Luxembourg is one of the smallest countries in the world, but also one of the wealthiest. And it could be the gateway for Chinese investors in Europe, as it is the hub for financial institutions operating on a cross-border basis in the European market, with more than 140 banks and financial institutions gathered there.
Luxembourg and China : long term friends
Since the foundation of diplomatic relations in 1972, Luxembourg and China have developed very close ties in different areas including trade, finance, higher education, research & development, tourism, and culture.
Taking into account its financial services, and stable political and economic environment, many Chinese corporations choose Luxembourg as the portal to the EU.
China-Luxembourg relations have also enjoyed healthy and stable development for a long time and the economies of the tow countries are highly complementary.
Luxembourg has a long-standing status of being the global center of cross-border investment fund management. Hence, if a Chinese asset manager plans to launch an investment fund product and distribute this on a cross-border basis, Luxembourg offers the perfect platform for their distribution ambitions.
Outlined next, are a couple of well-established factors that make Luxembourg the leading jurisdiction for Chinese institutions.
Luxembourg: A natural gateway for investment flows in and out of China.
- Luxembourg is recognized as the international hub for cross-border investment funds that offer Chinese asset managers a platform to launch an investment fund product and to dispense it on a cross-border basis, i.e., not only in Europe but also back to Asia and across the globe.
- The MoU signed between the Luxembourg and Chinese regulators makes Luxembourg one of the few financial centers to have such an agreement, encouraging QDIIs (Qualified Foreign Institutional Investors) to invest directly in Luxembourg-regulated financial products, including investment funds domiciled in Luxembourg.
- Luxembourg offers Chinese investors a strong tradition of the investor protection program.
- Being a founding member of the European Union, it has a stable democracy and strong economy for Chinese institutions to get in on.
Luxembourg offers a practical tax regime
Below are a number of key features that makes Luxembourg a tax-efficient place for Chinese institutions to conduct business:
- Luxembourg has a stable and consistent tax legislation.
- There is Access to a wide variety of more than 75 double taxation treaties, and these types of agreements between countries tend to eliminate the taxation of the same income in two countries.
- There are Efficient possibilities for cash repatriation to Chinese investors.
- Dividends and capital gains are tax-exempt in accordance with the participation exemption regime.
- No withholding tax on interest, license fees, and dividends.
- Management and administration services provided by a Luxembourg service provider to a Luxembourg fund are VAT exempt.
- No capital duty or stamp duty.
- Special tax regime for expatriates of highly skilled employees if specific conditions are met.
A flexible investment toolbox
Chinese investors find in Luxembourg, a large variety of investment vehicles that can suit their investment needs. The existence of a center of excellence for its fund industry, infrastructure and skill to create products covering all asset classes and for any investor type is well appreciated by Asian investors.
In addition, Luxembourg is also recognized internationally for:
- genuine servicing and product structuring expertise in the cross-border space,
- its genuine servicing and product structuring expertise in the cross-border space,
- multilingual capabilities, and, especially,
- an incredibly stable economic,
- political and regulatory environment.
This recognition has made Luxembourg the most significant hub for Chinese institutions cross-border business in the Eurozone.
Given Luxembourg’s strengths of the RMB clearing capability in addition to its financial services ability, an ever-increasing number of Chinese institutions will continue to use Luxembourg as the gateway to the Eurozone.
If you plan to invest in Europe, contact your Damalion expert now so we can help you create your Luxembourg company, or investment fund. We shall help you for relocation services and bank account opening.
