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Luxembourg introduces new rules on immigration to attract foreign capital

Luxembourg introduces new rules on immigration to attract foreign capital

Introduction

Luxembourg, as a leading European financial centre, has a long history of attracting foreign workers. A new law on immigration has been introduced in 2017, which aims to strengthen the economy through bringing in foreign capital and improving the mobility of both workers and investors.

Specifically, the new Law of 8 March 2017 amends the law of 29 August 2008 on freedom of movement and immigration, as amended, and implements two EU Directives, namely:

  • Directive 2014/36/UE on the conditions of entry and stay of third-country nationals for the purpose of employment as seasonal workers.
  • Directive 2014/66/UE on the conditions of entry and residence of third-country nationals in the framework of an intra-corporate transfer.

The new Law, which seeks to encourage entrepreneurship and diversification of investments, takes an innovative approach by creating two new categories of authorisation to stay which do not exist elsewhere, namely residence permits for investors and residence permits for employees involved in a ‘business continuity plan’.

Furthermore, the new Law also introduces new categories of authorisations to stay in the form of residence permits for seasonal workers and residence permits in the case of temporary intracompany transfers.

Finally, citizens from third countries who have chosen Luxembourg for professional reasons may also benefit from amendments to some existing immigration provisions.

New residence permits

For investors wishing to stay:

The new Law provides that any independent investor engaging in one of the following investment plans will be eligible for a specific residence permit:
Investments of at least EUR 500,000 in an already-existing Luxembourg company carrying out commercial, industrial or craft activities. Unless the concerned company was in financial difficulties at the time of investment, the investor must also undertake to maintain and secure all the existing job positions in the company for a period of at least 5 years following the initial investment.
Investment of at least EUR 500,000 in a newly created company in Luxembourg carrying out commercial, industrial or craft activities. The investor must commit to create at least five new
job positions within three years from the date of incorporation of the company. Investment of at least EUR 3,000,000 in an investment/management fund or vehicle already existing or to be
established and having its head office in Luxembourg.

At least 75% of the above-mentioned investments must be composed of the personal resources/funds of the investor. The remaining 25% may be subject to a loan, the duration of which must not exceed three years. Investment of at least EUR 20,000,000 in cash or securities for a minimum period of 5 years with a financial institution established in Luxembourg.

The investment must be entirely funded by personal resources of the investor, excluding any loan possibilities.

In all circumstances, the company where the investment is made must be able to demonstrate solid internal governance and employ at least two employees. Investment in the real estate
market is excluded from the provisions of the new Law. Any authorisation to stay granted under these provisions will be valid for a maximum of three years and is renewable.

For employees involved in a ‘business continuity plan’:

Under the new Law, where a serious incident takes place in a third country which impacts upon a business located there, then a residence permit may be granted to one or more employees to ensure the continuity of that business in Luxembourg. This represents an innovative approach, with Luxembourg being the first country in the EU to introduce the concept of a ‘business continuity plan’ in the unfortunate event of a major incident within a non-EU company.

A number of conditions will apply to be granted the opportunity to continue the business in Luxembourg, including the following:

The receiving entity - namely the location where the business activity should be pursued - was already established in Luxembourg before the incident;

The sending entity is required to file an application with the Luxembourg Ministry of Foreign and European Affairs providing details of the business continuity plan, the activity to be pursued in Luxembourg, the identity and functions of the employees to be transferred and the shareholders or other members who have an interest in the entity concerned. Only then will the registration be considered valid;

It should be clear that the only purpose of the entity located in Luxembourg is to ensure that the business activity can be maintained or restored on short notice in case of failure of the normal course of activities in the country of origin. If a major incident occurs in the country of origin, additional information is required in order to be able to establish a business continuity plan in Luxembourg. The incident must be described and the tasks to be performed by the transferred employees have to be submitted to the Luxembourgish Ministry of Foreign and European Affairs.

