115(17a) Exempt:benefitspaidbyasupplementarypensionscheme(Actof8June1999)

100%

115(21) Exempt:mealvouchersifandonlyifnocompanycanteen

100% ifmealvouchers<limitofvalue

115(para.22) Exempt:bracketofincomefromsavingsandcreditingofinterest–loanforpersonalhome,etc.

3,000/spouseand6,000forsolepar-entemployee


115(para.22) Exempt:bracketofincomefromsavingsandcreditingofinterest–otherloans

500/spouseand1,000foremployee


123 Taxrebatesforchildren max.900/child VII.Misc.dataline83

123bis Taxrebatesforchildforsoleparentandifincome<67,000

seeArticle123bis VII.Misc.dataline83



Taxa

tion

inL

uxem

bour

g




127(para.6) Fixeddeductionfordomestichelp,assistanceandcareduetoastateofdependencyandchildcarecosts–illness-relatedcostsnotcoveredbyasocialsecurityfund,supportingrelativesinneed,alimony,divorcecosts,funeralexpensesnotcoveredbyasocialsecurityfundorbythedeceased’sestate,expenditurearisingfromachangeofprofession

3,600(300/month) VIII.Exceptionalchargesline92

127bis Deductionforchildrenwhoarenotpartofthetaxpayer’shousehold

max.3,480/child VIII.Exceptionalchargesline93

127ter Soleparentdeduction 1920(160/wholemonth)

VIII.Exceptionalchargesline94

128 Farmingdeduction 2,250/spouse II.Incomefromfarmingandforestry

128bis Commercialdeduction-firstbracketofcommercialincome

5%of75,000and2%on25,000

I.Commercialincomeline11

129 Compensatorydeductionforemployees 600(50/wholemonth)

129a Retirementdeductionforpensioners 600(50/wholemonth)

129b Extra-professionaldeductionforspousestaxablejointly(notcumulative)

4,500(375/wholemonth)

130 Deductionduetoacapitalgainrealisedonthesaleofabuildingorasignificantholding

50,000

130 Deductionduetoacapitalgainrealisedonthesaleofaconstructedbuildingacquiredbymeansofinheritanceinadirectline(parents’mainhome)

75,000

131 Thresholdoftaxationforexceptionalincome 250

Asfrom1January200642:iftheamountofinterestreceivedonasavingsdepositdoesnotexceedtheannualamountofEUR250perpersonandperpayingagent,notaxwillbededucted.

6.2. How is company income taxed?

6.2.1. Which entities are liable for corporation tax?

Thefollowingcompaniesandentitiesareliableforcorporationtax43:

- capitalcompanies:SAs,SARLs,SCAs,

- cooperativecompanies,cooperativecompaniesorganisedaspubliccompaniesandagriculturalassociations,

- specialpurposefunds(patrimoinesd’affectation)andassetsinabeyance(patrimoinesvacants),

- mutualinsuranceassociations,pensionfundassociationsandemployerfundscreatedintheinterestsofcompanypersonnel44.

Thefollowinginparticularareexemptfromcorporationtax45:

• certaincollectivebodieswhoseactivityisdirectlyandsolelyforcharitablepurposesorinthegeneralinterest,

• holdingcompaniesasdefinedintheActof31July192946,

42 Actof23December2005introducingawithholdingtaxthatexemptsthetaxpayerfrompayingfurthertaxonsuchamountsoncertaininterestgener-atedbysavingsthroughinvestmentsinsecurities.

43 Article159ActonIncomeTax:partnerships(sociétésennomcollectif),limitedpartnerships(sociétésencommanditesimple),economicinterestgroups,Europeaneconomicinterestgroupsandnon-commercialcompanies(sociétésciviles)aretobeconsideredastaxtransparent.

44 Thefollowingshouldbeadded:religiousassociations,non-profitmakingassociations,establishmentsinthepublicinterest(établissementsd’utilitépublique)andotherfoundations,commercial,industrialorminingenterprises,evennon-profitmaking,Stateenterprises,enterprisessetupbytowns,associationsoftowns(syndicatsdecommunes),publicinstitutionsandotherlegalentitiesunderpubliclaw.

45 Article161oftheActonIncomeTax.46 Seesection2.2.ofthisbrochure.



Taxa

tion

inL

uxem

bour

g

• associationsthatareexclusivelyprofessionalandfarmingcooperativessetuptoshareuseofmachinesandprocessingorthesaleoftheirmembers’agriculturalproducts,

• associationswhosesoleactivityisprovidingsecurityforprofessionalloansandgrantingsaleandconstructionguaranteesfortheirmembers,

• undertakingsforcollectiveinvestment.

6.2.2. What are the main attractions of Luxembourg’s tax system?

Theoveralltaxburdenoncompaniescanbeconsiderablyreducedbythefollowingmechanisms:

- specialtaxtreatmentforparentcompany-subsidiarycompaniesthatcanleadtothecompleteexemptionofdividendsand/orcapitalgainsondisposalsfromtax,

- deductions,

- losscarry-forwards,

- taxationofagroupofcompanies:taxconsolidation,

- variousformsoftaxrebates.

Special tax treatment for parent-subsidiary companies or “Schachtelprivileg”: tax exemption for dividends and capital gains

Conditionsrelatingtoexemptionofdividendsfromtax47

-Conditionsrelatingtothebeneficiaryofthedividendwhichmustbeoneofthefollowing:

• aresident,fullytaxablecapitalcompany,

• theState,towns,associationsoftowns,publicinstitutionsandotherlegalentitiesunderthepubliclawofLuxembourg,

• aLuxembourgpermanentestablishmentofacompanywhichisaresidentofanEUMemberStateandiscoveredbyArticle2oftheEuropeanCouncilDirectiveof23July1990onthecommonsystemoftaxationapplicableinthecaseofparentcompaniesandsubsidiariesofdifferentMemberStates(90/435/EEC)48,or

• alocalpermanentestablishmentofacapitalcompanywhichisaresidentofaStatewithwhichLuxembourghassignedadoubletaxationtreaty.

-Conditionsrelatingtotheconditionsunderwhichtheholdinginthesubsidiaryisowned:

• theholdingmustbeowneddirectlyorindirectlythoughtax-transparentcompanies,and

• onthedatetheincomeismadeavailable,therecipientoftheholdingmustholdorundertaketoholdsaidholdingforacontinuousperiodofatleast12months,and

• throughout this period, the percentage of the holding held may not fall below 10% or the purchase price belowEUR1.2million.

-Conditionsrelatingtothesubsidiaryowned,whichmustbeoneofthefollowing:

• aresident,fullytaxablecapitalcompany,

• anon-residentcapitalcompanywhichisfullyliableforataxcorrespondingtocorporationtax,or

• acompanywhichisaresidentofanEUMemberStateandiscoveredbyArticle2oftheEuropeanCouncilDirectiveof23July1990onthecommonsystemoftaxationapplicableinthecaseofparentcompaniesandsubsidiariesofdifferentMemberStates(90/435/EEC).

Ifalltheseconditionshavebeenmet,thedividendsreceivedbytheparentcompanywillbeexemptfromcorporationtax,thecommunaltradetax(seesection6.4below)andwealthtax(seesection6.6.1).Inaddition,intheeventthesubsidiarycompanyisacompanythatisresidentinLuxembourg,thedistributionofdividendswilltakeplaceundercertainconditionswithanexemptionfromthewithholdingtaxof20%ondividendsthatwouldnormallyapply49.

Conditionsrelatingtotheexemptionofcapitalgainsonthesaleofaholdingfromtax50

- Theconditionsrelatingtotheparentcompanyarethesameasthosethatapplytotheexemptionofdividendsfromtax(seeabove).

- Theconditionsrelatingtothesubsidiarywhoseholdingissoldarethesameasthosethatapplytotheexemptionofdividendsfromtax(seeabove).

47 Article166oftheActonIncomeTax.48 Essentiallycapitalcompanies.49 Formoredetails,pleasesee:Article147oftheActonIncomeTax.WherethesubsidiaryisinaforeigncountrywithwhichLuxembourghassigneda

doubletaxationtreaty,thistreatygenerallyprovidesforareducedrateofwithholdingtax.50 LuxembourgRegulationof21December2001implementingArticle166paragraph9(1)oftheActonIncomeTax.



Taxa

tion

inL

uxem

bour

g

- Conditionsrelatingtotheholdingwhichissold:

Whentheholdingissold,thetransferormustownorundertaketoownsaidholdingforacontinuousperiodofatleast12monthsand,duringthisperiod,thepercentageoftheholdingmaynotfallbelow10%orthepurchasepricebelowEUR6million.

Ifalltheseconditionshavebeenmet,thecapitalgainonthesaleisexemptfromcorporationtaxandfromthecommunaltradetax.

Deductible expenditure

Inadditiontothedeductibleexpenditureprovidedforbylawasregardsthetaxationofindividuals,thefollowingarealsodeductible51:

• allocationstounderwritingreservesbyinsurancecompanies,

• rebatesgrantedtotheirmembersbycooperativecompaniesandcertainagriculturalassociations.Deductionisonlyallowedhoweverprovidedthatthedistributionofprofitsotherthantherebatesamountstoatleast5%ofthenetassetsinvestedattheendofthefinancialyearofoperation,

• amountsowedtoordinarypartnersinpartnershipslimitedbysharesasrentalincome,assetsinanaccountoractivityforthecom-pany.

Thefollowinginparticulararenotdeductible52:

- expenditureforthepurposeoffulfillingobligationslaiddownbytheArticlesofAssociation,

- corporationtax,wealthtax,communaltradetax,

- feesallocatedtodirectorsandstatutoryauditors,

- thecostsoffinancingaholdinguptotheamountofthedividendsthatareexemptfromtax.

Carry forward of losses

Lossesthataroseduringfinancialyearsofoperationclosedafter31December1990maybecarriedforwardindefinitelyundercertainconditions.Itshouldbenotedthatcarryingbacklossesisnotallowed53.

Tax consolidation

Thetaxconsolidationmechanismallowsagroupofcompanies,underspecificconditions,toelectfortaxationasaconsolidatedgroup.Theconsequenceofsuchelectionisthatthetaxableresultsofonecompanyareoffsetagainstanothercompany’sresults.InpracticethisallowslossesmadebyonecompanytobesetoffagainstprofitsmadebyothercompanieslocatedinLuxembourg54.

Taxconsolidationmaybeusedbyresident,fullytaxablecapitalcompaniesofwhichatleast95%55ofthecapitalishelddirectlyorindirectlybyanotherresident,fullytaxablecapitalcompanyorbytheLuxembourgpermanentestablishmentofanon-residentcapitalcompanythatisfullyliableforataxcorrespondingtocorporationtax.Theminimumtermfortaxconsolidationisfiveyears.

Main tax rebates (see chapter on State aid)

- Taxrebateforinvestment(Article152bisoftheActonIncomeTax),

- Taxrebateforaudiovisualinvestments,

- Taxrebateforinvestmentsinventurecapital,

- Corporationtaxrebateintheeventacompanyhirespeopleregisteredasunemployed,

- Taxrebateforinvestmentincontinuingprofessionaleducation.

6.2.3. What is the taxable base for corporation tax?

Corporationtaxiscalculatedonacompany’sprofitswhicharedeterminedbycomparing the company’s invested net assets at the beginning and at the end of the financial year,fromortowhichsumtaxadjustmentsaredeductedoradded.Residentcompaniesaretaxableontheirworldwideincome(subjecttotheapplicationofdoubletaxationtreaties,seesection6.5).

51 Article167oftheActonIncomeTax.52 Article168oftheActonIncomeTax.53 Article114oftheActonIncomeTax.54 Article164bisoftheActonIncomeTaxFormoredetails,pleaseseetheCircularontheActonIncomeTaxno.164bis/1of27September2004. http://www.impotsdirects.public.lu/legislation/legi04/L_I_R__164bis-1.pdf(onlyinFrench).55 Intheeventtheholdingisatleast75%butlessthan95%,thetaxconsolidationregimemaybegrantedonanexceptionalbasis,afterconsultingthe

MinistryofFinance,ifsaidholdingisparticularlyaimedatpromotingtheexpansionandstructuralimprovementofthenationaleconomy.



Taxa

tion

inL

uxem

bour

g

6.2.4. How much are profits taxed overall?

Overall,profitsofcapitalcompaniesaretaxedatapproximately30.38%,consistingofcorporationtax56itself,thecommunaltradetax57andthecontributiontotheemploymentfund58.Itshouldbenotedthatthisoveralltaxburdenhasfallenby22%overthelast10years59,whichshowstheLuxembourg’sgovernment’sdesiretocreateataxenvironmentthatisfavourableforcompanieswishingtosetupbusi-nessinthecountry.

Individualswhogeneratecommercialprofitsmaybenefitfromadeductionof5%fromthefirstbracketofcommercialincomethatmaynotexceedEUR75,000andof2%forthebracketofprofitsthatexceedEUR75,00060.

6.2.5. What are the tax benefits for permanent establishments of foreign companies?

Taxtreatmentundertheparent-subsidiaryregimeappliesto:

• Luxembourgpermanentestablishments61ofcompanieswhichareresidentinanEUMemberStateandwhicharecoveredbyArticle2oftheEuropeanCouncilDirectiveof23July1990onthecommonsystemoftaxationapplicableinthecaseofparentcompaniesandsubsidiariesofdifferentMemberStates(90/435/EEC)62,

• LuxembourgpermanentestablishmentsofcapitalcompaniesresidentinaStatewithwhichLuxembourghassignedadoubletaxationtreaty.

Subjecttotheapplicationofdoubletaxationtreaties(seesection6.5.),permanentestablishmentsaretaxedontheincomegeneratedthroughthepermanentestablishment63.Theyaretaxedatthemaximumrateforresidentcompanies.

6.2.6. Which authority collects corporation tax?

TheIncomeTaxAuthority.

6.3. How are directors’ fees (tantièmes) taxed64?

Parties liable for tax in this respect

Individualswhoreceivedirectors’feesandsimilarremuneration,thatisallowancespaidtodirectors,statutoryauditorsandindividualsperformingsimilardutieswithincompaniesliableforcorporationtax.

Taxable base

Thegrossamountofdirectors’fees.However,remunerationpaidforthedailymanagementofthecompanyisnotconsideredasdirectors’percentageofprofits,butistaxedasincomefromsalariedemployment.

Method of taxation

Awithholdingtaxof20%isappliedbythepartythatpaysthedirectors’feesonthegrossamountpaid.

Themethodofcollectionvariesdependingonwhetherthedirectors’feesarepaidtoaresidentoranon-resident:

- Residenttaxpayersshouldsubmitataxreturnwhentheirincomeincludesdirectors’feesforanamountexceedingEUR1,500.Failingthis,thewithholdingtaxisconsideredasfinaltaxation.

- Thewithholding taxof20%exempts the taxpayer frompaying further taxonsuchamounts fornon-resident taxpayers,up toamaximumannualamountfordirectors’feesofEUR100,000andprovidedthattheseamountsarethetaxpayer’sonlyprofessionalincomeinLuxembourg.However,taxpayersmayrequesttobetaxedbyassessmentinordertobenefitfromarateoftaxlowerthanthewithholdingtaxof20%.

56 Corporationtax: 20%fortaxableincomeunderEUR10,000, EUR2,000+26%ofincomeoverEUR10,000fortaxableincomebetweenEUR10,000andEUR15,001, 22%fortaxableincomeoverEUR15,000.57 Communaltradetaxrates:between200and350%xtaxbase3%.DuetotheparticularlylowrateofcommunaltradetaxleviedbytheCityof

Luxembourg,theoveralltaxburdenforcapitalcompanieshavingtheirregisteredofficewithintheCityofLuxembourgis29.63%.58 4%oftherateofcorporationtax.59 In1997,thetaxburdenamountedto39.34%.60 Article128bisoftheActonIncomeTax.61 Forthedefinitionoftheconceptoffixedestablishment:seesection16oftheSteueranpassungsgesetz;subjecttodoubletaxationtreaties.62 EssentiallycapitalcompaniesfromMemberStates.63 Article156oftheActonIncomeTax.64 Article152oftheActonIncomeTax.



Taxa

tion

inL

uxem

bour

g

Authority which collects this tax


6.4. Who is liable for the communal trade tax65?

Parties liable for this tax

Commercial,industrial,miningandskilledcrafttradeenterprisesestablishedinLuxembourgandthepermanentestablishmentsofforeigncompanies.Itshouldbenotedthat,undercertainconditions,taxconsolidationbetweenthevariouscompanieswithinagroupispos-sible66.

Taxable base for the communal trade tax

Thebaseforthecommunaltradetaxisacompany’sprofitsthatareliableforcorporationtax,exceptwhereitisnecessarytomakecertainadditions67anddeductions68,inordertotakeintoaccounttheasset-basednatureofthistax.

TheamountofEUR40,000isdeductedfromtheincomefromoperationsofindividualsandpartnerships,andEUR17,500isdeductedfromtheincomeofcompaniesliableforcorporationtax.

Carry forward of losses

Lossesmaybecarriedforwardforanunlimitedtimeandoffsetagainstprofitsfromsubsequentfinancialyearsofoperation.

Collection

Annualtaxationonthebasisofataxreturn.

Rateofassessmentofthecommunaltradetax:

3%ofincomefromoperationsaftertheabove-mentioneddeduction.

Theoverallbasisforassessmentisthenmultipliedbyacoefficientofbetween2and3.5dependingonthetown.Mosttownshavefixedthiscoefficientat2.5.

Forcompaniesliableforcorporationtax,thecommunaltradetaxisnolongerdeductiblefromcommercialprofitsasregardscorporationtax.


TheIncomeTaxAuthorityassessesthetaxonbehalfofthetowns.

6.5. What measures have been taken to avoid international double taxation69?

Forinternationalfinancialflows,thequestionarisesastowhichStateshouldtaxtheseflows.Therearetwosituationshere:

- casesoffinancialflowsbetweenLuxembourgandaStatewithwhichLuxembourghasnotsignedadoubletaxationtreaty,

- casesoffinancialflowsbetweenLuxembourgandaStatewithwhichsuchatreatyhasbeensigned.

6.5.1. How is income taxed where there is no international double taxation treaty?

Ifthereisnointernationaltaxtreatyorwherethetreatydoesnotapply,Luxembourglaw70providesforcertainmeasuresaimedatavoidingthedoubletaxationofincomeinLuxembourg.

65 Actof1December1936relatingtothecommunaltradetax;TaxCode,Volume4.66 Section2,number2oftheActof1December1936;CircularontheActonIncomeTax164bis/1of27September2004.67 Forexample,thefollowingareadded:sharesofprofitsandsalariesandotherremunerationpaidtoordinarypartnersforthemanagementofapart-

nershiplimitedbyshares,andsharesoflossesinpartnerships.68 Forexample,thefollowingarededucted:operatinglossessustainedinpreviousyears,sharesofprofitsinapartnership;dividendspaidbyaresident

capitalcompanyorafullytaxablenon-residentcapitalcompany,iftheholdingrepresentsatleast10%ofthesharecapitalofthecompanypayingthedividendsandwherethisincomeisincludedinincomefromoperations.

69 TaxCodeVolume1forthetextofdoubletaxationtreaties.70 Articles134to134teroftheActonIncomeTax.



Taxa

tion

inL

uxem

bour

g

Beneficiaries of these measures

- FullytaxabletaxpayerswhoareLuxembourgresidentshavingincomefromaStatewithwhichLuxembourghasnotsignedataxtreaty.

- Undercertainconditions,non-residenttaxpayershavingincomegeneratedbytheirLuxembourgpermanentestablishment,ifthereisnotreatyorifitdoesnotapplytonon-residenttaxpayers.

Nature of foreign tax that may be offset

ThetaxoftheforeignStatemustcorrespondtoLuxembourgincometax.Thefollowingmaybenefitfromthesemeasures,interalia:

• commercialincomegeneratedabroadbyapermanentestablishmentorthroughtheintermediaryofapermanentrepresentative,

• incomefromtherealisationofacompany’sinvestednetassetsorsharesincapitalcompanies,wherethecompanyhasitsregisteredofficeoritspermanentestablishmentabroad,

• incomefromsecurities,ifthepartypayingtheincomehasitstaxdomicileorprincipalestablishmentabroad.

Methods for avoiding double taxation

LuxembourgappliesamethodconsistingofsettingtheforeigntaxpaidoffagainsttheLuxembourgtaxburden.ThisoffsettingisdoneeitherStatebyState,orglobally.Anysurplusforeigntaxwhichithasnotbeenpossibletooffsetisdeductibleasanoperatingexpenseinthevariouscategoriesofnetincome.

6.5.2. How do double taxation treaties apply?

International double taxation treaties

AninternationaldoubletaxationtreatyisenteredintobytwoStatesinordertodeterminewhichStateshouldlevytaxwherethereisacross-borderflowoffundsbetweenthesetwoStatesandtherebyavoidataxpayerhavingtopaytaxonthesameincomeintwoStates.

Overrecentyears,inanattempttofacilitateinternationaltrade,theLuxembourggovernmenthasincreasedthenumberoftaxtreatiesithassigned71.MostofthetaxtreatiessignedbyLuxembourgarebasedontheOECD’smodeltaxconvention.Therefore,wherethereisaproblemasregardsinterpretinganOECDconvention,itisadvisabletorefertotheOECD’scommentaries72.Theinformationprovidedbelowisbasedonthismodelconvention.

Beneficiaries of tax treaties

- TaxresidentsofoneofthecontractingStatesthatisnaturalandlegalpersonsliabletotax.

- Financialholdingcompaniesmaygenerallybenefitfromtaxtreaties.

- Open-endedinvestmentcompanies(SICAV)andclosed-endedinvestmentcompanies(SICAF)mayonlybenefitfromcertaintaxtrea-ties73.

- HoldingcompaniesundertheActof1929maynotgenerallybenefitfromtaxtreatiesastheyareexemptfromanyLuxembourgtaxexceptforregistrationtax(onsecurities).

Taxes covered by tax treaties

ThetaxescoveredaregenerallyStatetaxesandtaxesleviedbylocalauthoritiesonincomeandwealth.

InLuxembourg,thesearegenerallyincometaxleviedonindividuals,corporationtax,thespecialtaxonfees,wealthtaxandthecommunaltradetax.

General rules

Generally,doubletaxationtreatiescontainthefollowingrules:

- acompany’sprofitsaretaxableintheStateofthecompany.Exception:profitsmadebyapermanentestablishmentlocatedintheotherStatearetaxedinthisotherState.

71 Forthelistoftaxtreatiesinforce,pleasesee: http://www.impotsdirects.public.lu/dossiers/treaties/conv_vig/index.html(onlyinFrench).SouthAfrica,Germany,Austria,Belgium,Brazil,Bulgaria,

Canada,China,SouthKorea,Denmark,Spain,UnitedStatesofAmerica,Finland,France,GreatBritainandNorthernIreland,HellenicRepublic,Hungary,Indonesia,Ireland,Iceland,Italy,Japan,Malta,Morocco,RepublicofMauritius,Mexico,Malaysia,Mongolia,Norway,Uzbekistan,TheNetherlands,Poland,Portugal,Romania,RussianFederation,RepublicofSingapore,RepublicofSlovakia,Slovenia,CzechRepublic,Sweden,Switzerland,Thailand,TrinidadandTobago,Tunisia,TurkeyandVietnam.Thefollowingtaxtreatiesareundernegotiationorarebeingratified:Argentina,Azerbaijan,UAE,Estonia,Israel,Latvia,Lebanon,Lithuania,StMarin,SerbiaandMontenegro,Ukraine.

72 www.oecd.org73 Germany,Austria,China,RepublicofKorea,Spain,Finland,Indonesia,Ireland,Malaysia,Malta,Morocco,Uzbekistan,Poland,Portugal,Romania,

SlovakRepublic,Singapore,Slovenia,Thailand,TrinidadandTobago,Tunisia,Vietnam.



Taxa

tion

inL

uxem

bour

g

- immovablepropertyandtheincomeandcapitalgainsrelatingtheretoaretaxableintheStatewherethepropertyislocated.

- dividendsandinterestinprinciplearetaxedintheStateinwhichthebeneficiaryisaresident,exceptforalimitedrightoftaxbytheStateofthesourceofthedividendsbymeansofawithholdingtax(maximumrecommended:fordividends,5%foraholdingofatleast25%heldbyacapitalcompany,otherwise15%,forinterest10%)74.

- gainsderivedfromthealienationofmoveablepropertyformingpartofapermanentestablishmentaretaxableintheStatewherethepermanentestablishmentislocated,allothergainsaretaxableintheStateinwhichthetransferorisaresident.

- incomefromemploymentintheprivatesectoristaxableintheStateinwhichtherecipientishabituallyaresident,providedthatsaidrecipienthasnotbeenpresentformorethan183daysovera12-monthperiodintheStateinwhichtheemploymentisexercised,thattheemployerisnotaresidentofthisStateandthattheremunerationisnotbornebyapermanentestablishmentinsaidState.

Avoiding double taxation

Doubletaxationispreventedeitherbytheexemptionmethod75,orbythecreditmethod76.



6.6. How are assets taxed?

6.6.1. Is wealth77 taxable?

Parties liable for tax in this respect

Legalentitiesexceptpartnerships.Forpartnerships,partnersaretaxedonthevalueoftheirshare.

ThefollowingcompanieshavingtheirregisteredofficeormainestablishmentinLuxembourgmustfileawealthtaxreturn:

- allcapitalcompanies,

- othercompanieswithwealthexceedingEUR2,500.

Thefollowingbodiesareexempt:savingsbanksthatperformnootherrole,pensionfunds,employers’pensionandprovidentfundswithlegalpersonality,non-profit-makinginstitutionsofaculturalorcharitablenatureorsuchinstitutionsservingthepublicinterest,thena-tionalsocietyforlow-costhousing,andcompaniesthatbelongtopublicauthorities.

Wealthtaxonindividualswasabolishedon1January200678.

Taxable base

Totalgrosswealth(agriculturalandforestwealth,immovableproperty,operatingwealth,miscellaneousassets)lessanydebtsrelatingthereto.

Taxation of Luxembourg wealth of non-residents

TaxationofwealthlocatedinLuxembourg.

Rate applicable

0.5%.

PubliccompaniesandpartnershipslimitedbysharesaretaxedonaminimumamountofwealthofEUR12,500(EUR5,000forlimitedliabilitycompanies,EUR2,500forpartnerships).

Companiesmay,onrequest,reducethewealthtaxowedforaspecifictaxyearprovidedthattheyrecordanamountcorrespondingtofivetimesthereductionrequestedinareserveitemandthattheykeepthisreserveonthebalancesheetforfivetaxyearsaftertheyearforwhichthereductionwasrequested.

74 ItshouldbenotedthatLuxembourgnolongerleviesawithholdingtaxoncharges(redevances).75 Foranexampleofacalculationillustratingtheexemptionmethod: http://www.impotsdirects.public.lu/dossiers/treaties/elimin/exemption/index.html76 Foranexampleofacalculationillustratingthecreditmethod: http://www.impotsdirects.public.lu/dossiers/treaties/elimin/imputation/index.html77 Actof16October1934onthevaluationofassetsandsecurities,TaxCode,Vol.3,Title2.78 Billno.5504.



Taxa

tion

inL

uxem

bour

g

Collection of the tax

Thegeneralbasisofassessment isfixedeverythreeyears.Theannualtaxpayable isfixedandthetax iscollected inquarterly instal-ments.



6.6.2. What is inheritance tax?

Inprinciple,inheritancetaxispayablefollowingthedeathofaninhabitantofLuxembourg79.


TheheirsandpersonsentitledtoashareofanestateofadeceasedpersonwhohadhisorherdomicileorofficeinLuxembourgarejointlyliablefortaxowed.

Taxable base for inheritance tax

- marketvalue80onthedateofdeathofallthenetwealthacquiredintheestateofaninhabitantofLuxembourg,afterdeductingthedeceased’sdebts.

Exceptforthefollowing:

- immovablepropertylocatedinaforeigncountry,

- certaincasesofpersonalpropertylocatedabroad.

Estates that are exempt

- Everythingtransferredtoalinealheir(apartfromthedisposableportionofanestate81).

- Everythingtransferredtoaspousehavingthesamechildrenorthesamedescendantsasthedeceased.

- Everythingtransferredbetweenpartnerswhereataxreturnofpartnershiphadbeenregisteredformorethanthreeyearsbeforethedeathofoneofthem,leavingoneorseveralchildrenorthesamedescendantsasthedeceased.

- Everythingtransferred,ifthetotalamountoftheestate,afterdeductingdebts,islessthanEUR1,250.

Tax rate applicable

Thetaxrateiscalculatedasfollows:

Basicrate+one-tenths=finalratewhichvariesbetween2%and48%

- Thebasicratevariesdependingonthedegreeofrelationshipbetweenthedeceasedandthebeneficiarybetween2%(linealheir)and15%(betweenestateswheretherelationshipisfurtherthanthefourthdegreeofrelationshipandbetweenindividualswhowerenotrelated)82.

- Theone-tenthsiscalculatedinaccordancewithaprogressiveratewhichincreaseswiththevalueofthewealthtransferred83.

Collection of inheritance tax

Heirstoanestatearerequiredtofileanestate declarationcontainingalistofalltheassetsandliabilitiesintheestatewiththeReg-istrationandDomainsAuthoritywithinsixmonthsofthedeath.TheRegistrationandDomainsAuthoritydeterminesthetaxpayableonthebasisofthisdeclaration.


TheRegistrationandDomainsAuthority.

79 SeeLuxembourgTaxCode,Vol.5Title3.Intheory,theinheritancelawswhichapplyarethoseinthedeceased’slastdomicile.80 Marketvalue=salevalueoftheproperty:thepricethatitmaybeexpectedtobringonsale.81 “Partextralégale”=disposableportionoftheestatereceivedbyanheirpursuanttoaprovisionofawilloragift,towhichheorshewouldnothave

beenentitledintheabsenceofsuchprovision.UnderLuxembourginheritancelaw,anonlychildinanyeventisentitledtohalfhisorherparent’sestate(“partlégale”orreservedportionoftheestate).Theotherportionisthedisposable portion(partextralégale)whichapersonmakingagiftorwritingawillmaydisposeoffreely.Iftherearetwochildren,thedisposableportionwillbeonethirdoftheestate,forthreeormorechildren,thedisposalportionwillbeonequarteroftheestate.

82 Ratesmaybeconsultedonhttp://www.aed.public.lu/successions/tarifs.html(onlyinFrench).83 Ratesmaybeconsultedonhttp://www.aed.public.lu/successions/tarifs.html(onlyinFrench).



Taxa

tion

inL

uxem

bour

g

6.6.3. What is succession duty (for non-residents)?

SuccessiondutyispayableintheeventthedeceasedwasnotaninhabitantofLuxembourg.

Taxable base of succession duty

MarketvalueoftheimmovablepropertylocatedinLuxembourgonthedateofdeath.Debtsmaynotbededucted.Noamountisexempt.

Tax rate applicable

Between2%and5%dependingonthedegreeofrelationship84.

Collection of succession duty

TheheirsarerequiredtofileadeclarationoftransferwiththeRegistrationandDomainsAuthoritycontainingalistofalltheassetsandliabilitiesintheestate.Inpractice,thisdeclarationisdrawnupbythenotaryinchargeofdividingtheestatebetweentheheirs.TheReg-istrationandDomainsAuthoritycalculatesthedutypayableonthebasisofthisdeclaration.



6.6.4. How is real estate taxed85?

Parties liable for land tax

- Ownersofimmovablepropertylocatedinatown(landtaxB).

- Ownersoffarmsandforestryholdingslocatedinatown(landtaxA).

Taxable base

Landed estate, that is the following:

- agriculturalandforestrywealth,

- property,

- operatingproperty.

Landtaxiscalculatedonthebasisoftheunitvalue86ofeachpieceofrealestate,whetherbuiltonornot,assessedinaccordancewiththelegalprinciplesthatapplytoassessingpropertyandsecurities.

Thefollowingareexempt:

Realestatebelongingtopublicauthoritiesandusedforpublicservices,realestateusedforcharitable,sporting,religiousandscientificpurposes,landedestateofhospitals,roadsandpublicriversandstreams,cemeteries.

Taxation of non-residents

Thesameasthetaxationofresidents,sincethetax,asanon-personalpropertytax,isattachedtorealestatelocatedinLuxembourg.

Tax rate applicable

Therearethreeelementsinthecalculationoflandtax:

- theunitvalue(Einheitswert)oftheimmovableproperty:determinedonthebasisofthelawsthatapplytoassessingpropertyandsecurities,

- therateofassessment(Steuermesszahl)whichvariesbetween0.7%and1%inrelationtothetypeofproperty,

- thecommunalrate(Hebesatz)setbyeachtownwhichvariesbetween100%and800%inrelationtotheuseofthetypeofprop-erty.

Landtaxiscalculatedintwostages:

Unitvaluexrateofassessment=basisofassessment

Basisofassessmentxcommunalrate=landtaxpayable

84 Ratesmaybeconsultedonhttp://www.aed.public.lu/successions/tarifs.html(onlyinFrench).85 Grundsteuergesetzof1December1936(GrStg),TaxCodeVolume4Part2.86 Intheory,unitvalue,significantlylowerthancurrentmarketvalue,correspondstothepricewhentheunitvalueofthepropertywasfixed,asat

1January1941.



Taxa

tion

inL

uxem

bour

g

Inprinciple, landtax isdeductibleasabusinessexpenseoroperatingexpense in theevent income isgeneratedor thereare taxableprofits.

Collection

Annualcalculationwithoutataxreturn.Payablequarterly,six-monthlyorannuallydependingonamountofthetax.


TheIncomeTaxAuthority.Theend-beneficiariesofthistaxarethetowns.

6.7. How is value added tax (VAT) levied?

Luxembourg’srulesonVATarecontainedintheActof12February1979relatingtovalueaddedtax87whichtransposedthevariousECdirectivesonthissubjectintonationallaw.

Inthecontextofthetransitionalregime,VAToncross-bordersalesbetweenmosteconomicoperatorsispaidbythebuyerintheMemberStateofdestination.

Thenormalrateis15%.Thereisalsoareducedrateof6%,aspecialreducedrateof3%andanintermediaryrateof12%.

6.7.1. Who is liable for VAT?

IndividualsandentitiesareconsideredliableforVATwheretheycarryouttransactionsthatfallwithinthescopeofeconomicactivity88ofanykindwhatsoever,independentlyandonahabitualbasis.

ThisnaturalorlegalpersonmustregisterwiththeRegistrationandDomainsAuthoritywithin15daysofstartingsaidactivity,submittingacopyofthecertificateofincorporationiftheapplicantisalegalpersonandacopyoftheapplicant’sidentitycardiftheapplicantisanaturalperson.

6.7.2. What transactions are subject to VAT?

ThefollowingtransactionsaresubjecttoVAT:

- deliveriesofgoodsandservicesforvaluableconsiderationinsidethecountrybytaxpayersinthecontextoftheirbusiness,

- intra-CommunityacquisitionsofgoodsforvaluableconsiderationinsidethecountrybytaxpayersregisteredforVATpurposes,

- intra-Communityacquisitionsofnewmeansoftransportforvaluableconsiderationinsidethecountry,and

- importsofgoodsfromothercountries.

6.7.3. How does VAT work?

Ateachstageoftheeconomiccircuit,tradersdeducttheVATchargedthembyothertaxpayers(inputVATi.e.VATonpurchases)fromtheVATinvoiced(outputVATi.e.VATonsales).ThebalanceisowedtotheRegistrationandDomainsAuthorityor,whereapplicable,mayberecoveredfromsaidauthority.

Thismechanismworksasfollows:

Stage Addedvalue

VATcharged

Priceinvoiced

VAT levied

1 40 40x15%=6 46 6

2 25 (40+25)x15%=9.75 74.75 9.75–6=3.75

3 35 (65+35)x15%=15 115 15–9.75=5.25

Atraderatstage2willthereforeinvoicethetraderatstage3fortheproductorserviceatEUR74.75whichbreaksdownintoanamount,exclusiveofVAT,ofEUR65andVATofEUR9.75.ThistraderwillonlypaytheRegistrationandDomainsAuthoritythedifferencebetweenthisoutputVATandtheinputVATpaid.Heorshewillthuspaytheauthoritythedifference,thatisEUR3.75.

87 TaxCodePart6.88 Economicactivity=anyactivityaimedatgeneratingincome,andinparticulartheactivitiesofaproducer,atraderoraserviceprovider,includingex-

traction,farming,activitiesbyprofessionalsandactivitiesinvolvingtheuseofatangibleorintangibleassetwithaviewtodrawingincomefromsuchactivityinapermanentmanner.



Taxa

tion

inL

uxem

bour

g

6.7.4. Which goods and services are exempt from VAT?

Thefollowing,interalia,areexemptfromVAT:

• withtherighttodeductinputVAT:intra-Communitydeliveriesofgoods,exportsofgoodsoutsidetheEUandinternationalcarriageofpassengers,

• withouttherighttodeductinputVAT:transactionscarriedoutbythepostalandtelecommunicationsauthority(excepttelecommuni-cations),thedeliveryandrentalofimmovableproperty,bankingandinsurancetransactionsandcertainotherhealth-related,social,culturalandeducationaltransactionsoractivities.

6.7.5. What triggers VAT?

ThefollowingactivitiesortransactionstriggerVAT:

- deliveriesofgoodsandtheprovisionofservicesforvaluableconsiderationinsidethecountry,

- privateuseofbusinessassets,

- intra-Communityacquisitions,

- importsofgoodsfromcountriesoutsidetheEU.

6.7.6. What is the basis of assessment for VAT?

• Fordeliveriesofgoods,theprovisionofservicesandintra-Communityacquisitions:theamountpaid(withoutVAT).

• Forprivateuseofbusinessassets:thenormalvalue(withoutVAT).

• Forimports:thecustomsvalue(withoutVAT),addingalltheduties,taxedandlevies(otherthanVAT)andancillarycostsincurreduntilthefirstplaceofdestinationofthegoodsinsidethecountry.

6.7.7. What are the applicable tax rates?

Thefollowingtaxratesareapplicable89:

- Normalrateof15%:onallgoodsandserviceswhicharenotsubjecttoanotherrate.

- Intermediaryrateof12%:oncertaingoodsandserviceslikethoseprovidedbycertainprofessions,travelagencies,thecustodyandmanagementofsecurities.

- Reducedrateof6%:inparticularonthesupplyofgas,electricityandcertaindeliveriesofworksofart.

- Special reducedrateof3%: inparticularoncertain foodproducts,booksandnewspapers, thehotelbusiness, foodanddrink inrestaurantsetc.,radioandtelevisionbroadcasting.

6.7.8. How is the tax collected?

Declarationsandmonthly,quarterlyorannualpayments,dependingontheturnoverinvolved.

6.7.9. Which authority collects this tax?



Excisedutyisanindirecttaxontheconsumptionoruseofcertaingoodsinsidethecountry.

6.8.1. What goods are subject to excise duty?

Goodsmanufacturedinsidethecountry,aswellasthoseacquiredinanotherMemberStateorimportedfromacountryoutsidetheEUaresubjecttoexciseduty.

89 PleaseseetheTaxCodePart6a.AlistofitemssubjecttovaryingratesofVAT:acompletelistofgoodsandserviceswiththeapplicableVATratesisavailableat:http://www.aed.public.lu/tva/taux/index.html(onlyinFrench).



Taxa

tion

inL

uxem

bour

g

Therearefourcategoriesofexciseduty:

a. excisedutyleviedbytheBLEU(Belgian-LuxembourgEconomicUnion)

b. excisedutyleviedonalcoholproducedinsidethecountry

c. autonomousexciseduty

d. additionalautonomousexciseduty

Thetaxonalcoholconsumptionandthemonitoringchargeondomesticfuelinparticularareconsideredascommonand/orautonomousformsofexciseduty.

Excise duty is payable on the following goods:

• EthylalcoholandspiritsproducedinLuxembourg

• EthylalcoholandspiritsotherthanthoseproducedinLuxembourg

• Beer

• Non-sparklingwine,sparklingwineandintermediarygoods

• Mineraloil

• Processedtobacco

Themainrulesforexcisedutyaresetoutbelow:

a) Thegoodsinvolved(mineraloil,processedtobacco,ethylalcoholandalcoholicdrinks)areliableforexcisedutywhentheyarepro-ducedintheBLEUorwhentheyarereceivedorimportedintothisterritory.

b) Excisedutyistobepaidinthecountryofconsumptioninaccordancewiththerateapplicablethere.

c) Theproduction,processingandholdingofgoodsonwhichthepaymentofexcisedutyhasbeensuspendedtakesplace inataxwarehousewhoseopeningandoperationissubjecttoauthorisationbytheCustomsandExciseAuthority.

d) Intra-Communitymovementofthesamegoodsonwhichthepaymentofexcisedutyhasbeensuspendedmustbedonewithanaccompanyingadministrativeorcommercialdocument.

e) Theauthorisedwarehousekeeperbenefitsfromadeductibleforlossesincurredinthisregimeofsuspendedpayments,duetoexcep-tionaleventsorcasesofforcemajeureandestablishedbyagentsoftherelevantauthority.

f) Theprofessionaloperatorinformstherelevantauthorityofdeliveriessentorreceivedwiththeaccompanyingdocument.

g) Theauthorisedwarehousekeeperholdingexcisedutygoodsonwhichthepaymentofexcisedutyhasbeensuspendedisreleasedfromliabilityandissentadocumentstatingthisbytherelevantauthorityafterthereturnofthereturncopyoftheaccompanyingdocumentwithreceiptacknowledgedbytherecipientand,whereapplicable,astampbytherelevantauthorityinthecountryofdestination.

h) Theshipperofexcisedutygoodsonwhichexcisedutyhasbeenpaidmayobtain,onrequest,therefundoftheexciseduty,bysubmit-tingthereturncopyofthesimplifiedaccompanyingdocument,dulydischargedandtogetherwithacertificateshowingpaymentofexcisedutyintheMemberStateinwhichthegoodsaretobeconsumed.

i) Ifthegoodsdonotreachtheirdestinationandwhereitisnotpossibletodeterminewheretheoffenceinvolvedoccurred,theMemberStateofdeparturecollectstheexciseduty.

6.8.2. What rates are applied?

AcompletelistoftheexcisedutyratesappliedinLuxembourgmaybeconsultedontheCustomandExciseAuthority’swebsite90.

6.8.3. Which authority collects this tax?

TheCustomsandExciseAuthority.

6.9. Other taxes and duties

6.9.1. What is insurance tax91?


Theinsuredcoveredbytheinsurer.

Taxable base

Ingeneral,theamountofthepremium,includingancillarycosts,thesuminsured,forinsuranceagainstdamagecausedbyhail.

90 http://www.do.etat.lu/acc/taux_et_timbres/taux_nationaux.htm(onlyinFrench).91 Taxoninsurance(Versicherungssteuer-Gesetz)TaxCodeVolume6a.



Taxa

tion

inL

uxem

bour

g

Trigger

Paymentofpremiumsoncertaininsurancepolicies(e.g.:policiescoveringhail,theft,glassbreakage,civilliability,accidents,fire,construc-tion,transport,ships,planes,cars,illness,disability,totalinsurance,capitalredemptioninsurance,etc.).

Thefollowingareexempt:certaininsurancepolicies,inparticularsocialsecurityinsurancebodiestowhichpaymentsaremandatory,lifeassuranceandold-ageassurance.

Rate applicable

4%ofthepremium.

Collection

Onthebasisofadeclarationandquarterlypaymentsbytheinsurer.



6.9.2. What are registration duties?

Registrationdutiesareindirecttaxesonthelegalmovementofpropertywithaverybroadmeaning.Thefollowinginparticularthusmustberegistered:publicsales,contributionstocompanies,rentalleases,donations,salesofimmovableproperty92.

