In recent years, Luxembourg has emerged as a strategic destination for Japanese manufacturers seeking to expand their footprint in Europe. This trend is underpinned by Luxembourg’s robust economic environment, strategic location, and proactive bilateral relations with Japan.
Strategic economic partnerships
The economic ties between Luxembourg and Japan have strengthened notably. As of 2023, Japan stands as Luxembourg’s second-largest trading partner in Asia, with trade in goods amounting to €361 million in imports and €78 million in exports. This burgeoning relationship is further evidenced by the presence of 41 Japanese companies operating in Luxembourg, nearly half of which are in the finance sector. Tadahiro Matsubara, Japan’s ambassador to Luxembourg, highlighted, “Japanese companies established in Luxembourg are very active and successful in their business.”
Favorable business environment
Luxembourg offers a pro-business climate characterized by political stability, a competitive tax regime, and a commitment to innovation. The nation’s strategic location at the heart of Europe provides Japanese manufacturers with seamless access to the European market. The Luxembourg Trade and Investment Office (LTIO) in Tokyo plays a pivotal role in assisting Japanese companies with their Luxembourg business expansion, offering services such as information on the business environment, assistance with company establishment, and facilitation of contacts with potential business partners.
Incentives for innovation and investment
Luxembourg’s tax framework is designed to attract foreign investment, particularly in research and development. The intellectual property (IP) regime offers an 80% exemption on eligible net income derived from qualifying IP assets, resulting in an effective tax rate of approximately 4.774% for corporate taxpayers. This incentive is especially appealing to Japanese firms focusing on innovation and technological advancement.
Success stories in the manufacturing sector
The pharmaceutical industry exemplifies the successful integration of Japanese manufacturers in Luxembourg. JCR Pharmaceuticals, specializing in treatments for rare genetic diseases, has established operations in the Wolser economic zone. Ambassador Matsubara noted, “Luxembourg is the perfect fit for their needs,” emphasizing the country’s sophisticated logistics and strategic access to European markets.
Collaborative initiatives and future prospects
The commitment to fostering bilateral relations is evident through initiatives such as the memorandum of cooperation between Luxinnovation and the Japan External Trade Organisation (JETRO). This agreement aims to support innovative Japanese companies in establishing a presence in Luxembourg, facilitating access to the European market. Luxinnovation’s CEO, Sasha Baillie, stated, “Luxembourg has much to offer Japanese companies, and we hope that it will become the natural choice for them when they wish to expand to Europe.”
It is with hope that the collaborative efforts between both nations continue to pave the way for sustained economic growth and innovation.
