India recently signed a Double Taxation Avoidance Agreement (DTAA) with Luxembourg for avoidance of double taxation, prevention of tax evasion and promotion of economic cooperation between the two countries.

For India, the agreement covers income tax, wealth tax and surcharges while for Luxembourg it covers income tax, corporation tax, communal rate tax and capital tax. DTAA provides for taxation of dividend, interest, royalties and fees for technical services both in country of residence as well as the country of source.

Financial Sector

In a chat with Diplomatist, André Biever, First Secretary-Deputy Head of Mission, Embassy of Luxembourg in New Delhi showcased his country’s mettle in capturing the mind share of the Indian business community. In his projection, Luxembourg is the emerging financial centre in Europe, and the second biggest after the US.

Luxembourg is famous for its financial sector. It has 154 banks, of which 150 are foreign majority owned with total assets of US$828 billion; 2,170 investment funds with assets under management of US$1,733 billion of which 2-3 percent is invested in India.

MICE Destination

It strengths are numerous; surrounded by big neighbours like France, Germany and Belgium, this small country — a Grand Duchy — offers big opportunities in investment, trade and tourism. The country encompasses an area of 2,586 square kilometres with a population of half a million.

According to Biever, Luxembourg is keen to tap the MICE market (meetings, incentives, conferences and entertainment) and attract business visitors to that country. The embassy in India is looking forward to a dialogue with the key stakeholders in travel and tourism industry in this regard. Visiting Luxembourg also provides the opportunity to visit 15 Schengen States with a single visa.

Ties with India

The high-level ministerial visits from Luxemberg have done a good job in stepping up awareness about investment opportunities there. In the past one-year, three senior Luxembourg ministers visited India. Visits of Treasury and Justice Minister, Mr Luc Frieden, Deputy Prime Minister and Foreign Affairs Minister, Mr. Jean Asselborn and Economy and Foreign Trade Minister Mr. Jeannot Krecke were significant.

Steel Sector

Steel exports constitute one quarter of the value of Luxembourg’s export trade. It was the discovery of the iron ore around year 1850, which marked the turning point for Luxembourg and its economic take-off.

An important steel industry came into being in the south-western corner of the country, drawing tens of thousands of foreign workers into the ore mines and steel factories, and bringing prosperity to the whole country.

Luxembourg is home to the ArcelorMittal group (previously known as ARBED), the largest private employer in the country and the number one steel company in the world. It has presence in over 60 countries, and produces around 10 percent of world steel output. The factor that its promoter Lakshmi Mittal is a person of Indian origin creates an emotional link with India.

With the manufacturing sector giving way to the dominance of the service sector, the former’s contribution to Luxembourg’s GDP is on the decline; Luxembourg is positioning itself as a logistics hub and a place for the plastic industry. It is also endowed with a strong auto component industry.

EU Institutions

Many European Union institutions are headquartered in Luxembourg:

• The Court of Justice of the European Communities

• The General Secretariat of the European Parliament

• The European Investment Bank

• The European Court of Auditors

• The Official Publications Office

• The Nuclear Safety Administration

• The Directorate-General of ‘Credits and Investments

Luxembourg’s leading satellite company, SES, which operates Astra satellites has merged with GE Americom into SES Global, becoming the leading satellite operator in the world.

India Connection

Luxembourg cargo airline, Cargo-Lux, is flying to Chennai, West Asia and on to Singapore and is doing a brisk business. More than two-thirds of Luxembourg’s exports to India are comprised of machines, engineering items and other equipment such as batteries. Imports from India constitute metals, raw materials such as iron ore, besides textile items.

Haven of non-resident workers

June 23rd is Luxembourg’s National Day and the Official Birthday of the Grand Duke.

It has the highest national income per head in Europe, more than twice that of France or Britain. A third of Luxembourg’s workforce is non-resident.

Many people come every day and work in Luxembourg, which is only 82 km long and 57 km wide. German workers in Luxembourg commute to work in the morning and return to their homes across the border every evening, as do workers from France and Belgium, the other countries neighbouring Luxembourg.