Registrationhasinteraliathebenefitofgivinganauthenticateddatetoregistereddeeds.

Taxable base

Themarketvalueofthepropertytransferredorthesumsofmoneyandsecuritiesthatarethesubjectofthelegaldeeds.

Tax rate applicable

AnamountispayabletotheRegistrationAuthoritydependingonthetypeofdeed,eitherafixedamountoraproportionalamount.

Proportional registration duties,whoseratevariesbetween0.24%and14.4%dependingonthetypeandthesubjectofthelegaltransactions,arepayableonobligationsinvolvingsumsofmoneyandsecuritiesandforanyintervivostransferofownership,usufructorpossessionofpersonalpropertyandimmovableproperty93.

Fixed registration dutiesvaryingbetweenEUR 12(ingeneral)and EUR 24arepayableondeedswhichdonotgiverisetothepay-mentofproportionalregistrationduties.

Transfersofpropertyandmoveablepropertyrightswhichtriggertheeffectivepayabilityofvalueaddedtaxareregisteredonlywithfixedregistrationduties.However,thisprovisiondoesnotapplytocontributionstocompaniesremuneratedbycorporaterights.

Rate of registration duties applicable to sales of immovable property

• Normalrate:6%94.TaxrebateofEUR20,000tobeoffsetagainsttheregistrationdutiespayableinthecaseoftheacquisitionbyaresidentindividualofapersonalhomeorlandforbuilding.

• Reducedrateapplicable tothesaleof immovableproperty followingbankruptcyand,undercertainconditions, to ruralproperty:1.2%.

• Low-costhomes:fixedregistrationdutiesofEUR12.

Rate of registration duties applicable to companies95

• Ordinarycontributionsofmoveablepropertyorimmovableproperty:capitaldutyof1%96.

• Contributionsforvaluableconsideration:capitaldutyofbetween0.20%and6%dependingonthetypeofpropertycontributed.

• Increasesincapitalbymeansofnewcontributions:capitaldutyof1%.

92 LuxembourgTaxCodeVolume5Title2.93 Forasummarytableoftheratesofproportionaldutiesapplieddependingonthetypeofinstrument:TaxCodeVolume5Title2ChapterVpage34,or: http://www.aed.public.lu/enregistrement/index.html(onlyinFrench).94 ForpropertylocatedintheCityofLuxembourg,therateis9%.95 Actof29December1971relatingtotaxonraisingcapitalinnon-commercialcompaniesandcommercialcompanies,LuxembourgTaxCodeVolume5

Title2ChapterXII.96 FixeddutyofEUR1,200forcollectiveinvestmentschemes,pensionschemes,“Sicar”(venturecapitalinvestmentvehicles)andsecuritisationcompanies.

D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 1 0 0


Taxa

tion

inL

uxem

bour

g

• Forfamilycompanies(includinglimitedliabilitycompanies),thecapitaldutyisreducedto0.5%97.

• Increasesincapitalbyincorporatingreserves:fixeddutyofEUR12.

Contributionsareexemptfromthistaxinthefollowingcases:

• contributionbyoneorseveralcompaniesofalltheirassets,orofoneorseveraloftheirlinesofbusinesstooneofseveralcompaniesbeingincorporatedoralreadyincorporated,providedthatthecontributionsareremuneratedsolelybytheallocationofshares(withtolerationofacashpaymentoflessthan10%oftherelevantbookvalue)andprovidedthatthecompaniesthatarepartiestothetransactionhavetheireffectiveheadofficeortheirregisteredofficewithintheEuropeanUnion.

• contributionofpartners’sharesrepresentingatleast65%oftheissuedcapitalofacapitalcompanytoacapitalcompanybeingin-corporatedoralreadyincorporated,providedthatthecontributionsareremuneratedsolelybytheallocationofshares(withtolerationofacashpaymentoflessthan10%oftherelevantbookvalue)andprovidedthatthecompanywhichreceivesthecontributionandthecompanywhosesharesarecontributedhavetheireffectiveheadofficeortheirregisteredofficewithintheEuropeanUnion,andthatthecompanythatreceivestheshareskeepstheholdingforfive5years.

Mergersofcompanies:

• ordinarycontributionstothenewcompanyareexemptfromcapitaldutyundercertainconditions.

• contributionsforvaluableconsideration(encumberedpropertyrecordedasaliability)areexemptwhereallassetsandliabilitiesarecontributed.

• transfersofpartners’shares:fixeddutyofEUR12.

Collection

Ingeneral,thesedutiesarecollectedwhenjudicialorextrajudicialcivildeeds(publicorbyprivatesignature)areregistered.

- OfficialdeedsareregisteredbynotarieswiththeofficeoftheRegistrationAuthorityintheplacetheylive.

- PrivatedeedsmayberegisteredinanyRegistrationAuthorityoffice.

- DeedsintendedtobefiledwiththeTradeandCompaniesRegisterortobepublishedintheMémorialCshouldbesubmittedtothebureaudessociétés(companiesoffice)inLuxembourgorthebureaudesrecettes(collectionoffice)inDiekirch,respectively.

- Realestateagentsshouldregistertheirdeedsattheofficeoftheirplaceofdomicile.

Registration tax on securities

Registrationtaxonsecurities98wasabolishedbytheActof6December1990forcommercialcompaniesotherthanforholdingcompaniesandundertakingsforcollectiveinvestment.

TherateofthisregistrationtaxforsecuritiesofholdingcompaniesundertheActof1929hasbeensetat0.2%.Theannualrateofregistra-tiontaxpayablebyundertakingsforcollectiveinvestmentamountsto0.05%,or,undercertainconditions,to0.01%.Registrationtaxonmoneymarketfundsandliquidassetsamountsto0.01%.

InaccordancewiththeActof21June2005amendingArticle1oftheActof31July1929onthetaxtreatmentoffinancialholdingcompa-nies,asamended,holdingcompaniesundertheActof1929whichreceiveatleast5%ofthetotalamountofdividendsduringafinancialyearfromholdingsincompaniesthatarenotresidentinLuxembourgandthatarenotliabletocorporationtaxmaynolongerbenefitfromthepreferentialtaxtreatmentthatappliestothemforthisfinancialyear.

Thisactappliestoallfinancialyearsstartingafter1July2005.AsregardsexistingholdingsthatbenefitedfromtheprovisionsoftheActof31July1929,asamended,beforethisnewactcameintoforce,thenewformoftaxtreatmentwillonlyapplyafter1January2011.

Onlyincomeintheformofdividendsistakenintoaccountincalculatingwhetherthelegallimithasbeenexceeded.TherateofforeigntaxconsideredtobecomparabletothatoftheLuxembourgtaxisatleast11%(i.e.approximatelyhalfthecorporationtaxrate).

Toassesswhetherornotthelegallimithasbeenexceeded,holdingcompaniesundertheActof1929henceforthhavetousetheservicesofanindependentauditororacharteredaccountanttocertifytheirrecordsofincome.

Intheeventthethresholdiscrossedduringthefinancialyear,thecompany’slossofstatusasaholdingcompanyundertheActof1929isrecordedbytheManageroftheRegistrationandDomainsAuthority.



97 Article7ofsaidlawwhichdefineswhatshouldbeunderstoodby“familycompany”publiccompanies(SARL),partnerships(SENC),limitedpartner-ships(SECS)andnon-commercialcompaniesarenotcommercialcompanieswhereatleastninetenthsofthesharesareallocatedbytheArticlesofAssociationonlytospouses,tothefatherandmotherorthesurvivoroftheseandtotheirdescendantsorrelativesbymarriageinadirectline,or,inthecaseofthedeathofthefatherandmother,tothebrothersandsistersasanundividedwhole,andrespectivelytothespousesofsaidpersons,andtheirdescendantsandrelativesbymarriageinadirectline.

98 TaxCodeVolume5Title2,ChapterXII.



Taxa

tion

inL

uxem

bour

g

6.9.3. What is stamp duty99?

Deeds subject to stamp duty

Thefollowing,inparticular,aresubjecttostampduty:

- publicandprivatedeedsintendedtobeauthenticbetweentheparties:deedsdrawnupbynotaries,civilenforcementofficers,judg-ments,businesspermits,permitsforclassifiedestablishments,

- writtendocumentsissuedtoindividualsbythepublicservices:passports,certificatesauthenticatingdocuments,huntingpermits,etc.

Thefollowingareexemptfromthisduty:

- certaindeeds,eitherduetothetypeorsubjectthereoforduetothecapacitiesoftheparties,

- shareorbondcertificatesissuedbycompaniesareexemptfromstampduty.

Tax rate applicable

a) Stampdutypayableaccordingtothesizeofthepaper,varyingbetweenEUR1.86andEUR9.92,ispayableonpapersintendedforpublicandprivatedeedsdrawnupinordertobeauthenticbetweentheparties.

b) Fixedorvariablestampduty,varyingbetweenEUR0.25andEUR148.74ispayableoncertainwrittendocuments(passports,permits,certificates,administrativefeesforcertificatesauthenticatingdeeds,authorisations,etc.),issuedtoindividualsbythepublicservices.

Collection

Byaffixingtaxstampsorpayingthedutieswhenpayable.TaxstampsmaybepurchasedintheofficesoftheRegistrationandDomainsAuthority100.



6.9.4. What are mortgage duty, registration fees, duties for renewed registration and registra-tion duties101?

Deeds subject to these duties and fees

- Forregistrationfees,liens102andmortgages103,inordertograntthecreditortherighttofollowpropertyintothehandsofathirdpartyandtherighttoberankedalongsideregisteredcreditors.

- Forregistrationduties:

- allintervivosdeedsconveyinginremimmovablepropertyrightsotherthanliensandmortgages(e.g.salesordonationsofimmovableproperty,andforaircraftandboatsforinlandwaterways),

- deedsdividingupimmovableproperty,

- leasesofmorethannineyears.

Thefollowinginparticularareexemptfromthesedutiesandfees:inprinciple,alltransfersofimmovablepropertythatareexemptfromproportionalregistrationduties,registrationsofmortgagesbytheCaissed’Epargne(savingsbank),divisionsofpropertybetweenascend-ants.

Taxable base

• Forregistrationfeesanddutiesforrenewedregistration:theprincipalamountofthereceivable,thatisthesubjectoftheregistration.

• Forregistrationduties:thepriceorthemarketvalueofthepropertytransferred.

Collection

ThedutiesandfeesarecollectedwhenthedeedsaresubmittedtotheMortgageRegistryinthedistrictinwhichthepropertyinquestionislocated.Theyarepayablebythedebtor,unlessprovidedotherwise.

99 Actof23December1913onregistration,asamended;TaxCodeVolume5,Title4.100 Fortheaddressesoftheseoffices:http://www.aed.public.lu/functions/contact/points.html(onlyinFrench).101 SeeTaxCodeVolume5Title5,mainlyChapterXIII.102 Alienisacreditor’srighttobepaidthepricefromthesaleofoneormoreassetsheldbyhisorherdebtorbeforeothercreditors.103 Amortgageisanancillarypropertyrightguaranteeingthebeneficiarythereofwhohasregisteredthemortgagetoarrangeforthesaleoftheproperty

encumberedbythemortgageregardlessofwhoownsit(righttofollowpropertyintothehandsofathirdpartyor“droitdesuite”)andtobepaidfirstfromtheprice(preferentialright).

D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 1 0 �


Taxa

tion

inL

uxem

bour

g

Tax rate applicable

• Registrationfeesanddutiesforrenewedregistration(inprincipleevery10years):0.5%.

• Registrationduties: ingeneral1%.Reducedrateof0.5%forcertaintypesofimmovableproperty(ruralproperty)andforcertaindeeds(exchanges,salesofimmovablepropertyfollowingbankruptcy).

Please note:

Aspecialfee(=remunerationofmortgageregistrars)ofbetweenEUR1.24andEUR12,dependingonthevalueoftheimmovablepropertybeingtransferredoramountofthemortgagedebttoberegisteredorstruckoff,iscollectedonbehalfoftheState,ofwhich1/5ispaidtothemortgageregistrarsasanindemnityforliability.



6.9.5. What is the tax on motor vehicles104?

Actions triggering liability for the tax on motor vehicles

Thetaxispayableforthefollowing:

- owningamotorvehicleintendedtobeusedonpublicroads,

- unlawfuluseofamotorvehicleonpublicroads,

- allocationofaspecialnumberplate(redplate),

- vehicleswithoutengines,designedanddevelopedtobepulledbyself-propelledvehicles,inparticulararticulatedlorriesandtrailers.

Taxable base

The basis of assessment is determined, depending on the type of vehicle, on the basis of:

- enginecapacity,or

- theemptyweightofavehicleinworkingorder.

Applicable tax rates

Theamountoftaxdependsonthevehicle’senginecapacityorweightinaccordancewiththecategoryofvehicle.Forpassengervehicles,itvariesbetweenEUR3.5andEUR336.75peryear105.



6.9.6. What are road use charges (on certain roads)?

Parties liable for these charges

Roadusecharges(Eurovignette)havetobepaidwhenheavycommercialvehiclesusedtotransportgoods,withamaximumauthorisedmassequaltoormorethan12tons,usecertainroads,evenwhenthevehiclesareempty.Itmaybeasinglevehicle(e.g.alorry)oragroupofvehicles(e.g.anarticulatedvehicleoraconvoyofvehicles).Thecarrier,theownerofthevehicleandthedriverarejointlyandseverallyliableforpaymentoftheseroadusecharges.

Applicable rates

TheamountofroadusechargesvariesinrelationtothelengthoftimetheEurovignetteisvalidandthenumberofaxlesthevehiclehas(forexample,EUR1,250peryearforavehiclewithfouraxlesormore)106.



104 Kraftfahrzeugsteuergesetz(KraftStG)of23March1935,TaxCodeVolume3Title3.105 Ratesavailableathttp://www.do.etat.lu/vehaut/baremes.pdf(onlyinFrench).106 Taxscheduleavailableathttp://www.do.etat.lu/vehaut/eurovignette.htm(onlyinFrench).



Taxa

tion

inL

uxem

bour

g

6.9.7. What is the fire service tax?


Insurancecompaniesthatprovideinsuranceagainstfire.

Taxable base

Premiums,includingancillarycosts,receivedbytheinsurancecompany.

Applicable rate

6%.

Collection

Declarationandquarterlypayments107.



6.9.8. What is the tax on games of chance and sporting bets108?


Organisersofsportingbetsandorganisersoflottery-typegames.

Taxable base

Amountsplacedasbetsandamountspaidbypeopletakingpartinlottery-typegames.

Applicable rate

Thetaxonsportingbetsandgamesofchanceisfixedat15%ofthegrossamountplacedasabet.

TheinitialamountoftaxtobepaidbyorganisersofbettingmaynotexceedEUR600.



6.9.9. What is the tax on licensed premises109?


Personsauthorisedtoservealcoholicbeverages.

Taxable base

Thetaxisleviedontheoperationofpremiseswherealcoholicbeveragesaresold.

Applicable tax rates

Annualtaxesandthetaxwhenlicensespremisesopenareasfollows:

Annual tax Tax on opening Towns

EUR24 EUR60 townswithfewerthan1,000inhabitants

EUR49 EUR120 townswithbetween1,000and5,000inhabitants

EUR74 EUR240 townswith5,000inhabitantsormore

107 Theformsmaybedownloadedfrom: http://www.aed.public.lu/autres/assurances/declarations.html(onlyinFrench).108 Actof20April1977relatingtobusinessesinvolvinggamesofchanceandsportingbets(TaxCodeVolume3a).109 Actof29June1989reformingthelicensingsystem(régimedescabarets),TaxCodeVolume3,Title4.



Taxa

tion

inL

uxem

bour

g

RunninganadditionalbarissubjecttothepriorauthorisationoftheCustomsandExciseAuthorityandpaymentofadailytaxamountingtoonetenthofthebar’sannualdutyforopen-airbars.Inallothercases,thedailytaxisthesameamountastheannualtax.

Collection

Paymentiscollected:

- whenabaropensoristakenover,bymeansoftheopeningtaxandtheannualtax,

- whenthebariscontinuingoperationortoretaintherighttosellalcoholorservealcoholicbeverages,bymeansoftheannualtax.



6.9.10. What is the entertainment tax110?


Organisationsthatprovideentertainmenttothepublic.

Taxable base

Shows,balls,fireworks,concerts,cinemas,fun-fairs,lotteries,skittles,musicalequipment,etc.

Applicable rate

Therightisfixedbyeachmunicipalauthority.Thistaxisnotcollectedinsometowns.

Collection

Bymeansofadeclaration.


Towns.

6.10. What is excise duty111?

SincethecreationoftheenlargedinternalEuropeanmarketon1May2004,themovementofgoodsbetweenEuropeanUnionMemberStateshasbeengovernedbycompletelynewrules,bothasregardsbusinessgoodsandgoodsforprivateuse.

Thecreationoftheinternalmarket,inasmuchasitisanareawithnointernalborders,necessarilyledtotheabolitionofcustoms,taxandstatisticalformalitiesonthebordersbetweenMemberStates.

Nonetheless,therearestillmanyproceduralrequirementsintheareaofthetransferofgoodsinsidetheEU.

Totakethisfundamentalchangeintoaccount,manyEUlawsandregulationshavehadtobesignificantlychanged.

Since1January1994,customslawshavebeenpublishedinasinglebook,theCustomsCode.

Inordertohaveabetteroverallviewofthisissue,cross-bordermovementofgoodshouldbeexaminedonthebasisofthefourfollowingangles:

1. communitygoods(T2procedure)subjectonlytoVAT,

2. non-Communitygoods(T1procedure),

3. communitygoodssubjecttoexciseduty,

4. non-Communitygoodssubjecttoexciseduty.

110 Implementingtheregulationoncharitableofficesof11December1846andthecircularof29December1846relatingtotheorganisationofpubliccharitiesinLuxembourg(TaxCodeVolume4,Title4).

111 CustomsandExciseAuthority(AdministrationdesDouanesetAccises),BP1605,L-1016Luxembourg.www.do.etat.lu(onlyinFrench).



Taxa

tion

inL

uxem

bour

g

6.10.1. Which Community goods are subject solely to VAT?

1. ThecustomsterritoryoftheCommunitycomprises:

— theterritoryoftheKingdomofBelgium,

— theterritoryoftheKingdomofDenmark,excepttheFaroeIslandsandGreenland,

— theterritoryoftheFederalRepublicofGermany,excepttheIslandofHeligolandandtheterritoryofBüsingen

(Treatyof23November1964betweentheFederalRepublicofGermanyandtheSwissConfederation),

— theterritoryoftheHellenicRepublic,

— theterritoryoftheKingdomofSpain,exceptCeutaandMelilla,

— theterritoryoftheFrenchRepublic,excepttheoverseasterritoriesandSaint-PierreetMiquelonandMayotte,

— theterritoryofIreland,

— theterritoryoftheRepublicofItaly,exceptthemunicipalitiesofLivignoandCampioned’ItaliaandthenationalwatersofLakeLuganowhicharebetweenthebankandthepoliticalfrontierofthearealocatedbetweenPonteTresaandPortoCeresio,

— theterritoryoftheGrandDuchyofLuxembourg,

— theterritoryoftheKingdomoftheNetherlandsinEurope,

— theterritoryoftheRepublicofAustria,

— theterritoryofthePortugueseRepublic,

— theterritoryoftheRepublicofFinland,

— theterritoryoftheKingdomofSweden,

— theterritoryoftheUnitedKingdomofGreatBritainandNorthernIrelandandoftheChannelIslandsandtheIsleofMan,

— theterritoryoftheCzechRepublic,

— theterritoryoftheRepublicofEstonia,

— theterritoryoftheRepublicofCyprus,

— theterritoryoftheRepublicofLatvia,

— theterritoryoftheRepublicofLithuania,

— theterritoryoftheRepublicofHungary,

— theterritoryoftheRepublicofMalta,

— theterritoryoftheRepublicofPoland,

— theterritoryoftheRepublicofSlovenia,

— theterritoryoftheSlovakRepublic.

2. AlthoughsituatedoutsidetheterritoryoftheFrenchRepublic,theterritoryofthePrincipalityofMonaco,asdefinedintheCustomsConventionsignedinParison18May1963(OfficialJournaloftheFrenchRepublicof27September1963,page8679)is,byvirtueofthatConvention,alsoconsideredaspartofthecustomsterritoryoftheCommunity.

3. ThecustomsterritoryoftheCommunityincludestheterritorialwaters,theinlandmaritimewatersandtheairspaceoftheMemberStatesandtheterritoriesreferredtoinparagraph2,exceptfortheterritorialwaters,inlandmaritimewatersandtheairspaceoftheseterritorieswhicharenotpartofthecustomsterritoryoftheCommunitypursuanttoparagraph1.

Communitygoodsmeansgoods:

• whollyobtainedinthecustomsterritoryoftheCommunityundertheconditionsreferredtoinArticle23ofCouncilRegula-tion(EEC)no.2913/92andnotincorporatinggoodsimportedfromcountriesorterritoriesnotformingpartofthecustomsterritoryoftheCommunity.GoodsobtainedfromgoodsplacedunderasuspensivearrangementarenotdeemedtohaveCommunitystatusincasesofspecialeconomicimportancedeterminedinaccordancewiththecommitteeprocedurelaiddownintheregulation,

• importedfromcountriesorterritoriesnotformingpartofthecustomsterritoryoftheCommunitywhichhavebeenreleasedforfreecirculation,

• obtainedorproducedinthecustomsterritoryoftheCommunity,eitherfromgoodsreferredtointhesecondindentaloneorfromgoodsreferredtointhefirstandsecondindents.

6.10.2. Non-Community goods

Non-CommunitygoodsaregoodswhicharenotinfreecirculationwithintheEU.

Theinternalmarketdoesnothaveasignificanteffectonthemovementofnon-Communitygoods(T1procedure).



Taxa

tion

inL

uxem

bour

g

6.10.3. Community goods subject to excise duty

On1January1993,taxandcustomsbarrierswereliftedfromthebordersthatstillseparatedtheStatesinvolvedandgoodsmaymovefreelywithinthenewtaxterritoryformedbythegeographicalterritoriesofthe12MemberStates(Germany,Belgium,Denmark,Spain,France,Luxembourg,Greece,Ireland,Italy,Netherlands,PortugalandtheUnitedKingdom).On1January1995,Austria,FinlandandSwe-denjoinedtheEU.On1May2004,tennewMemberStates(CzechRepublic,Estonia,Cyprus,Latvia,Lithuania,Hungary,Malta,Poland,Slovenia,SlovakRepublic)joinedtheEuropeanUnion.

ThecreationoftheinternalEuropeanmarketin1993gaverisetoaCommunitysystemaimedatregulatingtaxation,movement,thehold-ingandcontrollingofexcisedutygoods.

ThisnewsystemappliesthroughouttheterritoryoftheCommunityasitwasdefined,foreachMemberState,bytheTreatycreatingtheEuropeanEconomicCommunity,excludingthefollowingterritories:

Denmark: FaroeIslandsandGreenland

Spain: CanaryIslands,CeutaandMelilla

Germany: IslandofHeligolandandtheterritoryofBüsingen

France: Overseasadministrativeareas(départements)andterritories

Italy: LivignoandCampioned’ItaliaandthenationalwatersofLakeLuganowhicharebetweenthebankandthe politicalfrontierofthearealocatedbetweenPonteTresaandPortoCeresio

UnitedKingdom: ChannelIslands

Greece: MountAthos

Finland: AlandIslands

ThefollowingarehoweverconsideredtoformpartofthecustomsterritoryoftheCommunity:

Monaco

SanMarino

IsleofMan.

Onthebasisofprovisionsthatcameintoforceon1January1993,excisedutygoodsmaybemovedfreelyintheEuropeanUnionuptotheleveloftraderwithouthavingtobecheckedatinternalborders.However,thecompaniesinvolvedinthetransferofexcisedutygoodsarerequiredtoinformtheauthoritiesofthedepartureandarrivalofsaidgoods.

Inthissystem,excisedutymustbepaidinthecountryofconsumptionattherateinforceinsaidcountry.

Inaddition,anadministrativeorcommercialaccompanyingdocumentisrequiredtothegoodstobemoved.

Atthebasisofthissystemistheconceptofanauthorisedwarehousekeeper,ataxwarehouse,aregisteredoperatorandanunregisteredoperator.

Underthissystem,theproduction,processing,holdingandshippingofdutysuspendedgoods,whetherthisisinthesamecountryorinanotherEUMemberStatemayonlytakeplaceinorfromaplaceacknowledgedtobeataxwarehouse.

Onlynaturalorlegalpersonswiththestatusofanauthorisedwarehousekeeper,aregisteredoperatororanunregisteredoperatormayreceivedutysuspendedgoods.

AlthoughthecapacityofauthorisedwarehousekeeperandregisteredoperatorneedstobeauthorisedbytheCustomsandExciseAuthor-ity,anunregisteredoperatordoesnot.

6.10.4. Non-Community goods subject to excise duty

Asbefore1January1993,thesimplestsolutionistosendthesegoodswithanexternaltransitdocument(T1)fromtheexternalbordertotheclosestcustomsofficeinLuxembourg.Asinthepast,importdutyandexciseduty(andcommoditytax,whereapplicable)arepaidatthisoffice.

While,priorto1January1993,operatorscouldputthesenon-Communitygoodsinfreemovement(paymentof importduties)atthepointofentryontheEuropeanUnion’sexternalbordertoshipthemsubsequentlywithaninternalCommunitytransitdocument(T2)toLuxembourg,proceduresbecamemorecomplicatedasfrom1January1993inthatinpracticeithasnolongerbeenpossibletoseparatefreemovementfrominwardclearance.Thus,whereanoperatorchoosesthismethod(carryingouttheformalitiesontheexternalborder),thefollowingarerequired:



Taxa

tion

inL

uxem

bour

g

a) theoperatorshouldhaveaVATidentificationnumberintheimportingMemberStateoranamednaturalorlegalpersoninthisMem-berStateshouldact,onbehalfoftheLuxembourgoperator,asthetaxrepresentativewiththe(VAT)taxauthoritiesofthiscountry,

b) thecorrespondentoftheLuxembourgrecipientattheplaceofimportationintotheEUshouldberecognised,bytherelevantauthori-tiesofthisMemberState,ashavingthecapacityofauthorisedwarehousekeepertobeabletosendthesegoodstoLuxembourgwithexcisedutysuspended.Therefore,thetransfertoLuxembourgmustbedonewithanaccompanyingdocument.

6.10.5. Useful websites

a)Customstariffs:

MarketAccessDatabase

mkaccdb.eu.int/mkaccdb2/indexPubli.htm

ConsultationofTARIC(IntegratedCustomsTarifffortheEuropeanCommunities)

http://europa.eu.int/comm/taxation_customs/dds/cgi-bin/tarchap?Lang=EN

WorldCustomsOrganisation

www.wcoomd.org/hsxpl/default.jsp?jsessionid=3170671018939049031

b)Miscellaneous

LuxembourgCustomsandExciseAuthority(AdministrationdesDouanesetAccises)www.etat.lu/DO(inFrenchonly)

EuropeanCommission’sTaxationandCustomsUnionDirectorate-General

http://europa.eu.int/comm/taxation_customs/common/about/welcome/index_en.htm

CouncilRegulation(EEC)No2913/92of12October1992establishingtheCommunityCustomsCode

http://europa.eu.int/eur-lex/en/consleg/pdf/1992/en_1992R2913_do_001.pdf

CouncilDirective92/12/EECof25February1992onthegeneralarrangementsforproductssubjecttoexcisedutyandontheholding,movementandmonitoringofsuchproducts

http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:31992L0012:EN:HTML

6.10.6. Authority which collects this tax



ChaptER 7LABOUR LAW AND SOCIAL SECURITY

7.1. Access to employment

7.2. The employment relationship

7.3. Regulation of labour

7.4. Dialogue between labour and management

7.5. Social security

LABOUR LAW AND SOCIAL SECURITYChaptER 7


Labo

urla

wa

nds

ocia

lsec

urity

7.1. Access to employment

7.1.1. The job market

Therearecurrentlyapproximately315,000employeesand21,000self-employedworkersinLuxembourg(January2006).ManyforeignemployeesworkinLuxembourg,someofwhomliveinthecountryandothersoutside:morethan40%ofsalariedjobsareheldbycross-borderworkers.CompaniesinLuxembourgthushaveaccesstoahighly-diversified,qualifiedandmultilingualworkforce.

LabourdisputeshavebeenrareinLuxembourg,whereindustrialproblemsaresettledbyconsultationbetweenemployersandworkers,bothatundertakinglevelandnationally.

7.1.2. Luxembourg workers

TheLuxembourgconstitution1guaranteeseveryLuxembourgcitizenovertheageof15therighttowork.

7.1.3. Foreign workers2

Inprinciple,inordertobeabletotakeupsalariedemploymentinLuxembourg,foreignershaveto:

- meettheconditionsofentryintoandresidenceinLuxembourg.Themunicipalauthorityinthetownofresidenceisresponsibleforthesematters.

- haveaworkpermit.

Thespecificconditionsthatapplywillvarydependingonwhetherworkersare:

- EUorEuropeanEconomicAreanationals,or

- nationalsfromothercountries.

SpecialconditionsapplytoforeignworkerswhoaretemporarilysecondedtoLuxembourgbyaforeignorLuxembourgundertaking.

Otherconditionsapplytocollectivepermissiontoworkandtemporarypermissiontowork.

7.1.3.1 EU or EEA workers

Dotheseworkersneedtoapplyforpermissiontoliveinthecountry?

NationalsofEUorEuropeanEconomicAreaMemberStatesmayenterLuxembourgsimplybyshowinganationalidentitycardorapass-portthatisvalidorthatexpiredlessthanfiveyearspreviously.

IftheywishtoliveinLuxembourgformorethanthreemonths,theyneedtoobtainpermissiontoresideinthecountry,intheformofaresidencepermitforanEUMemberStatenational.Toobtainthispermit,workersshallapplytothemunicipalauthorityinthetownwheretheywishtolive.Permitsarevalidforfiveyearswhentheyarefirstissuedandfortenyearsasfromthefirsttimetheyarerenewed.Theyareautomaticallyrenewable.

Dotheseworkersneedtoapplyforaworkpermit3?

Workersfromthesecountriesnolongerneedaworkpermit4.

7.1.3.2. Workers who are nationals of other countries

Dotheseworkersneedtoapplyforpermissiontoliveinthecountry?

ForeignerswhoarenotnationalsofEUorEEAMemberStatesmayonlyenterLuxembourgwithavalidpassportandavisaifrequired.

Theymustreporttothelocalmunicipalauthorityeveniftheyintendtostaylessthanthreemonthsinthecountry.Inthiscase,fillingintheforminaregisterheldbyhotelsinaccordancewiththelawtakestheplaceofreportingtheirarrivalinthecountrytoanofficialbody,providedthattheforeignerstayinglessthanthreemonthsinthecountrydoesnotcarryoutanyactivityforprofit.Foreignerswhowishtoliveinthecountryformorethanthreemonthsmustsubmitanapplicationforaforeigner’sidentitycardtothemunicipalauthorityinthetownwheretheyintendtolive.

Asanexceptiontothisrule,foreignworkersemployedbyaforeigncompanyandsecondedtoLuxembourgtocarryoutworkforaforesee-ableperiodoftimewhichdoesnotexceedoneyearisnotrequiredtoapplyforaforeigner’sidentitycard.

1 Article11.4.oftheLuxembourgconstitution.2 ThisisgovernedbytheprovisionsoftheActof28March1972relatingtoentryandresidenceofforeigners,medicalexaminationsofforeignersand

employmentofforeignworkers,asamended,andtheLuxembourgRegulationof28March1972relatingtotheconditionsofentryandresidenceforcertaincategoriesofforeignersunderinternationalconventions.Luxembourggovernmenthasannouncedadeepreformofimmigrationlegislation.Abillisexpectedbytheendof2006.

3 Theprovisionsrelatingtoworkpermitsdonotapplytothecommercial,skilledcrafttrades,industrialandotherprofessionscoveredbytheprovisionsoftheActof28December1988relatingtotherighttosetupabusiness,asamended.

4 EuropeanCouncilRegulation1612/68/EECof15October1968onfreedomofmovementforworkerswithintheCommunity.



Labo

urla

wa

nds

ocia

lsec

urity

Dotheseworkersneedtoapplyforaworkpermit5?

Inprinciple,foreignworkersfromnon-EUorEEAcountriesmayonlybeemployedinLuxembourgiftheyhaveaworkpermitissuedbytheMinistryofLabourandEmployment(MinistreduTravailetdel’Emploi)oranotherauthoritydelegatedtoactonitsbehalf.UnderLuxem-bourgregulations,therearefourtypesofworkpermit.

Typesofworkpermit

Category Maximumlength Scopeofapplication:profession Scopeofapplication:employer

A oneyear oneprofession oneemployer

B fouryears oneprofession anyemployer

C unlimited anyprofession anyemployer

D forthetimeofanapprenticeship oneprofession oneemployer

WorkpermitsareissuedbytheMinistryofLabourandEmploymentorbyanotherauthoritydelegatedtoactonitsbehalfonthebasisoftherecommendationofaspecialcommitteeoftheEmploymentAuthority(Administrationdel’Emploi),whichtakesintoconsiderationtheposition,thedevelopmentandtheorganisationofthejobmarketinLuxembourg.

WorkpermitsincategoriesBandCaresubjecttoconditionsrelatingtominimumperiodsofresidenceandworkinginLuxembourg.Thus,BpermitsmaybeissuedtoworkerswhocanprovideevidencethattheyhavelivedandworkedinLuxembourgforacontinuousperiodofatleastoneyearandCpermitsmaybeobtainedbyworkerswhoeithermeetconditionsrelatingtoresidencyandworkingforacontinuousperiodofatleastfiveyearsorwereborninLuxembourgandhavelivedthereforatleasttwoyears.

Howareworkpermitsobtained?

Beforeforeignworkerswithoutworkpermitsstartwork,employersmustsubmitadeclarationtotheLuxembourgEmploymentAuthority(Administrationdel’Emploi)relatingtothevacancytobefilled.

Thisdeclaration,countersignedbytheworkerinquestion,constitutesanapplicationforaworkpermit.Thisdeclarationmustbemadebeforethepersonstartsworkandbeforetheworkerentersthecountry.

TheEmploymentAuthority issues theworkerwitha receipt for thedeclaration.This receipt,ofwhichacopy is sent to theemployer,constitutesprovisionalpermissiontowork.Thisprovisionalpermissionwillautomaticallybecomeinvalidintheeventtheapplicationforaworkpermitisrejected.

TheEmploymentAuthoritymaycheckwhethertheworkerhastheprofessionalskillsrequiredtopracticetheprofessionstatedontheapplication.

Whereapplicable,theEmploymentAuthoritymayorderatestoftheworker’sprofessionalskills.Itmayalsomakegrantingtheworkpermitsubjecttosigninganemploymentcontract.

Collectivepermissiontowork

ForforeignworkerstemporarilysecondedtoLuxembourgeitherbyaforeigncompanyoraLuxembourgcompany,collectivepermissiontoworkmaybegrantedinexceptionalcasesattherequestofthecompanyunderwhoseauthoritytheworkersareemployed.Thispermis-sionmaybeforamaximumperiodofeightmonths,includinganyrenewal,andisonlyvalidfortheworkersandtheworkspecifiedintheapplication.

Temporarypermissiontowork

TemporarypermissionmaybegrantedbytheMinistryofLabourandEmployment(MinistreduTravailetdel’Emploi)onthebasisofthesubmissionofacertificateissuedbytheMinistryofJustice(MinistredelaJustice)certifyingthattheapplicantcomesfromanareaatwarandthathasbeenacknowledgedassuchbyLuxembourg’sgovernment.

Theprocedureforobtainingsuchpermissionisthesameasforworkpermits.

Temporarypermissiontoworkisvalidforamaximumperiodofsixmonths.Itmayberenewedonce.Itisvalidforaspecificemployerandonlyforoneprofession.

7.2. The employment relationship

Warning:Luxembourglabourlawwastraditionallygovernedbynumerouslawsandgrand-ducalregulations.Duringthepreparationofthisdocument,labourcodewhichcameintoforceon1stSeptember2006.Thecodecontainsallthelawsgoverninglabourlawaspects.Thecodedoeshowevernotamendtherulesassuch.Thereferencesinthisdocumenttolawsneedtoberegardedasreferencestothecorrespondingarticlesofthelabourcode.

5 Theprovisionsrelatingtoworkpermitsdonotapplytothecommercial,skilledcrafttrades,industrialandotherprofessionscoveredbytheprovisionsoftheActof28December1988relatingtotherighttosetupabusiness,asamended.



Labo

urla

wa

nds

ocia

lsec

urity

7.2.1. Employment contracts

Beforehiringanemployee,allemployersmustreportalljobpositionstotheEmploymentAuthority(Administrationdel’Emploi).

7.2.1.1. Individual contracts

ThereciprocalrightsanddutiesofemployeesandemployersaregovernedmainlybytheActof24May1989onemploymentcontracts6,asamended,and,secondarily,byArticles1779etseq.oftheCivilCode(CodeCivil)andordinarylawgoverningobligations.

TheActof24May1989,asamended,onlyprovidesfortheparties’minimumrightsandobligations.Referencemaysimplybemadetotheseprovisionsinanindividualemploymentcontractorprovisionsthataremoregeneroustotheworkermaybestipulated.Incontrast,anyclausethatislessfavourabletotheemployeeisdeemedtobenullandvoid.

7.2.1.2. Written contracts

Itismandatoryforallemploymentcontractstoberecordedinwritingandtocontainthefollowinginformation:

- theidentitiesoftheparties,

- thedateofcommencementofthecontract,

- theplaceofwork;wherethereisnofixedormainplaceofwork,theprinciplethattheworkerisemployedatvariousplacesandmoreparticularlyabroadandtheemployer’sofficeorresidenceshouldbegiven,

- thenatureofthejoband,whereapplicable,adescriptionofthedutiesortasksassignedtotheemployeeatthetimeofhiring,withoutprejudicetoanysubsequentnewassignment,

- thelengthoftheemployee’snormalworkingdayorweek,

- normalworkinghours,

- thesalaryorbaseremunerationand,whereapplicable,anyadditionstosalary,bonusesorprofit-sharingagreedon,andthefrequencyatwhichtheremunerationtowhichtheworkerisentitledwillbepaid,

- thelengthofanytrialperiodthatmaybeprovidedfor,

- anyderogatoryoradditionalclauses,

- whereapplicable,theexistenceandnatureofanysupplementarypensionscheme.

Whereapplicable,referenceshallbemadetostatutory,regulatoryoradministrativeprovisionsoranyprovisionslaiddownintheArticlesofAssociationorcollectiveagreementsgoverningthelengthoformethodsfordeterminingpaidleavetowhichtheworkerisentitledandthelengthoformethodsfordeterminingthenoticethatmustbegivenbytheemployerandbytheworkerintheeventtheemploymentcontractisterminated.

Whereapplicable,referenceshallalsobemadetothecollectiveagreementsgoverningworkers’workingconditions,andtoanysupple-mentarypensionschemewithintheundertaking.

Writtencontractsaremandatoryforbothindefinite-termemploymentcontractsandfixed-termemploymentcontracts.Thecontractmustberecordedinwritingforeachindividualemployeenolaterthanwhentheemployeestartswork.Theremustbetwocopiesofthecontract,thefirstfortheemployerandthesecondfortheemployee.

Inundertakingsorsectorswhere there isacollectiveagreement,an individualemploymentcontractmustbedrawnup foreachem-ployee.

Intheabsenceofawrittenagreement,employeesmayprovideproofoftheexistenceandthecontentsoftheemploymentcontractbyanymeans,regardlessoftheamountinvolvedinthedispute.Thelawdoesnotprovideforthispossibilityforemployers,suchthat,inprinciple,employerscanonlyprovetheexistenceandthecontentsofaworkingrelationshipinwriting.

LuxembourglabourlawappliestoallworkperformedwithinLuxembourg.

7.2.1.3. Collective agreements

Legislationonemploymentcontractsprovidesonlyaminimumamountofprotectionforworkers.ItappliestoallworkingrelationshipssubjecttoLuxembourglaw.

However,eachlineofbusinessandeachsector,oreveneachundertaking,hasitsowncharacteristicsforwhichspecificregulationisre-quired.Whereapplicable,suchparticularitiesaregovernedbyacollectiveagreement7,describedinmoredetailinSection7.2.8.below.

6 CertainprovisionsoftheActof12November1971relatingespeciallytoprivatesectoremployeeshavebeenkeptinforce.7 Collectivelabouragreementsthatareinforcemaybeconsultedat:http://www.itm.public.lu(onlyinFrench).



Labo

urla

wa

nds

ocia

lsec

urity

7.2.2. Fixed-term employment contracts

Fixed-termemploymentcontractsmayonlybeenteredintointhespecificcircumstancesgivenintheActof24May1989.

7.2.2.1. For which type of tasks may fixed-term employment contracts be used?

Fixed-termcontractsmayonlybeentered into for theperformance of a specific short-term task.Fixed-termcontractsmaynotbeusedtofillpositionslinkedtoanundertaking’snormalandpermanentactivity.Thefollowinginparticularareconsideredasspecificshort-termtasks:

- thereplacementofanemployeewhoistemporarilyabsentorwhoseemploymentcontracthasbeensuspendedforreasonsotherthanacollectivelabourdispute,

- workofaseasonalnaturedefinedbytheLuxembourgRegulationof11July1989implementingtheprovisionsofArticles5,8,34and41oftheActof24May1989onemploymentcontracts,

- jobsforwhich,incertainsectorsofactivity,itiscustomarynottoenterintoindefinite-termcontractsduetothenatureoftheactivityperformedorthetemporarynatureofthesejobs.AlistofthesesectorsandjobsiscontainedintheLuxembourgRegulationof11July1989implementingtheprovisionsofArticles5,8,34and41oftheActof24May1989onemploymentcontracts.

- theperformanceofaspecificshort-termtaskintheeventofatemporaryandexceptionalincreaseinthecompany’sactivityorwhenacompanystartsuporisextended,

- theperformanceofemergencyworkrequiredtopreventaccidents,thecorrectionofproblemswithequipment,theorganisationofemergencymeasuresforthecompany’sfacilitiesorbuildingssoastoavoidanydamagetothecompanyoritspersonnel.

Inprinciple,whenfixed-termcontractsend,employersmaynotusethesameemployeetofillthepositionoftheemployeewhosecontracthasendedoranotheremployeehiredonthebasisofafixed-termcontractoremployedonthebasisofanassignmentbyatemporaryworkagencyorinthecontextofaloanofmanpoweruntiltheendofaperiodequaltoonethirdofthetermofthefixed-termcontract,includingrenewal.

7.2.2.2. What form shall fixed-term contracts take?

Fixed-termcontractsmustberecordedinwritingindividuallyforeachemployeenolaterthanwhentheemployeestartswork.Theremustbetwocopiesofthecontract,thefirstfortheemployerandthesecondfortheemployee.

Inadditiontothedefinitionofitspurpose,thatisthespecificshort-termtaskforwhichitisbeingenteredinto,afixed-termemploymentcontractmustcontaintheinformationalreadygivenaboveandthefollowingspecificinformation:

- whereitisenteredintoforaspecificterm,thedateoftheendofthisterm,

- whereitdoesnotcontainthedateoftheendoftheterm,theminimumtimeforwhichitisbeingenteredinto,

- whereitisenteredintotoreplaceanabsentemployee,thenameoftheabsentemployee,thelengthoftimeofanytrialperiod,and,whereapplicable,aclauserelatingtorenewal.

