Banks & Finances Luxembourg

Luxembourg, as a leading financial center in Europe, offers a wide range of banking institutions ready to serve foreign clients.

Banque et Caisse d'Épargne de l'État (Spuerkeess): The state bank of Luxembourg, offers a wide range of services for residents and non-residents. The bank is known for its reliability and high level of customer service.

Banque Internationale à Luxembourg (BIL): Provides services to both private individuals and corporate clients, including foreigners. The bank offers multi-currency accounts and services tailored for international clients.

BGL BNP Paribas: Offers a wide range of services for foreign clients, including investment products and multi-currency accounts. The bank has an extensive network of branches and ATMs throughout the country.

ING Luxembourg: ING Luxembourg offers retail and corporate banking services, including special offers for expatriates and foreign clients. The bank is known for its innovative digital services and multilingual support, making it easier for foreign clients to interact.

Advanzia Bank: Advanzia Bank specializes in providing credit cards and deposit accounts for private clients across Europe. The bank offers services without annual fees and with simple conditions.

Recommendations for choosing a bank in Luxembourg for foreigners:

Check bank requirements: Some banks may have specific requirements for documents or minimum deposits for foreign clients. It is recommended to clarify these conditions in advance by contacting the chosen bank directly.

Language support: Many banks in Luxembourg provide services in multiple languages, including English, French, and German, which facilitates communication for foreign clients.

Digital services: Pay attention to the availability of internet banking and mobile applications, which can significantly simplify account management from abroad.

Fees and charges: Study the fee structure for account servicing, international transfers, and other services to avoid unexpected expenses.

Opening a bank account in Luxembourg for foreigners is a process that requires preparation and understanding of local requirements. Luxembourg banks offer a wide range of services for non-residents, but procedures and required documents may vary depending on the specific bank and applicant's status.

Steps to open a bank account in Luxembourg

Choosing the right bank: Luxembourg offers many banks ready to work with foreign clients. Some of them specialize in international services and have experience working with non-residents.

Gathering necessary documents: The standard set of documents to open an account includes:

Identity verification: A valid passport or national ID card.

Proof of residence: Documents that confirm the official address of residence, such as a rental agreement, utility bills, or a registration certificate.

Proof of income: Salary certificate, letter from employer, bank account statement or other documents confirming the legality of received funds.

Tax identification number: Tax number from the country of residence or Luxembourg tax number.

Important: Each bank may request additional documents depending on its internal policy and the applicant's status.

Completing the "Know Your Customer" (KYC) procedure: Banks are required to conduct the KYC procedure to ensure the client's reliability and the legality of the source of funds. This may include filling out a questionnaire indicating sources of income, assets owned, business information and counterparties, as well as confirming the absence of connections with companies or individuals on sanctions lists.

Submitting documents and opening an account: After gathering all necessary documents, they should be submitted to the chosen bank. Some banks allow sending documents online with subsequent mailing, however, it is recommended to clarify the possibility of such a submission method in advance. The average time for opening an account depends on the bank and ranges from 10 to 30 working days.

Features for citizens of different countries:

Citizens of European Union countries: The account opening process for EU residents is generally simpler and requires a minimal set of documents, such as a passport, proof of address in Luxembourg, and a document confirming income.

Citizens of other countries: For citizens of other countries, the process may be more complicated and require more documents. Some banks may request additional confirmations of the legality of funds and the completion of the KYC procedure.

Recommendations: It is recommended to contact your chosen bank to clarify all requirements and procedures before submitting documents.

Using ATMs

ATMs (Automated Teller Machines) that accept cards from international payment systems like Visa, Mastercard, and UnionPay are widely available in Luxembourg. However, the availability and usage terms may vary depending on the type of card and the issuing bank.

Fees and charges

Issuer bank fee: Many banks charge a fee for withdrawing cash from overseas ATMs. The fee can range from 1% to 5% of the transaction amount, but not less than a certain fixed amount.

ATM owner fee: Some banks that service ATMs may charge an additional fee for using their machines with foreign cards. This information is usually displayed on the ATM screen before confirming the operation.

Currency conversion

When withdrawing euros with a card whose account is in another currency, conversion occurs. Banks may apply their own exchange rates, which are not always favorable to the client. Additionally, there may be extra conversion fees, usually ranging from 1–3% of the transaction amount.

Cash withdrawal limits

Banks set daily and monthly limits on cash withdrawals. These restrictions depend on the type of card and the bank's policy.

Recommendations to minimize expenses

Check your bank's conditions: Before traveling, contact your bank to find out about fees for withdrawing cash abroad and the applicable conversion rates.

Choose ATMs with minimal fees: Some partner banks may offer more favorable terms for cash withdrawals. Information about possible fees is usually displayed on the ATM screen before completing the operation.

Withdraw large amounts less frequently: To reduce the number of operations and, accordingly, the total amount of fees, plan cash withdrawals so that you withdraw larger amounts less frequently.