Any authorisation to stay, granted under the above conditions, is for a maximum period of one year but can be renewed if the situation remains unchanged and if the major incident that arose in the third country still produces negative effects.

It should be noted that the ministerial authorisation is not needed if the necessary period of residence is less than three months in each calendar year. However, the third country national concerned is required to make a declaration of arrival in his/her commune of temporary
residence.

For seasonal workers:

A new category of “third-country seasonal worker” has been introduced under the new Law, implementing Directive 2014/36/EU, which has been added to the list of employees who are eligible to apply for an authorisation to stay in Luxembourg.

The term “seasonal worker” means a third-country national who retains his/her principal place of residence in a third country and stays legally and temporarily in Luxembourg to carry out an activity dependent on the passing of the seasons, under one or more fixed-term employment contract(s) entered into directly between that third-country national and the employer established in Luxembourg.

The term “activity dependent on the passing of the seasons” means an activity that is tied to a certain time of the year by a recurring event or pattern of events linked to seasonal conditions during which required labour levels are significantly above those necessary for usually ongoing operations. The eligible sectors are listed in the relevant Grand-Ducal regulations.

In terms of the application process, the seasonal worker or his employer is required to provide a valid employment contract with a Luxembourg entity, proof of adequate accommodation and evidence of health insurance cover, in order to be entitled to receive an authorisation to stay.

Any authorisation granted to a seasonal worker is valid for a maximum of five months over a one year reference period.

For a third-country national wishing to stay as an intra-corporate transferee:

The concept of an ‘intra-company transfer’ has been introduced under Directive 2014/66/EU, which provides that this transfer is a temporary secondment at least 3 months of a third-country
national who is seconded by a company established outside the EU to an entity based in Europe. It is a requirement that both companies belong to the same group of companies.

The new Law, which implements this Directive, creates a new category of authorisation to stay, with a view to facilitating intra-group mobility and flexibility within the EU. It is notable that transferees must have achieved a certain level of seniority to managerial level, or must be specialists with specific professional qualifications and skills. Trainees may also be eligible.

Any authorisation to stay provides the right to both the employee and his or her family members to reside and work in Luxembourg.

In terms of validity of the authorisation, a distinction is drawn between a permanent employee (valid for three year) and a trainee (valid for one year). Both types of authorisation are renewable on demand.

Amendments to existing immigration law

A number of changes have been made to the existing immigration laws of Luxembourg to promote flexibility, which includes the following:

Students who have completed their university studies in Luxembourg will benefit from an easing of the application process. Under the changes, students seeking to obtain a residence permit as self-employed persons or as employees will now be able to apply directly from Luxembourg, instead of being required to return home to apply.

The validity of the European Blue Card - introduced in Luxembourg in 2011 to ensure equal pay and working conditions as well as access to basic socio-economic rights for highly-skilled thirdcountry
graduates or employees who may wish to reside in Luxembourg – has been extended from two to four years.

About SGG Group

SGG Group is a leading fund and investor services firm providing a comprehensive range of compliance, administration and asset services to alternative investment funds, international companies, HNW families and entrepreneurs, headquartered in Luxembourg.

From our early beginnings in the Private Clients space, we have evolved and grown, and this has shaped the way we do business. SGG is among the most flexible providers in the sector and our entrepreneurial spirit drives us to find the best solutions for our clients.

We help our clients realise their ambitions as they seek to keep pace with a changing environment. SGG attracts and retains the most experienced experts and invests in the industry’s leading software platforms to deliver the highest quality service to our clients across more than 25 countries.

If we can provide any advice or further information regarding the impact of the changes to immigration law in Luxembourg, please don’t hesitate to contact Pascal Rapallino.

Pascal Rapallino
Group Private Clients Solutions Leader
SGG Luxembourg
412F, route d'Esch, L-2086 Luxembourg
T : +352 466111 3849 M : +352 661 451 102

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