Intheabsenceofawrittendocumentorofawrittendocumentspecifyingthattheemploymentcontractisbeingenteredintoforafixedterm,thecontractisdeemedtohavebeenenteredintoforanindefiniteterm.Proofofthecontraryisnotadmissible.

7.2.2.3. How long may fixed-term contracts last?

Fixed-termcontractsmaynotbeforaperiodofmorethan24months,includingrenewals,forthesameemployee.Thesecontractsmayberenewednomorethantwicewithinthemaximumperiodof24monthsprovidedthatthecontractitselforasubsequentridercontainsaclauserelatingtosuchrenewal.

7.2.2.4. When do fixed-term contracts end?

Fixed-termcontractsautomaticallyendontheirexpirydateorwhenthepurposeforwhichtheywereenteredintohasbeenfulfilled.

Unlessthereareseriousgroundstodoso,fixed-termemploymentcontractsmaynotbeterminatedbeforetheirexpirydate.

Anyfailurebyemployerstocomplywiththeseprovisionsentitlesemployeestoclaimdamagesofanamountequaltotheremunerationtheywouldhavereceiveduntiltheexpirydateofthecontract.However,thisamountmaynotexceedtheremunerationcorrespondingtothelengthofthenoticethatwouldhavehadtobegivenifthecontracthadbeenenteredintowithoutanexpirydate,i.e.twomonthsalaries.

Anyfailurebyemployeestocomplywiththeseprovisionsentitlesemployerstoclaimdamagescorrespondingtotheharmactuallysus-tained.However,thisamountmaynotexceedtheremunerationcorrespondingtothelengthofthenoticethatwouldhavehadtobegivenbytheemployeeifthecontracthadbeenenteredintowithoutanexpirydate,i.e.onemonthsalary.



Labo

urla

wa

nds

ocia

lsec

urity

7.2.3. Trial periods

7.2.3.1. What is a trial period?

Atrialperiodisnotacontractthatisseparatefromthefinalemploymentcontract,butitisviewedasaperiodoftrialsubjecttospecialconditions.

Atrialperiodmaybeprovidedforinfixed-termemploymentcontractsandinindefinite-termemploymentcontracts.

7.2.3.2. How long do trial periods last?

Asageneralrule,trialperiodsmaynotlastlessthantwoweeks.

Themaximumlengthofatrialperioddependsontheemployee’sleveloftrainingandremuneration:

- aminimumoftwoweeksandamaximumofthreemonthsforemployeeswhoselevelofprofessionaltrainingisbelowthatofaTechnicalandProfessionalCertificate(Certificatd’AptitudeTechniqueetProfessionnelle,or“CATP”).

- aminimumoftwoweeksandamaximumofsixmonthsforemployeeswiththeCATPoranequivalentorhigherleveloftraining.

- aminimumoftwoweeksandamaximumof12monthsforemployeeswhosegrossmonthlystartingsalaryisfixedatanamountequaltoorhigherthanEUR536withtheindexat100(EUR3,495.58withtheindexat652.16).Indefiningmonthlysalary,bonuses,allowances,andancillaryandadditionalamountsmaybeincluded,onthebasisofonetwelfthoftheirannualvalue.

Trialperiodsthatdonotexceedonemonthshouldbeexpressedinwholeweeks.Trialperiodsthatexceedonemonthshouldbeexpressedinwholemonths.

Intheeventtheperformanceofthecontractissuspendedduringthetrialperiod(e.g.duetoillness),thetrialperiodisextendedbyaperiodequaltothetimeofsuspension.However,theextensionofthetrialperiodmaynotexceedonemonth.

Theclauserelatingtothetrialperiodmaynotberenewed.

7.2.3.3. Termination during the trial period and notice periods

Acontractmaynotbeterminatedunilaterallyduringtheminimumtrialperiodoftwoweeks,exceptonseriousgrounds.

Afterthistwo-weekperiod,acontractmaybeendedbybothparties.

Thecontractmustbeterminatedbylettersentbyrecordeddelivery,orbysigningacopyoftheletteroftermination.Noreasonneedbegivenforthetermination.

Thenoticeperiodisthesamenumberofdaysasthetrialperiodisweeks.Wherethetrialperiodisagreedinmonths,thenoticethatmustbegivenisfourdayspermonth.However,itmaynotbelessthan15daysandmaynotexceedonemonth.

Trialperiod Noticeperiod(calendardays)

2weeks 2days

3weeks 3days

4weeks* 4days

2months 15days

3months 15days

4months 16days

5months 20days

6months 24days

7months 28days

8-12months 1month

*Inaccordancewiththelaw,atrialperiodthatdoesnotexceedonemonthmustbeexpressedinwholeweeks.Atrialperiodthatexceedsonemonthmustbeexpressedinwholemonths.Thismeansthatthelawdoesnotprovideforatrialperiodofonemonth.

Wherethecontractisnotendedundertheabove-mentionedconditionsbeforetheendofthetrialperiodagreedbytheparties,theem-ploymentcontractisconsideredtohavebeenenteredintoforanindefinitetermorforafixedterm,asapplicable,asfromthedatetheemployeestartedwork.



Labo

urla

wa

nds

ocia

lsec

urity

7.2.4. Termination of employment contracts with notice

Termination with notice being given is only possiblewhere employers and employees have entered into indefinite-term employmentcontracts.

Employersandemployeesmayterminateemploymentcontracts,evenagainsttheotherparty’swishes.Terminationisaunilateralactionwhichissubjecttocertainrulesasregardsformandthenoticeprovidedforbylawmustbegiven.

Luxembourg labour lawprohibits the terminationwithnoticeofemployment contractswithcertain typesofemployees.Theyare thefollowing:

- pregnantwomen,

- employeesunabletoworkduetoillness,

- employeeswhohavebeengivenanotherpositionwithinthecompany(reclassementinterne),

- employeerepresentatives.

7.2.4.1. Which employers are obliged to hold interviews with employees prior to dismissal?

Employerswith150ormoreemployeesandwhoareconsideringdismissinganemployeemustsummontheemployeeinquestiontoaninterviewpriortopossibledismissalbeforeanydecisionistaken.

Thismustbedonebylettersentbyrecordeddeliveryorinawrittendocumentofwhichreceiptisdulycertified.Theletterorwrittendocu-mentmuststatethepurposeofthesummonsandthedate,timeandplaceoftheinterview.

7.2.4.2. What time must elapse between the interview prior to possible dismissal and the dismissal?

Theemployeeshouldbenotifiedofthedismissal(withnoticeoronseriousgrounds):

- thedayfollowingtheinterviewpriortopossibledismissalattheearliest,

and

- eightdaysafterthisinterviewatthelatest.

Iftheemployeedulysummonedtotheinterviewdoesnotattendtheinterview,theemployeemaybenotifiedofthedismissal:

- onthedayfollowingthedatesetfortheinterviewpriortopossibledismissalattheearliest,

and

- eightdaysafterthedatesetforthisinterviewatthelatest.

Iftheemployerisinformedthattheemployeeisillorhasamedicalcertificate,givingtheemployeenoticeoftheinterviewpriortopossibledismissalisnotauthorised,evenonseriousgrounds.

7.2.4.3. What is the dismissal procedure and how much notice should be given?

Anemployerwhodecidestodismissanemployeemustgivetheemployeenoticeofdismissalbylettersentbyrecordeddelivery.Failingthis,thedismissal isheldduetobedefect inform.However,theemployee’ssignatureonacopyoftheletterofdismissalconstitutesacknowledgementof receiptof thenotification.Whenanemployeehasbeennotifiedofdismissal, thismayno longerbeunilaterallywithdrawnbytheemployer.Thisalsoappliestoemployeeswhowishtoterminatethecontract.

Intheeventanemployeeisdismissedbytheemployer,theemploymentcontractendsattheendofanoticeperiodwhich,dependingonthelengthofserviceoftheemployee(officeworkerormanualworker),iscalculatedasfollows:

Lengthofservice Noticeperiod

Lessthan5years 2months

5yearstolessthan10years 4months

10yearsandover 6months

Thesenoticeperiodsonlystartasregardstheemployee:

- onthe15thdayofthemonthinwhichnoticeoftheterminationofthecontractisgiven,ifnoticeisgivenbeforethisdate(atthelatestonthe14thdayofthemonth).

- onthefirstdayofthecalendarmonthwhichfollowsthemonthinwhichnoticeoftheterminationofthecontractisgiven,ifnoticeisgivenafterthe14thdayofthemonth.

Intheeventtheemployeeterminatesthecontract,thenoticeperiodisdividedinhalf.



Labo

urla

wa

nds

ocia

lsec

urity

7.2.4.4. Are employers required to give a reason for dismissal?

Lettersgivingemployeesnoticeofdismissaldonothavetoincludeareasonforthedismissal.Withinonemonthasfromnotificationofsuchdismissal,theemployeemayasktheemployerforthereasonfordismissalbylettersentbyrecordeddelivery.

Theemployermustgivetheemployeetheprecisereason(s)fordismissalbylettersentbyrecordeddeliveryatthelatestonemonthafternotificationoftheemployeebylettersentbyrecordeddelivery.

Reasonsthatarebasedonconcreteandspecificfactsarethefollowinginparticular:

- reasonslinkedtotheemployee’sskills,

- reasonslinkedtotheemployee’sconduct,

- reasonsbasedonrequirementsrelatedtotheoperationoftheundertaking,theestablishmentorthedepartment(“economicrea-sons”).

Legalactionfordamagesonthebasisoftheterminationofanemploymentcontractmustbebroughtbeforethelabourcourtswithinthreemonthsasfromthedateonwhichnoticeofthedismissalorthereasonforthedismissalwasgiven.Thisperiodmaybevalidlyinterruptedintheeventofawrittenclaimmadetotheemployerbytheemployee,hisorherrepresentativeoratradeunionorganisation.Thisclaimstartsafurtherperiodofoneyearwithinwhichlegalactionmustbetakenunderpenaltyofforeclosure.

Intheeventthereasonsgivenaredisputed,theemployerisresponsibleforprovidingevidenceoftheexistenceandtherealandseriousnatureofthereasonsgiven.

7.2.4.5. What are the penalties in the event of any failure to follow these procedures?

Aparty(employeroremployee)whoterminatesanindefinite-termcontractwithouttherehavingbeenanyseriousmisconductonthebasisofwhichterminationwithimmediateeffectwouldhavebeenjustified,orwhofailstocomplywiththenoticeperiodsrequiredmustpaytheotherpartycompensationforthenoticeperiod.Thiscompensationisequaltotheremunerationcorrespondingtothelengthofthenoticeperiodor,whereapplicable,thepartofthenoticeperiodstilltorun.

7.2.4.5.1. Which employees are entitled to severance pay?

Employees(officeworkersormanualworkers)withindefinite-termcontractsandwhoaredismissedbyanemployerwithouttheemployerbeingabletoasserttheexistenceofafactorseriousmisconductjustifyingtheemployees’dismissalwithimmediateeffectareentitledtoseverancepaywheretheycanprovideevidenceofatleastfiveyears’servicewithintheundertaking.

7.2.4.5.2. How much severance pay shall be paid?

Severancepayiscalculatedasfollows:

Lengthofcontinuousservice Monthsofsalaryorwages

Manualworker Officeworker

atleast5years 1month 1month

atleast10years 2months 2months





TheamountofEUR12,500oftheseverancepayisexemptfromincometaxandisalsoexemptfrompaymentofsocialsecuritycontribu-tions.



Labo

urla

wa

nds

ocia

lsec

urity

7.2.4.5.3. A choice for undertakingss with fewer than 20 employees

Intheletterofdismissal,employerswithfewerthan20employeesmaystateeitherthattheyaregoingtopaytheabove-mentionedsever-ancepayorthattheyaregoingtoextendtheabove-mentionednoticeperiods,which,inthiscase,arecalculatedasfollows:

Lengthofcontinuousservice Noticeperiod

Manualworker Officeworker







7.2.4.6. Can dismissed employees be given permission not to work during the notice period?

Iftheemploymentcontractisbeingterminatedbytheemployer,saidemployermaygivedismissedemployeespermissionnottoworkduringthenoticeperiod.

Thefactthattheemployergivesdismissedemployeespermissionnottoworkduringthenoticeshallnotentail,until theendofsaidperiod,anyreductionofsalary,wagesandotherbenefitsthatemployeeswouldhavereceivediftheyhadworkeduntiltheendofthenoticeperiod.

Intheeventemployeesresign,theirrequestnottoworkduringthenoticeperiodandtheemployer’sagreementtheretoconstitutestheterminationoftheemploymentcontractbymutualagreement.

7.2.5. Termination on serious grounds (licenciement pour motif grave)

7.2.5.1. What is dismissal on serious grounds?

Seriousgroundsjustifyingtheimmediateterminationofanemploymentcontractareanyfactsormisconductwhichmakethecontinuationoftheemploymentrelationshipimmediatelyanddefinitivelyimpossible.

Eitheroftheparties(employeroremployee)mayterminateanemploymentcontractwithoutnotice(forindefinite-termcontracts)orpriortoexpiry(forfixed-termcontracts),ononeorseveralseriousgroundsarisingfromfactsduetoormisconductbytheotherparty,withdamagespayablebythepartywhosemisconductcausedtheimmediatetermination.

However,employersmaynotdismissemployeeswhoareilloremployeeswhoareespeciallyprotectedbylawsonemployeerepresentationandonjointworkscouncilsonseriousgrounds(except,inthislastcase,forthespecialsuspensionprocedure).

Intheeventofdismissalonseriousgrounds,thedismissedemployeemaynotclaimpaymentofseverancepay.

7.2.5.2. What are the time limits as regards facts that constitute serious grounds for dismissal?

Thefact(s)thatmayjustifyterminationofanemploymentcontractonseriousgroundsmaynolongerbeputforwardbytheemployerortheemployeewhenthefact(s)has/havebeenknowntothemformorethanonemonth.However,thisone-monthperioddoesnotapplytofactswhichhavegivenrisetocriminalproceedingsagainsttheemployeeortheemployerwithinthismonth.Theone-monthperiodalsodoesnotapplywhenoneofthepartiesputsforwardapriorfactorpriormisconducttosupportanewfactornewmisconduct.

7.2.6. Improper termination of the employment contract by the employer

Therulessetoutbelowapplytoboththeterminationofanemploymentcontractwithnoticeandtoterminationonseriousgrounds.

7.2.6.1. When is dismissal considered as improper?

Thedismissalofanemployeewhichiscontrarytothelawand/orwhichisnotbasedonrealandseriousgrounds,linkedtotheemployee’sskillsorconductorbasedontheoperatingrequirementsoftheundertaking,theestablishmentorthedepartmentisimproper.

7.2.6.2. Who must prove the existence of reasons for dismissal?

Intheeventthereasonsgivenbytheemployerforadismissalaredisputedbytheemployee,theemployerisresponsibleforprovingtheexistenceofthefactsandtherealandseriousnatureofthereasonsgiven.Duringproceedings,theemployermaysubmitadditionalinfor-mationrelatingtothereasonsgivenintheletterofdismissalbutundernocircumstancesmaynewreasonsbegiven.



Labo

urla

wa

nds

ocia

lsec

urity

7.2.7. Protection of employees against dismissal

7.2.7.1. In which situations is terminating an employment contract prohibited?

Therighttoterminateanemploymentcontractissuspendedinthesituationsdescribedbelow.

7.2.7.2. How soon should employees inform employers if they are unable to work?

Employeeswhoareunabletoworkduetoillnessorfollowinganaccidentarerequiredtoinformemployersortheirrepresentatives,per-sonallyorthroughanintermediary,onthefirstdaytheyareunabletowork.

Thisinformationmaybegivenorallyorinwriting.Itmaybegivenbyanymeans(e-mail,telegram,fax,etc.),withtheburdenofproofasregardsthisinformationbeingbornebytheemployee.

7.2.7.3. When should employees submit a doctor’s certificate?

Employeesarerequiredtosubmitadoctor’scertificatecertifyingthattheyareunabletoworkandstatinghowlongthisisexpectedtolasttotheemployernolaterthanonthethirddayoftheirabsence.

7.2.7.4. How long does the prohibition on dismissal last?

Employerswhohavebeeninformedintheformandwithinthetimessetoutaboveandwhohavereceivedadoctor’scertificateintheformandwithinthetimessetoutabovearenotauthorisedtonotifytheemployeesinthissituationoftheterminationoftheiremploymentcontract,or,whereapplicable,tosummonthemtoaninterviewpriortopossibledismissal.

Inthissituation,theemployers’righttodismissemployeesissuspended,evenincasesofdismissalonseriousgrounds,andevenifthefactortheseriousmisconductwaspriortotheemployees’inabilitytowork.

Theprohibitiononemployers’terminatingtheemploymentcontractlastsfor26weeksatthemost,asfromthefirstdaytheemployeeisunabletowork.

Employersmaydismissemployeeswhoeitherfailedtoinformtheiremployeronthefirstdaytheywereunabletoworkordidinformthemonthefirstdaybutfailedtoprovidetheemployerwithadoctor’scertificatenolaterthanonthethirddayoftheirabsence.

Employmentcontractsofemployees(officeworkersormanualworkers)maybeterminatedbyemployersattheendofa26-weekperiodasfromthefirstdaytheemployeewasunabletowork.

7.2.7.5. How are pregnant women, women who have recently given birth and breastfeeding women protected against dismissal?

Employersareprohibitedfromgivingnoticeoftheterminationofanemploymentrelationshiptoemployeesiftheyarepregnantandthishasbeendulyrecordedbydoctor’scertificate.Thisremainsthecasefor12weeksafterthebirth.

However,terminatinganemploymentcontractonseriousgroundsduetoafactcausedbyormisconductbytheemployeeandterminatingafixed-termemploymentcontractwhenitexpiresarestillpossible.

7.2.7.6. Are employee representatives protected against dismissal?

Throughouttheirtermsofoffice,employeerepresentativesandtheirdeputiesmaynotbedismissed.Iftheemployernotifiesarepresenta-tiveofdismissal,thiswillbeconsideredasnullandvoid(exceptforthespecialsuspensionprocedure).

Thisprotectionincludesformeremployeerepresentatives,forthefirstsixmonthsaftertheendoftheirtermofoffice,andcandidatesforthepositionofemployeerepresentatives,fromthetimethecandidacyissubmittedandforaperiodofthreemonthsthereafter.

7.2.7.7. Are employees who are offered another position within the undertaking (reclassement interne) protected against dismissal?

Employeeswhoareunabletocontinueintheirpreviouspositionmay,undercertainconditions,beofferedanotherpositionwithintheundertakingoroutside8.Employeeswhoareofferedanotherpositionwithintheundertakingmaynotbegivennoticeoftheirdismissalasfromtheemployer’snotificationofthedecisionrelatingtotheobligationtotransfertheemployeetoanotherpositionuntiltheendofthe12thfollowingmonth.However,dismissalonthegroundsoftheemployee’sseriousmisconductremainspossible.

8 Actof25July2002oninabilitytoworkandoutplacement.



Labo

urla

wa

nds

ocia

lsec

urity

7.2.8. Collective labour agreements9

Thespecificnatureofcertaineconomicsectors,orevenofcertaincompanies,hasledtotheneedtoregulatecertainproblemsoftheseparticularsectorscollectively,forallthepersonnel.

7.2.8.1. Who may enter into a collective labour agreement?

Fromtheemployers’side:

- oneorseveralprofessionalorganisationsofemployers,

- aparticularundertaking,

- agroupofundertakingsorasetofundertakingswiththesamekindofproductionoractivityorwhichformaneconomicandsocialentity.

Fromtheemployees’side:

- oneorseveraltradeunionswhichcanprovideevidenceeitherthattheyaregenerallyrepresentativeatnationallevelorthattheyarerepresentativeinaparticularlyimportantsectoroftheeconomy.

Employerswhoareaskedtostartnegotiationsinordertoenterintoacollectivelabouragreementarerequiredbylawtostartsuchnego-tiations.RefusaltodosowillbereferredtotheLuxembourgnationalconciliationoffice(Officenationaldeconciliation).

Partiesnegotiatingacollectivelabouragreementmaydecideto:

- enterintoacollectivelabouragreementforallpersonnel,or

- enterintoacollectivelabouragreementformanualworkersandacollectivelabouragreementforofficeworkers,or

- onlytoenterintoacollectivelabouragreementforoneofthesetwocategoriesofpersonnel.

Unlessprovidedotherwiseinthecollectivelabouragreement,seniorexecutivesareexcludedfromanysuchagreement.

Whenacollectivelabouragreementhasbeendrawnup,itmustbesubmittedtotheEmploymentandMiningInspectorate(InspectionduTravailetdesMines).Itmaynotlastlessthansixmonthsormorethanthreeyears.

Anysuchagreementmayonlybeterminatedafternoticehasbeengiven.Howmuchnoticeshouldbegivenisagreedbytheparties.Underthelaw,thenoticeperiodmaylastnomorethanthreemonthsandnolessthan15days.Terminationmayapplytotheentireagreementoronlytosomeofitsprovisions.

Iftheagreementendsandithasnotbeenterminatedoramendedbytheparties,itwillberenewedasanagreementforanindefiniteterm,whichmaybeterminatedprovidednoticeisgivenasagreedbytheparties.

7.2.8.2. Declaration of general applicability

Collectivelabouragreementsthatcomplywiththelawmaybedeclaredapplicabletoallemployersandworkerswithintheprofession,thelineofbusinessortheundertakingforwhichtheywereenteredinto.

AdeclarationofsuchgeneralapplicabilitytakestheformofaGrandducalregulationpublishedintheofficialgazette(Mémorial).

7.3. Regulation of labour

InadditiontotheruleslaiddownbytheActof24May1989onemploymentcontracts,asamended,Luxembourglawhasintroducedsomepublicpolicyprovisionstoguaranteeincreasedprotectionforemployees.

9 ThisisgovernedbytheActof30June2004oncollectivelabourrelations,thesettlementoflabourdisputesandtheLuxembourgnationalconciliationoffice(Officenationaldeconciliation).



Labo

urla

wa

nds

ocia

lsec

urity

7.3.1. Remuneration of labour: does Luxembourg labour law lay down a minimum social wage?

Luxembourgguaranteesallemployeesaminimumsocialwagewiththelevelofsuchminimumwagebeingsetatfollowsasfrom1October2005atEUR1,503.42(withtheindexat652.16).

Age Monthlywage Hourlyrate

18yearsandover EUR1,503.42 EUR8.6903

17butunder18 EUR1,202.74 EUR6.9523

between15butunder17 EUR1,127.57 EUR6.5177

In addition to the amounts shown in the table, there is also a minimum social wage for qualified workers which amount toEUR1,804.11.

Thefollowingareconsideredasskilledworkers:

- employeeswhohaveanofficialcertificatewithatleasttheleveloftheTechnicalandProfessionalCertificate(“CATP”),

- employeeswhohaveaCertificateofManualAbility(certificatdecapacitémanuelleor“CCM”)withtwoyears’experienceintheoccupationinquestion,

- employeeswhohaveaTechnicalandProfessionalCertificate(certificatd’initiationtechniqueetprofessionnelleor“CITP”)withfiveyears’experienceintheoccupationinquestion,

- employeeswithoutanyqualificationswithtenyears’experienceintheoccupationinquestion.

Otherwagesandsalaries

Apartfromtheminimumwage,thelevelofremunerationoflabourisdeterminedeitherbyacollectivelabouragreemententeredintoattheleveloftheundertakingorthelineofbusiness,orinthecontextoftherelationshipbetweenanemployerandanemployee.

Indexation

Inprinciple,salariesareindexedtothegeneralcostofliving10.

7.3.2. Working time11

7.3.2.1. What is normal working time in Luxembourg12?

Inprinciple,normalworkingtimeislimiteduniformlyto8hoursadayand40hoursaweek,exceptforcertainlinesofbusinesswheretherearespecialconditions(e.g.thetransportsector,hotelsandrestaurants).

However,employeesmayworkmorehoursthanthis,providedthatanemployee’saverageweeklyworkinghoursdonotexceedeither40hoursorthenormalweeklyworkinghourslaiddownbycontract,calculatedoverareferenceperiodoffourweeksoronemonth13.

Inthiscase,employersarerequiredtodrawupaworkschedulefortheforeseeableactivityofthecompanyduringthereferenceperiod,nolaterthanfivedaysbeforethestartofthereferenceperiod,andlayingdowntheprinciplesgoverningtheorganisationofworkinthecaseofunforeseeableeventsoracaseofforcemajeure.

Theproposedworkscheduleshouldbesubmittedtoemployeerepresentativesfortheirviews,or,failingthis,tothepersonnelinvolved.ItmustbedisplayedinthecompanyandacopymustbesenttotheEmploymentandMiningInspectorate.

UnderLuxembourglaw,regulationsontheoperationofasystemofflexibleworkinghoursmayreplaceaproposedworkscheduleandmaydefinetheconceptofflexibleworkinghours.

Inprinciple,aworkingdaymayonlycontainoneunpaidbreak.

10 Actof27May1975extendingtheslidingscaleofsalariesandwages,asamended.Salariesarechangedonemonthafterthisindexshowsadiffer-enceof2.5%ascomparedtotheamountthattriggeredthepreviouschange.TheActof27June2006adaptingcertainaspectsoftheslidingscaleofsalariesandwagesprovideshoweverthatwagesandsalariesshallnotbeadaptedin2007.In2006,2007and2008onlyoneadaptationperyearwillbemade.Theforeseeablematuritydatesin2008and2009arefixedeitheron1stJanuaryor1stMarch,dependingontheevolutionofthepetrolprice.Thesemeasureswillremainapplicableuntil31stDecember2009.Aftersuchdatetheywillbereconsideredbythegovernmentandsocialpart-nersinlightoftheevolutionoftheeconomic,socialandfinancialsituationofthecountry.

11 Theapplicationsformsrequiredforadditionalwork,workingonSundayandworkingonpublicholidaysmaybedownloadedfromhttp://www.itm.public.lu/formulaires/duree_travail/index.html(onlyinFrenchandGerman).

12 ThisisgovernedbytheActof7June1937onthereformoftheActof31October1913introducingthelegalregulationofthehiringtheservicesofprivateofficeworkers,asamended,andtheActof9December1970reducingandregulatingtheworkinghoursofworkersinthepublicandprivatesectorsoftheeconomy.

13 Actof12February1999relatingtotheimplementationofthenationalactionplaninfavourofemploymentin1998.


D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 1 � 0

Labo

urla

wa

nds

ocia

lsec

urity

Intheeventtheworkingdayislongerthansixhours,allemployeesmusthaveoneorseveralpaidorunpaidrestperiods,dependingonthetypeofactivityperformed.

Duringeach24-hourperiod,allworkersmusthavearestperiodofatleast11consecutivehoursandtheymustalsohaveaminimumperiodofrestof44hoursduringeachseven-dayperiod.

Derogationsmaybemadebywayofcollectiveagreements,agreementsreachedthroughsocialdialogue,orinter-companyagreementsincertainbusinesslines,forcertainactivitiesincertaincircumstancestothelegalprovisionsrelatingtodailyrestperiods,weeklyrest,workingtime,nightworkandreferenceperiods14.

7.3.2.2. Are there any special laws on part-time work?15

Employeesmaycometoanagreementwiththeiremployer,inthecontextofaregularactivity,onworkinghourswhicharelessthanthenormallengthofworkinghoursapplicableintheestablishmentunderthelaworpursuanttothecollectivelabouragreement.

Onconditionthataworkscheduleisdrawnup,workingtimeinthecaseofpart-timeworkiscalculatedoverareferenceperiodoffourweeksoronemonth.

Thelawdefinesworkingtimeasbeingthetimeduringwhichworkersareavailabletotheiremployeror,ifthereismorethanone,theiremployers.

7.3.2.3. How are employees paid for overtime?

Apartfromcertainspecialcases,workerswhoareunder18arenotallowedtoworkovertime.Foradultworkers,twosystemsarelaiddownbylawwhichdepartfromtheprinciplesunderlyingnormalworkinghours.

Exceedingnormalworkinghoursmaybeoffsetbyrestperiods

Thesystemofexceedingnormalworkinghoursandoffsettingthemwithrestperiodsconsistsofallowingcertainhoursofovertimetobeworkedinexcessofnormalworkinghoursprovidedthatthesehoursareoffsetatothertimesbyrestperiodsthatcorrespondtotheovertimeauthorised.

Inthissystem,theovertimehoursworkedarenotsubjecttoanyincreaseinpay.

Thissystemisusedinparticularforexceptionstoworkinghoursforparticularsectorsorfortechnicalreasons,forcompanieswithcontinu-ousworkingorshiftworkandtherecuperationofhourslost.

Overtime

Luxembourglawallowsemployeestoworkovertimeprovidedthatpriorapprovalhasbeengivenbyaministry16incertainspecificcaseswhichareallnamedinthelaw:

- topreventthelossofperishablematerialortoavoidjeopardisingthetechnicalresultsofwork,

- toallowspecialworktobeperformed,

- indulysubstantiatedcasesthathavenodirecteffectontheemploymentmarket,

- inexceptionalcasesrequiredinthepublicinterest.

Formalitiesthatarenotasstrictareprovidedforincertainsectorswhichareknowntosufferfromashortageofmanpowerandforworkperformedinordertodealwithanaccidentthatiseitherimminentorhasoccurred.

Employeesmaynotworkmorethantenhoursaday.

Overtimeispaidasfollows:

Manualworkers: 125%ofnormalhourlypay

Officeworkers: 150%ofnormalhourlypay

Workersunder18: 200%ofnormalhourlypay

Hourlypayisobtainedbydividingmonthlybasesalarybythefixednumberof173hours.

14 Actof19thMay2006.15 Actof26February1993relatingtovoluntarypart-timework,asamended.16 Inspring2006thegovernmentannouncedthatthecurrentsystembasedonapriorauthorizationbytheministerwillbereplacedbyanotificationof

theovertime,subjecthoweverofsuchnotificationbeingaccompaniedbyafavorableopinionoftheworkers’representatives,or,forundertakingswithlessthan15workers,ofafavorableopinionoftheworkers.



Labo

urla

wa

nds

ocia

lsec

urity

However,overtimemaybeoffset,asfaraspossible,byreplacingtheincreasedsalaryshownabovebypaidrestperiods,onthebasisofoneandahalfhours’paidrestforeachhour’sovertimeworked.

Transportsector

Specialregulationsapplytoworkingtimeintheroadhaulagesector.ECRegulationno.3820/85of20December1985governsdrivers’drivingtimeandrestperiods.

Theseregulationsapplytobothintra-CommunitytransportandtransportbetweenaMemberStateandanon-MemberState.

7.3.2.4. Is working on Sunday allowed in Luxembourg?

Inprinciple,workingonSundayisnotallowed.However,therearefourgroupsofexceptionsunderLuxembourglaw:

• Employeesexemptfromthisrule

TheprovisionsgoverningthebanonSundayworkdoesnotapplyto:

- employeeswithaneffectivemanagementposition,

- seniorexecutiveswhosepresenceinthecompanyisessentialtoensureoperationandsupervision,

- travellingsalesmenandwomenandsalesrepresentativesinasmuchastheyworkoutsideanestablishment.

• Companiesexemptfromthisrule

ThefollowingcompaniesareallowedtoarrangefortheirpersonneltoworkonSunday:

- familycompaniesinwhichtheonlyemployeesaretheascendants,descendants,brothers,sistersorrelativesbymarriagerelatedtotheemployertothesamedegree,

- hotels,restaurants,canteens,barsandotherestablishmentswherefoodand/ordrinkisserved,

- chemists’shops,drugstoresandshopssellingmedicalandsurgicalequipment,

- undertakingsthatorganisefun-fairs,

- farmsandvineyards,

- undertakingssthatorganisepublicshows,

- companiesthatprovidelightingorsupplywaterandenergy,

- transportfirms,

- establishmentswhoseobjectsarethetreatmentorhospitalisationofpatients,thedisabled,peoplewhoaredestituteandthementallyill,healthcentres,children’shomes,sanatoriums,resthomes,retirementhomes,holidaycamps,orphanagesandboardingschools,

- personnelthatprovidedomesticservices,

- undertakingsthatareauthorisedtoorganiseworkinsuccessiveteamswithacontinuouscyclesothatworkisnotaffectedbyanyinterruptionordelayduetoconsiderationsrelatingtotheproductionprocess(continuousshiftwork).

• Retailshops

UnderLuxembourglaw,workisallowedinshopsforamaximumoffourhoursonSunday,butonlyiftheshopisauthorisedtoopenonSundayunderthelegalprovisionsgoverningtheopeningofretailoutlets.

CompaniesnotsubjecttotheprohibitiononworkingonSundaybymeansofaGrandducalregulation

UnderLuxembourg law,work isallowedonSundaywithoutanyauthorisationbeing requiredunderconditions tobe laiddownbyaLuxembourgregulationfor:

- activitieswhichmaybeperformedforonlypartofayearorwhichareoperatedmoreintenselyatcertaintimesoftheyear,

- theperformanceofactivitiesdemandedonSundaytosatisfythepublic’srequirementsandwhichareneededeithereverydayormainlyonSunday,

- activitiesperformedonthegroundsofthepublicinterest.

Basedononeorseveralofthesegeneralcriteria,aproposedLuxembourgregulationliststhetypesofpersonnelauthorisedtoworkonSunday.

NopriorauthorisationisrequiredfortheemploymentofthispersonnelunderLuxembourglaw,butemployersarehoweverrequiredtonotifytheLabourInspectorate(InspectionduTravail)beforehandofthedate(s)onwhichthispersonnelwillworkonSunday,theworkschedule,thenumberofemployeeswhowillbeworkingandthenatureoftheirjobs.


D o i n g B u s i n e s s i n L u x e m b o u r g v e r s i o n 1 1 / 1 1 / 2 0 0 6 1 � �

Labo

urla

wa

nds

ocia

lsec

urity

• Typesofworkexemptfromthisrule

TheprohibitiononworkingonSundaydoesnotapplytocertaintypesofworkregardlessofwhatsortofcompanyisinvolved.Thesearethefollowinginparticular:

- providingsecurityforanundertaking’spremises,

- cleaning,repairandmaintenanceworkrequiredfortheproperoperationofanundertaking,

- unproductiveworkonwhichtheresumptionoftheproperoperationoftheundertakingthefollowingdaydepends,

- workrequiredtopreventdamagetorawmaterialsorproducts,

- emergencyworkwhichmustbecarriedoutimmediatelytoorganiserescuework,topreventimminentaccidentsortorepairdamagecausedbyaccidentsinvolvingacompany’sequipment,installationsorbuildings.

• Workersagedunder18

TheLabourandMiningInspectoratemaygrantextendedauthorisationsallowingworkersagedunder18toworkoneSundayoutoftwoincertaincategoriesofundertakings.

• HowareemployeespaidforworkingonSunday?

EmployeesarepaidforworkingonSundayasfollows:

UnderLuxembourglaw,employees’wagesareincreasedby70%foreveryhourworkedonSunday(towhichincreasesforovertimeshallbeaddedwhereapplicable).

However,wherepaidadditionalrestperiodsaregranted,employeesmayonlyclaimpaymentofthis70%increase.

UnderLuxembourglaw,employeesagedunder18arepaid100%moreforeachhourworkedonSunday.

7.3.2.5. What public holidays are there in Luxembourg?

TheActof10April1976relatingtopublicholidays,asamended,appliestoallemployeesintheprivatesector.

TherearetenpublicholidaysinLuxembourg:NewYear’sDay,EasterMonday,1May,Ascension(religiousfestivalinMay),WhitMonday,23June(nationalday),Assumption(religiousfestivalon15August),AllSaints’Day(1November),ChristmasDay(25December)andBoxingDay(26December).

WhenapublicholidayfallsonaSundayoronadayonwhichtheemployeewouldnothaveworked,itisreplacedbyanadditionalday’sleavewhichhastobetakenonanindividualbasiswithinthreemonths.

Workerswhohavehadtoworkonapublicholidayareentitledtotheirnormalwagesforthisdayplus200%,regardlessofanyadditionalpaymentsowedduetotheprovisionsgoverningovertimeandadditionalpaymentsduetoworkingonSunday.

7.3.2.6. How much annual leave is allowed?17

Thesameamountofannual leave isgranted toallemployees in theprivatesector.This leaveamounts to25days, regardlessof theemployee’sage.

Additionalleaveisgrantedtodisabledworkers,peoplewhoworkinminesandthemineralindustryandtoemployeeswhosejobsdonotallowthemuninterruptedrestperiodsof44hoursperweek.

Therighttotakeleavestartsafterthreemonths’continuousworkforthesameemployer.

Employersmayrejectemployees’requestsforleaveiftheirabsencesfornogoodreasoncalculatedoverthepreviouspartoftheyearexceed10%ofthetimeduringwhichtheyshouldnormallyhaveworked.UnderLuxembourglaw,absencesfornogoodreasondonotincludeabsencesauthorisedbytheemployee’slinemanagers,absencesduetoillness,accidents,publicholidaysorlawfulstrikes.

Inprinciple,workersmaysettheirowndatesfortheirleave,unlesstheundertaking’srequirementsandthewishesofotherundertaking’semployeeswithvalidreasonspreventthis.Intheeventtheundertakingclosesforannualleave,theperiodofcollectiveleavemustbesetbymutualagreementbetweentheemployerandtheworkersnolaterthanduringthefirstquarterofthecalendaryear.

Leavemustbetakenduringthecalendaryear.Ifanemployee’srequestforleavehasbeenrefused,thismayexceptionallybepostponeduntil31Marchofthefollowingyear.

Intheeventtheemploymentrelationshipendsduringacalendaryear,workersareentitledtoone-twelfthoftheirannualleavewhichhasnotyetbeentakenforeachcompletemonthworked.Fractionsofmonthsworkedthatexceed15calendardaysarecountedaswholemonthsworked.

17 TheActof22April1966introducingastandardamountofannualpaidleaveforemployeesintheprivatesector,asamended.



Labo

urla

wa

nds

ocia

lsec

urity

• Specialleave

Therearealsosomespecialtypesofleave:

- educationalleave,

- trainingleave,

- leavetoseekanewjob,

- leaveforpoliticalreasons,

- leaveforsportingreasons,

- specialleaveforvolunteersworkinginthefire,rescueandemergencyservices,

- culturalleave,

- adoptionleave,

- leaveforvoluntarywork.

• Exceptionalleave

UnderLuxembourglaw,workerswhoareunabletogotoworkforpersonalreasons(deathofamemberofthefamily,marriage,birthoradoption)maytakeexceptionalleaveonfullpay.Thenumberofdays’leavegrantedvariesdependingontheeventbetweenoneandsixdays.

• Maternityleave

Maternityleaveincludesleaveofeightweeksbeforetheexpecteddatefordelivery,extendedwhereapplicableuntiltheactualbirth,andleaveofeightweeksafterthebirth,whichisextendedto12weeksintheeventofaprematurebirth,multiplebirthsorforbreastfeedingmothers18.

Maternityleavedoesnotendtheemploymentcontract;itismerelysuspendedthroughouttheleave.Whenthereasonforsuspensionends,thecontractcomesintoeffectagain.

• Adoptionleave

Eightweeks’leaveisgrantedforwhenachildisadopted.

• Parentalleave

Parentalleaveisanindividualrightforachild’sparentsprovidedcertainconditionshavebeenmet19.Thus,employeeswishingtotakeparentalleavemust:

- bebringinguponeorseveralchildrenagedunderfiveintheirhouseholdforwhomtheyarepaidfamilyallowances,

- belawfullyandcontinuouslyemployedataplaceofwork(eitherindependentlyorasanemployee)locatedinLuxembourgwhenthechildisborn,and

- havecontributedtotherelevantsocialsecuritysystemforthe12monthsimmediatelyprecedingthestartoftheparentalleave.

Parentalleaveperchildlastseithersixmonthsonafull-timebasisor12monthsonapart-timebasis.Inthesecondcase,theemployer’sagreementisrequired.Theentireperiodofparentalleavemustbetakenatonetime.Itmaynotthereforebedivided.

Oneoftheparentsmusttakehis/herparentalleaveafterthematernityleave.Theotherparentmaytakehis/herparentalleaveanytimebeforethechild’sfifthbirthday.

Parentsmaynotbothtakefull-timeparentalleaveatthesametime.

Theparentwhowishestoexercisehis/herrighttoparentalleaveaftermaternityleavemustnotifyhis/heremployerofhis/herrequestbylettersentbyrecordeddeliverywithreturnreceiptrequestedbeforethematernityleavestarts.Theemployermayonlyrejectthisrequesttotakeparentalleaveandaskforitspostponementinexceptionalcircumstances,allofwhicharelaiddownbylaw.

Theotherparentmustnotifyhis/heremployerofhis/herrequestbylettersentbyrecordeddeliverywithreturnreceiptrequestedatleastfourmonthsbeforetheparentalleavestarts.Inthiscasetheemployermayaskfortheparentalleavetobepostponedincertainsitua-tions.

Theemploymentcontractissuspendedduringparentalleave.Itthereforedoesnotentitletheemployeetoannualleave.However,theparentalleaveistakenintoaccountinthecalculationofrightsrelatingtolengthofservicewiththeundertaking.

Employersarerequiredtokeeptheemployee’sjobforhim/her,or,ifthisisimpossible,asimilarjobcorrespondingtohis/herqualificationsandwithalevelofpaythatisatleastequivalent.

18 Actof1August2001relatingtotheprotectionofpregnantworkers,newmothersandbreast-feedingmothers.19 Actof12February1999creatingparentalleaveandleaveforfamilyreasons.Billn°5161willamendtheregimeoftheparentalleave.Formoreinfor-

mation,seethewebsiteoftheCaisseNationaledesPrestationsFamilialesathttp://www.cnpf.lu(onlyinFrench).



Labo

urla

wa

nds

ocia

lsec

urity

Asfromthelastdayoftheperiodfornoticeofarequestforparentalleave,employersarenotauthorisedtonotifytheemployeethathis/heremploymentcontractisbeingterminated,withanoticeperiod.

However,theforegoingprovisionsdonotpreventtheendingoffixed-termemploymentcontractsortheterminationofanemploymentcontractonseriousgrounds.

Parental leaveentitlestheemployeetoagrossfixedfinancialpaymentofpermonthEUR1,778.31forfull-timeleaveandpermonthEUR889.15forpart-timeleave.

TheseamountsarepaidbytheNationalFamilyAllowancesFund(Caissenationaledesprestationsfamilialesor“CNPF”).

• Leaveforfamilyreasons

Anyemployeewhohasadependentchildagedunder15whoneedsthepresenceofoneofhis/herparentsduetoseriousillness,anac-cidentorothersignificanthealthreasonsisentitledtoleaveforfamilyreasons.

Leaveforfamilyreasonsmaynotexceedtwodaysperchildandperyear.ThistimemaybeextendedifthisisrecommendedbytheSocialSecurityMedicalControlBoard(ContrôleMédicaldelaSécuritéSociale)inthecaseofanexceptionallyseriousillnessormedicaldefi-ciency.

Thistypeofleavemaybetakeninparts,whichmeansthatitdoesnotneedtobetakeninfullatonetime.

Theperiodofleaveforfamilyreasonsistreatedinthesamewayasaperiodduringwhichanemployeeisunabletoworkduetoillnessoranaccident.

7.3.3. Safety at work

ProblemsinvolvingthehealthandsafetyofworkersarecoveredinLuxembourglaweitherbygeneralprovisionssuchastheActonthesafetyandhealthofworkersatworkorbyspecialprovisionsrelatingtovarioussectorsofactivity.

• Classifiedestablishments

Inparticular,theActof10June1999relatingtoclassifiedestablishmentsmakesestablishmentswheretherearedangersorriskssubjecttosafetycheckseitherbytheEmploymentandMiningInspectorateorbythemayor.