Alternative ways to get cash

Cash withdrawal at a store checkout: In some retail locations in Luxembourg, you can additionally withdraw cash when making a purchase with a card. However, the terms and availability of this service depend on the specific store and bank.

Using cards with multi-currency accounts: Some banks offer cards linked to accounts in different currencies, allowing you to avoid double conversion and associated fees.

Bank transfers (SWIFT):

Luxembourg banks provide international transfer services through the SWIFT system. To make such a transfer, the following recipient details need to be provided:

Recipient's first and last name

Bank account number or IBAN

BIC/SWIFT code of the recipient's bank

Name and address of the recipient's bank

Fees and timelines:

- Fees for SWIFT transfers can be significant and depend on the tariffs of the specific bank.

- The funds are usually credited within 1 to 5 business days.

Online money transfer services

There are specialized platforms offering more favorable conditions for international transfers:

Wise: Provides transfers at the real exchange rate with transparent and low fees.

TransferGo: Known for fast transfers and competitive rates.

Paysend: Specializes in card-to-card transfers with a fixed fee.

Advantages:

- More favorable exchange rates compared to traditional banks.

- Quick funds crediting, sometimes within minutes.

- The ability to send money directly to the recipient's bank card.

International money transfer systems

Classic systems such as Western Union and MoneyGram allow sending money in cash or to a bank account. However, their availability and terms of operation may vary depending on the destination country.

Cryptocurrency Transfers

For those familiar with digital currencies, transferring funds via cryptocurrencies can be an alternative method. However, this approach requires certain knowledge and understanding of the risks associated with the volatility of cryptocurrencies.

The optimal method depends on your individual needs, the urgency of the transfer, and the acceptable level of fees.

Foreign citizens can obtain a loan or mortgage in Luxembourg, but the terms and availability of such financial products depend on their residency status and financial situation.

Mortgage for foreigners

Residents with a residence permit: Foreign citizens with a residence permit in Luxembourg can apply for a mortgage on the same terms as citizens of the country. Banks typically require proof of income and official employment. Mortgage rates in Luxembourg are relatively high compared to other European countries: the fixed rate is about 6%, and the variable rate is about 4%.

Non-residents without a residence permit: For foreign citizens without a residence permit, it is significantly more challenging to obtain a mortgage. Banks may require a higher initial deposit and additional guarantees. In some cases, a mortgage may be unavailable for non-residents.

Consumer loans for foreigners

Residents with a residence permit: Foreign citizens with a residence permit can apply for consumer loans in Luxembourg banks. Requirements include proof of stable income, an employment contract, and a credit history.

Non-residents without a residence permit: Obtaining a consumer loan for non-residents is problematic and depends on the specific bank's policy. Additional documents and collateral are often required.

Recommendations for foreign citizens

Prepare the necessary documents: Passport, proof of residential address, income statement, employment contract, and, if necessary, documents confirming the legality of the origin of funds.

Contact several banks: Loan conditions can vary, so it's recommended to compare offers from different financial institutions.

Consider using mortgage brokers: They can help find the most favorable conditions and expedite the loan process.

Consider tax and legal aspects: Acquiring property and obtaining a loan may have tax implications. Consulting with a lawyer or tax advisor can help avoid potential issues.

In Luxembourg, when making large purchases, such as real estate or a car, non-cash payments are preferred. Using cash for such transactions is limited and associated with certain risks.

Real estate payment

Non-cash payment: Real estate purchases are usually conducted through a bank transfer. After signing the purchase agreement, the buyer has 15 days to transfer the funds to the seller. Transactions are processed through public notaries, which ensures the safety of the transaction.

Cash payment: Paying in cash for real estate is not prohibited, but it carries risks such as potential fraud or problems with verifying the source of funds. Therefore, using cash in such transactions is not recommended.

Car payment

Non-cash payment: Purchasing a car is most often done using bank transfers or credit card payments. This ensures transaction transparency and security.

Cash payment: Although Luxembourg law does not impose strict limits on cash payments for car purchases, sellers may set their own limits or prefer non-cash payment methods. Additionally, questions about the source of funds may arise with large cash payments.

Recommendations

Prefer non-cash payment methods: Using bank transfers or payment cards ensures the security and transparency of the transaction.

Clarify payment terms with the seller: Before making a large purchase, discuss acceptable payment methods and possible restrictions with the seller.

Be prepared to confirm the origin of funds: When making a large payment, especially in cash, documentation may be required to verify the legality of the money's origin.

Luxembourg, being one of Europe's leading financial centers, offers a variety of opportunities for saving, accumulation, and investment.

Bank Deposits

Luxembourg banks provide various types of deposit accounts, including term deposits and savings accounts. The interest rates on deposits may be lower compared to investment products, but they offer a high degree of capital preservation.

Investment Funds

Luxembourg is a leading jurisdiction for the creation and management of investment funds. More than 15,000 funds are registered here with assets under management totaling around USD 4.6 trillion. Investors can choose between different types of funds, including specialized investment funds and investment companies in venture capital, depending on their investment goals and acceptable risk level.

