Why is Luxembourg So Rich ?
If you’ve ever been to Luxembourg, you know it’s one of the most beautiful countries in the world.
You might also know that it’s incredibly wealthy – GDP per capita is nearly $100,000! But what exactly makes Luxembourg so rich?
We have five potential explanations for Luxembourg’s relative wealth, and we invite you to chime in with your thoughts on our ultimate reason why Luxembourg is so rich…
Find more statistics at Statista
1) Tax advantages
The tax advantages of setting up a company in Luxembourg are well known. According to KPMG, these can be summarized in 4 points: i) no corporate income tax (CIT); ii) no withholding tax on dividends and interest; iii) financial services are exempted from VAT; iv) fiscal transparency, since companies resident in Luxembourg are not subject to worldwide taxation.
2) Export economy
The country’s diversified export economy, fueled by strong trade ties to other countries and a world-class banking system, has been one of its defining features since independence.
Remarkably, 80 percent of gross domestic product (GDP) comes from services – especially banking and financial services – while only 20 percent stems from manufacturing and agriculture.
3) Currency stability
The strength of Luxembourg’s economy has a lot to do with its currency. Being a small, landlocked country in Western Europe doesn’t hurt, but being on both sides of three different European borders (Germany, France and Belgium) is hardly ideal when it comes to establishing an independent national currency.
4) Economic diversity
While it’s true that Luxembourg has a very low unemployment rate and an incredibly high GDP per capita, it also boasts one of Europe’s most diverse economies.
This variety helps insulate it from downturns in other markets and makes for a solid foundation for sustained growth.
5) Location, location, location
Why is Luxembourg so rich? The answer might surprise you. While it’s certainly not a tax haven, Luxembourg has a rather advantageous location.
Located between Germany, France and Belgium, its small size makes it an ideal starting point for trade with other countries in Europe.
Additionally, its proximity to Germany gives it an edge over other European countries—Germany alone generates more than 60% of all of Europe’s exports.