• Healthserviceforemployees

Everyundertakingisrequiredeithertosetupitsownhealthserviceforemployeesortojoinaninter-companyhealthserviceforemployeesoramulti-sectorhealthserviceforemployees20.Priortostartingwork,allemployeesmustundergoamedicalexaminationbyaphysicianofthemedicalservice.Fordangerousjobs,theexaminationmusttakeplacebeforethepersonishired.Forotherjobs,theexaminationmusttakeplacewithintwomonthsofbeinghired.

Inaddition,itismandatoryforcertainworkerssuchas,forexample,workersinjobsinwhichtheyareexposedtotheriskofanoccupa-tionaldiseaseorradiation,tohaveperiodicalmedicalexaminations.

• Safetyandhealthatwork

TheActof17June1994andnumerousimplementingregulationshavelaiddownmeasuresaimedatpromotinganimprovementinthesafetyandhealthofemployeesatwork21.

Thus,employersmustappointoneorseveralworkerstodealwithissuesrelatingtoprotectingthecompany’semployeesandpreventinganyprofessionalrisks.

Equally,employersarerequiredtotakethenecessaryprotectiveandpreventivemeasuresasregardsfirstaid,fire-fightingandtheevacu-ationofworkersintheeventofaseriousandimmediatedanger.

Lastly,employersarerequiredtoensurethateachworkerhassufficientandadequatetraininginhealthandsafety,inparticularintheformofinformationandinstructions.

Inaddition,theEmploymentandMiningInspectoratecontinuouslyissuesrecommendationsonthesubjectofhealthandsafetyatworkwhichmaybeconsultedonitswebsite.

20 Actof17June1994relatingtohealthservicesforemployees,asamended Multi-sectorhealthserviceforemployees(Servicedesantéautravailmultisectoriel),CentreinLuxembourg 32,rueGlesener•L-1630Luxembourg•Telephone:400942-1•Fax:406151.Themembershipformmaybedownloadedfromthefollowingweb-site:http://www.st.m.lu

21 Foracompletelistofallthelawsandregulationsthatapplytohealthandsafety,seetheEmploymentandMiningInspectorate’swebsiteat: http://www.itm.public.lu(inFrenchonly).



Labo

urla

wa

nds

ocia

lsec

urity

• EmploymentandMiningInspectorate(InspectionduTravailetdesMines)

TheEmploymentandMiningInspectorate22isresponsibleformonitoringtheapplicationofprovisionsgoverningworkingconditionsandtheprotectionofworkersduringtheperformanceoftheirduties.

7.4. Dialogue between labour and management

7.4.1. Organisations at national level

7.4.1.1. Professional chambers

TheActof4April1924,asamended,createdasysteminwhichworkersandemployersarerepresentedbyelectedprofessionalbodies.

• Labour

EmploymentAssociation(ChambredeTravail)

Associationofofficeworkersintheprivatesector(ChambredesEmployésprivés)

Associationofcivilservantsandofficeworkersinthepublicsector(ChambredesFonctionnairesetEmployéspublics)

• Management

ChamberofCommerce(ChambredeCommerce)

ChamberofTrade(ChambredesMétiers)23

AgriculturalAssociation(Chambred’Agriculture)

Theseprofessionalchambersareinvolvedintheprocessofadoptinglawsandimplementingregulations.Theyarealsoinvolvedinvoca-tionaltrainingandhavesetupcertainspecializedservicesfortheirmembers.

7.4.1.2. Economic and Social Council (Conseil Economique et Social)

TheEconomicandSocialCouncil24ismadeupofrepresentativesofthecountry’smostimportantsectors.Itisaconsultativebodythatisresponsibleforexaminingeconomic,financialandlabour-relatedproblems.ItmaychoosetoexaminecertainissuesandmakereasonedproposalstotheLuxembourggovernment.

7.4.1.3. Trade unions and professional federations

TradeunionfreedomisguaranteedintheLuxembourgconstitution.Workersareorganisedonavoluntarybasisintoseveraltradeunionswhoseactivityincludesinparticularnegotiatingcollectivelabouragreements.

Similarly,employersmayjoinvariousprofessionalfederations.

7.4.2. Staff representative committee (délégation du personnel)

7.4.2.1. In which companies must employee representatives be appointed?

Staffrepresentativecommitteesmustbeappointedinallindustrial,commercialorskilledcrafttradeestablishmentsintheprivatesectorwhichregularlyemployatleast15people25.

Inestablishmentswithfewerthan100workers,manualworkersandofficeworkerselectasinglestaffcommittee.Ifanundertakinghasatleast15manualworkersandatleast15officeworkersandthetotalworkforceexceeds100workers,separatemanualworkers’andemployeescommitteesareelected.Inestablishmentswhichregularlyemployatleastfiveyoungpersonsundertheageof21,theseyoungpersonselecttheirownrepresentatives.Thenumberofthestaffcommitteeisproportionaltothenumberofemployeesintheestablish-ment.

22 EmploymentandMiningInspectorate 3,ruedesPrimeurs,L-2361Strassen•Telephone:478-6145•Fax:491447;http://www.itm.public.lu/(inFrenchonly)

23 GovernedmoreparticularlybytheLuxembourgOrderof8October1945reorganisingthestatusoftheChamberofSkilledCraftTradesmenandWomen(asamended).

24 Actof21March1966(asamended).EconomicandSocialCouncil(ConseilEconomiqueetSocial) CentreAdministratifPierreWerner,13rueErasme•L-1468Luxembourg•Telephone:435851•Fax:422729.http://www.ces.etat.lu/(inFrenchonly).

25 Actof18May1979reformingthesystemofemployeerepresentatives,asamended.



Labo

urla

wa

nds

ocia

lsec

urity

Inaddition,eachstaffcommitteemustappointaspecificrepresentativeforsafetyandaspecificrepresentativeforequality.

7.4.2.2. How are employees representatives elected?

Employeerepresentativesareelectedbytheemployeesbysecretballot.

Employeerepresentatives’termsofofficearesetatfiveyears.Electionsmayalsobeheldoutsidethisperiodifthepersonnelinanes-tablishmentreachesthethresholdof15employeesoriftherearenolongersufficienteffectiverepresentativesandtherearenodeputyrepresentativestofillthevacantpositions.

7.4.2.3. What are the duties of employee representatives?

Thegeneraldutyofemployeerepresentativesistosafeguardanddefendtheinterestsoftheestablishment’spersonnelasregardswork-ingconditions,jobsecurityandstatus,providedthisdoesnotfallwithinthescopeofthedutiesofthejointworkscouncil,ifthereisone.Representativestalktoemployersaboutthepositionofthepersonnel,theysubmitanyclaimsmadebytheemployees,theyareinvolvedintheprotectionofemployeesandthepreventionofaccidents,theypromotetheintegrationofthedisabledandparticipateinorganisingapprenticeshipsystems.

Inordertoperformtheirduties,employeerepresentativesmusthavethefreetimerequiredtocarryouttheirduties.Inaddition,underLuxembourglaw,employeerepresentativeshavespecialprotectionagainstdismissal.

7.4.3. Joint works councils

7.4.3.1. In which companies must joint works councils be appointed?

Jointworkscouncilsaremadeupofequalnumbersofrepresentativesoftheemployerandofrepresentativesofthepersonnel26.

JointworkscouncilsmustbesetupinallprivatesectorundertakingsestablishedinLuxembourghaving150employeesoverathree-yearreferenceperiod.Theactualnumberofrepresentativesdependsonthenumberofemployeesintheparticularundertaking.

7.4.3.2. How are joint works councils elected?

Therepresentativesoftheemployerareappointedbytheheadoftheundertakingonthebasisofthemethodshe/sheshalldecide.

Therepresentativesofthepersonnelareappointedbyasecretballotbytheemployeerepresentatives,onthebasisoftherulesofpropor-tionalrepresentation.Theymustbechosenfromamongtheworkerswhohavebeenemployedintheundertakingforatleastoneyear.

Inprinciple,therighttobeelectedisreservedforLuxembourgandCommunitynationalshavingreachedtheageofmajority.

Placesareallocatedbeforehandtorepresentativesofmanualworkersandrepresentativesofofficeworkersinproportiontotherespectivenumbersofworkersandofficeworkersascomparedtothecompany’soverallworkforce.

7.4.3.3. What are the duties of joint works councils?

Jointworkscouncilsareessentiallyconsultativebodies.Thus,theheadoftheundertakingconsultsthe jointworkscouncilbeforeanyimportantdecisionrelatingtoinvestmentsinequipment,productionprocessesandworkingconditions.Inaddition,jointworkscouncilsareinformedabouttheundertaking’sgeneralactivityandthedevelopmentoftheemploymentwithintheundertaking.

7.4.4. Participation in the management of public companies (sociétés anonymes)

Luxembourgcompanylawestablishedtheformofapubliccompany(sociétéanonyme)onthebasisofasingle-tiersystem,withGeneralMeetingsoftheshareholders,aBoardofDirectorsandapanelofstatutoryauditors,ifthereareany27.

TheActof6May1974,asamended,introducedtherepresentationofworkersbothattheleveloftheBoardsofDirectorsandinthepanelsofstatutoryauditorsinpubliccompanies.Inpubliccompanieswithatwo-foldedorganisation(i.e.amanagementboardandasupervisoryboard),workersarerepresentedwithinthesupervisoryboard.

26 Actof6May1974creatingjointworkscouncilsinprivatesectorcompaniesandorganisingtherepresentationofemployeesinpubliccompanies(sociétésanonymes).

Community-levelcompaniesalsohaveaEuropeanworkscouncil(Actof28July2000relatingtotheintroductionofaEuropeanworkscouncilorsimi-larprocedureinEU-levelcompaniesandEU-levelgroupsofcompaniesinordertoinformandconsulttheworkersinthesecompanies).

27 Where,followingtheintroductionofthetypeofpubliccompanywithaManagementBoardandaSupervisoryBoard,acompanywithinthescopeofapplicationoftheActof6May1974haschosenthisnewsystem,theprovisionsofsaidactreferringtotheboardofdirectorswillapplytothesuper-visoryboard.



Labo

urla

wa

nds

ocia

lsec

urity

7.4.4.1. In which companies must directors representing employees be appointed?

Twocriteriaareusedtodeterminewhethercompaniesintheformofapubliccompanyneedtoappointsuchdirectors:

- aquantitativecriterion:theparticipationofworkersinthemanagementbodiesofpubliccompaniesismandatoryforanycompanyestablishedinLuxembourgemploying1,000workersduringathree-yearreferenceperiod,

- aqualitativecriterion:theinclusionofworkersinthemanagementbodiesofpubliccompaniesismandatoryforanycompanyestab-lishedinLuxembourgandinwhichtheStatehasafinancialholdingofatleast25%orwhichhasaStateconcessionforthecompany’smainactivity,regardlessofthenumberofworkersemployedbythecompany28.

7.4.4.2. Level of representation

Incompanieswhichmeetthequantitativecriteriaforworkerrepresentation,thelawlaysdownthatonethirdofthedirectorsmakinguptheBoardofDirectors,whichmusthaveatleastninemembers,mustrepresentcompany’sworkers.

7.4.4.3. How are these directors appointed?

Departingfromtherulewherebydirectors/membersof thesupervisoryboardareappointedbyGeneralMeetingsof theshareholders,underLuxembourglawemployeerepresentativesappointthedirectors/membersofthesupervisoryboardwhowillrepresentthepersonnelbymeansofavoteonthebasisofalistinaccordancewiththerulesofproportionalrepresentation.

Thesedirectors/membersofthesupervisoryboardmustbeappointedfromamongtheworkersemployedbythecompany.

Theelectionofdirectorsbytheemployeerepresentativesformanualworkersandtheelectionofdirectorsbytheemployeerepresentativesforofficeworkerstakeplaceinseparateballots.

Representativesofworkersoncompanymanagementbodieshavecertaintypesofspecialprotection,inparticularasregardsdismissal.

7.5. Social security

7.5.1. The organisation of social security

7.5.1.1. Independent public institutions

Luxembourg’ssocialsecuritysystemisbasedonagroupofindependentpublicinstitutions,eachresponsibleforspecificcategoriesofrisksandeachprovidinginsuranceforspecificsocio-professionalgroups.

TheJointSocialSecurityCentre(CentreCommundelaSécuritéSociale29)isresponsibleforprocessingdata,registeringpeoplecoveredandcollectingcontributionsforthevariousfunds.

TheUnionofHealthInsuranceFunds(UniondesCaissesdeMaladie30)isresponsibleforfixingtherateofcontributions,forcontrolmea-sures,authorisationsrequiredandlimitationsonpaymentsofclaimsbythosecovered.

7.5.1.2. General inspectorate

TheSocialSecurityInspectorate(InspectionGénéraledelaSécuritéSociale31)isresponsiblefordesigningandmonitoringtheentiresocialsecuritysystemundertheauthorityoftheMinistryofSocialSecurity.

28 Currently,theLuxembourgElectricityCompany(CompagnieGrand-Ducaled’ElectricitéorCegedel),theLuxembourgBroadcastingCompany(CompagnieLuxembourgeoisedeRadiodiffusionorCLT),theLuxembourgAirNavigationCompany(CompagnieLuxembourgeoisedeNavigationAérienneorLuxair)andtheEuropeanSatelliteCompany(SociétéEuropéennedesSatellitesorSES)arerequiredtohavethistypeofworkerrepresen-tationunderthisqualitativecriterion.

29 JointSocialSecurityCentre(CentreCommundelaSécuritéSociale) 125,routed’Esch•L-2975Luxembourg•Telephone:40141-1•Fax:404481;http://www.ccss.lu(inFrenchonly).Formsforjoiningorleavingareavailableathttp://www.ccss.lu/site.html(inFrenchonly).

30 UnionofSicknessFunds(UniondesCaissesdeMaladie) 125,routed’Esch•L-1471Luxembourg•Telephone:498331-1•Fax:498332;http://www.secu.lu/31 SocialSecurityInspectorate(InspectionGénéraledelaSécuritéSociale). 26,rueZithe•B.P.1308•L-1013Luxembourg•Telephone:478-6371•Fax:478-6225;http://www.mss.etat.lu/(inFrenchonly).



Labo

urla

wa

nds

ocia

lsec

urity

7.5.1.3. Medical control

TheSocialSecurityMedicalControlBoard(Contrôlemédical32delaSécuritéSociale),whichoperatesundertheauthorityoftheMinistryofSocialSecurityisespeciallyresponsiblefordeterminingwhetheremployeesareunabletowork(incapacitédetravail),authorisingpaymentofthecostsofcertainmedicaltreatmentsandinvestigatingabuseofthemedicalbenefitssystem.

7.5.1.4. Disputes

Anydisputerelatingtomembership,contributionsandbenefitsmustbereferredwithin40daysasfromnotificationofthedecisioninquestiontotheSocialInsuranceArbitrationCouncil(Conseilarbitraldesassurancessociales33)whichdecidesinthefirstinstance.Ifthereisanappeal,theHigherSocialInsuranceArbitrationCouncil(Conseilsupérieurdesassurancessociales)willdecideonthematter.ThemattermaybereferredtotheCourtofCassationonapointoflaw(pourvoiencassation).

7.5.2. Social security benefits

7.5.2.1. Health insurance and maternity benefits (assurance maladie-maternité)

Healthinsurancefundspayhospitalcostssubjecttoasmallcontributionbytheinsuredperson.Thepercentageofthecostspaidvariesbetween40%and100%dependingonthetypeofcostsinvolved34.

Intheeventmanualworkersareunabletowork,theyareentitledtosicknessbenefit,fromthefirstdayofillness,calculatedonthebasisoftheworker’sgrosssalary,for52weeksduringareferenceperiodof104weeks.Officeworkersintheprivatesectorreceiveasimilarallowance,exceptthatemployerscontinuetopaytheirsalaryduringthemonthinprogressandthethreesubsequentmonths.Self-em-ployedworkersmayreceiveasicknessallowanceinanamountcorrespondingtotheamountusedasthebasisforcontributionsappliedwhenthepersonwasfirstunabletowork,althoughthismaynotexceedfivetimestheminimumwage,asfromthefirstdayofthefourthcalendarmonthfollowingthemonthinwhichtheillnesswasreportedtothehealthinsurancefund.Since1May2005,employeeshavebeenrequiredtosubmitadetailedmedicalreport,drawnupbytheperson’sdoctorforthetenthweekofillnessinareferenceperiodof20weeks,givingevidenceoftheperson’scontinuedinabilitytoworkafterthistime.Intheabsenceofsuchmedicalreport,theallowancewillnolongerbepaid.EmployersalsohavetoreporttotheJointSocialSecurityCentreeverymonththeperiodsduringwhichtheiremployees(manualworkersandofficeworkers)wereunabletowork35.

Asregardsmaternity,femaleemployeesreceivematernitypayduringthematernityleavelaiddownbylaw,thatisatleasteightweekspriortoandeightweeksafterthebirth.Womenwhoareself-employedareentitledtomaternitypayduringtheirmaternityleavewhichisdeterminedinthesamewayassicknessbenefit.Maternitypaymaynotbepaidatthesametimeassicknessbenefit.Womenwithnoprofessionalactivityreceiveamaternityallowancefor16weeksasfromtheeighthweekpriortotheexpecteddateofdeliveryofEUR194.02perweek.

7.5.2.2. Pension insurance (assurance pension)

Peopleareentitledtostartreceivinganormaloldagepensionattheageof6536providedtheycanprovideevidenceofhavingcontributedtoanobligatoryinsuranceschemeforatleasttencontinuousyearsorhavingmaderetroactivecontributions.However,peoplewhomeettheconditionofhavingcontributedtoanobligatoryinsuranceorsimilarschemefor40years(periodsspentbringingupchildren,studyingorundergoingunpaidprofessionaltraining,periodsduringwhichadisabilitypensionwasreceivedetc.alsocount),includingatleasttenyearsofcontributionstoanobligatoryinsurancescheme,havetherighttoreceiveanoldagepensionearly,asfromtheageof60.Peoplewhocanprovetheycontributedtoanobligatoryinsuranceschemefor40yearssolelyduringperiodsofworkmayclaimtheiroldagepensionearly,attheageof57.

7.5.2.3. Disability (pension d’invalidité)

Disabilitypensionsaresimilartooldagepensionsinmanyways.Beneficiariesareindividualswhohavesufferedalossintheircapacitytoworksuchthattheyarepreventedfrompracticingtheprofessiontheymostrecentlypracticedoranotherjobcorrespondingtotheabilitiesandcapacitiesoftheindividual.

32 SocialSecurityMedicalControlBoard(AdministrationduContrôleMédicaldelaSécuritéSociale) 125,routed’Esch•B.P.1342•L-1013Luxembourg•Telephone:40141-2060•Fax:261913-1.33 SocialInsuranceArbitrationCouncil(Conseilarbitraldesassurancessociales),16bvddelaFoire,L-1528Luxembourg.Telephone:453286-1, fax443266.34 Forfurtherinformationonpercentagespaidandtheconditionsofpayment,pleaseconsultthewebsiteoftheUnionofSicknessFunds(Uniondes

CaissesdeMaladie)at:http://www.secu.lu35 FormsformakingdeclarationsmaybedownloadedfromthewebsiteoftheJointSocialSecurityCentre(CentreCommundelaSécuritéSociale)at:

http://www.ccss.lu(inFrenchonly).36 TheActof24April1991alsoprovidedforthepossibilityofretiringlater,uptotheageof68.



Labo

urla

wa

nds

ocia

lsec

urity

7.5.2.4. Survivor’s pension (pension de survie)

Intheeventofthedeathofthepersoninsured,his/herspouseorpartner37mayinprincipleobtainasurvivor’spension.Theamountofthispensioncorrespondsapproximatelytotwo-thirdsoftheinsuredperson’stheoreticaloreffectiveoldagepensionordisabilitypensionatthetimeofdeath.Inthiscase,thedeceasedinsuredperson’sminorchildrenalsoreceiveanorphan’spension.

7.5.2.5. Accident insurance (assurance accident)

Industrialaccidentsandoccupationaldiseasesinsurance38,whichismandatoryforallprivatesectoremployeesandself-employedindividu-alsperforminganindustrialorcommercialactivityorintheskilledcrafttrades,coverstherisksrelatingtoindustrialaccidentsthemselves,accidentsonthewaytoorfromworkandoccupationaldiseases.

7.5.2.6. Family allowances39 (prestations familiales)

AfamilyallowanceispayabletothepersonresponsibleforanyminorchildbeingbroughtupinLuxembourg.Theamountofthemonthlyallowanceincreaseswiththenumberofchildren(minimumofEUR185.60perchild).Theamountsareincreasedslightlywhenchildrenreachtheageof6and12respectively.

Anallowance on the birth of a baby(allocationdenaissance)ofEUR1,740.09ispaidonthebirthofeachchild,providedthatthepregnantwomanandthenewbornbabyhavebeensubjecttomedicalchecks.

Areturn to school allowance(allocationderentréescolaire)ispaidwhenchildrenreturntoschoolafterthesummerholidays.Theamountvarieswiththeageofthechildrenandthenumberofpeopleinthefamily(itvariesbetweenEUR113.15andEUR323.34).

Furthermore,thereisalsoaneducation allowance(allocationd’éducation)ofEUR485.01permonthforpeoplebringingupchildrenundertwoandwhoseactivitymainlyconsistsinbringingupthechildrenathomeorwhichperformaprofessionalactivitywhoseincomeisbelowcertainlevels.

AnypregnantwomanorwomanwhohasgivenbirthhavingherlegaladdressinLuxembourgatthetimetheentitlementstartedand,undercertainconditions,anyonewhohasadoptedachildmayreceiveamaternity allowance(allocationdematernité).Itispaidforamaximumperiodof16weeksasfromtheeighthweekpriortotheexpecteddeliverydate.TheamountofthematernityallowanceisfixedatEUR194.02perweek.Ifwomenalsoreceivematernitypay,theywillonlyreceivetheamountofthematernityallowancepayablethatexceedssaidmaternitypay.

7.5.2.7. Unemployment benefit (prestations de chômage)

Unemploymentbenefitcoversboth“partial”unemploymentduetobadweatherorintheeventofaccidentalortechnicalunemploymentand“total”unemployment.

EmployeeswhohavebeenworkinginLuxembourginthecontextofanemploymentcontractandwhoareresidentinthecountryarecon-sideredastotallyunemployedprovidedtheydidnotlosetheirjobdeliberately,thattheyareavailableforworkandthattheyareregisteredasjobseekerswiththeEmploymentAuthority40.

Self-employedworkerswhohavehadtoceasetheirbusinessactivitiesfollowinggeneralorsector-specificeconomicproblemsandyoungunemployedpeoplewhoareunabletofindajobattheendoftheireducationmayalsoreceiveunemploymentbenefit.Forsalariedem-ployees,fullunemploymentbenefitisinprinciplefixedat80%oftheemployee’spreviousgrosssalary,whilethebenefitpaidtoyoungunemployedpeopleisfixedwithreferencetotheminimumwage.Self-employedworkersareentitledtounemploymentbenefitcalculatedwithreferencetotheamountusedasthebasisfortheircontributions.Thismaynotexceed250%oftheminimumwageorbelessthantheminimumwage.

7.5.2.8. Minimum guaranteed income (revenu minimum garanti-RMG)

Certainindividualsareentitledtoaminimumguaranteedincomewhoselevelisdeterminedinrelationtothehouseholdofwhichtheyformapart.Applicantsmustinparticularmeetcertainconditionsrelatingtoresidenceandage41.

37 WithinthemeaningoftheActof9July2004relatingtothelegaleffectsofcertainpartnerships.38 Accidentinsurance(Assurance-Accidents) 125,routed’Esch•L-1471Luxembourg•Telephone:261915-1•Fax:495335.39 Formoreinformation,andforapplicationforms,pleaseseethewebsiteoftheNationalFamilyAllowancesFund(CaisseNationaledesPrestations

Familiales),1A,boulevardPrinceHenri•B.P.394•L-2013Luxembourg•Telephone:477153-1•Fax:477153-328;http://www.cnpf.lu/(inFrenchonly)

40 EmploymentAuthority(Administrationdel’Emploi),10,rueBender,L-1229Luxembourg,Telephone:4785300;Fax406140;www.adem.public.lu(inFrenchonly).Thebillpromotingthemaintenanceatworkprovidesforstricterconditionsinordertobenefitfromunemploymentbenefit.

41 TheActof29April1999creatingtherighttoaminimumguaranteedincome,asamended;monthlyminimumguaranteedincomeforasingleperson,inaccordancewiththeLuxembourgRegulationof14June2005fixingnewamountsfortheminimumguaranteedincome:EUR164.20withtheindexat100,(thatisEUR1,070.08withtheindexat652.16).



Labo

urla

wa

nds

ocia

lsec

urity

7.5.2.9. Long-term care insurance (assurance dépendance)

Themainaimoflong-termcareinsuranceistoprovideassistanceandtreatmentforapersoninneedoflong-termcare,eitherathomeor inaspecialistestablishment,bymeansofbenefits inkindandtheproductsrequiredforassistanceandtreatment,equipmentandadaptationofthehome.

Forapersoninneedoflong-termcarewhostaysathome,insurancemayalsoinclude,secondarily,paymentsincashandmeasuresinfavouroftheindividualswhoprovidetheassistanceandtreatmentofsuchperson.

7.5.3. Social security contributions

Since1January2006,themainratesofsocialsecuritycontributionspayablehavebeenasfollows.

7.5.3.1. Health and maternity insurance42

Employer’scontribution Employee’scontribution

Manualworkers 5.05% 5.05%

Officeworkersintheprivatesector 2.80% 2.80%

Self-employedworkers 5.60%

7.5.3.2. Old age pension insurance43

Employer’scontribution Employee’scontribution

Manualworkers 8% 8%

Officeworkersintheprivatesector 8% 8%

Self-employedworkers 16%

7.5.3.3. Family allowances

TheStateisresponsibleforcontributionstotheNationalFamilyAllowancesFund(CaisseNationaledesPrestationsFamiliales44)byindivid-ualswhoworkforanyemployerintheprivatesectorandintheindustrial,commercialandotherprofessionsandtheskilledcrafttrades.

7.5.3.4. Accident insurance

Accidentinsuranceisfinancedbyemployers’contributions.Therateofthecontributionisfixedinrelationtofactorsorratiosandthedegreesofriskofvariousindustrial,commercialoragriculturalactivityandisseteveryyear.Theratevariesbetween0.53%and6%ofthesalariesorprofessionalincomerespectively.

7.5.3.5. Employment Fund

TheEmploymentFund(Fondspourl’Emploi45)isfinancedbya“solidarity”taxrepresentingalevyinadditiontotheincometaxpayablebyindividualsandcorporationtaxpayablebycompanies46,byacontributionpaidbyLuxembourgtownsandanadvancepaidbytheState.

7.5.3.6. Long-term care insurance (Assurance dépendance)

Therateofthecontributiontolong-termcareinsuranceissetat1%.Thebaseusedtocalculatethiscontributionisprofessionalincomeandreplacementincomeaswellasincomefromassets.

42 Theseratesapplytoremunerationandprofessionalincomeuptoamaximumamountequaltofivetimestheminimumwage(EUR230.53withtheindexat100).

43 Theseratesapplytoremunerationandprofessionalincomeuptoamaximumamountequaltofivetimestheminimumwage(EUR230.53withtheindexat100).

44 NationalFamilyAllowancesFund(CaisseNationaledesPrestationsFamiliales),1aBdPrinceHenri,L-1724Luxembourg,B.P.394L-2013Luxembourg,Telephone:00352477153-1;www.cnpf.lu(inFrenchonly).

45 Actof30June1976containing1)thecreationofanemploymentfunds,2)regulationofthegrantingofbenefitforcompleteunemployment,asamended.

46 Thelevyamountsto2.5%inadditionalincometaxforindividualsand4%inadditionalcorporationtaxforcompanies.



Labo

urla

wa

nds

ocia

lsec

urity

7.5.3.7. Health services for employees

Thecostofhealthservicesforemployeesiscoveredinfullbycontributionspaidbyemployers:

- fortheMulti-SectorHealthServiceforEmployees(ServicedeSantéauTravailMultisectorielor“STM”):0.11%deductedfromprofes-sionalincome;

- forHealthServicesforEmployeesinIndustry(ServicedeSantéauTravaildel’Industrieor“STI”):0.10%deductedfromprofessionalincome;

- fortheAssociationfortheHealthofEmployeesintheFinancialSector(Associationpourlasantédutravaildusecteurfinancieror“ASTF”):EUR35peremployee.

7.5.4. Employers’ main obligations as regards social security

Employers,understoodtobenaturalorlegalpersonswhoorwhichemployemployees(manualworkersorofficeworkers)whocarryoutworkonbehalfoftheemployerinexchangeforremunerationandinarelationshipofsubordination,arerequired:

- toregistertheirundertakingwiththeJointSocialSecurityCentre,

- toarrangefortheiremployeestojoinorleavesaidJointSocialSecurityCentreandtoreportanychangeinemploymenttoit(e.g.anychangeinprofessionalactivity,workinghours,etc.),

- toreportthegrosssalariespaidtotheJointSocialSecurityCentreeverymonth,

- toreportperiodsinwhichemployeeshavebeenunabletoworktotheJointSocialSecurityCentreeverymonth,

- topaycontributions.

TheformsrelatingtoalltheseobligationsmaybedownloadedfromtheJointSocialSecurityCentre’swebsite47.

7.5.5. International agreements

7.5.5.1. Coordination

InternationalcoordinationofsocialsecurityisthenecessaryandinevitablecorollaryoftheprincipleofthefreemovementoflabourwhichformsoneofthecornerstonesoftheEU.ThesequestionsareofparticularimportanceforasmallcountrylikeLuxembourg,asforeignworkers,eithercross-borderorresident,representapproximatelyhalftheactivepopulation.

7.5.5.2. Legislation

TheEuropeanConventiononSocialSecurityandthesupplementaryagreementfortheapplicationoftheEuropeanConventiononSocialSecurityadoptedbytheCouncilofEuropeon10March1972andratifiedbycertaincountries,includingLuxembourg,laiddownvariousprinciplesapplicabletothesocialsecurityofmigrantworkers,whethertheyareemployeesorself-employedworkers.AttheleveloftheEU,Regulationsno.1408/71/EECof14June1971and574/72/EECof21March1972definetheconcreteformulasforcoordinationforthevarioussocialsecurityschemesapplicabletoemployees.

7.5.5.3. Principles

LuxembourghassignedaseriesofbilateralconventionswithEUMemberStatesandwithcertainothercountriessuchasSwitzerland,theUnitedStatesofAmerica,Brazil,CapeVerde,Tunisia,CanadaandQuebec.

Thesevariousinternationalconventionsaremainlybasedontheprinciplesoftheequalityoftreatment,theaggregationofperiodsofinsuranceandtheexportofbenefits.

Generally,salariedemployeesaresubjecttothelawsoftheStateoftheirplaceofwork,eveniftheyliveinanotherStatethathassignedoneoftheseconventionsoriftheemployerhasitsregisteredofficeinanotherStatethathassignedoneoftheseconventions.

Exceptionstothisprincipleareprovidedforinparticularforsecondedworkers,peopleemployedininternationaltransportandworkerswhoworkwithin the territoryofseveralMemberStates.Forself-employedworkers, thisgeneralprinciplealsoapplies, subject toanyspecificfeaturesandexceptionsarisingfromtheapplicationofthelegalsystemsinquestion.

47 http://www.ccss.lu(inFrenchonly).



Labo

urla

wa

nds

ocia

lsec

urity

TABLE SUMMARISING SOCIAL SECURITY CONTRIBUTIONS (position on 1 January 2006, index 652.16)

1.Ratesofcontribution

Insurancebranch Manualworkers

Officeworkers

Self-employedworkers

Rate Employer’sshare

Manualworker’sshare

Rate Employer’sshare

Officeworker’sshare

Rate(1)

Oldagepensioninsurance 16% 8% 8% 16% 8% 8% 16%

Healthinsurance 10.10% 5.05% 5.05% 5.80% 2.80% 2.80% 5.60%

Familyallowances 1.7%(2) - - 1.7%(2) - - 0.6%(3)

Familyallowances 0.53%-6% 0.53%-6% - 0.53%-6% 0.53%-6% - 1.40%(0.55%(4))

Healthatwork 0.11%(5) 0.11% - 0.11%(5) 0.11% - -

0.10%(6) 0.10% - 0.10%(6) 0.10% - -

35EUR(7) 35EUR - 35EUR(7) 35EUR - -

Long-termcareinsurance 1%(8) - 1% 1%(8) - 1% 1%(9)

(1) Basisofassessment:netincomefromanindependentactivity,asreferredtointaxlegislation(incomeTaxAct,Article10).(2) Since1July1994,thecontributionhasbeenpaidbytheState.(3) Since1January1999,thecontributionhasbeenpaidbytheState.(4) Non-manualself-employedworkers(5) OnlyforundertakingsthataremembersoftheMulti-SectorHealthServiceforEmployees(ServicedeSantéauTravailMultisectorielor“STM”)

(amounttobewithdrawnfromprofessionalincome).(6) OnlyforcompaniesthataremembersoftheHealthServicesforEmployeesinIndustry(ServicedeSantéauTravaildel’Industrie,or“STI”)

(amounttobewithdrawnfromprofessionalincome).(7) OnlyforcompaniesthataremembersoftheAssociationfortheHealthofEmployeesintheFinancialSector(Associationpourlasantédutravaildu

sectorfinancier,or“ASTF”)(fixedcontributionperemployee).(8) 1%ofgrossremunerationafterdeductingonequarteroftheminimumwage(EUR375.86).(9) 1%ofgrossremuneration.

2.Minimumandmaximumamountsusedasbasesforcontributions

Insurancebranch Minimummonthlyincomeforcontributions Maximummonthlyincomeforcontribution

HealthinsuranceOldagepensioninsurance

TheminimumsocialwagewhichisEUR230.53withtheindexat100,thatisEUR1,503.42withtheindexat652.16

Fivetimestheminimumsocialwagei.e.7,517.1EUR,withtheindexat652.16

FamilyallowancesFamilyallowancesHealthatworkLong-termcareinsurance

EUR1,503.42foremployeesover18EUR1,202.74foremployeesbetween17and18EUR1,127.57foremployeesbetween15and17

Fivetimestheminimumsocialwagei.e.7,517.1EUR,withtheindexat652.16


ChaptER 8COMMERCIAL PRACTICES

8.1. Competition law

8.2. Intellectual property

8.3. Regulation of retail trading

8.4. Commercial leases

8.5. Businesses (Fonds de commerce)

COMMERCIAL PRACTICESChaptER 8


Com

mer

cialp

ract

ices

8.1. Competition law

TheprovisionsoftheTreatyofRomeoncompetitionlawapplywheneveracompany’sactivitymayaffecttradebetweenEuropeanUnionandtheEuropeanEconomicAreaMemberStates.Inparticular,agreementsbetweenundertakingswhichhaveastheirobjectoreffecttheprevention,restrictionordistortionofthecompetitionwithinthecommonmarketareprohibited.AnyabuseofadominantpositioninasubstantialpartoftheEuropeanUnionisalsoprohibited.AsalargemajorityofLuxembourgundertakingshavesignificanttraderelationswithundertakingsfromotherEUcountries,theseprovisionsmayalsoapplytoeconomicactivitiesperformedinLuxembourgitself1.

Anindependentadministrativeauthority,theCompetitionCouncil(ConseildelaConcurrence),monitorscompliancewithcompetitionlaw.Ithaspowerstocarryoutinvestigationsanditcantakeprotectivemeasuresorimposefinesandpenalties.

Anyactcontrarytohonestcommercialorindustrialpracticesortoacontractualundertakingwherebytraders,manufacturersorskilledcrafttradesmenattempttopoachsomeoftheircompetitors’customersorattempttoharmtheirabilitytocompeteconstitutesanactofunfaircompetition2.Thismainlyinvolvessellingataloss,defamatorycomparativeadvertising,etc.

8.2. Intellectual property

8.2.1. What is a patent?

ApatentisanindustrialpropertyrightgrantedbytheMinistryoftheEconomy.Itisintendedtoprotectnewinventionsthatmaybeusedinanindustry.Inordertopreservethenoveltyoftheinvention,whichisessentialinordertoobtainprotectionbymeansofapatent,inventorsmustkeeptheirinventionsecretuntilthepatentapplicationhasbeenfiled.

Apatentgrantsanexclusiverighttopatentholdersortheirbeneficiariestoexploittheinventionfor20yearsasfromwhentheapplicationwasfiled.Theexclusiverighttoexploittheinventionprotectspatentholdersagainstanyproduction,distributionorsaleoftheirinventionsbyathirdpartywithouttheirconsent.

ApatentgrantedbytheLuxembourgMinistryoftheEconomyprovidesprotectioninLuxembourg.ThisprotectioncanbeextendedtootherStatesbyusingtheEuropeanpatentsystem.ThisisasystemwherebyapatentisfiledandexaminedandleadstothegrantingofasmanynationalpatentsasStatesspecifiedbyapplicantsontheirapplicationform.ApplicationsshouldbemadetotheIntellectualPropertyDivi-sionoftheMinistryoftheEconomy(DirectiondelaPropriétéIntellectuelleduMinistèredel’Economie)3ordirectlytotheEuropeanPatentOfficeinMunich4.TheEuropeanpatentsystemwasintroducedbytheEuropeanPatentConventionsignedinMunichon5October1973.

ThePatentCooperationTreaty(hereinafter“PCT”)allowsinternationalprotectiontobeobtainedforaninvention.ThePCTcameintoforcein1978andisadministeredbytheWorldIntellectualPropertyOrganisation(WIPO)5whichhasitsheadquartersinGeneva.ThefirststepinthePCTprocedureisthefilingofaninternationalapplicationandthefinalstep(ifthepatentisapproved)isthegrantingofseveralnationalorregionalpatents.ApplicationsmaybefiledeitherwiththeWorldIntellectualPropertyOrganisationinGenevaorwithanationalreceivingoffice,whichistheIntellectualPropertyDivisionoftheMinistryoftheEconomyinLuxembourg.

8.2.2. What is a trademark?

Atrademarkisadistinctivesignthatenablescustomerstodistinguishanundertaking’productsandservicesfromacompetitor’s.Itisawayofidentifyingproductsandservicesbymeansofwhichacompanytargetsagivenpublic,byassociatingacertainqualityorimagetoitsproductsorserviceswhichisusedtopromoteandadvertisetheproductsorservices.Inordertoplaythisrole,asignmustbedistinctiveandoriginal.Asignthatmerelydescribestheproduct’sfunctionsorqualitiescannotbeprotected.

Trademarkprotectiongivestrademarkholderstheexclusiverighttoexploitthetrademarkinthecountrieswherethetrademarkisreg-istered,whichmeansthatthirdpartiescannotusethetrademarkorasimilarsignforsimilargoodsorserviceswithoutthetrademarkholder’sconsent.Wherethetrademarkiswellknowninaparticularcountry,theholdermayobjecttotheuseofthetrademarkevenforgoodsthatarecompletelydifferent.

TrademarksareprotectedinLuxembourgbytheUniformBeneluxAct,whichprotectsatrademarkregisteredinoneofthethreeBeneluxcountriesinauniformmannerthroughouttheterritoryoftheBeneluxcountries.TheBeneluxTrademarkOfficeinTheHagueisresponsibleforregisteringtrademarks.TrademarkregistrationapplicationscanbemadetotheBeneluxTrademarkOfficeortooneofthenationaloffices6.InLuxembourg,thenationalofficeistheIntellectualPropertyDivisionoftheMinistryoftheEconomy.Trademarkprotectionisgrantedfortenyearsandmayberenewedeverytenyears.

1 Actof17May2004relatingtocompetition.2 Actof30July2002regulatingcertaincommercialpractices,preventingunfaircompetitionandtransposingDirective97/55/ECconcerningmisleading

advertising.3 DirectiondelaPropriétéIntellectuelle,Ministèredel’Economie(IntellectualPropertyDivisionoftheMinistryoftheEconomy),6BoulevardRoyal,

L-2449Luxembourg,Telephone:478-4119/4175/4120.4 www.european-patent-office.org5 www.wipo.int/6 www.bmb-bbm.org/



Com

mer

cialp

ract

ices

TheEuropeanRegulationontheCommunitytrademarkof20December1993madeitpossible,from1April1996,forasigntobepro-tectedbyasingletrademarkregistrationvalidintheEuropeanUnionasawhole.ApplicationsforregistrationshouldbesubmittedtotheOfficefortheHarmonisationoftheInternalMarket7basedinAlicanteinSpainortonationaloffices.ThenationalofficeinLuxembourgistheIntellectualPropertyDivisionoftheMinistryoftheEconomy.Atrademarkisregisteredfortenyearsandregistrationmayberenewedeverytenyears.

TheMadridsystemofferstrademarkholdersthepossibilityofobtaininginternationalprotectionforatrademarkbyfilingasingleapplica-tionforregistrationwiththeirnationaloffice.ApplicantsmustspecifytheMemberStatesoftheMadridAgreementinwhichtheywishtheirtrademarktobeprotected.Unlessprotectionisrefusedbythetrademarkofficeinadesignatedcountrywithinasettime,thesameprotectionwillapplyasifthistrademarkhadbeenregistereddirectlybythisoffice.

8.2.3. What is a design?

Anyaspectoftheappearanceofacraftorindustrialproductgivenbylines,shapesormaterialsinparticularisconsideredtobeadesign.Onlyanewandindividualdesignmaybeprotected.Adesignshallbeconsideredtobenewifithasnotbeenmadeavailabletothepublicbeforeregistration.Itwillbeconsideredasindividualiftheoverallimpressionitproducesontheinformeduserdiffersfromtheoverallimpressionproducedonsuchuserbyanydesignwhichhasbeenmadeavailabletothepublic.Registrationofadesignshallnotsubsistinfeaturesofaproductwhicharesolelydictatedbyitstechnicalfunction.

InLuxembourg,theprotectionofadesignisprovidedforbytheamendedUniformBeneluxActonDesignsof1January1975,assubse-quentlyamended,andbyCouncilRegulationNo.6/2002/ECof12December2001whichcameintoforceon1January2003.

ApplicationsfortheregistrationofaBeneluxdesignmaybesubmitteddirectlytotheBeneluxDesignsOfficeinTheHagueortonationaloffices8.TheregistrationofficeinLuxembourgistheIntellectualPropertyDivisionoftheMinistryoftheEconomy.Protectionisgrantedforatermoffiveyearsandmayberenewedeveryfiveyears.Themaximumtermofprotectionis25years.

TheCommunityRegulationprovidesfortwotypesofdesigns:unregistereddesignsandregistereddesigns.Anunregistereddesignwillbeprotectedforthreeyearsasfromthedateonwhichthedesignwasfirstmadeavailabletothepublic.However,anunregistereddesignonlyhaslimitedprotectionagainstsimplecopiesofthedesign.

Aregistereddesignisprotectedforfiveyearsandthismayberenewedeveryfiveyears.Themaximumtermofprotectionis25years.Theapplicationmaybesubmittedeithertothenationalindustrialpropertyoffices,theBeneluxOfficeordirectlytotheOfficefortheHarmoni-zationoftheInternalMarket(OHIM)9basedinAlicanteinSpain.

Moreover,LuxembourghassignedtheHagueAgreementondesigns,whichenablesMemberStatesoftheHagueAgreementtoprotectdesignsinothercountriesboundbytheAgreement.ApplicationsforregistrationmaybesubmittedtothenationalintellectualpropertyofficeordirectlytotheWIPO.Thisinternationalregistrationhasthesameeffectasregistrationdirectlyineachofthecountriesnamedintheapplicationforregistration.

8.3. Regulation of retail trading

8.3.1. Are prices regulated?

8.3.1.1. Can prices be freely set?

Pricesofgoods,productsandservicesarefreelysetonthebasisofcompetition10.However,theMinistryoftheEconomycansetmaximumpricesforpetroleumproducts,pharmaceuticalproductsandtaxifares.