Stocks and Bonds

Investors have the opportunity to purchase stocks and bonds of both Luxembourgish and international companies. This can be done through local brokerage firms or international online brokers.

Real Estate

Investing in real estate in Luxembourg is a popular way to preserve and grow capital. However, one should consider the high cost of real estate in the country.

Pension Savings

Luxembourg offers various pension schemes, including state and private pension funds. Participation in such programs allows for financial stability in the future and benefits from tax incentives.

The choice of suitable instruments depends on individual financial goals, the level of acceptable risk, and the investment horizon. Careful planning and professional consulting can help effectively manage savings and investments in this country.

The tax obligations of foreign nationals in Luxembourg depend on their residency status and sources of income. Let's consider the key aspects of taxation for foreigners:

Determination of Tax Residency

Tax Resident: An individual is considered a tax resident of Luxembourg if they have a permanent residence in the country or spend more than six consecutive months (183 days) in Luxembourg within a year.

Non-resident: Individuals not meeting the aforementioned criteria are considered non-residents.

Income Tax

Residents: Taxed on worldwide income, meaning income earned both in Luxembourg and abroad.

Non-residents: Taxed only on income sourced from Luxembourg.

Tax Classes

There are three tax classes in Luxembourg defining the tax rates:

Class 1: Single individuals.

Class 1a: Single individuals with children and individuals over 65 years old.

Class 2: Married couples and individuals in civil partnerships under certain conditions.

Income Tax Rates

The tax is calculated on a progressive scale from 0% to 42%, depending on the income level and tax class. Additionally, a solidarity tax of 7% on the income tax amount is charged, increasing to 9% for higher incomes.

Social Contributions

Foreign nationals working in Luxembourg are obliged to pay social contributions, including:

- Health insurance;

- Pension insurance;

- Accident insurance.

Contribution rates depend on the type of activity and income level.

Value Added Tax (VAT):

The standard VAT rate in Luxembourg is 17%, with reduced rates of 14%, 8%, and 3% for certain goods and services.

Inheritance and Gift Taxes

Luxembourg applies inheritance and gift taxes, with rates depending on the degree of kinship and the value of the estate.

Tax Declarations:

Residents are required to submit annual tax returns, disclosing all sources of income. Non-residents submit returns if they receive Luxembourg-source income subject to taxation.

Recommendations for foreign citizens: Consult tax specialists to properly fulfill tax obligations and take advantage of possible benefits.

In Luxembourg, the process of submitting a tax declaration for foreign citizens depends on their residency status and sources of income.

1. Determination of tax residency: tax resident or non-resident.

2. Obligation to submit a tax declaration:

Residents: Required to submit a tax declaration, indicating all sources of income, both from Luxembourg and abroad.

Non-residents: Required to submit a declaration if they receive income from sources in Luxembourg.

3. Deadlines for submission:

The tax declaration must be submitted by March 31 of the year following the reporting tax year.

4. Methods of submission:

Paper form: Filling out form 100 and sending it to the relevant tax authority.

Electronic form: Submission via the portal MyGuichet.lu using an electronic signature.

5. Required documents:

- Form 100 (tax declaration).

- Annual salary statement from the employer.

- Documents confirming additional income or deductions.

6. Tax rates:

The tax is calculated on a progressive scale from 0% to 42%, depending on the level of income and tax class.

Recommendations: Consult a tax consultant if you are unsure about the declaration process.

In Luxembourg, self-employed persons and freelancers have the opportunity to conduct professional activities, complying with certain rules and utilizing available benefits.

Registration and permissions

Obtaining a business permit: Before starting activities, it is necessary to obtain a business permit confirming professional qualification and compliance with established requirements.

Registration with tax authorities: Registration with the Administration for Registration and Domains is mandatory to obtain a VAT number.

Registration with the Social Security Center (CCSS): Self-employed persons are required to register with the CCSS for paying social contributions.

Taxation

Income tax: Self-employed persons are subject to income tax based on their net profit. Tax rates are progressive and depend on the level of income.

Value-added tax (VAT): The standard VAT rate is 17%. However, businesses with an annual turnover of less than 35,000 euros are exempt from VAT.

Social security

Social contributions: Self-employed individuals pay contributions for health, pension insurance, and accident insurance themselves.

Benefits: By paying the appropriate contributions, self-employed individuals are entitled to medical services, pension benefits, and other social benefits.

Benefits and support

Financial assistance: Governmental and private programs provide subsidies and preferential loans to support entrepreneurs.

Tax benefits: Certain types of activities may benefit from reduced VAT rates or exemptions.

Additional requirements

Membership in professional chambers: Depending on the type of activity, self-employed individuals may be required to join the relevant professional chamber, such as the Chamber of Commerce or the Chamber of Crafts.

Special permissions: Additional accreditation or a license may be required for certain professions.

Recommendations

Consultation with experts: Before starting activities, it is recommended to consult professional advisors for understanding all legal and tax obligations.

Compliance with reporting: Keeping accurate accounting and timely submission of tax declarations will help avoid fines and penalties.