Inprinciple,tradersarenotauthorisedtoselltoconsumersataloss11.

8.3.1.2. How should retail prices be displayed?12

- Products:

Allprofessionalsmustinformconsumersofthesaleprice(includingVATandanyadditionaltaxes)oftheproductstheysellandtheunitpricebasedonquantity13.

7 www.oami.eu.int/8 www.bmb-bbm.org/9 www.oami.eu.int/10 Actof17May2004relatingtocompetition.11 Exceptinparticularfordulyauthoriseddiscountsalesandliquidationsales,salesofgoodsliabletorapiddeteriorationwhichcannotbepreserved.12 GrandDucalRegulationof29July2004onthedisplayofpricesofproductsandservices.13 However,suchregulationprovidesforexceptionsforcertaintypesofproductssoldandforshopswhosesurfaceareadoesnotexceed400square

meters,sellersofartandantiquesellers.



Com

mer

cialp

ract

ices

- Services:

Inprinciple,allprofessionalswhoprovideservicestoconsumersmustinformthemoftheunitprices(includingtaxes)forthemostcommonservicestheyprovide.

8.3.2. What days and times may shops be open?

Thelaw14authorisesretailshopstoopenasfollows:

- fromMondaytoFridayfrom6.00amto8.00pm.Shopsmaystayopenuntil9.00pmonceaweek.

- onSaturdayandthedaybeforepublicholidays:6.00amto6.00pm,

- onSundayandonpublicholidays:6.00amto1.00pm.

Theserules,whichhavebeenmademoreflexibleforsomesectorsofactivityandsometowns,applywithoutprejudicetostatutoryprovi-sionsgoverningemployees’workinghours.

8.3.3. How are the various selling techniques regulated?

8.3.3.1. Are hawking and street sales authorised in Luxembourg?

HawkinganddisplayinggoodsforsaleinaplaceotherthanthepermanentestablishmentnormallyusedtosellsuchgoodsareprohibitedinLuxembourg15.However,thisprohibitiondoesnotapplytosellingcertainagriculturalgoodsandnewspapers,fairsandmarketsandcertaintemporaryexhibitionsorfairs.Ordertakingfromindividualsisstrictlyprohibited.

Streetsalesareonlypermittedforbakers,representativesforundertakingssellingdrinks,grocersandmilkproductsalesmenwhorundulyauthorisedestablishments.

Streetsalesareauthorisedbythemayoranddeputymayorsofthetowninwhichtheestablishmentinquestionislocated.

8.3.3.2. Do any specific regulations apply to e-commerce?

TheActof14August2000relatingtoe-commercecreatedafavourablelegalframeworkforonlinesales.

8.3.4. Are there any consumer protection rules?

AnActof25August1983asamendedrelatingtoconsumerprotectionprohibitsallclausesthatmaycreateanimbalancebetweentheprofessionalandtheconsumer.Inaddition,acertainnumberofspeciallawsrelatingtocertaintypesofagreementsenteredintowithconsumerscontainconsumerprotectionrules.

8.3.4.1. Prohibition of unfair clauses

TheaforementionedActof25August1983laysdownconsumerprotectionrules.Theserulesapplytoallagreementsenteredintobetweenprofessionalsandconsumers.Anyclauseorcombinationofclauseswhichcreateanimbalanceintherightsandobligationsoftheparties,totheconsumer’sdetriment,isconsideredunfairandisdeemedtobenullandvoid.Theactlistsacertainnumberofunfairclauses.

IncasethelawapplicabletothecontractisthelawofanonEUMemberState,theActof25August1983nonethelessapplies,incasetheconsumerhasitsresidenceinaEUMemberStateandthecontractwasproposed,enteredintoandexecutedinaMemberStateoftheEuropeanUnion.IncasetheconsumerisdomiciledinLuxembourgandhiscontractingpartyisdomiciledabroad,LuxembourgcourtsshallhavejurisdictionincasetheconclusionofthecontractwasprecededbyaproposalorpublicitymadeinLuxembourgandtheconsumerac-complishedalltheactionsnecessaryfortheconclusionofthecontractinLuxembourg.Formailorderselling,theconsumermaywithdrawfromtheagreementwithinsevendaysfollowingtheorderor15daysafterreceiptofthegoods.

8.3.4.2. Is there any specific legislation on consumer credit?

A specific Act16 protects the consumer in the event of sales of goods on credit for an amount of between EUR 185.92 andEUR24,789.35.

Salesoncreditaresubjecttoaspecificauthorisationissuedonacase-by-casebasisbytheMinistryresponsibleforthefinancialindustrywherethesellerisaprofessionalinthissector,orbytheMinistryofMiddleClasseswherethesellermainlyperformsanactivitycoveredbytheActof28December1988ontherighttosetupabusiness.

14 Actof19June1995,asamended,regulatingtheclosureofcommercialandcraftretailshops.15 Actof16July1987,asamended,relatingtohawking,streetselling,displayinggoodsandordertakings.16 Actof9August1993regulatingconsumercredit.



Com

mer

cialp

ract

ices

Hirepurchaseagreementsmustbeenteredintoinwriting.Theseagreementsmustcontaincertainmandatoryinformation.Inparticular,theeffectiveannualrateofthecreditandthetermsandconditionsofpaymentmustmeetcertainlegalstandards.

Thepurchaserislegallyentitledtowithdrawfromtheagreementinwritingwithintwodays.Thistimelimitisconsideredtohavebeenobservedifthecancellationnoticeissentbymailonthelastday.

8.3.4.3. Is there any consumer protection in respect of distance contracts?

Anycontract17concerninggoodsorservicesbetweenaprofessionalandaconsumerunderanorganiseddistancesalesorservice-provisionschemerunbytheprofessional,who,forthepurposeofthecontract,makesexclusiveuseofoneormoremeansofdistancecommunica-tionuptoandincludingthemomentatwhichthecontractisconcluded,iscoveredbyspecificconsumerprotectionlegislation.Thislegisla-tionmakestheprofessionalsubjecttoastricterobligationtoprovideinformation.Consumersareentitledtoaperiodofatleastsevendaysinwhichtheymaywithdrawfromthecontract.

8.4. Commercial leases

8.4.1. What is a commercial lease?

Acommercialleaseisanagreementpursuanttowhichpremisesforcommercialuseareleased18.

Ifpremisesmainlyforcommercialusealsoincludehousing,theActwithregardtorentalleaseswhichwasadoptedon13thJuly2006,mayalsobeappliedtothepartusedforhousing.

8.4.2. May rents be freely set?

Commercialrentsarenotspecificallyregulated.Rentsaredecidedfreelybythepartiesdependingonmarketconditions.Modifyingrents(forinstance,basedonchangesinconsumerprices)islegallyauthorisedforpremisesforprofessionaluse.

8.4.3. Are tenants authorised to sub-let premises?

Anyprohibitionontransferringaleaseorsub-lettingpremisesforcommercialusecontainedinaleaseisnullandvoidifthetransferorsub-lettingiscarriedoutinconjunctionwiththetransferofthebusiness,providedthatanidenticalbusinesscontinuestobebasedinthepremises.

8.4.4. Do tenants have a preferential right in the event the lease is renewed?

Alltenantsinpremisesforcommercialusewhohaveruntheirbusinessinthepremisesformorethanthreeyearsandlessthanfifteenyearsareentitledtoapreferentialrightwhenthecommercialleaseisrenewed19.Intheabsenceofagreementbetweenthepartiesrelatingtotherentandotherchargestobepaidbythetenantduringtherenewalperiod,suchamountsaredecidedbyoneorthreeexperts.

8.4.5. What is the effect of a termination clause?

Ifanagreementcontainsaterminationclauseallowingoneofthepartiestoterminatetheagreementincertaincircumstances,theap-plicationofthisclausewillbesubmittedtoacourtforadecisionintheeventofadispute.

8.4.6. What are the tenant’s rights in the event the premises are sold by the owner?

Theleaseisalsobindingonthepurchaseroftheleasedpremisesprovidedthattheleaseisevidencedbyannotariseddeedoraprivatedeedcontaininganauthenticateddate.Itisinthetenant’sinteresttoregisterthisdeed,whichgivesitanauthenticateddate.

8.5. Businesses (Fonds de commerce)

8.5.1. What is a business?

NostatutoryprovisionsinLuxembourglawdefinethecompositionofabusiness.Abusinessisgenerallyconsideredtobeasetoftangibleandintangibleassetsusedbytraderstoperformtheiractivityandwhichcontributetothedevelopmentoftheirundertaking.

17 Actof16April2003onconsumerprotectioninrespectofdistancecontracts.18 ThematterisessentiallygovernedbytheCivilCode(Article1762-2to1762-7)andtheActofonrentalleaseagreementswhichwasadoptedon

13thJuly2006bytheLuxembourgParliament.TheActwasnotyetinforcewhenthepresentdocumentwasfinalised.19 LuxembourgOrderof31October1936regardingtheprotectionofbusinessesinrelationtocommercialleases.



Com

mer

cialp

ract

ices

Themainelementsofabusinessare:itscustomers,name,licence20,furnitureusedtorunthebusiness,goodsavailableforsaleupto50%oftheirvalue,andtherighttotheleasewheretradersoperateinpremisestheydonotown.Whereapplicable,abusinessmayalsoincludeotherassetssuchastrademarks,patents,licencesandequipment,etc.

8.5.2. Can businesses be pledged as collateral?

CommercialundertakingsareauthorisedtopledgetheirbusinessascollateraltocreditinstitutionsandbreweriesdulyapprovedbytheGovernment21.

Thepledgemaybeevidencedinaprivatedeedoranotariseddeed.ThedeedmustberegisteredwiththeRegistrationandDomainAuthor-ity(Administrationdel’EnregistrementetdesDomaines).

20 Inthisdocument,thetermlicenceparticularlyrelatestotherighttosellalcoholicbeveragesinaccordancewithlicensinglaws.21 LuxembourgOrderof27May1937relatingtopledgingbusinesses,asamended.


ChaptER 9E-COMMERCE AND DATA PROTECTION

9.1. E-commerce

9.2. Personal data protection

E-COMMERCE AND DATA PROTECTIONChaptER 9


E-Co

mm

erce

and

dat

apr

otec

tion

Computersand informationandcommunicationtechnology (ICT)arewidelyused inLuxembourg.Accordingto2004figures,74%ofLuxembourghouseholdsownacomputerand62%haveaccesstoInternet.Asmanyas46%ofhouseholdsmakeonlinepurchases.Asforcompanies,97%haveInternetaccessand56%makeonlinepurchases.

Since2000,theLuxembourgauthoritieshavefocusedonICTandthecountry’sentryintotheinformationsocietyhasbeenoneofthemainlinesofthegovernment’spolicysincethen.Inthisrespect,LuxembourgwasnotablythefirstMemberStatetoimplementEuropeandirectivesrelatingtoelectronicsignaturesande-commerce.

Luxembourgprovidesexcellentconditionsforcompaniesspecializingine-commercetosetupofficesandgrowtheirbusinesses.Luxem-bourg’slegalenvironmentefficientlycombinesflexibleregulationsthatenablecompaniestodevelopandtherequirementsnecessarytoprotectconsumersandpersonaldata.

9.1. E-commerce

Thegovernment’sstrategyconsistsinimplementingEuropeanandinternationalstandardsasquicklyaspossibleinordertoguaranteelegalsecurityfore-commerce.Luxembourgconsequentlybenefitsfromarealfirst-moveradvantagewhichhasattractedmajorforeigncompaniesspecializinginonlinesalestothecountryanddevelopednewmarkets.

Luxembourg’se-commercelawsarebasedontheprovisionsoftheActof14August2000relatingtoe-commerce,asamended,whichprovideanappropriateframeworkforelectronictransactionstogrowunderthebestconditions.

Moreover,withaVATrateof15%(thelowestinEurope)andeffectiverecognitionofelectronicinvoicing,Luxembourghasthebestcondi-tionsforcompanieswishingtoincreasetheire-commerceactivitiesthroughoutEurope.

9.1.1. Do any specific regulations govern electronic signatures?

Insomecases,tradersusinge-commerceneedtobeabletoauthenticatepeople’sidentityandthedatatheysendelectronically.Theelec-tronicsignatureofelectronicmessagesmakesitpossiblefortheauthenticityofamessageandtheidentityofthesendertobeguaranteed.Thisiscrucialinorderforpurchaserstohaveconfidenceininformationandcommunicationtechnology.

Inpractice,anelectronicsignatureisasetofdatainelectronicformatwhichisattachedtoorlogicallyassociatedwithotherelectronicdataandusedforauthentificationpurposes.Electronicsignaturesnormallyallowthesignatorytobeidentifiedandtherelateddatatobeassociatedwiththeelectronicsignaturesuchthatanysubsequentalterationstothisdatawillbeimmediatelydetected.

InLuxembourg,anelectronicsignaturecreatedbyasecuresignaturecreationsystem,whichthesignatorycanexclusivelymonitorandbackedbyaqualitycertificate,constitutesasignaturewithinthemeaningofArticle1322-1oftheCivilCode.

InordertosecuretransactionsontheInternet/Intranet,theChamberofCommerceissuesdigitalcertificateswhichenabletheidentityofapersonoracompanytobecheckedinthecontextofanelectronictransactionandallowtheintegrityoftheuser’sdatatobemaintained.Adigitalcertificateisusedasanelectronicidentitycardwhichenablesinformationthatistobetransmittedtobeencryptedandsigned.DuetoGlobalSign’sexperienceandthefactthattheChamberofCommerceiswell-knownforitsapproachtocertificationinvolvingATAcarnetsandcertificatesoforigin,anewplatformcanbeofferedforsecureelectronictransactions.TheChamberofCommercenowactsasaCertificationServicesProvider(CSP)byprovidingthefollowingservices:

- providingadviceandassistanceonsecuree-commerce,

- checkingdataforthepurposeofdrawingupdigitalcertificates,

- issuingdigitalcertificates,

- confidentialandprofessionalservice.

9.1.2. What information must always been shown on an e-commerce website?

Allwebsites,whethertheyareusedtocarryouttransactionsorsimplytoprovideinformation,mustprovidevisitorswiththefollowinginformation:

- thetrader’sidentity(exactnameand,whereapplicable,itslegalform),

- whereapplicable,thetrader’sregistrationnumberwiththeTradeandCompaniesRegister,VATidentificationnumberandthenumberofthepermitissuedtothetraderinordertoperformtheactivity,

- intheeventthetraderexercisesaregulatedprofession,theprofessionaltitleorthereferencesoftheprofessionalbodyofwhichhe/sheisamember,

- theaddresswherethetraderisbased,

- thepostaladdress,telephonenumberande-mailaddressatwhichthetradermaybecontacteddirectly,

- thedaysandtimesatwhichthetradermaybecontactedinpersonorbytelephone.



E-Co

mm

erce

and

dat

apr

otec

tion

Moreover,tradersmustprovidetheircustomerswiththefollowingtechnicalinformation:

- thevarioustechnicalstagestobecompletedinordertoenterintotheagreement,

- whethertheagreementwillbestoredornotonceithasbeenenteredintoandinformationaboutaccessthereto,

- thetechnicalmeansthatmaybeusedtoidentifyandcorrecterrorsmadeindataentrybeforetheorderisplaced,

- languagesavailableforplacingtheorder.

9.1.3. How should products and services offered to customers be presented?

Beforeplacinganorder,tradersmustpresenttheirproductsand/orservicestocustomers.Clearandfullinformationmustbeprovidedtocustomersabouttheproductsand/orservicesoffered.Customershavetherighttoexpectthefollowinginformationfromtraders:

- theexactname,precisereferencesandmainfeaturesoftheproductsorservices,

- thecurrencyinwhichtheywillbeinvoiced,

- thepriceoftheproductsorservicessoldincludinganytaxes.Tradersmustinformcustomersofthetotalamountofthecostsrelatingtotheproductsorservices(whereapplicable,transportcosts,customscosts,etc.),

- howlongtheofferandthepricewillremainvalid,

- thetermsofpayment,deliveryandexecutionoftheorder(inparticular,deliverytimesordeadlinesforperformingaservice),

- whereapplicable,thegeographicallimitsfortheoffer(istheofferlimitedtoLuxembourg,neighbouringcountriesortheEuropeanUnionasawhole?),

- whereapplicable,thetermsofanycreditoffered,

- intheeventcustomersdonothavetherighttocanceltheorder,thefactthatthereisnosuchcancellationright(seebelow),

- intheeventcustomershavetherighttocanceltheorder,thefactthatthereissuchacancellationrightandthetermsunderwhichthisrightmaybeexercised(inparticular,anytimelimitsandthetermsofrefunds,whereapplicable,ofanysumspaidbycustomersintheeventofcancellation),

- thetermsandconditionsofanycommercialwarrantiesandafter-salesservice,

- theminimumtermofanyagreementrelatingtothesupplyofproductsorservicesonalong-termorperiodicbasis,

- complaintproceduresandcontactdetailsforthecustomerservicesdepartmentthatdealswithcomplaints.

9.1.4. What is the procedure for placing an order?

Beforeordersarefinallyplaced, tradersmustprovidecustomerswithacompletesummaryof thepurchasesmade (typeofproducts/services,quantity,price)andthegeneraltermsandconditionsofthetransaction(deliverytimesordeadlinesforexecution,termsofpay-ment,contactdetailsoftheafter-salesservice,termsandconditionsforcancellation,etc.).

Tradersmustallowcustomerstochangeorcanceltheorder.Tothisend,tradersmustmakeadouble-clicksystemavailabletocustomerswithwhichtheycanconfirmtheorder:

- firstclick:agreeingtothecontentoftheorder,

- secondclick:confirmingtheorder.

Intheabsenceofconfirmation(secondclick),theorderisnotvalid.

Whencustomershaveconfirmedtheirorder,tradersmustacknowledgereceiptoftheorderinane-mailsummarisingsaidorderwithoutdelay,unlessthereisaspecificreasonfordelay.E-mailsacknowledgingreceiptofordersmustcontainthefollowinginformation:

- acompletedescriptionofthepurchasesmade(typeofproducts/services,quantity,price),

- probabledeliverytime,

- generaltermsandconditionsofsale,

- postaladdress,telephonenumberande-mailaddresstobeusedbycustomerstosubmitcomplaints,

- whereapplicable,informationabouttheterms,conditionsandmethodstobeusedtoexerciseanyrighttocancelanorder,

- whereapplicable,informationaboutafter-salesservicesandwarrantiesofferedbythetrader,

- thetermsandconditionsunderwhichagreementsmaybeterminatedwheretheyareenteredintoforanunlimitedtermorforatermofmorethanoneyear.

9.1.5. Do any rules lay down restrictions on executing orders?

Tradersmustinformcustomersoftheprobabledateonwhichproductsorderedwillbedeliveredorservicesorderedwillbecarriedout.Unlessthepartiesagreeotherwise,thisdateshouldbenomorethan30daysafterthedayfollowingthedateonwhichthecustomersplacedhis/herorderwiththetrader.



E-Co

mm

erce

and

dat

apr

otec

tion

Obviously,tradersmustdeliverproducts/servicestocustomersthatmatchtheorder.Inordertomatchtheorder,productsmust:

-correspondtothedescriptiongivenbythetraderbeforetheorderwasplaced,

-havethefeaturesstatedbythetraderinanyadvertisement,

-matchthelabelsontheproducts,

-befitfortheuseforwhichtheproductsarenormallyandgenerallyintended.

Intheeventtradersfailtoexecuteanorderduetothefactthatthegoodsorservicesorderedareunavailable,customersmustbeinformedofthisinwriting(byletterore-mail).Unlessthepartiesagreeotherwise,customersmustthenreceivearefundofallamountspaid,whereapplicable,assoonaspossibleandinanyeventwithin30days.

Ine-commerce,asinothertypesofdistancesales,itisadvisabletohaveanafter-salesserviceinordertodealwithanycustomercom-plaints.

Whenafter-salesservicesareofferedtocustomers,tradersmustprovidecustomerswiththefollowinginformation:

- themaininformationregardingtheimplementationoftheafter-saleswarrantyandtheafter-salesservice:term,geographicalscopeandanyotherrelevantinformationrelatingtoimplementationthereof,

- theprecisedetailsoftheafter-salesservice(postaladdress,telephonenumberande-mailaddress)andthetimestheserviceisavail-abletocustomers.

9.1.6. Does Luxembourg have any specific anti-spamming legislation?

Tradersmustobtaincustomerspriorconsentbeforesendingthemadvertisinge-mails.

Traderswhohaveobtainedcustomers’e-mailcontactdetailsthroughthesaleofproductsorservicesmayusethesecontactdetailsandsendcommercialmessagesaboutsimilargoodsorservicestothesecustomersbye-mail.Inthiscase,tradersmusthoweverenabletheircustomerstorefusesuchuseoftheircontactdetailsatnocostandinanuncomplicatedmanner.Customersmustalsobeabletostatethattheydonotwishtoreceiveanysuchmessagesbothwhentheygivetheircontactdetailsandwhenanynewcommercialmessageissentbye-mail.

Anycommercialmessagesentbye-mailmustmeetthefollowingconditions:

- commercialmessagesmustbeclearlyidentifiableassuch,

- thetraderonwhosebehalfofthecommercialmessageissentmustbeclearlyidentifiable,

- competitions,promotionaloffersorgamesmustbeclearlyidentifiableassuchandthetermsandconditionsforparticipationmustbeeasilyavailableandpresentedinapreciseandclearmanner.

9.1.7. Do any specific rules apply to games of chance on the Internet?

NospecificrulesapplytogamblingontheInternet.

PursuanttotheActof20April1977onrunninggamesofchanceandbettingonsportingevents,runninggamesofchanceisprohibited.Thisactalsocontainsaprohibitiononslotmachinesinpublicplacesandstrictregulationswithregardtobettingonsportingeventsandrunningcasinos.

TheActof20April1977alsoappliestogamesofchanceandgamblingontheInternet.Nospecialrulesapplytoonlinecasinosorsitesofferinggambling.

Onlylotteries,competitivegamesandrafflesforadvertisingpurposesareauthorised.Inthisrespect,thegamesmustbefreeofchargeandcarriedoutexclusivelyforadvertisingpurposes.

Inaddition,organisersofgamesforadvertisingpurposesmustfulfilthefollowingconditions1:

- organisersoflotteries,competitivegamesorrafflesforadvertisingpurposesmustdrawupregulationssettingforththeterms,condi-tionsandimplementationofthecommercialoperationbeforesendinganyadvertisingmessage.Theseregulationsandacopyofthedocumentssenttoconsumersmustbesubmittedtoaministerialofficerwhowillcheckthattheyarelawful.Theadvertiserwillsendthefulltextoftheregulationstoanypersonrequestitfreeofcharge.

- theadvertisingdocumentsmustnotgiverisetoanyconfusionwhatsoeverfortherecipientsorcauseanyerrorregardingthenumberandvalueoftheprizes,andthetermsandconditionsunderwhichprizesareawarded,

- theentryformmustbeseparatefromtheorderformforthegoodsorservices,

1 Article21oftheActof30July2002regulatingsomecommercialpractices,preventingunfaircompetitionandimplementingEuropeanParliamentandoftheCouncilDirective97/55/ECamendingDirective84/450/EECconcerningmisleadingadvertisinginordertoincludecomparativeadvertisingtherein.



E-Co

mm

erce

and

dat

apr

otec

tion

- participatinginagameinvolvingdrawinglots,irrespectiveoftherelevantarrangements,mustnotrequireanyfinancialconsiderationwhatsoeveroranypurchaseobligation,

- advertiserswhogiveconsumerstheimpressionthattheyhavewonaprizethroughthedesignorpresentationoftheadvertisementofthegamemustgivecustomersthisprize.

9.1.8. What tax rules apply to electronically supplied services provided by companies based in Luxembourg?

Luxembourgoffersthebesttaxenvironmentpossibleforcompaniesoperatinginthee-commercefield.Moreover,allEuropeanstandardsrelatingtoinvoicingandVATforonlineservicesintheActof1July20032havebeentransposedintoLuxembourglaw.

VATononlinesalestransactionsis15%,i.e.thelowestrateinEurope.ThisrateappliesnotonlytoonlinesalestoconsumersresidinginLuxembourgbutalsotoonlinesalestoconsumerswholiveinoneofthe25EUMemberStates.

Thistaxtreatmentappliestoallcompanieswhichchoosetoregistertheire-commerceactivitiesinLuxembourg,whethertheyareEUornon-EUcompanies.

Indeed,companiesbasedoutsidetheEUwhichprovidesgoodsorservicestoconsumersintheEUcanalsochoseLuxembourgastheMemberStateofidentificationforthepurposeofregisteringtheiractivities.Inthiscase,salestoconsumersintheEUwillbeliabletoVATat15%irrespectiveoftheconsumer’sMemberStateofresidence.

Withthesetaxrules,togetherwiththelegalframeworkfore-commerceinLuxembourg,Luxembourgoffersallcompaniesoptimalcondi-tionsfordevelopmentandgrowth.

9.2. Personal data protection

WiththearrivaloftheInternetandthedevelopmentofe-commerce,personaldataprotectionisofgrowingimportance.Forasmallecon-omysuchasLuxembourg,itisimportanttobeabletoprovideguaranteestoindividualsandcompaniesthattheirdatawillbeprocessedinawaythatrespectsallindividualrightstoconfidentialityandprivacy.

AtEuropeanlevel,theCouncilofEurope3andtheEuropeanUnion4havedrawnuprulesrelatingtotheprotectionofpersonaldata.InLuxembourg,theprotectionofpersonaldataisgovernedbytheActof2August2002,whichtransposedEuropeanrequirementsintoLux-embourglawandcontainssomeadditionalprovisions5.TheapplicationoftheseregulationsisguaranteedbytheNationalDataProtectionCommission(Commissionnationalepourlaprotectiondesdonnées)6.

Ingeneral,theframeworkfortheprotectionofpersonaldatainLuxembourgisbasedonacertainnumberofkeyprinciplesaimedatguaranteeingindividualrights.Thisprotectionhasledtoacertainnumberofrestrictionsoncompanies.However,theguaranteesprovidedapplytobothindividualsandcompanies. Indeed, inaccordancewiththerelevantregulationsondataprotection,companiesbasedinLuxembourgbenefitfromasecureenvironmentinwhichconfidentialityanddatasecurityaremaintained.

9.2.1. What is the scope of application of Luxembourg data protection legislation?

Legislationontheprotectionofpersonaldataappliestotheautomaticprocessinginfullorinpartandthenon-automaticprocessingofdatacontainedorthatwillbecontainedinacomputerfile.

Thislawappliestoallformsofcollection,processingandcirculationofsoundandimageswhichenablenaturalorlegalpersonstobeidentified.Fromthisstandpoint,itshouldbestressedthatLuxembourglawgoesfurtherthanEuropeanrequirementsinthisarea.Indeed,Communitylawprovidesfortheprotectionofindividualsbutnotfortheprotectionoflegalentities.Inthisrespect,Luxembourglawwillbeamendedveryshortly inorder toavoidcreatinganyadditional restrictionscomparedwithEuropeanrequirements (seebox)underLuxembourglaw.

Thefollowingissubjecttothislaw:

(a) theprocessingofpersonaldatabyaprocessorgovernedbyLuxembourglaw,

(b) theprocessingofpersonaldatabyaprocessorwhich,withoutbeingbasedinLuxembourgor inanotherEUMemberState,usesmeansofprocessinglocatedinLuxembourg,excludingmeansthatareonlyusedfortransitingpurposesinthisterritoryorinanotherEUMemberState.

2 ThisActof1July2003implementsDirective2001/115/ECof20December2001withaviewtosimplifying,modernisingandharmonisingthecondi-tionslaiddownforinvoicinginrespectofvalueaddedtaxandDirective2002/38/ECof7May2002asregardsthevalueaddedtaxarrangementsapplicabletoelectronicallysuppliedservices.

3 ConventionfortheprotectionofindividualswithregardtoautomaticprocessingofpersonaldatasignedinStrasbourg,28January1981.4 Directive95/46/ECoftheEuropeanParliamentandoftheCouncilontheprotectionofindividualswithregardtotheprocessingofpersonaldataand

onthefreemovementofsuchdata,24October1995.5 Actof2August2002relatingtopersonaldataprotection.6 Commissionnationalepourlaprotectiondesdonnées(NationalDataProtectionCommission).Address:68RoutedeLuxembourg

L-4221Esch-sur-Alzette-Telephone:261060-1-Fax:261060-29-E-mail:[email protected]–website:www.cnpd.lu(onlyinFrenchandGerman).



E-Co

mm

erce

and

dat

apr

otec

tion

Thislawappliestotheprocessingofdataaboutpublicsafety,defence,investigationsandlegalproceedingsinrelationtocriminaloffencesorStatesecurity,evendatathatislinkedtoanimportanteconomicorfinancialinterestfortheState,withoutprejudicetothespecificprovisionsofnationalorinternationallawapplyingtotheseareas.

Thislawdoesnotapplyto:

- theprocessingofpersonaldatabyanindividualinthecourseofapurelypersonalorhouseholdactivity,

- theprocessingofdataaboutalegalpersonwhichmustbepublishedinaccordancewiththelaworregulations.

9.2.2. What are the main principles governing the processing of personal data?

TheActof2August2002laysdowntheprinciplethatpersonaldatamayonlybeprocessedifitislegitimatetodoso.Somecaseswherethis“conditionoflegitimacy”issatisfiedaresetoutbelow:

- processingisnecessaryforcompliancewithalegalobligation.Thisisthecase,forexample,wheretheprocessingofdataaboutacompany’scustomersorsuppliersisusedinaccount-keeping,orwheredataaboutemployeesneedstobedisclosedtosocialsecuritybodies.

- processingisnecessaryfortheperformanceofacontract.Inthiscase,thedataprocessingisrequiredforaneconomicactivity.Forexample,whereaconsumerwishestoopenabankaccount,thebankcollectsandprocessescertainpersonaldataforthepurposeofrunningandmanagingthisaccount.

- datasubjectshavegiventheirconsent.Companiesmustprovideeachdatasubjectwithinformationenablingthemtounderstandwhatprocessingwillbecarriedoutinrelationtothispersonaldata.Customers’consentshouldbeobtainedwhere,forexample,acompanywishestocollectinformationaboutitscustomersthatisnotnecessaryfortheperformanceofaserviceoranagreement,butwhich is intendedtodeterminecustomers’commercialprofiles inorder tosend themadvertisingoroffer thempersonalisedservices.

Inordertobelawful,theprocessingofpersonaldatamustalsocomplywithacertainnumberofmajorprinciples:

- allprocessingofpersonaldatamusthaveapreciseandclearpurposeand theNationalDataProtectionCommissionshouldbeinformedinorderforthedataandthedatasubjectsinvolvedtobeprotected.Inpractice,somecompaniesasktheircustomerstocompleteformsandprovidepersonalinformationwhichisnotstrictlynecessaryforperformingtheserviceorcarryingoutanorderforgoods,butcomesundercommercialprofiling.CommercialprofilingisnotprohibitedbuttheNationalDataProtectionCommissionshouldbeinformedclearlyoftheexactpurposeofthedatacollection.Fullandaccurateinformationmustbeprovided.

- allprocessingofpersonaldatamustbeinproportiontotheobjectivestobeachieved.Companiesmustlimitprocessingtodatathatareadequate,relevantandnotexcessiveinrelationtothepurposeforwhichtheyarecollected.

- allprocessingofpersonaldatainvolvesregularlyupdatingsuchdata.Thismeansmaintenanceworkbycompaniesthatprocesstheircustomers’personaldata.Onrequest,datasubjectsmayobtainaccesstodataaboutthemandhavethemcorrected.

- datacollectedorprocessedmustbekeptforalimitedperiodoftime.Thistimeshouldnotexceedthetimenecessarytoattaintheobjectivesforwhichthepersonaldatawasprocessed.

9.2.3. What formalities are required prior to processing personal data?

NopersonaldatamaybeprocessedunlesstheNationalDataProtectionCommissionhaspreviouslybeennotifiedofsuchprocessing.Insomecircumstances,theActof2August2002evenrequirespriorauthorisationbytheNationalDataProtectionCommissionfortheprotectionofdata.

• Notification

TheNationalDataProtectionCommissionmustbenotifiedbytheprocessorbeforesaidprocessorstartstoprocesspersonaldata.

TheNationalDataProtectionCommissionhaspreparedanotificationformwhichisavailableinpaperformandinelectronicformat.

Thenotificationformshouldcontainthefollowinginformation:

- theprocessor’snameandaddress,

- thecriterionwhichmakestheprocessinglegitimate(seeabove),

- thepurposeoftheprocessing,

- thecategoryofpeopleinvolved,

- therecipientstowhomthedatamaybedisclosed,

- thecountriestowhichthedatamaybetransferred,

- ageneraldescriptionoftheappropriatenatureofthemeasurestakentoensurethesecurityofthepersonaldataprocessing,

- howlongthedatawillbekept.

TheNationalDataProtectionCommissionmustacknowledgereceiptofthenotificationform.Dataprocessingmaystartpriortoreceiptofthisacknowledgement.



E-Co

mm

erce

and

dat

apr

otec

tion

TheNationalDataProtectionCommissiondoesnotmonitorthelegitimacyorlegalityofprocessingofwhichitisnotified.However,theCommissionmayrequestadditionalinformationandcarryoutinvestigations.Inprinciple,suchrequestsorinvestigationsmaynotdelaythestartofthedataprocessing.

Iftheoutcomeoftheinvestigationsshowsthatthedataprocessingbyacompanyisunlawful,theNationalDataProtectionCommissionmaytakecertainmeasures(seebelow).

Thereisalsoasimplifiednotificationprocedurefordataprocessingthatisnotliabletoundermineprivacy.TherelevantformsareavailableontheNationalDataProtectionCommission’swebsite.

• Priorauthorisation

TheActof2August2002makescertaincategoriesofdataprocessingpersonaldatathatmayinvolvespecificdataprotectionriskssubjecttopriorauthorisation:

- theprocessingofsensitivedata(inparticularhealth-relateddata),

- theprocessingofgeneticdata,

- processingforsurveillancepurposes(closed-circuittelevisionsurveillanceofpublicroads,closed-circuittelevisionintheworkplace,etc.),

- theprocessingofdatarelatingtoindividuals’creditstandingandinformationabouttheirinsolvency,etc.

TherelevantformsareavailableontheNationalDataProtectionCommission’swebsite7.

9.2.4. What rights do data subjects have?

Theobjectiveofthelegislationonpersonaldataprotectionistoguaranteetherightsofdatasubjects.Datasubjectsmustbeabletomoni-tortheprocessingoftheirdatainordertoensurecompliancewithdataprotectionrules.

Datasubjectshavefourrights:therightofaccesstoinformationabouttheexistenceofandarrangementsforprocessing,therightofaccesstothedata,therightofcorrectionandtherightofobjection.

• Accesstoinformationabouttheexistenceofandarrangementsforprocessing

Datasubjectsmustbemadeawareofthefactthattheirpersonaldataarebeingprocessedandtheyshouldbeefficientlyprovidedwithfullinformationregardingthearrangementsforthisprocessing.

Datasubjectsmustbeprovidedwiththefollowinginformation:

- theidentityoftheprocessor,

- theintendedpurpose(s)ofthedataprocessing,

- anyotheradditionalinformation,suchastherecipientstowhomthedatamaybedisclosed,theexistenceofarightofaccesstothedata,andhowlongthedataaretobekept.

Ifthedataarecollecteddirectlyfromthedatasubject,thisinformationmustbeprovidedatthelatestwhenthedataarecollected.Ifthesedataarecollectedfromthirdparties,thedatasubjectmustbeinformedatthelatestatthetimewhenthedataarefirstdisclosedtothesethirdparties.

• Rightofaccesstothedata

Alldatasubjectshavetherightofaccesstoanypersonaldataaboutthem.Thisrightofaccessmustenabledatasubjectstocheckthatthedataareaccurateandthattheprocessingislegitimate.

Onlythedatasubjects(ortheirbeneficiaries)mayexercisethisrightofaccess.Individualswishingtoexercisetherightofaccessmustbeabletoprovideproofoftheiridentity.

Itmustbepossibletoexercisetherightofaccessatnocostand,consequently,thisshouldbetotallyfreeofchargeforthedatasubject.Theprocessorcannotdemandanycontributiontoanycostsarisingfromtheexerciseoftherightofaccess.

Inreturn,therightofaccessmayonlybeexercisedatreasonableintervals.Thefrequencywithwhichdatasubjectsmayexercisetheirrightofaccessislimited.

DatasubjectsmaycontacttheNationalDataProtectionCommissioniftheyhaveseriousreasonstoconsiderthatthatdatadisclosedtothemdonotcorrespondtothedataprocessed.TheNationalDataProtectionCommissionhasinvestigativepowerstocarryouttheneces-sarychecks.

7 www.cnpd.lu



E-Co

mm

erce

and

dat

apr

otec

tion

• Rightofcorrection

Therightofcorrectionmeansthatanydatasubjectsmay informtheprocessorof irregularitiesthattheyhavenoted.Theprocessor isobligedtocorrectthemistakesandupdatetheprocesseddata.

If,whentherightofaccessisexercised,thedatasubjectsnotethatdataaboutthemareincomplete,inaccurateorobsolete,theprocessormustcorrectthisdata.

If,whentherightofaccessisexercised,thedatasubjectsnotethatthedataaboutthemareinadequate,irrelevantorexcessiveinrelationtothenotifiedpurposeoftheprocessing,theymayasktheprocessortodeleteorlockthedata.

Iftheprocessorrefusestomakethecorrectionsrequestedwithoutanyreason,thiswillleadtoatemporaryorpermanentprohibitionontheprocessingofthedataorthedestructionofsaiddata.

• Rightofobjection

Alldatasubjectsmayobjecttotheprocessingofdataaboutthematanytimeoncompellinglegitimategrounds.

Therightofobjectionexercisedbythedatasubjectonlyappliestodatathatrelatedirectlytothisindividualandhasnoeffectontheprocessingofdataaboutotherindividuals.

In theeventdataareprocessed for commercial canvassingpurposes, theActof2August2002stipulates thatdatasubjectsarenotrequiredtoprovidereasonsfortheirobjectiononcompellinglegitimategrounds.Datasubjectsmaycausetheprocessingofdataaboutthemtobestoppedonrequest.

Theprocessormustinformalldatasubjectswhosedataarebeingprocessedforcommercialcanvassingoftheirrighttoobject.

9.2.5. What are the data processor’s obligations relating specifically to computer data security?

Theprocessorineachcompanymusttakealltheappropriatetechnicalandorganisationalmeasurestoensurethatprocesseddataareprotectedagainstaccidentalorunlawfuldestruction,accidentalloss,alteration,circulationorunauthorisedaccess.

Wheredataprocessorsusesub-contractors,theymustprovidesufficientguaranteeswithregardtothetechnicalandorganisationalmea-suresrelatingtotheprocessingtobecarriedout.

TheActof2August2002laysdownacertainnumberofsecuritymeasureswhichmustbetakenbyprocessors:

- monitoringentrancetothefacilities:processorsmustbeabletopreventanyunauthorisedpersonfromhavingaccesstothefacilitiesusedfordataprocessing,

- monitoringdatacarriers:processorsmustbeabletopreventthedatacarriersfrombeingread,copied,modifiedormovedbyanunauthorisedperson,

- monitoringmemory:processorsmustbeabletopreventanyunauthoriseddatafromenteringtheinformationsystemandanyunau-thorisedaccessto,modificationofordeletionoftherecordeddata,

- monitoringuse:processorsmustbeabletopreventthedataprocessingsystemsfrombeingusedbyunauthorisedpersonsusingdatatransmissionequipment,

- monitoringaccess:processorsmustbeabletoguaranteethatauthorisedpersonscanonlyaccessdatafallingwithinthescopeoftheirpowers,

- monitoringtransmission:processorsmustbeabletoguaranteethattheidentityofthirdpartiestowhomthedatamaybetransmittedbythetransmissionequipmentcanbecheckedandrecorded,

- monitoringentries:processorsmustbeabletoguaranteethattheidentityofpersonshavingaccesstotheinformationsystemcanbecheckedandrecordedaftertheeventanditmustalsobepossibletodeterminewhatdatahasbeenenteredintothesystem,atwhattimeandbywhichperson,

- monitoringtransportation:processorsmustbeabletopreventdatafrombeingread,copied,modifiedordeletedinanunauthorisedmannerwhendataaredisclosedanddatacarrierstransported,

- monitoringavailability:processorsmustmakeback-upcopies.

TheActof2August2002alsorequiresdataprocessorstosubmitareport,onanannualbasis,totheNationalDataProtectionCommissiononthesecuritymeasuresimplemented.TheActdoesnotspecifythecontentofthisreport.Inanyevent,thereportmustcontainaninven-toryoftheexistingcomputersecuritymeasuresimplementedandthelistofadaptationsimplementedduringthepreviousyear.

FailuretofulfilthesecurityobligationslaiddownbytheActof2August2002ispunishablebycriminalpenalties8.

8 Article25oftheActof2August2002:“AnypersoncarryingoutprocessinginbreachoftherulesrelatingtoconfidentialityorsecuritysetforthinArticles21,22and23shallbepunishedbyimprisonmentrangingfromeightdaystosixmonthsandafineofEUR125,000orbyonlyoneofthesetwopenalties”.



E-Co

mm

erce

and

dat

apr

otec

tion

9.2.6. How is the application of Luxembourg law on the protection of personal data supervised and monitored?

TheNationalDataProtectionCommissionisresponsibleforsupervisingandmonitoringtheapplicationoftheActof2August2002.

TheNationalDataProtectionCommissionisanindependentadministrativeauthoritycomprisedofthreemembersappointedforaperiodofsixyears,whichmayberenewed,whoseroleistoensurethattheprovisionsoftheActof2August2002areapplied.

TheNationalDataProtectionCommissionhasseveraltasks:

- supervisingandmonitoringdataprocessing,byreceivingnotificationpriortotheprocessingofpersonaldataand,whereapplicable,issuingpriorauthorisations,

- publicity,bykeepingapublicregisterofdataprocessinganddrawingupanannualreport,

- providinginformationandconsultingthegovernmentbydraftingnoticesonbillsrelatingtotheprotectionofpersonaldata,

- providinginformationtothepublicthroughpromotionalcampaignsaimed,forexample,atinformingdatasubjectsoftheirrightsasregardsdataprocessing,

- promotingself-regulationinrelationtodataprocessingandencouragingcodesofconducttobedrawnup,

- cooperatingwiththesupervisoryauthoritiesatCommunitylevel.

Initscapacityasasupervisoryauthority,theNationalDataProtectionCommissionhasthepowertocarryoutinvestigationsandimposepenalties.Itsinvestigativepowersenableitinparticulartohaveaccesstodatathathavebeenprocessed,todemanddirectaccesstothepremiseswheretheprocessingiscarriedout,etc.

PreventingorhinderingtheperformanceoftheNationalDataProtectionCommission’sdutiesispunishablebycriminalpenalties.

TheNationalDataProtectionCommissionmayimposeadministrativepenaltiesontheprocessor.ThesepenaltiesmaybeextremelyharshsincetheNationalDataProtectionCommissioncanorderthedatacollectedtobedestroyedandcanprohibittheprocessingofsomedata.

Reform in progress of the bill amending the Act of 2 August 2002 relating to the protec-tion of individuals with regard to the processing of personal data

On3February2006,thegovernmentintroducedabillamendingtheActof2August2002relatingtotheprotectionofpersonaldata.

Atthetimeofpublicationof“DoingBusinessinLuxembourg”,thebillhadnotyetbeenadoptedbytheHouseofRepresentatives(ChambredesDéputés).Forthepurposesoftransparency,theauthorshoweverwishedtoexplainthebroadlinesoftheplannedreforms,inparticularsincethemainamendmentsareaimedatsimplifyingtheadministrativeprocedurefortheimplementationoftheActof2August2002.Themainprovisionsofthisbillaresetoutbelow.

• Removal of any reference to the protection of the personal data of legal entities

ThescopeofapplicationofLuxembourglawontheprotectionofpersonaldatawillbelimitedtotheprotectionofthepersonaldataofindividuals.DatarelatingtolegalentitieswillnolongerbecoveredbytheActof2August2002.ThiswillconsiderablyeasetherestrictionscurrentlyimposedoncompaniesbasedinLuxembourg.

• Further exemptions from the obligation to notify the National Data Protection Commission

ThefollowingwillbeexemptfromtheobligationtonotifytheNationalDataProtectionCommissionofanyprocessingofpersonaldata:

- processingsolelyintendedtokeeparegisterwhich,pursuanttoaLuxembourgactorregulation,isaimedatinformingthepublicandisavailableforconsultationbythepublicoranypersonswhocanshowtheyhavealegitimateinterest,

- theprocessingofdatathatrelateexclusivelytopersonaldatarequiredtomanagethesalariesofpersonsintheserviceoforworkingfortheprocessor, insofarasthesedataareusedexclusively formanagingthesalariesreferredtoandthattheyaredisclosedsolelytotheauthorisedrecipients,

- dataprocessingexclusivelyintendedformanagingcandidateapplicationsandrecruitmentandmanagingthepersonnelworkingintheserviceoforworkingfortheprocessor(theprocessingmaynotcoverdatarelatingtothehealthofthedatasubject,sensi-tiveorjudicialdataordataintendedforassessingthedatasubject),

- theprocessingofdataexclusivelyrelatingtotheprocessor’saccounts,insofarasthesedataareusedexclusivelyfortheseac-countsandtheprocessingrelatessolelytopersonswhosedataarenecessaryfortheaccounts,

- theprocessingofdataexclusivelyforthepurposeofadministrationasregardsshareholdersandpartnersinsofarastheprocess-ingcoverssolelythepersonswhosedataarenecessaryforthisadministration,providedthatthedataarenotdisclosedtothirdparties,exceptwithinthescopeoftheapplicationofastatutoryorregulatoryprovision,



E-Co

mm

erce

and

dat

apr

otec

tion

- dataprocessingexclusivelyaimedatmanagingtheprocessor’scustomersorsuppliers,

- dataprocessingcarriedoutbyafoundation,associationoranyothernon-profitmakingbodywithinthescopeoftheirordinaryactivities,

- processingidentificationdatanecessaryfordisclosurecarriedoutwiththesoleobjectiveofenteringintocontactwiththeinter-estedparty,providedthesedataarenotdisclosedtothirdparties,

- dataprocessingrelatingexclusivelytoregisteringvisitorscarriedoutwithinthescopeofmanualaccesscontrols,providedthatthedataprocessedislimitedtovisitors’namesandprofessionaladdresses,thenameoftheiremployer,identificationoftheirvehicle,name,departmentandtitleofthepersonvisitedandthedateandtimeofthevisit,

- personaldataprocessingrequiredformanagingcomputerandelectroniccommunicationsystemsandnetworks,providedthattheyarenotusedforsurveillancepurposeswithinthemeaningoftheActof2August2002.

• Notifying the National Data Protection Commission only once when processing identical data

TheNationalDataProtectionCommissionneedonlybenotifiedonceoftheprocessingofpersonaldatawiththesamepurpose,relatingtoidenticalcategoriesofdataandwiththesamerecipientsorcategoriesofrecipients.Inthiscase,eachprocessorshouldsendtheNationalDataProtectionCommissionaformalundertakingthattheprocessingwillbeconsistentwiththatdescribedinthenotificationform.

• Implicit authorisation in the absence of a reply from the National Data Protection Commission

IftheNationalDataProtectionCommissionfailstoreplywithinthreemonthswitheffectfromreceiptoftherequest,thisconstitutesimplicitauthorisation.However,implicitauthorisationwillapplywithoutprejudicetotheNationalDataProtectionCommission’srighttotakeaformaldecisionwithinninemonthsfollowingtheaforementionedthree-monthtimelimit.IntheeventtheNationalDataProtectionCommission fails to replywithin12monthswitheffect from the receiptof the request,authorisation shallbedeemedtohavebeenfinallygranted.

• Abolition of the obligation to draw up an annual report

Atpresent,theActof2August2002alsorequiresdataprocessorstosubmitareporttotheNationalDataProtectionCommissiononsecuritymeasuresimplemented.Thebillproposesabolishingthisobligation.


ChaptER 10

10.1. Under which conditions may financial activity be performed?

10.2. Undertakings for collective investment

10.3. Hedge funds

10.4. Pension funds in Luxembourg

10.5. Venture capital investment vehicles (SICARs)

10.6. Guarantee arrangements

LUXEMBOURG’S FINANCIAL SECTOR

LUXEMBOURG’S FINANCIAL SECTORChaptER 10


Luxe

mbo

urg’

sfin

ancia

lsec

tor

Luxembourg’sfinancialsector,withitsnumerousbanksandprofessionalsinthefinancialservicesindustry,offersawiderangeofproductsandservicesincludinginvestmentfunds,insurancesolutionsandguaranteearrangements.

Luxembourg’sbankshavetheskillsandthecapacitytomeettheirprivateclients’requirements,bothintermsofinvestmentandadvice.

TherearemanyreasonsforchoosingLuxembourginvestmentfunds.Luxembourg’sfinancialsectorhasawholerangeofassetswhichhavemadeitthepreferredplaceforthedomiciliationandadministrationofinvestmentfundsandforthecross-borderdistributionoffundunitsorshares.

Luxembourg’sinvestmentfundshavethecompetitiveadvantageofofferingaverywiderangeoffunds,whichisoneoftheirmostattrac-tivefeatures.

InLuxembourg,amodernlegalandregulatoryframeworkhasbeencreatedwhichisflexibleenoughtobeabletoadaptastheinvestmentfundssectordevelopsandallowsanextensivechoiceofspecificinvestmentpoliciesinvariousformssuchasequityfunds,bondfunds,moneymarketfunds,hedgefundsandventurecapitalfunds.Withinthisframework,itispossibletomeettheneedsandtheprofileofaspecificclienteleintermsofyield,diversificationofrisksandinvestmenthorizondesired.

Inthisregard,thewidechoiceoflegalformsofinvestmentfundsisasignificantadvantageandakeydifferentiatorforLuxembourg.Theyincludethefollowing:

• Commonfunds(fondscommunsdeplacementor“FCP”),

• Open-endedinvestmentcompanies(sociétésd’investissementàcapitalvariableor“SICAV”),

• Closed-endedinvestmentcompanies(sociétésd’investissementàcapitalfixeor“SICAF”),

• Venturecapitalinvestmentvehicles(sociétésd’investissementencapitalàrisqueor“SICAR”).

Inaddition,Luxembourghastakenaninternationalapproachtooccupationalbenefitschemesinitsnationallaw,followingtheadoptionofCouncilDirective2003/41/ECof3June2003ontheactivitiesandsupervisionofinstitutionsforoccupationalretirementprovision.

First,theActof13July2005relatingtoinstitutionsforoccupationalretirementprovisionintheformofapensionsavingscompanywithvariablecapital (sociétéd’épargne-pensionàcapitalvariableor“Sepcav”)andapensionsavingsassociation (associationd’épargne-pensionor“Assep”)amendedArticle167,paragraph1oftheActof4December1967relatingtoincometax,asamended,createdtwolegalstructures,theAssepandtheSepcav.Thesetwopension-fundingvehicleswerebasedmainlyonthestructureofmutualfundsbutweredesignedespecially to coveremployerpensioncommitmentsandare supervisedby theCommissiondeSurveillanceduSecteurFinancieror“CSSF”(Luxembourgsupervisoryauthorityforthefinancialsector).

Second,bymeansoftheinclusionofageneralprovisionintheActof6December1991ontheinsurancesector,asamended,Luxembourghas formanyyears favoured thenationaland internationalemergenceofan insurance industryand thesettingupofpension fundssupervisedbytheCommissariatauxAssurancesor“CAA”(supervisoryauthorityfortheinsurancesector).Thesefundsareunusualinthattheyaredefinedcontributionanddefinedbenefitfunds.Thesecurityoftheassetsheldandtheprotectionofbeneficiariesisensuredunderprovisionssimilartothosethatgoverndirectinsurance.

Asregardsguarantees,theActof22March2004relatingtosecuritisationandamendinginteraliatheHarmonizedActof5April1993,asamended,relatingtothefinancialsector(the“Actof5April1993”)andtheActof27July2003ontrustsandfiduciaryagreementscreatedanewlegalframeworkinLuxembourg,aimedatofferingconsiderableflexibility,inparticularasregardstypesofsecuritisationvehicles,regulationofthevehiclechosenandclassesofassetsthatmaybesecuritised.Italsohastheadvantageofprovidinginvestorswithahighlevelofprotectionandlegalcertaintyinataxneutralenvironment.

UnderLuxembourglawonmortgagebonds(lettresdegage)of21November1997,subsequentlycompletedbytheActof22June2000amendingcertainspecialprovisionsformortgagebanksintheActof5April1993,amoderninvestmentproductisofferedwhichgivesbondholdersahigh-qualitypositionlinkedtotheAAAclassificationofthesecuritiesproposedandwhichguaranteesinvestorsanunri-valledlevelofprotection.Thislevelofprotectionisavailableduetotheapplicationofthespecialityprincipleappliedtotheissuingbankandthecollateralprincipleinfavourofbondholders.

TheActof5August2005onfinancialcollateralarrangements,publishedon16August2005,washighlyinnovativeinthatitcoveredalloftheusualtypesoffinancialguaranteesandappliestoallfinancialcollateralarrangementsinthisareaandthosewhichwereenteredintobeforeitcameintoforce.TheactmadevariouslegislativeamendmentsandrepealedvariouspartsoftheActof5April1993.

Themainaimofthisactwastomakenewlyregulatedfinancialguaranteesaseffectiveandasefficientaspossible.

Inordertodothis,itconsiderablybroadenedthedefinitionofthevarioustypesofguaranteesanditemstowhichtheycouldrelate,simpli-fiedthesystemofprovidingproofoftheentryintoandexistenceofsuchguarantees,provided,forthepartythattakestheguarantee,pos-sibilitiesofimplementationthatareeasierandfasterthanpreviously,andguaranteesystemsthatareeffectiveinthecaseofbankruptcy,insolvency,déconfiture(aparticulartypeofinsolvency),orbankruptcyproceedingsagainstthedebtorortheguarantor.

Lastly,anewregulatedcategoryoffinancialprofessionals,fiduciaryrepresentatives(représentants–fiduciaires),hasbeencreated,broad-eningthecategoryoffinancialsectorprofessionalsprovidedforintheActof5April1993.Theyplayasimilarroletotrustees.Havingthestatusoffinancialsectorprofessionals,fiduciaryrepresentativesneedtoapplyforauthorisationfromtheCSSFinordertoperformtheirbusinessactivity.Thesefiduciaryrepresentativesmayalsobeentrusted,withinthescopeofaguaranteearrangement,withtheprotectionoftherightsoftheholdersoftheguaranteesissuedbyaguaranteestructure.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.1. Under which conditions may financial activity be performed?

10.1.1. What conditions relating to authorisation apply to banks and credit institutions?

Entryintotheprofessionalsectorofbanksandnon-bankingfinancialinstitutionsisgovernedbytheActof5April1993.

ThelawlaysdowntheconditionsLuxembourgbanksandnon-bankingfinancialinstitutionshavetomeettoobtainauthorisationintheformofabusinesspermit.ThispermitisissuedbytheFinanceMinistry,theministrywithresponsibilityforthefinancialsectorandfortheCSSF1,aftertheCSSFhasexaminedtheapplication.

AuthorisationmayonlybegrantedtoaLuxembourglegalpersonifitisaninstitutionunderpubliclaw(établissementdedroitpublic),apubliccompany(sociétéanonyme),apartnershiplimitedbyshares(sociétéencommanditeparactions)oracooperativecompany(sociétécooperative).

Thefollowinglegalconditionsmustbemet:

a. ThecentraladministrationoftheinstitutionmustbelocatedinLuxembourg.

b. Asregardsshareownership,authorisationissubjecttoprovidingtheCSSFwiththenamesofthedirectorindirectshareholdersorpartners,naturalorlegalpersons,whoorwhichhaveaqualifiedholdingintheinstitutionoraholdingthatallowsthemtoexertsignificantinfluenceontheconductofthecompany’sbusinessandtheamountoftheseholdings.Thestructureofdirectandindirectshareownershipmustbetransparent.

c. Membersoftheadministrative,managementandsupervisorybodiesaswellastheshareholdersorpartnersreferredtoinparagraphbmustgiveevidenceoftheirprofessionalgoodstanding.Goodstandingisassessedonthebasisoftheindividual’spolicerecordandalltheinformationthatmakesitpossibletodeterminethattheindividualsinquestionhaveagoodreputationandprovidealltheguaranteesofirreproachableconduct.

d. Atleasttwoindividualsmustberesponsibleformanagementandtheymustbeauthorisedtodeterminetheorientationoftheactivityeffectively.Theseindividualsmusthavesufficientprofessionalexperienceonthebasisofhavingalreadyperformedsimilardutiesatahighlevelofresponsibilityandautonomy.

e. AuthorisationissubjecttoprovidingevidenceofsharecapitalofEUR8.7million,ofwhichEUR6.2millionmustbepaidup.

f. Inaddition,authorisationissubjecttoprovidingevidenceofsufficientcreditinrelationtotheactivityprogrammeandoftheparticipa-tionofthecreditinstitutioninasystemforcompensatinginvestorscreatedinLuxembourgandrecognisedbytheCSSF.

g. Theinstitutionmustentrustthemonitoringofitsannualaccountingdocumentstooneorseveralindependentauditors(réviseursd’entreprises),whomusthavesufficientprofessionalexperience.Theseoutsideauditorsareappointedbythebodyresponsiblefortheadministrationofthecreditinstitution.

h. AuthorisationofLuxembourgbanksorcreditinstitutionsisalsosubjecttothecreditinstitution’sparticipationinadepositguaranteesystemcreatedandrecognisedinLuxembourgbytheCSSF2.

AnycreditinstitutionthathasbeenauthorisedandissupervisedbytherelevantauthoritiesofanotherEUMemberStatemayconductbusinessinLuxembourg,bothbymeansofsettingupabranchorbymeansofprovidingservices,providedthatthisbusinessiscoveredbyitsauthorisation.TheconductofthisbusinessisnotsubjecttoauthorisationbytheLuxembourgauthorities.

Non-CommunitycreditinstitutionswishingtosetupabranchinLuxembourgaresubjecttothesameauthorisationrulesasLuxembourgcreditinstitutions.

10.1.2. What are the conditions of authorisation that apply to other financial sector professionals?

UndertheActof5April1993,theconductofbusinessbyfinancialsectorprofessionalsissubjecttoabusinesspermitbeinggrantedbytheMinistrywithresponsibilityfortheCSSF,aftertheCSSFhasexaminedtheapplication.

10.1.2.1. What professions are involved?

Investment firms

• Commissionagents3

Commissionagentsareprofessionalswhoseactivityconsistsinreceivingandtransmittingordersonbehalfofinvestorsforoneorseveralinstrumentssuchastransferablesecurities,sharesorunitsinundertakingsforcollectiveinvestment,moneymarketinstruments,financialfuturescontracts,etc,andinexecutingtheseordersonbehalfofthirdparties.

1 CSSF:CommissiondeSurveillanceduSecteurFinancier:110Routed’Arlon,L-1150Luxembourg,Tel.(352)26251-1,Fax(352)26251-601•http://www.cssf.lu

2 Article10-1oftheActof5April1993.3 Article24(A)oftheActof5April1993.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

AuthorisationtoactasacommissionbrokerissubjecttoprovidingevidenceoffinancialassetswithavalueofatleastEUR620,000,andtheparticipationoftheinvestmentfirminasystemforcompensatinginvestorscreatedinLuxembourgandrecognisedbytheCSSF.

Commissionagentsareautomaticallyauthorisedtoconductbusinessasadvisersinfinancialtransactionsandasbrokers.

• Assetmanagers4

Assetmanagersareprofessionalswhomanage investmentportfolios,onadiscretionaryand individualisedbasis, in the contextofamandategivenbyinvestorswheretheseportfolioscontainoneorseveralinstrumentssuchastransferablesecurities,sharesorunitsinundertakingsforcollectiveinvestment,moneymarketinstruments,financialfuturescontracts,etc.

AuthorisationtoactasawealthmanagerissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR620,000,andtheparticipationoftheinvestmentfirminasystemforcompensatinginvestorscreatedinLuxembourgandrecognisedbytheCSSF.

Assetmanagersarealsoautomaticallyauthorisedtoconductbusinessasadvisersinfinancialtransactions,brokersandascommissionbrokers.

• Professionalsactingontheirownaccount5

Professionalsactingontheirownaccountareprofessionalswhoseactivityconsistsinown-accounttradingofallinstrumentssuchastrans-ferablesecurities,sharesorunitsinundertakingsforcollectiveinvestment,moneymarketinstruments,financialfuturescontracts,etc.

Authorisationforown-accounttradingissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR1.5million,andtheparticipationoftheinvestmentfirminasystemforcompensatinginvestorscreatedinLuxembourgandrecognisedbytheCSSF.

Professionalsactingon theirownaccountareautomaticallyauthorisedalso toconductbusinessasadvisers infinancial transactions,brokers,commissionbrokersandaswealthmanagers.

• Professionaldepositoriesofsecuritiesorotherfinancialinstruments6

Professionaldepositoriesof securitiesorotherfinancial instrumentsareprofessionalswhoseactivity consists in receivingdepositsofsecuritiesorotherfinancialinstruments,butonlyfromfinancialsectorprofessionals,andinbeingresponsiblefortheircustodyandadmin-istrationandfacilitatingthecirculationofsaidsecuritiesorinstruments.

• Distributorsofsharesorunitsinundertakingsforcollectiveinvestment7

DistributorsofsharesorunitsinundertakingsforcollectiveinvestmentareprofessionalswhoseactivityconsistsindistributingsharesorunitsinundertakingsforcollectiveinvestmentacceptedformarketinginLuxembourg.

Authorisationfortheactivityofdistributorofsharesorunitsinundertakingsforcollectiveinvestmentmayonlybegrantedtolegalentities.ItissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR250,000andofatleastEUR1.5millionifthedistributoracceptsormakespayments,andtotheparticipationoftheinvestmentfirminasystemforcompensatinginvestorscreatedinLuxembourgandrecognisedbytheCSSF.

• Underwriters(preneursfermes)8

Underwritersareprofessionalswhoseactivityconsistsinunderwritingtheusesofallorsomeinstrumentssuchastransferablesecurities,sharesorunitsinundertakingsforcollectiveinvestment,moneymarketinstruments,financialfuturescontracts,etc.

• Registrarandtransferagents9

RegistrarandtransferagentsareprofessionalswhoseactivityconsistsinreceivingandexecutingordersrelatingtooneorseveraloftheinstrumentsreferredtoinSectionBofAppendixIIoftheActof5April1993.

Theexecutionoftheordersreferredtointhepreviousparagraphincludeskeepingaregisterfortheissuer.

AuthorisationtoactasaregistrarandtransferagentmayonlybegrantedtolegalentitiesandissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR1.5million.

4 Article24(B)oftheActof5April1993.5 Article24(C)oftheActof5April1993.6 Article24(F)oftheActof5April1993.7 Article24(D)oftheActof5April1993.8 Article24(E)oftheActof5April1993.9 Article24(G)oftheActof5April1993.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.1.2.2. Certain financial sector professionals other than investment firms

• Brokers10

Brokersareprofessionalswhoseactivity consists inputtingparties in touchwitheachother inorder to carryouta specificfinancialtransaction.

AuthorisationtoactasabrokerissubjecttoprovidingevidenceoffinancialassetswithavalueofatleastEUR370,000.

Brokersareautomaticallyauthorisedtoactlegallyasadvisersinfinancialtransactions.

• Marketmakers

Marketmakersareprofessionalswhoseactivityconsists inpublishingsimultaneouslyabuyingpriceandasellingpriceatwhichtheyundertaketoagreetoatransactionforthevolumesposted.

• Individualscarryingoutforeignexchange–cashtransactions11

Authorisationtocarryoutforeignexchange–cashtransactionsisnotsubjecttoprovidingevidenceoffinancialassets.

• Operatorsofpaymentsystemsorsettlementsystemsforsecuritiestransactions12

Operatorsofpaymentorsettlementsystems forsecurities transactions inLuxembourgarenaturalor legalpersonswhoorwhichareresponsible,aloneorwithothers,fortheproperoperationofthesystemandsecuritiestransactions.

Authorisationmayonlybegrantedtosystemoperatorsthatarelegalentitiesintheformofaninstitutionunderpubliclaw(établisse-mentdedroitpublic),acommercialcompany(sociétécommerciale),anon-commercialcompany(sociétécivile)oraneconomicinterestgrouping.

• Collectionofreceivables13

Collectionofthirdpartyreceivables,whereitisnotreservedbylawforjudicialenforcementofficers(huissiersdejustice),isonlyauthorisedaftertheJusticeMinistryhasgivenitsapproval.

• Professionalsgrantingloans14

Professionalswhograntloansareprofessionalswhoseprofessionalactivityconsistsingrantingloanstothepublicontheirownaccount.

Thefollowingtransactionsinparticularareincludedinthiscategory:

- financialleasing(unlessthisactivityisperformedonanancillarybasis),

- factoring.

Naturalorlegalpersonsthatgrantcredittoconsumersarenotincludedinthiscategory.

AuthorisationtoactasaprofessionalgrantingloansmayonlybegrantedtolegalentitiesandissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR1,500.

• Professionalslendingsecurities15

Professionalslendingsecuritiesareprofessionalswhoseactivityconsistsinlendingorborrowingsecuritiesontheirownaccount.

• Professionalsprovidingfundtransferservices16

Professionalsprovidingfundtransferservicesareprofessionalswhoseactivityconsistsin:

- receivingfundsfromaninvestorandtransferringthesefundsonsaidinvestor’sbehalftoathirdpartycorrespondentwithanentryintheaccounts,withaviewtomakingthesefundsavailabletoabeneficiarynamedbytheinvestoror

- keepingthefundsreferredtointhepreviousindentavailabletoanddeliveringthemtothebeneficiarynamedbytheinvestor.

10 Article26oftheActof5April1993.11 Article28-2oftheActof5April1993.12 Article28-1oftheActof5April1993.13 Article28-3oftheActof5April1993.14 Article28-4oftheActof5April1993.15 Article28-5oftheActof5April1993.16 Article28-6oftheActof5April1993.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

• Administratorsofcollectivesavingsfunds17

Administratorsofcollectivesavingsfundsarenaturalorlegalpersonswhoseactivityconsistsinadministeringoneorseveralcollectivesavingsfunds.

AuthorisationtoactasanadministratorofcollectivesavingsfundsissubjecttoprovidingevidenceoffinancialassetswithavalueofatleastEUR125,000.

• Managersofnon-harmonizedundertakingsforcollectiveinvestment18

Managersofnon-harmonizedundertakingsforcollectiveinvestmentareprofessionalswhoseactivityconsistsinmanagingundertakingsforcollectiveinvestmentotherthanundertakingsforcollectiveinvestmentestablishedinLuxembourgandotherthanUCITSthathavebeenauthorisedinaccordancewithCouncilDirective85/611/EECasamendedbyDirective2001/107/EC.

Theactivityofmanagersofnon-harmonizedundertakingsforcollectiveinvestmentmayincludecentraladministrationservicesperformedonbehalfofentitiesmanagedbytheprofessional.

Authorisationtoactasamanagerofnon-harmonizedundertakingsforcollectiveinvestmentmayonlybegrantedtolegalentitiesandissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR1.5million.

Financial sector professionals who perform an activity that is related or complementary to an activity in the financial sector

• Domiciliaryagentsforcompanies19

Thefollowingaredomiciliaryagentsforcompaniesandarethereforeconsideredasperforminganactivityinthefinancialsectoronaprofessionalbasis:

- naturalandlegalpersonswhoorwhichallowoneorseveralcompaniesinwhichthedomiciliaryagentisnotitselfapartnerexercisingasignificantinfluenceoverbusinessconducttoestablishanofficeintheirpremisesfromwhichanactivitythatfallswithinthescopeofitscompanyobjectmaybeperformedandwhichprovideanyserviceswhatsoeverrelatedtothisactivity,

- companieswhichallowoneorseveralcompaniesinthegrouptowhichtheybelongtoestablishanofficeintheirpremisesfromwhichanactivitythatfallswithinthescopeofitscompanyobjectmaybeperformedandwhichprovideanyserviceswhatsoeverrelatedtothisactivity.

Authorisationtoactasadomiciliaryagentforcompaniesissubjecttoprovidingproofofhavingcompletedauniversitycourseinlaw,economicsorcompanymanagementandfinancialassetswithavalueofatleastEUR370,000.

• Clientcommunicationagents20

ClientcommunicationagentsareprofessionalswhoseactivityconsistsinprovidingoneorseveralofthefollowingservicesonbehalfofLuxembourgorforeigncreditinstitutions,financialsectorprofessionals,undertakingsforcollectiveinvestmentorpensionfunds:

- preparingconfidentialdocuments,onamaterialmediumorelectronically,forthepersonaluseofclientsofcreditinstitutionsorfi-nancialsectorprofessionals,investorsinundertakingsforcollectiveinvestmentandcontributors,membersorbeneficiariesofpensionfunds,

- storingthedocumentsreferredtointhepreviousindent,

- providingthenaturalorlegalpersonsreferredtointhefirstindentwithdocumentsorinformationrelatingtotheirassetsandtotheservicesofferedbytheprofessionalinquestion,

- consolidating,onthebasisofaspecificmandate,positionsthatthenaturalorlegalpersonsreferredtointhefirstindentholdwithvariousfinancialprofessionals.

AuthorisationtoactasaclientcommunicationagentmayonlybegrantedtolegalentitiesandissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR370,000.

• Administrativeagentsofthefinancialsector21

Administrativeagentsofthefinancialsectorareprofessionalswhoseactivityconsistsinperformingallnecessaryadministrativeservicesinherenttotheprincipal’sprofessionalactivityonbehalfofLuxembourgorforeign.creditinstitutions,financialsectorprofessionals,under-takingsforcollectiveinvestmentorpensionfunds,inthecontextofasub-contractingagreement.

AuthorisationtoactasanadministrativeagentofthefinancialsectormayonlybegrantedtolegalentitiesandissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR1.5million.

Administrativeagentsofthefinancialsectorarealsoautomaticallyauthorisedtoactasclientcommunicationagents.

17 Article28-7oftheActof5April1993.18 Article28-8oftheActof5April1993.19 Article29oftheActof5April1993.20 Article29-1oftheActof5April1993.21 Article29-2oftheActof5April1993.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

• Operatorsofthefinancialsector’sITsystemsandcommunicationsnetworks22

Operatorsofthefinancialsector’sITsystemsandcommunicationsnetworksareprofessionalswhoorwhichareresponsiblefortheopera-tionoftheITsystemsandcommunicationsnetworksthatformpartoftheITsetupandcommunicationssystemsofLuxembourgorforeigncreditinstitutions,financialsectorprofessionals,undertakingsforcollectiveinvestmentorpensionfunds.

Theactivityofoperatorsofthefinancialsector’sITsystemsandcommunicationsnetworksincludestheautomaticprocessingortransferofdatastoredinITsystems.

Theymust act solely onbehalf of Luxembourgor foreign credit institutions, financial sector professionals, undertakings for collectiveinvestmentorpensionfunds.

Authorisationtoactasoperatorsofthefinancialsector’sITsystemsandcommunicationsnetworksmayonlybegrantedtolegalentitiesandissubjecttoprovidingevidenceofsharecapitalwithavalueofatleastEUR1.5million.

• Professionalsprovidingservicesinvolvedinincorporatingandmanagingcompanies23

Professionalsprovidingservicesinvolvedinincorporatingandmanagingcompaniesarenaturalorlegalpersonswhoseactivityconsistsinprovidingservicesinvolvedinincorporatingormanagingoneorseveralcompanies.

10.1.2.3. What are the conditions of authorisation applicable to foreign credit institutions or financial sector profession-als regarding the creation of branches and free provision of services in Luxembourg?

• Communitycreditinstitutionsandinvestmentfirms

AnycreditinstitutionandanyinvestmentfirmthathasbeenauthorisedandissupervisedbytherelevantauthoritiesinanotherECMemberStatemayconductbusinessinLuxembourg,bothbymeansofsettingupabranchandbyprovidingservices,providedthatitsactivitiesarecoveredbyitsauthorisation.TheauthorisationoftheLuxembourgauthoritiesisnotrequiredtoperformtheseactivities.

• Communityfinancialinstitutions

TheseprovisionsalsoapplytofinancialinstitutionsfromanotherECMemberStateiftheymeetallofthefollowingconditions:

- thefinancialinstitutionisthesubsidiaryofacreditinstitution,orthejointsubsidiaryofseveralcreditinstitutions,

- thefinancialinstitutionhaslegalstatusallowingittoperformtheactivitiesdefinedinthepreviousparagraph,

- theparentcompanyorcompanieshas/havebeenauthorisedtoactascreditinstitutionsintheMemberStatetowhichthesubsidiaryisconnected,

- theactivitiesinquestionareeffectivelyperformedontheterritoryofthisMemberState,

- theparentcompanyorcompanieshold90%ormoreofthevotingrightsattachedtoholdingsharesinthesubsidiary,

- theparentcompanyorcompaniesmustprovideevidenceoftheprudentmanagementofthesubsidiary,tothesatisfactionoftheregulatoryauthorities,andhavewarranted,withtheagreementoftheregulatoryauthoritiesoftheMemberStateoforigin,thatitortheyisorarejointlyandseverallyliableforthecommitmentsenteredintobythesubsidiary,

- thesubsidiaryiseffectivelyincluded,inparticularfortheactivitiesinquestion,inthesupervisiononaconsolidatedbasistowhichitsparentcompanyoreachofitsparentcompaniesissubject,inparticularasregardsthecalculationofthesolvencyratio,majorriskcontrolandthelimitationonholdings.

• Non-Communitycreditinstitutionsandinvestmentfirms,Communityornon-Communityfinancialsectorprofessionalsotherthaninvestmentfirms

Non-Communitycredit institutionsandinvestmentfirms,aswellasCommunityornon-CommunityfinancialsectorprofessionalsotherthaninvestmentfirmswhichwishtosetupabranchinLuxembourg,aresubjecttothesamerulesofauthorisationasLuxembourgcreditinstitutionsandotherprofessionals.

Fulfilmentoftheconditionsrequiredforauthorisationisassessedbythemanagementoftheforeigninstitution.

Authorisationforanactivityinvolvingtheapplicantmanagingthirdparties’fundsmayonlybegrantedtobranchesofforeigncompaniesifthesecompanieshavetheirownequity(fondspropres)thatisseparatefromtheassetsoftheirpartnersorshareholders.

Inaddition,branchesmustalwayshaveanamountofcapitalorfinancialassetsavailabletothem,thatistheequivalentoftheamountsrequiredforaLuxembourgnaturalorlegalpersonperformingthesameactivity.

Therequirementrelatingtogoodstandingandprofessionalexperiencealsoappliestothebranch.Theconditionrelatingtothecentraladministrationofthecompanyhavingtobe located inLuxembourg is replacedbyarequirementtoprovideevidenceofanadequateadministrativeinfrastructureinLuxembourg.

22 Article29-3oftheActof5April1993.23 Article29-4oftheActof5April1993.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.1.2.4. What are the conditions of authorisation applicable to Luxembourg credit institutions, investment firms and certain financial institutions relating to the creation of branches and the provision of services in another EC Member State?

• ThecreationofbranchesintheEC

AcreditinstitutionoraninvestmentfirmauthorisedinLuxembourgoraLuxembourgfinancialinstitutionwhichwishestocreateabranchontheterritoryofanotherECMemberStatemustfirstinformtheCSSFofitsintention.Itshouldprovidethefollowinginformationtogetherwithsaidnotification:

a) theMemberStateonwhoseterritoryitwishestocreateabranch,

b) aprogrammeofactivitiesinwhichwillbestatedinparticularthetypeoftransactionsbeingcontemplatedandthestructureofthebranch’sorganisation,

c) theaddressfromwhichdocumentsmayberequestedfromitinthehostMemberState,

d) thenameofthebranch’smanagersresponsibleforthebranch.

• TheprovisionofserviceswithintheEC

AcreditinstitutionoraninvestmentfirmwhichisauthorisedinLuxembourgoraLuxembourgfinancialinstitutionwhichwishestoperformactivitiesontheterritoryofanotherECMemberStateintheformoftheprovisionofservicesforthefirsttimemustinformtheCSSFoftheactivitiesitiscontemplatingperforminginsuchState.

10.1.3. What conditions relating to authorisation apply to the insurance sector?

AuthorisationtoprovideinsuranceservicesisissuedbytheFinanceMinistryafterapriorreviewoftheapplicationbytheCommissariatauxAssurancesor“CAA”(Luxembourgsupervisoryauthorityfortheinsurancesector).

TheLuxembourgRegulationof31December2001issuedonthebasisoftheActof6December1991ontheinsurancesector,asamended(the“Actof6December1991”)laiddowntheconditionsunderwhichinsurancecompaniesmaybesetup,inparticularasregardssol-vencymargins,guaranteefundsandunderwritingreserves.

TheCAA,whichwasgrantedsupervisorypowersunderthislaw,isalsoinvolvedinthepreparationofregulationsandisresponsibleforcoordinatinganddevelopingtheinsuranceandreinsurancesectorinLuxembourg.

ECrulesonthefreeprovisionofservicesandtherighttosetupabusinesshavebeentransposedintoLuxembourglaw(principleofhomecountrycontrol).

10.1.3.1. What legal provisions govern the activity of intermediaries in insurance and reinsurance?

ProvidingservicesasanintermediaryininsuranceandreinsuranceisgovernedbytheActof6December1991.

AuthorisationtoprovideintermediaryservicesininsuranceisissuedbytheMinistryresponsibleforsupervisingprivateinsurancecompa-niesafterapriorreviewoftheapplicationbytheCAA.

TheLuxembourgRegulationof31December2001issuedonthebasisoftheActof6December1991laiddowntheconditionsunderwhichinsurancecompaniesmaybesetup,inparticularasregardssolvencymargins,guaranteefundsandunderwritingreserves.

TheActof13July2005amendingtheActof6December1991wasaimedattransposingtheprovisionsofEuropeanParliamentandCouncilDirective2002/92/ECof9December2002oninsurancemediation(the“DirectiveonInsuranceMediation”)intonationallawasregardsinsuranceintermediaries.

ThroughthetranspositionoftheDirectiveonInsuranceMediation,theActof6December1991alsoextendedtheresponsibilitiesoftheCAA.TheCAAwashenceforthresponsible,alongsideitsgeneraldutiesofsupervisingtheinsuranceandreinsurancesectorinLuxembourg,for reviewing complaints and claimsmade against insurance intermediaries and insurance companies.These additional powersweremainlyaimedatincreasingconsumerprotection.

Definition of an insurance intermediary

• Whoisaninsuranceintermediary?

ThedefinitionofinsurancemediationgivenintheDirectiveonInsuranceMediationandintheActof6December1991isverybroad:“theactivitiesofintroducing,proposingorcarryingoutotherworkpreparatorytotheconclusionofcontractsofinsurance,orofconcludingsuchcontracts,orofassistingintheadministrationandperformanceofsuchcontracts,inparticularintheeventofaclaim”.

Thedefinitionofaninsuranceintermediarythereforeincludes:“anynaturalorlegalpersonwho,forremuneration,takesuporpursuesinsurancemediation”.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

• Whatshouldbeunderstoodbyremuneration?

Animportantelementisthusremuneration,whichmaybe“pecuniaryortakesomeotherformofagreedeconomicbenefittiedtoper-formance”.

Theterm“remuneration”istobeunderstoodincontrastto“apersonactingonavoluntaryornotforprofitbasis”.Thisdefinitionthuscoversallformsofremunerationsuchassalaries,commissionsorfees.

Asaresult,anypersonremuneratedfortheperformanceofinsurancemediationisconsideredasaninsuranceintermediary,whetherornotthisistheperson’smainactivity.Thus,theActof6December1991alsoextendsitsscopeofapplicationtoindividualswhomarketinsuranceproductsduringtheirworkinghoursintheframeworkoftheirusualprofession,butwhoareonlyremuneratedfortheirmainprofessionalactivity.

Inparticular,itisspecifiedinthecommentaryonarticlesoftheActof6December1991thatemployeesofbankbrancheswhosellinsuranceproductsduringtheirworkinghoursandwhodonotreceivecommissionarenonethelesstobeconsideredasinsuranceintermediaries.

• Whoisnotaninsuranceintermediary?

- Insurancecompanies,

- insurancecompanyemployees,onlywhentheyareactingonbehalfoftheiremployerinthecontextofdirectsales(branch),

- naturalorlegalpersonswhoorwhichprovide,inthecontextofanothermainprofessionalactivity,informationonanoccasionalbasis,providedthatthisactivityisnotaimedatassistingtheinsurancebuyerinenteringintoaninsurancecontract,

- naturalorlegalpersonswhoorwhichprovideinsurancemediationservices,ifcertain(cumulative)conditionsaremet.Bywayofanexample,someoftheseconditionsarethefollowing:

i. theproductsmaynotbelifeassuranceproducts,

ii. theinsurancecontractmaynotincludeanycoverofpublicliability,

iii. theannualpremiummaynotexceedEUR500,

iv. theinsuranceproductmaynotbesoldbyapersonwhosemainactivityisinsurancemediation.

10.1.3.2. What are the various types of insurance intermediaries in Luxembourg?

AccordingtotheDirectiveonInsuranceMediation,thedefinitionofthevarioustypesofinsuranceintermediariesistheresponsibilityoftheMemberStates.InLuxembourg,undertheActof13July2005,agentsandbrokershadalreadybeendefined.

ThisActcreatedanadditionalcategory,asub-insurancebroker.

• Insuranceandreinsuranceintermediaries

Inordertobeauthorisedtoactasinsuranceagents,insuranceandreinsurancebrokersandsub-insurancebrokers,individualsmustprovideevidenceoftheirprofessionalknowledge,characterandprofessionalgoodstanding.Inaddition,theymustberesidentorhavechosenanaddressforserviceinLuxembourgandmainlyperformtheiractivitiesinorfromLuxembourg.

Authorisationmayonlybeissuedtolegalentitiesasaninsuranceagencyorinsuranceandreinsurancebrokeragecompanyonconditionthattheyareeffectivelyrunbyanaturalpersonwhohimorherselfhasbeenauthorisedtoperformtheactivityperformedbytheselegalentities.

Luxembourgintermediaries,excludingtheiradministrativepersonnel,mustbeauthorisedbytheMinistryandregisteredintheregisterheldbytheCAAwhichmaybeconsultedbythepubliconInternet.TheconfigurationandcontentsofthisregisterarelaiddownbyLuxembourgregulation24.

• Singleauthorisationforlifeassuranceandnon-lifeinsurance

TheActof6December1991makesnodistinctionbetweentheauthorisationthatmustbeheldbyinsurancebrokersorbrokershandlinglifeassuranceandnon-lifeinsurance.

Authorisedinsuranceintermediariesmusthavethenecessaryskillsinbothareas,regardlessoftheoffertheymakeonthemarket.

Insurance agents

Insuranceagentsarenaturalorlegalpersonsactingasinsuranceintermediariesasagentsofaninsurancecompanyonaprofessionalornon-professionalbasis.

24 Articles105.1and107oftheActof13July2005.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

AgentsmayonlybeauthorisedattherequestofaninsurancecompanythathasbeenauthorisedtoprovideinsuranceservicesinLux-embourg.Aninsuranceagentmaynotworkforseveral insurancecompaniesinthesamesector,unlessthesecompaniesmakeajointapplicationinthisrespect25.

Actingasaninsurancebrokerandasasub-insurancebrokerisincompatiblewithactingasaninsuranceagent26.

Insurance brokers

Insurancebrokersarenaturalandlegalpersonswhoactastheirclients’representatives.Theymayonlybeauthorisedonthebasisofawrittenapplicationandonconditionthattheyarenotlinkedtooneorseveralinsurancecompanies.

Sub-insurance brokers

Sub-brokersactundertheresponsibilityoftheinsurancebrokeronbehalfofwhomorwhichtheywork.Sub-insurancebrokersmayonlybeauthorisedonthebasisofawrittenapplicationbyanauthorisedinsurancebrokeragecompanyorinsurancebroker27.

10.1.3.3. What legal framework applies to the provision of cross-border insurance mediation services?

OneofthenewconceptsintroducedbytheDirectiveonInsuranceMediationwastheconceptofEuropean“passportingrights”inthecontextofthefreeprovisionofservicesandthefreedomofestablishmentforinsuranceintermediaries.

10.1.3.3.1. Which classes of intermediaries are authorised?

UndertheActof6December1991,onlythefollowingclassesofintermediariesweregrantedEuropeanpassportingrights:agentsandbrokers.

Sub-insurancebrokersmaynotoffertheirservicesinthecontextofthefreeprovisionofservicesorfreedomofestablishment.Theyactunderthebroker’ssoleresponsibility.ThebrokerhowevermayuseEuropeanpassportingrights.

10.1.3.3.2. What are the conditions for cross-border insurance mediation?

TheActof6December1991laiddowntheconditionswhichmustbemetbyLuxembourginsuranceandreinsurancecompaniestobeabletoprovideinsuranceservicesorsetupabranch.

Notification by the intermediary28

AgentsorinsurancebrokerswishingtooffertheirservicesforthefirsttimewithintheframeworkofthefreeprovisionofservicesinoneorseveralMemberStatesmustnotifytheCAAoftheirintention.

Forinsuranceagents,thenotificationshouldbesubmittedtotheCAAbytheinsurancecompaniesonbehalfofwhichtheyareauthor-isedtoactasinsuranceagentsorbrokers.Agentsmayonlyprovideserviceswithintheframeworkofthefreeprovisionofservicesiftheinsurancecompaniesthemselvesareauthorisedtoprovideserviceswithintheframeworkofthefreeprovisionofservicesorfreedomofestablishment.

Notification by the CAA

Withinonemonth,theCAAwillinformthehostMemberState’sregulatoryauthority,ifthisauthoritywishes,oftheintermediary’sintentionandwillinformtheintermediarythatsuchnoticehasbeengiven.

Start of cross-border insurance activity

IfthehostMemberState’sregulatoryauthorityrequiresnotification,intermediariesmaystartactivityonemonthafterhavingbeenin-formedthattheCAAhasnotifiedthehostMemberState’sregulatoryauthorityoftheintermediary’s’intentiontoprovideserviceswithintheframeworkofthefreeprovisionofservices.

Ifnotificationisnotrequired,intermediariesmaystartcross-borderactivityasfromthedateonwhichtheynotifytheCAAoftheirinten-tion.

10.1.3.3.3. How are branches set up within the EU?29

ThenotificationprocedurethatappliestoaninsuranceorreinsurancebrokeroraninsuranceagentsettingupabranchinanotherMemberStateisthesameaswithintheframeworkofthefreeprovisionofservices.

25 Article106.1oftheActof13July2005.26 Article105.4oftheActof13July2005.27 Article106-1paragraph1oftheActof13July2005.28 Article109-2oftheActof13July2005.29 Article109oftheActof13July2005.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

InthecaseoftheopeningofabranchbyaLuxembourgagentontheterritoryofaMemberState,theinsurancecompanyonbehalfofwhichtheagent isauthorisedtoactasaninsuranceagentmustalsobeauthorisedtoworkwithintheframeworkofthefreedomofestablishmentinthisMemberState.

10.1.3.3.4. The free provision of services and the freedom of establishment of an EU intermediary in Luxembourg30

AnintermediaryfromanotherMemberStatemayprovideserviceswithintheframeworkofthefreedomofestablishmentorsetupabranchinLuxembourgsubjecttonotificationoftheCAAbytheregulatoryauthorityofitsMemberStateoforigin.Thebranchmaystartitsactivi-tiesonemonthaftertheCAAhasreceivedsaidnotification.

UndertheActof13July2005,inthecontextofcross-borderactivitieswithintheEuropeanEconomicArea,insurancecompanieswhichusetheservicesofanintermediaryarerequiredonlytouseintermediariesregisteredwiththeCAAorwiththeregulatoryauthorityinanotherMemberState31.

ThisintermediarymustbeauthorisedandregisteredintheMemberStateoforiginandmusthavedulynotifiedtheregulatoryauthorityofthehostMemberStateofitsintentiontoworkwithintheframeworkofthefreeprovisionofservicesorwithintheframeworkofthefreedomofestablishment.

10.2. Undertakings for collective investment

LuxembourgundertakingsforcollectiveinvestmentareregulatedbytheActof30March1988relatingtoundertakingsforcollectivein-vestment,asamended,andbytheActof20December2002onundertakingsforcollectiveinvestment(the“Actof20December2002”).ThisacttransposedDirective2001/107/ECandDirective2001/108/ECof21January2002(jointlythe“UCITSIIIDirective”)amendingDirective85/611/EECof20December1985intoLuxembourglaw.

UndertheprovisionsoftheUCITSIIIDirective,theActof30March1988relatingtoundertakingsforcollectiveinvestmentexistsalongsidetheActof20December2002.WhilecertainLuxembourginvestmentfundscreatedbefore13February2002maycontinuetobegovernedbytheActof30March1988until13February2007,newly-createdfundsandmanagementcompanieshavebeengovernedbytheActof20December2002since13February2004.

Advantages of Luxembourg’s financial sector for undertakings for collective investment

Luxembourghasanumberofadvantageswhichmakeitthebestchoiceforthedomiciliationandadministrationofinvestmentfunds.forthecross-borderdistributionoffundunitsorsharesandforotherfinancialproductssuchasSICARs(sociétésd’investissementencapitalàrisque-venturecapitalinvestmentvehicles).

• geographicallocationrightattheheartofEurope,nearthemainmarketstargetedbytheinvestmentfundindustry,

• political,economicandsocialstabilityandasecurelegalandtaxframework,

• freemovementofcapital,

• well-establishedfinancialcentre,

• effectivesupervisionofthefinancialsector,

• highlyqualifiedandmultilingualworkforce,

• arecognisedstockexchange,

• extensiveexperienceintheadministrationofinvestmentfundsandwealthmanagement.

TheLuxembourgauthoritieshavemadeeveryefforttoprovidethemostmodernlegalandregulatoryframeworkthatismostap-propriateforthedevelopmentoftheinvestmentfundsector.Inthisenvironment,itispossibletocreate,relativelyquickly,investmentfundsthatareperfectlysuitedtospecificinvestmentpoliciesortotherequirementsofaspecificmarketorclientele.

Thus,asaEuropeaninvestmentfundcentre,Luxembourgrepresentsamarketsharethatistheequivalentof80%ofcross-borderUCITSdistribution.

30 Articles109-1and109-3oftheActof13July2005.31 Article107oftheActof13July2005.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

A flexible legal environment

• Luxembourgoffersawiderangeoflegalstructureswhichmaybeusedtosetupinvestmentfunds.Thesemayoperateeitherwithasingleportfolioorasinvestmentfundswithnumeroussub-funds,witheachsub-fundapplyingadifferentinvestmentpolicywhilestillbeingpartofthesamelegalperson.

• Eachsub-fundmayhaveseveralclassesofshares(forexample,distributionoraccumulationclasses).

• WiththeActonSICARs,thesupervisoryauthority(CSSF)introducedspecificrulesforventurecapitalfundsandforpropertyfunds(fondsimmobiliers)aswellasaspecialregimeforundertakingsforcollectiveinvestmentwhichinvestinfuturesand/oroptions.

• TheActof20December2002allowstechniquesandinstrumentsontransferablesecuritiestobeusedwiththeaimofefficientlymanagingtheportfolio inorderto increasethesecurityof theshareholdersagainst foreignexchangerisks inthecontextofmanagingtheirassetsandtheirdebts.

• Asregardstax,Luxembourg’sinvestmentfundsarenotliableforcorporationtax.Nodeductionismadefromdividendspaidtoinvestors.However,undertakingsforcollectiveinvestmentareliableforaregistrationtaxof0.05%oftheamountofnetassets,reducedto0.01%forinstitutionalfundsandmoneymarketfunds(certaininstitutionalmoneymarketfundsandfundsoffundsareexemptfromtax).

• Luxembourglawallowsfunds,moneymarketfunds,investmentfundsforinstitutionalinvestors,hedgefunds,etc.tobepooled.

• Theprovisionofinvestmentadvicemaybedelegated,forexampletomanagementcompanieslocatedoutsideLuxembourg.

Whatlimitationsareimposedonundertakingsforcollectiveinvestment?

• MasterfeederfundsmayonlybeauthorisedbytheCSSFifthemasterandthefeederfundsaredomiciledinLuxembourg.

• Institutionalfundsareonlyaccessibletoinstitutionalinvestors.

• HedgefundsdonothavepassportingrightsundertheUCITSIIIDirective.Asaresult,theseundertakingsforcollectiveinvestmentmayfacediscriminatorytaxbarrierseveniftheycanberegisteredinthecountryofdistribution.Themethodsusedtoobtainatax-efficientproductmaydependmainlyonthetypesofinvestorstargeted.

• Doubletaxationtreatiesdonotapplyinthesamewaytocommonfunds(excludedfromthebenefitofthetaxtreaties,exceptforthetreatywithIreland)andtoopen-endedinvestmentcompaniesandclosed-endedinvestmentcompanies.

10.2.1. What is the scope of application of the Act of 20 December 2002?

TheActof20December2002makesadistinctionbetweentwomaincategoriesofinvestmentfunds.

PartIoftheActcoversundertakingsforcollectiveinvestmentintransferablesecurities(UCITS)locatedinLuxembourgandUCITSlocatedinotherMemberStatesthatareregulatedbytheUCITSIIIDirective,thathavebeenauthorisedbythesupervisoryauthorityofthehostcountryontheterritoryofwhichtheUCITSfromanEUMemberStateismarketed(the“Europeanpassport”),marketingtheirsharesorunitsinLuxembourg.

PartIIoftheActcoversallnon-harmonizedundertakingsforcollectiveinvestmentwhicharenotregulatedbytheUCITSIIIDirectiveandwhichdonothavetheEuropeanpassport.Thesearethefollowingclassesinparticular:

1. closed-endUCITS,

2. UCITSwhichcollectfundswithoutpromotingthesaleoftheirsharesorunitswithintheEU,

3. undertakingsforcollectiveinvestmentofwhichthesaleofsharesorunitsisreservedforthepublicinnon-EUcountriesbytheirinstru-mentsofincorporation,

4. categoriesofUCITSlaiddownbytheCSSFforwhichtherulesofPartIareinappropriateinviewoftheirinvestmentandborrowingstrategy.

UndertheActof19July1991,certainarticlesofPartIIoftheActof30March1988,asamended,applytoinstitutionalundertakingsforcollectiveinvestment.However,institutionalundertakingsforcollectiveinvestmentarenotcoveredbyPartIIoftheActof30March1988,asamended.

Securitiesininstitutionalfundsarenotintendedtobesoldtothepublic.Theyareintendedforexampleforfinancialsectorprofessionals,socialsecurityinstitutions,pensionfundsandleadingindustrialandfinancialgroups.

10.2.2. What form of legal structure may investment funds take?

TheUCITScoveredbyPartIoftheActmaybeincorporatedascommonfunds,managedbyamanagementcompany,pursuanttoacon-tractualagreement,orinstatutoryformasinvestmentcompanies.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

Commonfunds

Theymustbemanagedbyamanagementcompany incorporatedasapubliccompany (sociétéanonyme),a limited liabilitycompany(sociétéàresponsabilitélimitée),acooperativecompany(sociétécooperative),acooperativecompanyorganisedasapubliccompanyorasapartnershiplimitedbyshares(sociétéencommanditeparactions).

Investmentcompanies

Thecompaniesreferredtoarethefollowing:

- open-endedinvestmentcompanies(sociétésd’investissementàcapitalvariableor“SICAV”)whichhavetakentheformofapubliccompanyandwhoseArticlesofAssociationprovidethatthesharecapitalshouldalwaysbeequaltothecompany’snetassets,or

- closed-endedinvestmentcompanies(sociétésd’investissemmentàcapitalfixeor“SICAF”).

Open-endedinvestmentcompaniesandclosed-endedinvestmentcompanieseithermanagethemselvesorappointamanagementcom-panytomanagethem.

10.2.3. What financial requirements apply to common funds/open-ended investment companies/ closed-ended investment companies?

ThenetassetsofacommonfundmaynotbelessthanEUR1,250,000.

Thesharecapitalofanopen-endedinvestmentcompany/closed-endedinvestmentcompanymaynotbelessthanEUR1,250,000.

Theminimumamountmustbereachedwithinsixmonthsfollowingtheauthorisationofthecompany.

10.2.4. Management companies which manage undertakings for collective investment

TheActof20December2002introducedtwotypesofmanagementcompanyforwhichtheauthorisationoftheCSSFisrequiredandwhoseannualfinancialstatementsmustbeauditedbyanindependentauditorwithsufficientprofessionalexperience.

10.2.4.1. Management companies which manage UCITS

ThesemanagementcompaniesareregulatedbyChapter13oftheActof20December2002.

Activities

- ManagingUCITS,whichdoesnotexcludethepossibilityofalsomanagingothertypesofundertakingsforcollectiveinvestment.

- Managinginvestmentportfoliosonadiscretionaryandindividualisedbasis(includingthoseheldbypensionfunds).

- Investmentadviceandcustodyandadministrationofunits/shares(asancillaryservices).

Capital resources

Theamountofequity(fondspropres)isdeterminedonthebasisoftheamountofassetsundermanagement.

TheminimumlegalamountofcapitalisEUR125,000.

ForassetsexceedingEUR250million,anadditionalamountofequityisrequiredequalto0.02%oftheamountoftheportfoliosexceed-ingEUR250million.

50%oftheadditionalamountofequitymaybethesubjectofacontributionbymeansofaguaranteeissuedbyacreditinstitutionoraninsurancecompany.

Formalities to be accomplished by a management company in order for it to be authorised

ThemanagementcompanymustsubmitthefollowingdocumentsandinformationtotheCSSF:

- Theactivityprogrammeshowingtheorganisationalstructure.

- ThenamesofatleasttwoindividualswithagoodreputationandtheprofessionalexperiencerequiredtomanagetheUCITSinvolvedandresponsibleforrunningthemanagementcompany’sbusiness,ofwhomatleastonemustliveinLuxembourg.

- Reliableadministrativeandaccountingproceduresandappropriateinternalcontrolsystems.

Delegation of duties

Investmentmanagementmayonlybedelegatedtoentitiesthathavebeendulyauthorisedorregisteredforthepurposeofportfolioman-agementandsubjecttotheprudentialcontrolofanauthoritythatcooperateswiththeCSSF.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

Undernocircumstancesmayamanagementcompanydelegate its investmentmanagementdutiestothedepositaryof theUCITS in-volved.

WhenithasbeenauthorisedbytheCSSF,themanagementcompanymayperformtheactivityforwhichithasbeenauthorisedinanotherEUMemberbysettingupabranchorwithintheframeworkofthefreeprovisionofservices.ManagementcompaniesthathavebeensetupandauthorisedinanotherMemberStateinaccordancewiththeUCITSIIIDirectivemayalsocarryouttheiractivitiesinLuxembourgonthebasisoftheEuropeanpassport.

10.2.4.2. Other management companies managing Luxembourg undertakings for collective investment

ThesemanagementcompaniesareregulatedbyChapter14oftheActof20December2002andareobligedtolimittheiractivitiestomanagingLuxembourgundertakingsforcollectiveinvestment,withtheexceptionofUCITS.Theymayalsomanageforeignundertakingsforcollectiveinvestment.

TheminimumamountofcapitalrequiredisEUR125,000.

SincetheentryintoforceoftheActof20December2002,thesemanagementcompanieshavebeenrequiredtoapplyforpriorauthorisa-tionbytheCSSFandmustsubmittheirannualfinancialstatementstoanindependentauditorforauditing.

10.2.5. What are the legal requirements as regards investment policies?

10.2.5.1. UCITS

Generally,theActof20December2002broadenedtherangeoffinancialproductsinwhichUCITSmayinvest.Thislawprovidedadefini-tionoftransferablesecuritiesandofotherfinancialassetsinwhichUCITSmayinvest.Itauthorisedinvestmentsinmoneymarketdepositsandinstruments,extendedthepossibilitiesofinvestmentinderivatives,andchangedtherulesgoverningdiversificationandinvestmentofUCITSinotherundertakingsforcollectiveinvestment.

10.2.5.2. Other types of undertakings for collective investment

CSSFCircularno.03/8832laiddownthecategoriesofUCITSforwhichtheprovisionsofChapter5oftheActof20December2002wereinappropriateinviewoftheirinvestmentorborrowingpolicyandwhicharecoveredbyPartIIoftheAct.

10.2.6. What are the other legal requirements?

10.2.6.1. Approval of instruments of incorporation and of the choice of depositary

InorderforLuxembourg’sinvestmentfundstoperformtheiractivities,theymustbeauthorisedbytheCSSF.Tothisend,theCSSFmustfirstapprovetheirinstrumentsofincorporationandtheirchoiceofdepositary.

Themanagersofthemanagementcompany,theopen-endedinvestmentcompany/closed-endedinvestmentcompanyandthedepositarymusthavegoodreputationsandtheexperiencerequiredtoperformtheirduties.

Theterm“managers”means:

- naturalorlegalpersonswhoorwhichrepresentthemanagementcompany,theinvestmentcompanyorthedepositaryorwhoorwhicheffectivelydefinethepolicyofthemanagementcompany/investmentcompany/thedepositary,

- thepromotor,

- themainshareholdersofthemanagementcompany.

• Prospectusandmanagementregulations

Open-endedinvestmentcompanies,closed-endedinvestmentcompaniesandcommonfundsarerequiredtopublishthefollowingdocu-ments:

- aprospectusfortheattentionoftheshareholders,

- themostrecentannualreportandthemostrecentsix-monthlyreportbythecompanyorfundcoveringthefinancialyearandthefirstsixmonthsrespectively,

- foropen-endedinvestmentcompaniesandclosed-endedinvestmentcompanies,theArticlesofAssociation(statuts)whicharepub-lishedintheMémorial(Luxembourgofficialjournal),

- for common funds, the fund’s management rules. These regulations must be filed with the office of the local court (Tribunald’arrondissement)andarepublishedintheMémorialbymeansoffilingthisdocumentwiththeofficeofthecourt.

32 SeetheCSSF’swebsiteatwww.cssf.luunder“Circulars”.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

TheActof20December2002introducedanobligationforUCITStopublishasimplifiedprospectus.ThefullprospectusandthesimplifiedprospectusmustbeapprovedbytheCSSF.Theobligationtopublishasimplifiedprospectusdoesnotapplytotheundertakingsforcollec-tiveinvestmentcoveredbyPartIIoftheAct.

• Thedepositarybank

CustodyoftheassetsofinvestmentfundscoveredbyPartIoftheActmustbeentrustedtoadepositarywhichmustbeaLuxembourgbankoraLuxembourgbranchofabankfromanEUMemberState.ThisisalsothecaseforinvestmentfundscoveredbyPartIIexceptthatthedepositarymayalsobeaLuxembourgbranchofanon-EUcountry.

10.2.6.2. Central administration located in Luxembourg

ThecentraladministrationofallLuxembourg’sinvestmentfundsmustbelocatedinLuxembourg.Therequirementforthe“centralad-ministration”tobelocated“inLuxembourg”appliesonlytoadministrativeandaccountingfunctions.ChapterDofCircularno.91/75,asamendedbyCircularno.05/177,definedtheconceptofcentraladministrationasappliedtoLuxembourgundertakingsforcollectiveinvestment33.ThisdoesnotruleoutthepossibilityofusingthehelpofinvestmentadviserslocatedabroadtomanagetheirassetsandisnotcontrarytoinvestmentandredemptiondecisionsbeingtakenandexecutedoutsideLuxembourg.

10.3. Hedge funds

10.3.1. What regulatory framework applies to hedge funds?

Thereisnostandarddefinitionoftheconceptofhedgefunds.InLuxembourg,therearetwomaincategoriesofwhatcanbecalledhedgefunds:

• fundswhichinvestmainlyinderivativesandwhicharesubjecttoasetofspecificandflexibleprovisionsunderChapterIofcircularno.91/7534issuedbytheInstitutMonétaireLuxembourgeois(Luxembourgmonetaryinstituteor“IML”),and

• fundswhich invest intransferablesecurities,usingso-calledalternative investmentstrategies,usinggearingandshortsalestech-niques,subjecttoCSSFcircularno.02/8035.

Thefirstcategoryoffundsincludesfundsthathavebeenauthorisedsince1991.Sincethatdate,thesefundshavebecomeincreasinglypopularduetotheflexibilityprovidedbythisregulatoryframework.ThesefundsmayalsobeauthorisedtousefinancialderivativestradedonOTCmarkets.

Dependingonthestrategydefinedbythepromotor,theymayalsochooseinvestmentstrategiesthatarecomparabletothoseappliedbystandardhedgefunds,forexampletheneutralmarketoption,shortorlong-termcapital,systematictradingwithorwithoutgearing,fixed-incomearbitrage,etc.

FundsinthesecondcategorythatarethesubjectofCSSFcircularno.2002/80arereviewedinthefollowingsection.

What opportunities do hedge funds offer in Luxembourg?

• Luxembourgallowsagreatervarietyofalternativeinvestmentstrategieswhilemaintainingthebenefitsof“regulated”products.

• CSSFcircularno.02/80madeitpossibletoacceleratetheauthorisationprocedureforfundswithalternativeinvestmentstrategies,withcertainaspectshavingbeenclarified,suchas:

- thelimitsonborrowingsmadewiththeaimofinvestment,

- thepossibilityofcombininggearingthroughborrowingsandshortsales,

- therulesthatapplytofundsofhedgefunds,

- theuseoffinancialderivatives.

10.3.2. The capacities of the parties involved

• Thepromotor

Duetothehighlevelofriskwhichmayarisefromtheinvestmentstrategiesusedbytheseundertakingsforcollectiveinvestment,whentheCSSFexaminestheapplicationforauthorisationofahedgefund,itpaysparticularattentiontothepromotor’sreputation,experienceandfinancialstanding.

Inthisrespect,thepromotormustbeauthorisedinhisorhercountryoforiginandmustbeauthorisedtoperformthesametypeofactivi-tiesasthoseheorshewishestoperforminLuxembourg.

33 SeetheCSSF’swebsiteatwww.cssf.lu34 SeetheCSSF’swebsiteunder“Circulars”.35 SeetheCSSF’swebsiteunder“Circulars”.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

• Thedepositarybank

Thedepositarybankmustbeappointedoncethe investmentstrategyandthegeneral featuresof thefundhavebeendefinedbythepromotor.

ThedepositarybankmustbeapprovedbytheCSSF.Todothis,thesupervisoryauthorityexaminesthebank’sadministrativeandfinancialcapacitytocarryoutthedutiesofadepositaryand/orofaco-promotor.

• Managers

TheprofessionalqualificationandexperienceofthemanagersandoftheinvestmentadvisersandadministratorsareimportantcriteriafortheCSSFwhenitexaminesthehedgefunds’applicationsforauthorisation.

10.3.3. What legal structures are the most appropriate for hedge funds?

Duetotheirflexibility,open-endedinvestmentcompanies(SICAV)andcommonfunds(FCP),managedbyamanagementcompany,areparticularlysuitablestructuresforfundsinvestingintransferablesecuritiesorfinancialderivativesandinwhichtheshareholdersorunitholderswishtobeabletobuyandselltheirsharesorunitsfreely.

Whataspectsshouldapromotorconsiderbeforedecidinginfavourofanopen-endedinvestmentcompanyoracommonfund?

Inordertochoosebetweenanopen-endedinvestmentcompanyandacommonfund,thefollowingtwoaspectsneedtobetakenintoconsideration:

• Taxaspects,attheleveloftheinvestor,theinvestments,thefund,thepromotorandthecompanyorfundmanager.OneofthebenefitsofferedbyhedgefundsdomiciledinLuxembourgistheflexibilityofthetaxstructureusedinordertooffsetthetaxeffectatthesevariouslevels.

Suchastructurealsodependsonthetypeofunderlyinginvestmentandthecountriestargetedaswellasthegroupof investorsinterestedinthedistributionoftheprofitsmade.

• Whetherornotthehedgefundpromotorwishestokeeptightcontrolofthefund.

Thus,inahedgefundorganisedintheformofacommonfundwheretheholdersofunitsdonothavevotingrights,thepromotorhasthepossibilityofkeepinghisorherdecision-makingpowerthroughoutthefund’slife,throughthemanagementcompany.

Inafundorganisedintheformofanopen-endedinvestmentcompany,thepromotorgenerallyhasamajorityofvoteswithintheBoardofDirectors.

Themanagersnonethelessremainresponsibletotheshareholdersandtheymayevenbereplacedatanytimebyadecisionofageneralmeetingoftheshareholders.

10.3.4. What are the requirements as regards investment policies applicable to hedge funds?

10.3.4.1. Use of a first class broker

CSSFcircularno.02/80statesthatitispossibletocarryoutsecuritieslendingtransactions,asborrower,withfirst-classprofessionalsspe-cialisinginthistypeoftransaction.Thecounterpartyriskarisingfromthedifferencebetween(i)thevalueoftheassetsusedascollateralbytheundertakingforcollectiveinvestmentandassignedtoalenderinthecontextofsecuritieslendingtransactionsand(ii)thevalueofthedebtsowedbytheundertakingforcollectiveinvestmenttothislendermaynotexceed20%oftheundertakingforcollectiveinvestment’sassets.Thisprovisionisvitallyimportantforthefirst-classbrokerasmarketfluctuationscanreducethevalueoftheassetsassigned.

10.3.4.2. Restrictions relating to short sales and long-term contracts

Asregardslong-termcontracts,afundmaynotinvestmorethan20%ofitsassetsinsecuritiesfromthesameissuer.

Inaddition,transferablesecuritiesthatarenotlistedonastockexchangeornottradedonanotherregulatedmarketthatoperatesregu-larly,isrecognisedandopentothepublic,maynotrepresentmorethan10%ofthefund’sassets.

Asregardsshortsales,incomefromthesesalesattributabletoanyissuermaynotexceed10%ofthefund’sassets.Thesumofthesalespricesresultingfromshortsalesinvolvingtransferablesecuritiesfromthesameissuer,maynotintheoryrepresentmorethan5%ofthefund’sassets.

Asregardsshortandlong-termcontracts,itisnotpossibletoacquiremorethan10%ofsecuritiesissuedbythesameissuer.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.3.4.3. Borrowings

Theauthorisedlimitsapplicabletogearingarefixedonborrowingsbasedonnetassets.

Intheory,borrowingsarelimitedto200%oftheundertakingforcollectiveinvestment’snetassets.

Undertakingsforcollectiveinvestmentthathaveastrategywithahighdegreeofcorrelationbetweenlongandshortpositionsareauthor-isedtoborrowupto400%oftheirnetassets.

Inpractice,however,whereadditionalgearingisrequiredbyanundertakingforcollectiveinvestmentinordertoimplementaspecificstrategy,itispossibletoapplytotheCSSFinordertostartnegotiationsinthisregard.

10.3.4.4. Financial derivatives

CSSFcircularno.2002/80authorisestheuseofallsortsoffinancialderivatives:financialfutures,optionsonsuchfutures,OTCswapsonawiderangeoffinancialinstruments.Thislistisnotexhaustive.

Restrictionslinkedtouseoffinancialderivativesaregovernedbytheprincipleofriskspreading.

CSSFcircularno.02/80definedtheprinciplesapplicabletoriskspreadingasfollows:

• UndertakingsforcollectiveinvestmentmaynotholdanopenpositiononasinglecontractrelatingtoafinancialderivativetradedonanorganisedmarketorasinglecontractrelatingtoafinancialderivativetradedonanOTCmarketforwhichthemarginrequiredwithrespecttothecommitmentrepresents5%ormoreoftheundertakingforcollectiveinvestment’sassets.

• AsregardsfinancialderivativestradedonanorganisedOTCmarket,anyunrealisedlossinrelationtoanycontractwhatsoevermaynotexceed5%oftheundertakingforcollectiveinvestment’sassets.

• Thetotalmargindepositsand/orunrealisedlossesinrelationtofinancialderivativestradedonanOTCmarketmaynotexceed50%oftheundertakingforcollectiveinvestment’sassets.

• Premiumspaidonoptionsaretakenintoaccountwithintheabove-mentionedlimitsof5%and50%respectively.

AstheuseofthesefinancialderivativesmayincreasethelevelofgearingreferredtointheSectionon“Borrowings”,theprospectusmustclearlystatethemaximumlevelofgearingarisingfromthecombineduseofborrowingsandfinancialderivatives.

10.4. Pension funds in Luxembourg

Luxembourgmaintaineditsinternationalambitionsbycreatingalegalframeworkauthorisinginternationalpensionfundstobesetup.

Itslongexperienceandknow-howinfundadministrationandthestabilityofitspoliticalandlegislativesystemarekeyfactorstobetakenintoconsiderationwhendecisionsarebeingmadeonwhichtypeofpensionfundtochooseandwheretolocatesuchfund.

Luxembourglawsoninsuranceandpensionfundswereintroducedin1999and2000inordertoprovidepensionschemeswithafavour-able,flexibleandsecureenvironmentforpensionsatnationalandEuropeanlevel.

Theselawsintroducedthreetypesofpensionsavingsvehiclesprovidingasmuchflexibilityaspossiblewhilealsoensuringthesecurityofassetsandtheprotectionofbeneficiaries.

Basedonthesuccessandfinancialexpertisegainedintheinvestmentfundsector,theActof8June1999onthecreationofpensionfundsintheformofapensionsavingscompanywithvariablecapital(sociétéd’épargne-pensionàcapitalvariableor“Sepcav”)andapensionsavingsassociation(associationd’épargne-pensionor“Assep”),asamended,createdtwolegalpensionsavingsvehicles,theSepcavandtheAssep,andplacedthemunderthesupervisionoftheCSSF.

TheActof8August2000introduced,undertheActof6December1991ontheinsurancesector,asamended(the“Actof6December1991”),pensionfundsplacedundertheprudentialsupervisionoftheCAA.

TheEuropeanParliamentandtheCounciladoptedDirective2003/41/ECof3June2003ontheactivitiesandsupervisionofinstitutionsforoccupationalretirementprovisionandthishasbeentransposedintoLuxembourglawasfollows:

• theActof13July2005relatingtoinstitutionsforoccupationalretirementprovisionintheformofapensionsavingscompanywithvariablecapital(Sepcav)andapensionsavingsassociation(Assep),amendingArticle167paragraph1oftheActof4December1961relatingtoincometax,the“Actof13July2005”.

• theRegulationof23May2005amendingtheRegulationof31August2000implementingArticle26paragraph3oftheActof6December1991ontheinsurancesector,asamended,andrelatingtopensionfundssubjecttotheprudentialsupervisionoftheCAA,allowedajointlegalframeworktobecreatedforalltheinstitutionsforoccupationalretirementprovisionwithintheEuropeanCommunity.

AsregardstheactivitiesthatmaybeperformedinLuxembourgbyinstitutionsfromotherEUMemberStates,theregulatoryauthorityistheInspectionGénéraledelaSecuritéSociale(socialsecurityinspectorateor“IGSS”).



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.4.1. How is a pension fund defined?

Apensionfundcanbedefinedasacompanythatcollectsfundsfromoneorseveralcontributorswiththeaimoffinancing,bymeansofapensionscheme,pension,death,disability,survivalortransferbenefitsofitsmembers,thepersonnelofthecompaniesorbodiesinvolved,bypayingacapitalsumorapensionannuity.

• Whyinvestinapensionfund?

Therearemanyadvantageslinkedtosettingupapensionfund:

- Thefirstisfinancial,asinvestinginapensionfundmeansthatthecontributionsmadetothefundorcapitalisedbythefundareexemptfromcosts.

- Thesimplicityoftheadministrationofapensionfundandtheeffectivemanagementofinvestmentsbythefundmakeitpossibleforacompanyinvolvedtoobtainabetterreturnoninvestmentsandtomakesignificantcostsavings.

- Investinginapensionfundallowsmorefreedomatthelevelofthechoiceofinvestmentpoliciesthatmaybeadoptedbythefundaspensionfundmanagersarenotsubjecttorestrictionsimposedbyanexternalinsurancecompany.

- Pensionfundsareatoolthatisespeciallyappreciatedbymultinationalcompanies,enablingthemtocentralisethefinancialmanage-mentoftheirsupplementarypensionschemes.Fundscanbesetupinaccordancewithcompanies’specificrequirements.

- Forinternationalmanagerswhoworkinseveralcountries,pensionfundsofferthepossibilityofbeingabletobenefitcontinuouslyfrommoregenerouspensionswhilemaintainingthebenefitsarisingfrompensionfundsregardlessofthecountrieswherethemanag-erswork.

• WhatbenefitsareavailableunderLuxembourglawsforinstitutionsforoccupationalretirementprovision?

Luxembourgoffersseveralbenefitstoinstitutionsforoccupationalretirementprovision,ofwhichthefollowingarethemostsignificant:

- AsregardsAssepsandSepcavs,authorisationbytheCSFFofdirectors,managers,assetmanagers36,liabilitymanagers37(Assep)andfunds’investmentrules,and,asregardspensionfundssubjecttotheCAA’sprudentialsupervision,pensionfundmanagersiftheyareindividualsor,ifthefundisalegalperson38,itsmanagers,toguaranteeahigherlevelofsecurity.

- AsregardsAssepsandSepcavs,themandatorydepositingofapensionfund’sassetswithadepositaryestablishedinLuxembourgorinanotherEUMemberStatethathasbeendulyauthorisedtohavecustodyofassetsinaccordancewithDirective93/22/EECorDirective2000/12/EC,orauthorisedtoactasadepositaryforthepurposeofDirective85/611/EEC39.

- Amainlyqualitativeapproachtopensionfunds’investmentrulesthatprovidesthelegalsecuritydesiredbythemembersandcreditorsofthesestructures.

- Thestructuresaretaxneutral.

Sepcavsaresubjecttoincometax.

TaxmaybedeductedfromcontributionsmadebytheemployerdependingonthetaxrulesinforceineachMemberState.

Funds’managementexpensesareexemptfromVAT.

AssepsandSepcavsaresubjecttoacapitalduty(droitd’apport)collectedwhentheyareinitiallyformed,onnewcontributionsoruponthemergerwithanotherpensionfund,fixedatEUR1,25040.

Sepcavsareexemptfrompaymentofwealthtax41.

• WhatlegalrequirementsmustbefulfilledinordertocreateaSepcavoranAssep?

InadditiontotheArticlesofAssociation(statuts)ofthecompanyortheassociation,pensionfundsmustdrawuptheirownregulationsandatechnicalmemorandum.TheminimuminformationthismemorandummustcontainisspecifiedintheActof13July200542.

TheArticlesofAssociationofAssepsandSepcavsmustberecordedinanofficialdeedandmaybedrawnupinFrench,GermanorEnglish.

Sepcavs,likeAsseps,maybestructuredlikefundswithanumberofsub-funds,eachcorrespondingtoaseparatepartoftheSepcav’sortheAssep’sassets43.TheArticlesofAssociationmustexpresslyprovideforthispossibilityandthepensionfund’sregulationsshoulddescribethetermsandconditionsrelatingtosuchpossibility.Aspecificsub-fund’sassetsareonlyliableforthissub-fund’sdebtsandobligations,unlesstheArticlesofAssociationprovideotherwise.

36 Article23(1)oftheActof13July2005.37 Article49oftheActof13July2005.38 Article3.3paragraph1oftheLuxembourgRegulationof31August2000.39 Articles18-22(Sepcav)and42-46(Assep)oftheActof13July2005respectively.40 Articles1and2oftheLuxembourgRegulationof20September2005settingthefixeddutyapplicabletoraisingcapitalinpensionfundsgovernedby

theActof13July2005relatingtoinstitutionsforoccupationalretirementprovisionintheformofSepcavsandAsseps.41 Article82(1)oftheActof8June1999.42 Articles69and70oftheActof13July2005.43 Sepcav,Article11andAssep,Article37oftheActof13July2005.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.4.2. Sepcavs

• Registeredoffice

TheregisteredofficeofaSepcavmustbelocatedinLuxembourg.

• Legalstructure

Sepcavsusetheformofacooperativecompanyorganisedlikeapubliccompany(sociétéanonyme)underLuxembourglaw44.

Basedbroadlyonthephilosophyofopen-endedinvestmentcompanies(sociétéd’investissementàcapitalvariableor“SICAV”),aSepcavisaninvestmentcompanywithlimitedliabilityinwhichtheamountofretirementbenefitsisequaltothenumberofsharesmultipliedbythevalueofthesesharesonthepaymentdate.

Generally,Sepcavsareusedtofunddefinedcontributionschemes.Thecapitalsumpayableonretirementispaideitherinasinglepaymentorintheformofpaymentinseveralinstalmentsorforacertaintime.

AsanexceptiontoArticle137-4paragraph2oftheActof10August1915oncommercialcompanies,asamended,onlyonepartnerisrequiredtosetupaSepcav.

• SharecapitalofaSepcav

ASepcav’ssharecapitalmaynotbelessthanEUR1millionortheequivalentinanothercurrencyandthisamountmustbereachedwithintwoyearsasfromtheauthorisationoftheSepcavinvolved45.

IncaseswhereaSepcav’ssharecapitalexceedsEUR1million,thesharesrepresentingcontributionsmadebycontributorswhoarenotbeneficiariesareredeemedandcancelledasandwhennewsharesareissuedinfavourofitsmembers.

• Formofshares

ASepcav’ssharesareregisteredandmaynotbeassignedorattached.However,theincomefromtheirredemptionmaybegivenasaguarantee.

Whenamemberretiresordies,theSepcavmustredeemthemember’sshares.Redeemedsharesareautomaticallycancelledandthecompany’ssharecapitalisreducedaccordingly46.

ASepcav’ssharesdonotgivetheirholderstherighttoanydistributionofdividends.

ContrarytotheobligationtowhichpubliccompaniesareliableunderArticle72oftheActof10August1915oncommercialcompanies,Sepcavsarenotsubjecttotheobligationtocreatealegalreserve.

• Liabilityofshareholders

Membersintheircapacityasshareholdershavenopersonalobligationsrelatingtothecompany’scommitments.

10.4.3. Asseps

• Registeredoffice

TheregisteredofficeofanAssepmustbelocatedinLuxembourg.

• Legalstructure

Assepsarevehicleswiththestructureofanassociation,specificallydesignedtofinancebothdefinedbenefitanddefinedcontributionpen-sionschemes.Apartfromitsfeaturesanditsphilosophy,theformofanAssepissimilartothatofnot-for-profitassociations(associationsansbutlucratif)undertheActof21April1928.

Assepsmaypaybenefitsintheformofanannuity,asasinglecapitalsumorininstalments.Theymayalsoprovideadditionalservicessuchasdeathbenefitinsurance,disabilitypensionsorspecialpaymentstowidowsandorphans.

• SharecapitalofanAssep

AnAssep’sunderwritingreservesmaynotbelessthanEUR5million.ThisminimumamountmustbereachedwithintenyearsasfromtheauthorisationoftheAssepinvolved47.

44 Article5oftheActof13July2005.45 Article9paragraph1oftheActof13July2005.46 Article8§(3)oftheActof13July2005.47 Article28oftheActof13July2005.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

• Liabilitymanagers

Assepsmaymanagetheirliabilitiesthemselvesordelegatemanagementtooneorseveralliabilitymanagers.Intheeventofsuchdel-egation,whichmustbeprovidedforinanAssep’sArticlesofAssociation,theBoardofDirectorsisresponsibleforappointingaliabilitymanagerandforremovinghim/her/itfromoffice.

LiabilitymanagementmayonlybedelegatedtooneorseveralliabilitymanagerswhoorwhichhavebeenauthorisedeitherbytheCSSFonthebasisoftheirskills,goodstandingandfinancialsoundnessunderthetermsgiveninaLuxembourgregulation,orbytheCAAasaninsurancecompanyfortransactionsthatareconsideredasbranchesoflifeassuranceasdefinedinAppendixIIoftheActof6December199148.

Anapplicationforauthorisationmustcontainthefollowinginformation:

- alltheinformationrequiredtoassesstheapplication,inparticularonactuarialquestionsandtheactivityprogramme,statingthetypeandvolumeofbusinesscontemplatedandtheadministrativestructurechosen49,

- thenameoftheshareholdersordirectorindirectpartnerswhoorwhichholdaqualifiedholdingwithintheinstitutiontobeauthor-isedenablingthemtohaveasignificantinfluenceonbusinessconduct.

10.4.4. What provisions apply to both Sepcavs and Asseps?

• HowisthecustodyofassetsofAssepsorSepcavsorganised?

TheassetsofAssepsandSepcavsmustbeentrustedtoadepositaryestablishedinLuxembourgorinanotherEUMemberStatethathasbeendulyauthorisedtohavecustodyofassetsinaccordancewithDirective93/22/EECorDirective2000/12/EC,orauthorisedtoactasadepositaryforthepurposeofDirective85/611/EEC.

• HowareLuxembourgpensionfunds’assetsmanaged?

SepcavsandAssepsmaydelegatethemanagementofpensionfunds’assetstooneorseveralassetmanagers.Thesemanagersareap-pointedandremovedfromofficebytheBoardofDirectorsoftheSepcavortheAssep.

AnAssep’sArticlesofAssociationmayprovidefortheAsseptodelegatemanagementofitsassetstooneorseveralassetmanagerses-tablishedinLuxembourgorinanotherMemberStatethathasbeendulyauthorisedtomanageinvestmentportfoliosinaccordancewithDirectives85/611/EEC,93/22/EEC,2000/12/EC,2002/83/ECand2003/41/EC.

However,managementmayalsobedelegatedtoforeign,non-EUprofessionalsprovidedthattheyaresubjectintheircountriesoforigintopermanentsupervisionbyasupervisoryauthorityprovidedforbylaw,withtheaimofprotectinginvestors.Theseforeign,non-EUprofes-sionalsmaybeauthorisedspecificallybytheCSSFonthebasisofcriteriainvolvingskills,goodstandingandfinancialsoundness.ThetermsofthesecriteriaarespecifiedinaLuxembourgregulation.

• AuthorisationoftheAssep’sandtheSepcav’sdepositaryandassetmanager

Apensionfundwillonlybeauthorisedifthesupervisoryauthorityhasapprovedofthefollowing50:

- itsArticlesofAssociation,

- thepensionregulationsandthetechnicalmemorandumrelatingtothepensionschemesmanagedbythepensionfund,

- theindividualshavingtomeetthelegalconditionsregardinggoodstandingorqualificationsandprofessionalexperience,

- thechoiceofthedepositaryand,whereapplicable,themanagersoftheassetsandliabilities.

Inaddition,eachpensionfundmustsubmitanactivityprogrammetotheCSSF,and,fordefinedbenefitsschemes,afinancingplancontain-ingtheinformationprovidedforinArticle53(4)oftheActof13July2005.

• HowissupervisionofanAsseporaSepcavorganised?

Asanexceptiontotheprovisionslaiddownforthesupervisionofpubliccompanies,therequirementtoappointoneorseveralstatu-tory auditors (commissaires aux comptes) is removed and replaced by the requirement to appoint an independent auditor (réviseurd’entreprises).

AuthorisedindependentauditorsaudittheaccountingdataofAssepsandSepcavs.Theyareappointedbythepensionfund’sBoardofDirectorsandpaidbythefund51.

48 Article52(1)oftheActof13July2005.49 Article52(3)and52(8)oftheActof13July2005.50 Article53(2)oftheActof13July2005.51 Article90(2)and(5)oftheActof13July2005.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.4.5. How are pension funds supervised ?

ThesetypesofpensionfundswerecreatedonthebasisofageneralprovisionoftheActof6December1991whichhasfavouredtheemergenceofaninsuranceindustryatnationalandcross-borderlevelformanyyearsnow.

ThesefundsaresubjecttoprudentialsupervisionbytheCAA.

Thesefundsoffertheirmemberssomeflexibilityduetothefactthattheyprovidefordefinedcontributions,clearlyspecifiedbenefitsoradditionalbenefitsintheformofthepaymentofdeathbenefitoradisabilitypension.

Theirinvestmentpoliciesincludeaseriesofquantitativelimits.

Thesecurityoftheassetsandtheprotectionofthebeneficiariesareensuredbymeansofprovisionssimilartothosethatgoverndirectinsurance.

• Authorisationofpensionfunds

ThesetypesofpensionfundsaresubjecttotheauthorisationoftheMinistryresponsibleforthesupervisionofprivateinsurance,andap-plicationsforauthorisationshouldbesenttotheMinistrythroughtheintermediaryoftheCAA52.ThesepensionfundsaresupervisedbytheCAAinaccordancewiththeprovisionsoftheActof6December1991.AuthorisationisgivenbybranchofactivityasdefinedintheAppendixtotheLuxembourgRegulationof31August2000.

• Legalstructure

Pension funds subject to theCAA’s supervisionmaybe set up in the formof anassociationofmutual benefit societies (associationd’assurancesmutuelles),acooperativecompany(sociétécoopérative),acooperativecompanyorganisedintheformofapubliccompany(sociétécoopérativeorganiséesousformedesociétéanonyme)oranot-for-profitassociation(associationsansbutlucratif)53.

TheircentraladministrationmustbeestablishedinLuxembourg54.

• Thedepositary

CustodyoftheassetsofapensionfundestablishedunderthesupervisionoftheCAAmustbeentrustedtoadepositarywhichmustbeacreditinstitutionwithinthemeaningoftheActof5April1993relatingtothefinancialsector,asamended.Thedepositaryofafund’sassetsmayhaveitsregisteredofficeinLuxembourg,beestablishedthereorhaveitsregisteredofficeinanotherEUMemberState.

• Taxtreatment

Fromataxstandpoint,thistypeofstructureisrelativelytaxneutral.Underwritingreservesareconsideredasdeductiblechargesinthecalculationoftax.PensionfundsarenotliableforVATaslegalentities.ManagementexpenseswhichthesefundschargethepromotorarealsoexemptfromVAT.

• WhatreportingrequirementsapplytoauthorisedpensionfundsinLuxembourg?

SepcavsandAssepshavetodrawupannualfinancialstatementsandreports55andsubmitfinancialreportsandanannualactuarialreporttotheCSSF.

Informationtobeprovidedtothemembersandbeneficiaries56includesvoluntaryinformationonthepensionfund’sregulations(andanychangesthereto)andonthepersonalsituationofeachmemberandbeneficiaryaswellasinformationabouttheArticlesofAssociation,thetechnicalmemorandum,theannualfinancialstatementsandadeclarationoninvestmentpolicy,onrequest.

SepcavsandAssepsarerequiredtosendtotheLuxembourgincometaxauthority(Administrationdescontributions)theregisterofmem-bersandbeneficiariescontainingthename,addressetc.ofthemembersandbeneficiariesaswellastheamountsoftheirrightsattheendofthefinancialyearandbenefitspaidduringthefinancialyear.

PensionfundsplacedundertheprudentialsupervisionoftheCAAshoulddrawupannualandquarterlyfinancialstatementseveryyearandsubmitthemtotheCAA.Inaddition,everyyeareachmembershouldreceivealltheinformationrelatingtoanychangesintheprovisionsofthepensionscheme(LuxembourgRegulationof23May2005,Article9-2paragraph2),informationaboutthepositionofthepensionfundandthecurrentleveloffinancingofthemember’scumulativeindividualrights(Article9-2paragraph4).

Onrequest,membersmayreceivetheinformationlistedinArticle9-2,paragraph5.

52 SeetheCAA’swebsiteatwww.commassu.lu(onlyinFrench).53 LuxembourgRegulationof31August2000,Article3.2paragraph1.54 LuxembourgRegulationof31August2000,Article3.3paragraph1.55 Article87oftheActof13July2005.56 Articles85to89oftheActof13July2005.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.4.6. Comparison of Sepcavs, Asseps and pension funds under the supervision of the CAA

Sepcavs Asseps CAA-supervised pension funds

Pension scheme Definedcontributionscheme Definedcontributionorbenefitscheme

Definedcontribution/Benefit

Legal form Fundsincorporatedintheformofacooperativecompanyorganisedlikeapubliccompany

Fundsincorporatedbycontractintheformofapensionsavingsassociation

Fundsestablishedincontractualorfiduciaryformorintheformofanassociation

Rights of beneficiaries Ownersofshares Rightsfixedbycontract Rightsfixedbycontract

Payment of benefits Paymentinonesumorinseveralinstalmentsbymeansoftheredemptionofshares(possibilityofpurchaseoftheannualannuity)

Paymentinonesumorinseveralinstalmentsorlifeannuity

Paymentinonesumorannualannuity

Minimum amount ofcontributions

SharecapitalofaminimumofEUR1million(leveltobereachedwithintwoyears)

UnderwritingreservesofaminimumofEUR5million(leveltobereachedwithin10years)

Nospecialrequirement

Sub-funds Numeroussub-fundspossible.Liabilitylimitedtothecommitmentsofeachsub-fund,unlesstheinstrumentsofincorporationprovideotherwise.

Numeroussub-fundspossible.Liabilitylimitedtothecommitmentsofeachsub-fund,unlesstheinstrumentsofincorporationprovideotherwise.

Jointandseveralliabilitywithregardtocommitmentsbetweensub-funds

Investment policy Theprudentmanprinciple Theprudentmanprinciple Quantitativelimits57

Tax treatment -Subjecttotaxwithanexemptionforincomeandprofitsgeneratedbytransferablesecurities.-Shouldbenefitfromdoubletaxtreaties

-Subjecttotax.Profitsgivetherighttotheapplicationofataxdeduction.-Shouldbenefitfromdoubletaxtreaties

-Thetaxbaseisalwaysnil58.-Shouldbenefitfromdoubletaxtreaties

Managers of assets and liabilities

Authorisedassetmanager Authorisedmanagerofassetsandliabilitiespossible.

Managerofthepensionfund

Depositary BankorotherfinancialsectorprofessionallocatedinLuxembourgorinanEUMemberStateauthorisedtohavecustodyofassetsunderECdirectives

BankorotherfinancialsectorprofessionallocatedinLuxembourgorinanEUMemberStateauthorisedtohavecustodyofassetsunderECdirectives

BankdomiciledorlocatedinanEUMemberState

Reporting requirements -Namesandoverallamountofrightsandbenefitspaidtoshareholders.-AnnualreportandfinancialreportandannualactuarialreporttobesenttotheCSSF

-Namesandoverallamountofrightsandbenefitspaidtomembersandbeneficiaries.-AnnualreportandfinancialreportandannualactuarialreporttobesenttotheCSSF

AnnualandquarterlyreporttobesubmittedtotheCAA

5758

57 ExceptasregardsbondsissuedorguaranteedbyanOECDMemberStateoraninternationalorganisationwithatleasttwoOECDMemberStates,aterritorialpublicauthorityorapublicbodyinanOECDMemberState,apensionfundmaynotinvestmorethan10%ofitsassetsintransferablesecu-ritiesofthesameissuer.LuxembourgRegulationof31August2000,Article9paragraph2(a).

58 Anyprofitthatmayariseisautomaticallydeductedandusedtowipeoutlossescarriedforward.LuxembourgRegulationof31August2000,Article10(d).



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.5. Venture capital investment vehicles (SICARs)

TheactivityofSICARS(sociétésd’investissementencapitalàrisqueor“venturecapitalinvestmentvehicles”)isgovernedbytheActdated15June2004,morewidelyknownastheActonSICARs59orthe“Actof15June2004”,whichprovidesabroaddefinitionofprivatecapitalandincludesalltypesoffinancialassets(shares,loans,bonds,hybridfinancialinstruments)representinginterestsinunlistedcompanies.

TheActof15June2004isatoolforinvestmentinprivatecapitalandoffersconsiderableflexibilityincomparisontotheordinarylawgoverningcommercialcompaniesandisaimedatinformedinvestors60.

10.5.1. What is the purpose of SICARs?

Thepurposeoftheabove-mentionedactistopermittheinvestmentofassetsinsecuritiesrepresentingventurecapital.Investmentinventurecapitalisunderstoodtobeadirectorindirectcontributionofthecompany’sassetsinfavourofthelaunchinganddevelopmentofentitiesortheirlistingonastockexchange.

10.5.2. For which investors are SICARs intended?

TheActonSICARsappliestothefollowingtypesofinvestors:

- institutionalinvestors(seeCSSF’sinterpretationundertheActof19July1991,theActof30March1988,asamended,andtheActof20December2002onundertakingsforcollectiveinvestment,asamended),

- professionalinvestors,

- investorswhohaveconfirmedinwritingthattheywishtohavethestatusofaninformedinvestorand

- investatleastEUR125,000,or

- haveobtainedconfirmationfromafinancialsectorprofessionalcertifyingtheirknowledgeandexperienceinthefieldofinvestmentinventurecapital.

10.5.3. What legal forms are available?

SICARsmaybeincorporatedinoneofthefollowinglegalforms:

• alimitedpartnership(sociétéencommanditesimple),

• apartnershiplimitedbyshares(sociétéencommanditeparactions),

• acooperativecompanyorganisedintheformofapubliccompany(sociétécoopérativeorganiséesousformedesociétéanonyme),

• alimitedliabilitycompany(sociétéàresponsabilitélimitée),

• apubliccompany(sociétéanonyme).

10.5.4. Do any investment rules apply to SICARs?

TheActonSICARsdoesnotlaydownanyinvestmentruleforSICARsoranyotherrequirementasregardstheallocationofrisk.

10.5.5. Exceptions to the provisions of the Act on commercial companies

ContrarytotheActof10August1915oncommercialcompanies,whichstatesthatapubliccompanymayonlybevalidlyincorporatedifatleastonequarteroftheamountofeachsharehasbeenpaidup,theActonSICARsprovidesthatthecapitalmustbesubscribedinfullandthatatleast5%ofeachsharemustbepaidupbyapaymentincashoracontributionotherthanincash.

Justlikeopen-endedinvestmentcompanies,SICARscanprovideforvariablecapital.

SICARsarenotrequiredtocreatealegalreserve.

RedemptionsanddividendspaidtoinvestorsarenotsubjecttoanyrestrictionsotherthanthoseprovidedforintheArticlesofAssociation.

10.5.6. Which prudential supervisory authority supervises SICARs?

SICARsaresupervisedbytheCSSFwhich:

• approvesaSICAR’sinstrumentsofincorporationanditschoiceofdepositary,

59 TheFrenchtextontheSICARusestheterm“capitalàrisque”.ThepreparatoryworkontheActonSICARsclarifiesthistermwhichincludeswhatisgenerallyreferredtointheindustryas“privateequity”and“venturecapital”.

60 Article2oftheActof15June2004.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

• checksthattheSICAR’smanagers(membersoftheBoardofDirectors,managers,ordinarypartners)havegoodreputationsandcanprovideevidenceofsufficientexperience,

• approvesanychangetoaSICAR’sinstrumentsofincorporation,

• approvestheliquidatorandsupervisesliquidation.

ThecentraladministrationofaSICARmustbelocatedinLuxembourg.

Apartfromthelegalprovisionsrelatingtotheminimumamountofcapital,SICARsarenotsubjecttoanyrequirementsasregardsad-ditionalequityoranyspecialrequirementsrelatingtotheidentityandtheroleofthepromotor.

10.5.7. What documents should SICARs publish?

Aprospectusmustcontaintheinformationnecessaryforinvestorstomakeaninformedassessmentoftheproposedinvestmentandtherelatedrisks.

UnlikeUCITSandundertakingsforcollectiveinvestment,SICARsarenotrequiredtopublishsix-monthlyreports.

Anannualreportmustbepublishedwithinsixmonthsoftheendoftheperiodtowhichitrelatesandmustincludeastatementofassetsandliabilities,anincomeandexpenditureaccountcoveringthefinancialyear,areportontheactivitiesofthepreviousfinancialyear,andanysignificantinformationenablinginvestorstomakeasoundassessmentofthedevelopmentoftheSICAR’sactivitiesanditsresults.

SICARsarenotrequiredtodrawupconsolidatedfinancialstatementsaslaiddownintheActoncommercialcompanies.

10.5.8. Tax treatment specific to SICARs?

SICARsaresubjecttopaymentofafixedcapitaldutyofEUR1,25061. Inaddition,theconversionofanon-commercialcompanyoracommercialcompanythatisnotgovernedbytheActof15June2004intoacompanysubjecttotheprovisionsofthislawmakesthisregistrationtaxpayable62.

SICARsarenotsubjecttotheregistrationtax(onsecurities)ortowealthtaxinLuxembourg.

TheActonSICARsdistinguishesbetweenSICARsestablishedintheformofpubliccompanies,whichshouldnotbeconsideredascom-mercialcompanies,andSICARsthathavetakenoneofthelegalformsallowedbytheActoncommercialcompanies.

AsSICARsthattaketheformofapubliccompanyshouldnotbeconsideredascommercialcompanies,theseSICARsarenotsubjecttoincometaxinLuxembourg.

SICARsestablishedintheformofcommercialcompaniesaresubjecttoincometaxinLuxembourgbutanyincomearisingfromthesale,contributionorpaymentofthesecuritiesheldbytheSICARisnotconsideredastaxableincome.Incomegeneratedbyfundswhicharewaitingtobeinvestedinventurecapital(liquidassets)isnottaxableincomeeither,providedthattheseassetsareinvestedinventurecapitalwithin12months.

SICARsincorporatedintheformoflimitedpartnershipsarenotsubjecttothecommunaltradetax63.Incontrast,portionsofprofitaddedtoandincludedintheoperatingprofitofapartnershiplimitedbysharesaresubjecttothecommunaltradetax.

10.5.9. Authorisation and incorporation procedure

InordertobeauthorisedbytheCSSF,aSICARmustfirstofallmakeanapplicationtotheCSSFtogetherwiththefollowingdocuments:

• theArticlesofAssociation,

• theprospectus,

• thecontractwiththedepositarybank,

• thecontract(s)relatingtocentraladministration,

• thelistingagreement(whereapplicable),

• documentsshowingthegoodstandingandappropriateexperienceofthemanagersoftheSICAR(directors,ordinarypartnersormanagersdependingonthelegalform).Thesedocumentsaregenerallysuppliedintheformofacurriculumvitae.

WhenthesedocumentshavebeenreviewedandapprovedbytheCSSF,theSICARmayberegistered,theprospectusfinalisedandagree-mentssigned.WhenthesedocumentshavebeenregisteredwiththeCSSF,theSICARisregisteredontheofficiallistofSICARsheldbytheCSSF.

61 Article1oftheActof15June2004.62 Article2oftheActof15June2004.63 Article36,paragraph2paragraph2,(4)oftheActof1December1936onthecommunaltradetax,asamended.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.6. Guarantee arrangements

10.6.1. Fiduciary agreements

TheActof27July2003relatingtotrustsandfiduciaryagreements(hereinafterthe“Actof27July2003”)introducedinparticularnewregulationsgoverningfiduciaryagreementsandapprovedtheHagueConventionof1July1985onthelawapplicabletotrustsandontheirrecognition.

TheActof27July2003modernisedLuxembourgfiduciaryarrangementsbyreformingthecurrentlegalsystemforfiduciaryagreementsenteredintowithcreditinstitutionsbybasingthemontheLuxembourgRegulationof19July1983relatingtofiduciaryagreements.Thereformwasaimedfirstlyatensuringconsistencybetweenvariousformsoffinalguaranteearrangementsbymeansoffiduciaryagree-mentsandsecondlyatadaptingthelegalsystemapplicabletofiduciaryagreementsbyaddingtothelistofprofessionalswhocanactasfiduciaries.Untiltheadoptionoftheactinquestion,theLuxembourgregulationonlyappliedtofiduciaryagreementsinwhichthefiduciarywasacreditinstitutionestablishedwithintheEuropeanEconomicArea(EEA),authorisedandsubjecttothesupervisionofasupervisoryauthorityinanEEEMemberState.

TheActabrogatedtheLuxembourgRegulationof19July1983andappliestothefutureeffectsoffiduciaryagreementsenteredintobeforeitcameintoforcewithinthescopeoftheabove-mentionedregulation.

10.6.1.1. Management of fiduciary agreements under Luxembourg ordinary law

• Howcanafiduciaryagreementbedefined?

Afiduciaryagreementwithinthemeaningofthelawisanagreementunderwhichaperson,thesettlor,agreeswithanotherperson,thefiduciary,thatsaidfiduciarybecomestheowneroftheassetsthatformthefiduciaryassets,subjecttotheobligationsdeterminedbytheparties.

• Whoorwhatmayactasafiduciary?

TheActof27July2003increasedtherangeofnaturalorlegalpersonswhoorwhichmayactasafiduciaryinaregulatedfiduciaryagree-ment64:

- creditinstitutions,

- investmentfirms,

- open-endedorclosed-endedinvestmentcompanies,

- securitisationentities,

- managementcompaniesthatmanagecommonfundsorsecuritisationfunds,

- pensionfunds,

- insuranceandreinsurancecompanies,

- nationalorinternationalpublicbodiesoperatinginthefinancialsector,

- fiduciaryrepresentativesactinginthecontextofasecuritisationtransaction65.

• Whatarethecharacteristicsofthefiduciarytechnique?

Autonomyoffiduciaryassets

TheActof27July2003containstheconceptthatfiduciaryassetsareseparatefromthefiduciary’spersonalassetsandfromanyotherfiduciaryassets66.

Thisleadstothefollowing:

- fiduciaryassetsmaynotbeattachedbythefiduciary’spersonalcreditors,

- intheeventofthefiduciary’sliquidationorbankruptcyorinanyothersituationinvolvingthedivisionofassetsbetweenthefiduciary’spersonalcreditors,fiduciaryassetsarenotaffectedbytheseprocedures,

- theremaybeseveraldifferentsetsoffiduciaryassets,eachcompletelyseparatefromeachother.

Exceptionstothegeneralregimegoverningmandatesforthesettlor-fiduciaryrelationship,

Followingthesigningofthefiduciaryagreement,settlorsmaywaivetheirrighttogiveinstructionstothefiduciary67.

64 Article4oftheActof27July2003.65 InaccordancewiththeActof22March2004relatingtosecuritisation.66 Article6oftheActof27July2003.67 Article7(4)oftheActof27July2003.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

Incontrasttoamandate,afiduciaryagreemententeredintoforaspecificperiodoftimemaynotbeterminatedunilaterallyunlessthishasbeenspecificallyagreed68.

Theroleofthecourts

Thecourtsmayonlyacttoprotecttheoperationofthefiduciaryagreementifthereareseriousreasons(motifsgraves)todoso.

Intheabsenceofmutualagreementbetweenthepartiestothefiduciaryagreementasregardsterminatingoradaptingthefiduciaryagree-ment,thecourtsmaytakethefollowingmeasuresattherequestofthesettlor,thefiduciaryorathirdpartybeneficiary:

- theprovisionalorfinalreplacementofthefiduciary,

- theearlyterminationofthefiduciaryagreement.

Thecourtsaloneareauthorisedtoreducethetermoftheagreementascomparedtotheterminitiallyagreedonbytheparties,eveniftheyhavewaivedanypossibilityofearlytermination.Thecourtsarenotauthorisedtoamendanyprovisionsrelatingtothefinalsettlementoftheagreementprovidedforbytheparties.

10.6.1.2. Security trusts (fiducie sûretés), a flexible and open regime

• WhattransactionsarecoveredbyLuxembourg’ssecuritytrustregime?

TheActof27July2003providesfortheuseoftrustsforguaranteepurposes69.Itbroadenedthescopeofthesecuritytrustregimeandallowedallformsoftransfersoftitlebyfiduciarymeansasaguarantee.

• Howisthestatusofthepartiestoasecuritytrustagreementdefined?

Insecuritytrustsasprovidedforbytheabove-mentionedact,thefiduciarymustbeapersonauthorisedtoactasafiduciarypursuanttothisact(seepoint1.2above).

Creditors,debtorsorthirdpartyguarantorswhichprovidetheguaranteemaybefromoutsidethefinancialsector.

• Whatisthepurposeandthebaseofsecuritytrusts?

Securitytrustagreementsmaybeenteredintoinordertoguaranteebothexistingandfuturereceivables70.

Thepartiesmayagreetoadjustthecontentsofthetrustassetsregularlyinrelationtoguaranteedcommitmentsorotherfactorsoftheirchoice.

TheActof27July2003doesnotlaydownanylimitsonthetypesofassetswhichmaybethesubjectofasecuritytrust.Anykindofassetsmaythereforebeinvolved,movableorimmovableassets,tangibleorintangiblepropertyorassetscontributedbythesettlororacquiredbythefiduciaryitself.

• Howaresecuritytrustsfinallysettled?

Thefinalsettlementofsecuritytrustsisbasedontheprincipleofcontractualfreedom.Thepartiesarethereforeresponsibleforarrangingforsuchfinalsettlement.

TheActof27July2003doeshoweverprotectthesettloragainsttheriskoftheftbyprohibitinganystipulationintheagreementhavingthepurposeoreffectofexemptingthefiduciaryfromhavingtopaythesettlororthethirdpartybeneficiarythenetbalancearisingfromthedifferencebetweenthevalueoftheassetsmakinguptheguarantee,onthedateofrealisation,andtheamountofthereceivablesguaranteed71.

• Howcantheroleofthecourtsinthesecuritytrustregimebedefined?

Inthecaseofatrustagreemententeredintoforthepurposeofaguarantee,thecourtsareonlyauthorisedtoterminatetheagreementifthefiduciaryintendstokeeptheassetsgivenasaguaranteeaftertheendoftheagreedperiodorinthecasethatthedebtcoveredhasbeenfinallyextinguished.Inallothercases,thecourtsmayonlyorderthefinalorprovisionalreplacementofthefiduciary.

• Favourabletaxtreatment?

UnderLuxembourgtaxlaw,thesettlorhaseconomictitletotheassetsandisthereforethepartyliablefortax.Thetransactionremainstaxneutralforthefiduciary,towhichlegaltitletotheassetshasbeentransferred.Thismeansthat:

- thesettloristaxedonassetsplacedintrust72,

68 Article7(5)oftheActof27July2003.69 ThesecuritytrustregimehadalreadybeenconfirmedbytheActof1August2001onthetransferoftitleascollateral.70 Article8(1)oftheActof27July2003.71 Article8(2)oftheActof27July2003.72 Taxadaptationact(“Steueranpassungsgesetz”)paragraph11,indent2.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

- thesettlorisalsotaxedonassetsacquiredunderafiduciaryarrangementbythefiduciaryonthesettlor’sbehalf73.

However,thefiduciaryisrequiredtoprovethatitonlyholdsrightsunderatrustagreement.

EnteringintoandamendingatrustagreementarenotsubjecttoregistrationformalitieseventhoughitiscustomarytodosobymeansofapublicinstrumentwherethetrustagreementinvolvesassetsthatarelocatedorregisteredoutsideLuxembourg74.

Forthepurposeofwealthtax,trustassetsareincludedinthesettlor’swealth.

Ifthesettlorisatrader,trustassetsareincludedintheoperatingcapitalforthepurposesofthecommunaltradetax75.

Entering intoandamending trustagreements involvingassetsor rights that thefiduciarymaynotkeep formore than30years,andinstrumentsprovidingforthereturnoftheassetsorrightstothesettlorwithinthisperiod,aresubjecttopaymentofafixedduty,iftheagreementissubmittedforregistrationformalities76.

Theactthereforeoffersanadvantageousalternativetotheusualtypeofguarantee,whichisamortgage.

10.6.2. Special provisions relating to banks that issue mortgage bonds (lettres de gage)

TheActof21November1997,supplementedbyanActdated22June2000,hereinafterthe“Actof21November1997”introduced,inChapterIoftheActof5April1993relatingtothefinancialsector,asamended,specialprovisionsforbanksthatissuemortgagebonds(lettresdegage).

• Whatarethemainactivitiesofmortgagebanks?

Mortgagebanksarespecialisedcreditinstitutionswhosemainactivityisgrantingloans:

a) guaranteedbyrightsinreminimmovablepropertyorbysecuritiesintheformofimmovableproperty,

b) guaranteedbybondsorbydebtsecuritiessimilartothosein(a),

c) toauthoritiesunderpubliclaw,

d) guaranteedbyauthoritiesunderpubliclaw,bybondsissuedbyauthoritiesunderpubliclaworbybondsissuedbycreditinstitutionsestablishedinaMemberStateoftheEC,theEEAortheOECDandguaranteedbyreceivablesonauthoritiesunderpubliclaw;

andissuingguaranteeddebtsecuritiesonthisbasiscalledmortgagebonds(lettresdegage).

Theabove-mentionedActdistinguishesbetweenbondsissuedunder(a)and(b)called“hypothecarymortgagebonds”(lettresdegagehypothécaires)andthoseissuedunder(c)and(d)called“publicsectorbonds”(lettresdegagepubliques)77.

• Whataretheincidentalandancillaryactivitiesofmortgagebanks?

Mortgagebanksmayonlyperformotherbankingorfinancialactivitiesinsofarastheseactivitiesareincidentalandancillarytotheirmainactivity78.

Thefollowingactivitiesinparticularareconsideredasincidentaltotheirmainactivity:

- sellingandpurchasingsecuritiesintheirownnamefortheaccountofthirdparties,butexcludingforwardtransactions,

- withaviewtograntingmortgageloansorloanstopublicentities,receivingcapitalsumsasdepositsfromthirdparties,withorwith-outinterest,takingoutloansandfurnishingsecurityforsuchloans,andissuingbondswhicharenotsubjecttothemandatorycoverrequirementslaiddownformortgagebondsorpublicsectorbonds,

- providingcustodyandmanagementservicesinrespectofsecuritiesforthirdparties,

- acquiringholdingsinundertakings,providedthateachholdingdoesnotintotalexceedonethirdofthenominalvalueofallthesharesintheundertakinginwhichtheholdingisacquired79.

• Whichlegalprovisionsapplytomortgagebondsissuedbythesebanks?

Articles86to94-8oftheActof10August1915relatingtocommercialcompanies,asamended,relatingtotheissuingofbondsbypubliccompanies,applytomortgagebonds80.

73 Taxadaptationact(“Steueranpassungsgesetz”)paragraph11,indent3.74 Article12(1)oftheActof27July2003.75 Article2ofthetaxadaptationact(“Gewerbesteuergesetz”).76 Article12(3)oftheActof27July2003.77 Article12-1(3)oftheActof21November1997.78 Article12-2(1)oftheActof21November1997.79 Article12-2(1),points(a)to(d)oftheActof21November1997.80 Article12-1(5)oftheActof21November1997.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.6.2.2. Creation and maintenance of guarantees in consideration for the issuing of mortgage bonds

• Whatisthelimitonmortgagebondsincirculation?

Thetotalamountofhypothecarymortgagebondsandpublicsectorbondsofamortgagebankincirculationmaynotexceed60timestheamountofitsequity81.

• Howiscollateraldefined?

Ordinarycollateralconsistsofreceivablesandguaranteesrelatingtheretoasdescribedaboveandheldasassetsinconsiderationforthecommitmentsofthebankissuingmortgagebondsandresultingfromtheissueofsaidmortgagebonds.

Collateralallocatedtohypothecarymortgagebondsformsasetofassetsthatisseparatefromthesetofassetsallocatedtopublicsectorbonds82.

Ineachofthesesetsofassets,upto20%ofthenominalvalueofbondsincirculationmaybereplacedbysubstituteformsofcollateralmadeupofcash,assetsheldincentralbanksorothercreditinstitutionshavingtheirregisteredofficeinaStatethatisaMemberoftheEC,theEEAortheOECD,orbondsthatmeettheconditionslaiddownbyArticle42(3)oftheActof30March1988relatingtoundertak-ingsforcollectiveinvestment.

Thetotalnominalamountofmortgagebondsincirculationmustalwaysbefullyguaranteedbycollateral.Thiscollateralmustbearinterestinanamountthatisatleastequaltotheamountofinterestgeneratedbythesesamemortgagebonds83.

Upto60%oftheestimatedmarketvalueoftheimmovablepropertyusedtoguaranteereceivablesarisingfromloanswithguaranteesconsistingofhypothecarymortgagebondsmaybeusedascollateral84.

Afairandprudentestimateofthevalueofmortgageguaranteesmayonlytakeintoaccountthepermanentfeatureofthepropertyandthelastingincomethatitmayprovidetoanyownerusingitnormallyinaccordancewithitsintendeduse.Residentialpropertyandpropertyusedforindustrial,commercialandprofessionalpurposesmaybeusedascollateral.

• Whereisthecollateralofthesemortgagebondskept?

Mortgagebanksarerequiredtodrawuparegisterofmortgagebondsinwhichallthecollateralmustberegisteredonanindividualbasis85.

Theregisterissub-dividedintotwoparts,oneusedtoregistercollateralallocatedtohypothecarymortgagebondsandtheotherforcol-lateralallocatedtopublicsectorbonds.

10.6.2.3. Mortgage bondholder’s preferential right

Thecollateralguaranteesmortgagebondholders that their receivablewillbepaid in full.Thecollateralmaynotbeattachedormadesubjecttoanyenforcementmeasurebypersonalcreditorsoftheissuerotherthanthemortgagebondholders86.

Theregistrationofthecollateralintheregisterofmortgagebondsgrantsthemortgagebondholdersapreferentialrighttothecollateralwhichtakespriorityoverallotherrights,liensandpreferencesofanykindwhatsoever,includingthoseoftheLuxembourgTreasury.Regis-trationintheregisterofmortgagebondsisgoodevidenceofthedate.

Intheeventoftheliquidationofthemortgagebank,thiscollateraldoesnotformpartoftheassetstoberealisedundertheliquidation87.

Themortgagebondsandtheircollateralbothcontinuetoexistandthemortgagebondsarepaidwhentheyfalldue.Ifanyassetsremainafterthecreditorswithapreferentialrighthavebeenpaidoffinfull,theseassetsaretransferredtotheassetstoberealisedaspartoftheliquidationofthebankthatissuedthemortgagebonds.Ifthecollateralisinsufficienttopayoffthemortgagebondholdersinfull,thesemortgagebondholdersbecomeunsecuredcreditorswithregardtothebalanceowed.

10.6.2.4. How are mortgage banks supervised?

Thelegalprovisionsrelatingtoshareholders,financialassets,factorsorratios(coefficients),professionalobligations,etc.,arethesameformortgagebanksasforbanksgenerally.

81 Article12-3oftheActof21November1997.82 Article12-5(2)oftheActof21November1997.83 Article12-5(4)oftheActof21November1997.84 Article12-5(5)oftheActof21November1997.85 Article12-6(1)oftheActof21November1997.86 Article12-8(1)oftheActof21November1997.87 Article12-8(4)oftheActof21November1997.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

10.6.2.5. Who is entrusted with the auditing of the mortgage banks’ accounts?

Onthebasisofaproposalbythecreditinstitutioninvolved,theCSSFappointsaspecialauditor(réviseur),qualifiedasanindependentauditor,whoisnotthesamepersonastheindependentauditorthatauditstheaccountsofthemortgagebank88.

Thespecialauditorthusappointedmustactasfollows:

- reporttotheCSSFonhisorherfindingsandobservationsduringtheperformanceofhisorherassignment,

- ensurethatthecollateralissetupandregisteredintheregisterofmortgagebonds,thatitreachestheamountrequiredandcontinuestoexist,

- checkonthebasisofthebank’sassessmentruleswhethertheminimumrateofcoverforwhichtheimmovablepropertyassetsmaybeusedascollateralhasbeenrespected.

Whenmortgagebondsareissued,acertificatemustbeissuedbythespecialauditorcertifyingtheexistenceofthecollateralrequiredundertheabove-mentionedActandthecollateralmustberegisteredintheregisterofmortgagebonds.

Collateralmayonlyberemovedfromtheregisterwiththeagreementofthespecialauditor.

10.6.3. Financial collateral arrangements

TheActof5August2005onfinancialcollateralarrangements(the“Actof5August2005”),whichtransposedEuropeanParliamentandCouncilDirective2002/47/ECof6June2002onfinancialcollateralarrangements,cameintoforceon16August2005.

TheActisaimedatincreasingthelegalsecurityoffinancialcollateralarrangementsbyremovingcertain“inequalities”betweenthevarioustypesofarrangementsduetothefactthattheywereintroducedatdifferenttimes.Underthegenerictermof“financialcollateralarrange-ments”,theActcoverstraditionalguaranteesandnewformsofguarantees.

Oneoftheaimsoftheabove-mentionedActwastobringtogetherallthelegislationonfinancialcollateralarrangementsintoonesingleactandtoincreasethetransparencyandaccessibilityofthispartofLuxembourg’slegislation.

• Whoarethepartiestofinancialcollateralarrangements?

AlthoughDirective2002/47/ECappliestofinancialcollateralarrangementsinwhichatleastoneofthepartiesisapublicauthority,acentralbank,afinancialinstitution,acentralcounterpartyorcertaininternationalbanksorfunds,thescopeofapplicationoftheActismuchbroaderinasmuchasitintroducedtheconceptof“financialprofessionals”89.

In contrast toDirective2002/47/EC, this concept also includes industrial and commercial institutionswithprofessional access to thefinancialmarket, pension funds, undertakings for collective investment and theirmanagement companies, insurance and reinsurancecompanies,securitisationentitiesandanyotherfinancialsectorprofessionals.

• WhattypesoffinancialinstrumentsdoestheActcover?

TheActgivesadefinitionoffinancial instrumentsthat isnotexhaustive.Thedefinitionoffinancial instrumentscovers inparticularalltransferablesecuritiesandothersecurities,futures,unitsorsharesincompaniesandundertakingsforcollectiveinvestment,tradebills,bondsandotherdebtsecuritiesaswellasreceivablesrelatingtothesefinancialinstruments.

• Whatconditionsmustbemetforlowerrankingpledges?

TheActintroducedthepossibilityforthepledgortopledgeassets(financialinstrumentsandreceivables)infavouroflowerrankingcredi-tors,providedthefirstsecuredcreditordoesnothavearightofusetotheassets90and91.ThelegaltreatmentapplicabletoappropriationbythesecondsecuredcreditorisprovidedforinArticle6,paragraph1,indentsa)toe)oftheActof5August2005.

• Whatarerepurchaseagreementtransactions?

TheActreplacesandabrogatesthepreviousActof21December2004.Itdistinguishesbetweentransactionsinwhichthepurchaserisrequiredtoreconveythesecuritiesrepurchasedandthoseinwhichitonlyhasarighttoreconveythesecurities92.

Arepurchaseagreementtransactionisdefinedasanytransactioninwhichasellerassignsanassettoapurchaserinconsiderationforthepaymentofaprice,andwheretheobligationoroptionofsubsequentreconveyanceofthisassetoranequivalentassettothesellerisprovidedforatapriceagreedinadvance93.

88 Article12-7oftheActof21November1997.89 Article1point(12)oftheActof5August2005.90 Article6(1)oftheActof5August2005.91 Article6(3)oftheActof5August2005.92 Article16(5)and16(6)oftheActof22March2004.93 Article16(1)oftheActof22March2004.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

Likeanytransferoftitleascollateral,theActdefinesrepurchaseagreementsincomparisonwithtransfersoftitleenteredintotoensure“abalancebetweentheparties’obligations94”.

Thescopeofapplicationoftheseactsisverybroadastheymayrelateto“allkindsoftangibleorintangibleassets”,notmerelytransferablesecuritiesorfinancialinstruments.

• Whatisthevalidityoffinancialcollateralarrangementsinliquidationorrestructuringprocedures?

UndertheAct,financialcollateralarrangementsinvolvingassets(financialinstrumentsandreceivables)establishedinaccordancewiththisActarevalidandbindingonthirdpartiesnotwithstandingtheexistenceofanyrestructuring,liquidationprocedureoranyothernationalorinternationalmeasureinvolvingtherightsofcreditors95.

10.6.4. The Act of 22 March 2004 relating to securitisation

TheLuxembourgActof22March2004(the“Actof22March2004”)relatingtosecuritisationandamendinginteraliatheActof5April1993relatingtothefinancialsector,asamended,andtheActof27July2003ontrustsandtrustagreements,createdaveryattractivelegalframeworkforsecuritisationinLuxembourg.

Under theAct, securitisation transactionsmaybecarriedoutwithagreatdealofflexibilityandviablestructuresmaybesetupatareasonableprice.

• Howcansecuritisationbedefined?

TheActof22March2004definessecuritisationasatransactioninwhichasecuritisationentity(the“Issuer”or“DedicatedStructure”)acquiresortakesoverdirectlyfromanotherbody(the“Originator”)risksrelatingtoreceivablesorotherassets,bondsoractivitiesofathirdpartybyissuingsecurities(“Assets”)whosevalueoryielddependsontheserisks.

Duringtheperiodofsecuritisation,paymentsreceivedinregardtotheAssetsarecollectedbyaserviceprovider,oftentheOriginator(the“ServiceProvider”),thendepositedandinvestedinvariousaccountscontrolleddirectlyorindirectlybyatrustee(“Trustee”).PaymentsaremadebytheTrusteetotheinvestorsfortheirsecurities.

SecuritisationtransactionsasdefinedinthisActarenotoperationswhichfallwithinthescopeoftheActof6December1991relatingtotheinsurancesector.

• Whatadvantagesdoessecuritisationhavefortheassignor?

Securitisation:

- transformsnon-liquidfinancialassetsintoliquidfinancialassetsthatcanbemarketed,therebyenablingtheassignortoreplacetheAssetsbyequivalentliquidityandtofinanceadditionalactivitieswithcashflow,

- isaneffectiveandadvantageoussourceoffundingcomparedtootheralternativesourcesoffunding,

- mayallowtheassignortocontinueitsactivitiesandgeneratenewassetswithouthavingtowaitfortheAssetstomatureorfallduewheretheAssetsareassetsinkind,

- maycontributetoimprovingvariousfinancialratiosandthususecapitalmoreeffectivelybywithdrawingAssetsfromthebalancesheet.

• Whatriskscanasecuritisationentityassume?

Thefollowingmaybethesubjectofthesecuritisationoftheveryvariedriskslinkedtoholdingassetswhich:

- areinmoveableproperty,

- areinimmovableproperty,

- aretangible,

- areintangible,

- arisefromcommitmentsenteredintobythirdparties,

- areinherenttoallorsomeoftheactivitiesperformedbythirdparties.

• Whatarethemainfeaturesofsecuritisationstructures?

Asecuritisationentitymaybesetupintheformofacommercialcompanyorfundwhichismanagedbyamanagementcompanyonthebasisofmanagementregulations96.

94 Article16(2)oftheActof22March2004.95 Article21(1)oftheActof22March2004.96 Article2oftheActof22March2004.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

OnlysecuritisationentitiesdomiciledinLuxembourg,i.e.securitisationentitieshavingtheirregisteredofficeinLuxembourgandsecuritisa-tionfundswhosemanagementcompanyhasitsregisteredofficeinLuxembourg,areregulatedbytheAct97.

• Whatlegalformmaysecuritisationentitiestake?

Securitisationcompaniesmaytaketheformofapubliccompany,apartnershiplimitedbyshares,alimitedliabilitycompanyoracoopera-tivecompanyorganisedasapubliccompany98.

• Howdosecuritisationfundsoperate?

Securitisationfundsmayconsistofoneorseveraljointly-ownedentities(copropriétés)orfiduciaryassets(patrimoinesfiduciaires).

- Asecuritisationfundmayhaveseveralsub-fundsoperatingonthebasisoftheprincipleofthesegregationofassets,witheachsub-fundrepresentinganindividualsetofassetsanddebts99.

- Liquidationofasub-funddoesnotentailtheliquidationofothersub-funds.Equally,liquidationofallthesub-fundsdoesnotentailtheliquidationofthesecuritisationentity.

- Investors’andcreditors’rightsarelimitedtotheassetsofthesecuritisationentityorofthespecificsub-fundinaccordancewiththeprincipleofthesegregationofsub-funds.

Thecreditorsofthemanagementcompanyofasecuritisationfundoroftheinvestorshavenoaccesstothefund’sassets100.

10.6.4.2. Regulated securitisation entities

• Whenisauthorisationrequired?

Securitisationentitiesthatdonotissuetransferablesecuritiesforthepublicorwhichmakeonlyoneissueofsecurities(evenifthisisinseveralinstalments)orwhichissuesecuritiesotherthanonaregularbasisdonotneedtosubmitanapplicationtotheCSSFforauthorisa-tion.However,securitisationentitieswhichcontinuouslyissuesecuritiesforthepublicmustapplytotheCSSFforauthorisation101.

Inordertodothis,theCSSFmustfirstapprovethesecuritisationentity’sArticlesofAssociationormanagementregulations102.Equally,anychangeinthesedocumentsmustbesubmittedforitspriorapproval.

Inaddition,asecuritisationentitymusthaveasystemoforganisationandresourcesthatareappropriateforperformingitsactivities.Themembersoftheadministrative,managementandsupervisorybodiesofasecuritisationcompanyorthesecuritisationentity’smanagementcompanyandpartnersandshareholdersmusthavegoodstandingandexperienceortheresourcesrequiredtoperformtheirduties.Forthispurpose,theCSSFmustbenotifiedoftheidentityofthesenaturalorlegalpersonsandtheirreplacementswithoutdelay103.

• Howaresecuritisationentitiessupervised?

Allasecuritisationentity’sassetsthatareintheformofliquidassetsorsecuritiesmustberegisteredwithaLuxembourgcreditinstitution104.

10.6.4.3. Fiduciary representatives

TheActprovidesforanewcategoryofentities,thatoffiduciaryrepresentativeswhoserolemaybecomparedtothatofatrustee.ThescopeoftheAct’sapplicationislimitedsolelytofiduciaryrepresentativeswhoseregisteredofficeislocatedinLuxembourg.

• Whatlegalrequirementsmusttheymeetinordertobeauthorised105?

Fiduciaryrepresentativesmust:

- beincorporatedintheformofacapitalcompanywithaminimumsharecapitalandequityofnotlessthanEUR400,000,

- havearegisteredofficelocatedinLuxembourg,

- refrainfromanyotheractivitiesalongsidetheirmainactivity,exceptforactivitiesthatareincidentalandancillarytotheirdutiesasrepresentatives.

97 Article3oftheActof22March2004.98 Article4(1)oftheActof22March2004.99 Article8oftheActof22March2004.100 Article17oftheActof22March2004.101 Article19oftheActof22March2004.102 Article17oftheActof22March2004.103 Article20(1)oftheActof22March2004.104 Article20(2)oftheActof22March2004Article22oftheActof22March2004.105 Article22oftheActof22March2004.



Luxe

mbo

urg’

sfin

ancia

lsec

tor

• Whatdutiesareperformedbyfiduciaryrepresentatives?

Inordertoprotecttheirinterests,theinvestorsandcreditorsofasecuritisationentityorfundmayappointoneorseveralfiduciaryrepre-sentatives106.

Fiduciaryrepresentativesaccepttheirdutiesbymeansofanagreement.Thisagreementshouldspecifytheirrightsandpowers,inparticulartheirpowersofrepresentation,thegroupsofinvestorsorcreditorswhichhaveentrustedthemanagementoftheirintereststothefiduciaryrepresentatives,andtheproceduretobeusedintheeventthefiduciaryrepresentativesarereplaced.Thisagreementisbindingonalltheinvestorsandcreditorswhichhaveacceptedthefiduciaryrepresentatives.

Fiduciaryrepresentationofinvestorsandcreditors

Fiduciaryrepresentativesmayalsobeappointedbyinvestorsandcreditorstoactontheirbehalfonafiduciarybasis,inaccordancewithLuxembourglegislationontrustsandtrustagreements107.Delegatingthispowerofrepresentationentailsthewaiverbytheinvestorsandcreditorsoftheirrighttoexercisetheirrightsonanindividualbasis.

Representationofthesecuritisationentity

Securitisationentitiesmayassignallorsomeof therightsandsharesarisingfromanagreemententered intowithathirdparty (the“ContractingParty”)tofiduciaryrepresentatives.Thisthirdpartymayvalidlypayitsdebtstothesecuritisationentityprovideditwasnotawareofthetransfer108.

10.6.4.4. Tax treatment – Complete tax transparency

• Capitalduty

InLuxembourg,contributionsofcapitalaresubjecttoataxof1%109.

TheActof22March2004offersthepossibilityofcreatingstructuresbasedoncapitalcontributionswhichdonotgiverisetoanyadvaloremtaxes.

RegisteringasecuritisationentityissubjecttoregistrationtaxlaiddownbyLuxembourgregulationwhichmaynotexceedEUR1,250110.

• Taxesonincome

Securitisationentities

Securitisationentitiesorganisedintheformofcommercialcompaniesareliableforcorporationtax,thecontributiontotheemploymentfundandthecommunaltradetaxfunds,whichinprinciplecorrespondstoanoveralltaxburdenof30.38%111.

Paymentsmadebyasecuritisationcompanytoitsinvestorsandothercreditorsmaybedeductedinfull.

Inpractice,theseentitieswillnevermakeanyprofitthatcouldbetaxedandwillnotpayanytaxonincomeasanyincomeorprofitisnormallyoffsetbyataxdeductibleexpense.

Securitisationfunds

SecuritisationentitiesorganisedintheformofinvestmentfundsarebydefinitionexemptfromanytaxonincomeinaccordancewiththeprovisionsoftheActsof30March1988and20December2002relatingtoundertakingsforcollectiveinvestment.

Incontrasttomostinvestmentfunds,theseentitiesdonotneedtopayregistrationtax(onsecurities)112.

Treatmentofinvestors

Distributionsofdividendsandpaymentsofinterestbysecuritisationentitiesareexemptfromanywithholdingtax,subjecttothepossibledeductionoftaxinaccordancewiththeECDirectiveonthetaxationofsavingsincome.

106 TitleIV,Chapter2,Section2oftheActof22March2004.107 Article67oftheActof22March2004.108 Articles69and71oftheActof22March2004.109 Article72oftheAct.110 Article51(1)oftheAct,setatEUR1,250bytheLuxembourgRegulationof29April2005.111 29.63%forcompanieshavingtheirregisteredofficeontheterritoryoftheCityofLuxembourg.112 Article50oftheAct.