Cora Maglo: There are several sectors that are eligible for this residence permit, primarily information and communication technologies, space technologies, environmental technologies, health technologies, logistics, the industrial sector, and the tourism sector. The sectors that are eligible for this residence permit.

Salman Siddiqui: Welcome to the Investment Immigration podcast by Uglobal.com with weekly in-depth interviews with the world's leading investment immigration professionals.

Welcome to another episode of the Investment Immigration podcast by Uglobal.com. I'm your host, Salman Siddiqui, from Berlin. Today we are going to talk about Luxembourg. Recently, there was a very interesting change in the law. What happened with this law was it's called the “How to obtain a residence permit for personal reasons,” which means that there are some applicants who could before applying very easily to Luxembourg, it might not be the case anymore. And we're going to talk in this episode as well about the other options that investors and businesspeople have in Luxembourg to get a residence permit to cover all of this. I have a very special guest in my show today. Her name is Cora Maglo. She's the founder of a law firm called Cerno Law Firm. She's based in Luxembourg. And welcome to the show, Cora.

Cora Maglo: Thank you for inviting me to your podcast today.

Salman Siddiqui: Thank you so much. So, Cora, let's talk about this change in the law, which happened in May. And could you, for our listeners' benefit, explain what this law change was all about? What is this residence permit for personal reasons even mean?

Cora Maglo: Yes. So, in Luxembourg, you had for a long time the private reasons residence permit, which was used by third-country nationals who wanted to live in Luxembourg and reside in Luxembourg without working in Luxembourg. So, the idea was that you had to prove that you could live off your own financial resources, showing that you had a regular flow of income of at least €27,000 per year and that you could find accommodation in Luxembourg, and hence live with only those resources. So, you were not allowed to work in Luxembourg. Now, on May 12, a new law came into effect that changed the conditions of the criteria that are required to be met to receive. Now this residence permit. Now the applicants must prove either that they have a professional activity exercised in another member state of the European Union or the Schengen area, or that they have an old age, invalidity, or survivor's pension paid by a Social Security institution in Luxembourg or another member state of the European Union or the Schengen area. So, this has really restricted these private reasons because the applicants of this residence permit were usually Chinese citizens, Russian citizens, and US citizens everywhere in the world who were either retired or had stocks, were living from dividends, portfolio funds, and these kinds of income. It has made it impossible for them to apply and come live in Luxembourg based on those financial resources.

Salman Siddiqui: So, give us a background about this law. What was the political situation in the country before they introduced this law? Why is this happening?

Cora Maglo: One of the most probable reasons why this happened is that there is a Luxembourg residence permit for investors. This one was created in 2017 by law in March 8, 2017. The problem is that it has not been very much used since it came into effect. Since 2017, only six investor residence permits have been granted in Luxembourg. It was much easier for high-net-worth individuals to apply for a residence permit for private reasons because they only had to prove that they had more than the minimum revenue to live in Luxembourg, which was about €2,300 per month. Of course, it was very easy for these people to apply to that one, so they were applying for it rather than the investor's residence permit. We are going to talk about the conditions of that one later. Right now, you have a trend as well in Europe, where it was said in Portugal, in Ireland, and other European countries where you had golden visas that they were being used as the backdoor entry for Chinese people, for instance, or anti-money laundering issues came in. And so the ministry had the problem that people are showing that they have financial resources, but where does this money come from? So, they decided that it was important to restrict these private reasons residence permits and because of the situation with Russia that happened in the past years. And so, many Russians have been trying to come to Luxembourg using this private residence permit and Chinese people.

Salman Siddiqui: Okay. So, you're saying that these private reasons residence permits existed for a long time, now they've just made it more restrictive.

Cora Maglo: Restrictive because you must either have a professional activity inside the European Union or a pension paid by a Social Security institution inside the European Union. That was not the case before. Before you just had to prove that you had regular income, stable income from outside, and that you had a minimum amount of these resources. That was about it.

Salman Siddiqui: That would make a lot of people ineligible, especially foreign applicants from China, of course, and basically a lot of countries in the world outside the EU.

Cora Maglo: Exactly.

Salman Siddiqui: That doesn't sound like a good strategy for the government.

Cora Maglo: Well, they are trying to ensure that people will use the residence permit investors they have created. We'll see. It's brand new. We haven't made a single application yet because it happened about two months ago. So, we will see if that works out or not.

Salman Siddiqui: Okay. Let's talk more about what the law now says about the specific criteria for establishing a link with Luxembourg or a Schengen area such as Family Ties or existing residency in Luxembourg. So, can a distant relative in Luxembourg, for example, a distant uncle or a cousin, be a good enough link to become eligible for this?

Cora Maglo: No. You have to stick to the conditions. Either you have a professional activity or a pension paid inside the European Union. These are the main criteria. In addition, you have to prove that your criminal record is clean, and that you can find accommodation in Luxembourg. These are the main conditions, but having family ties to Luxembourg does not help. It helps, but it's not the main criteria that you have to meet.

Salman Siddiqui: Okay. And in terms of the professional activity you mentioned, what kind of activity does that mean? Is setting up a business or what exactly are we talking about?

Cora Maglo: Well, it would mean having regular income coming from professional activity. So, if you are a business owner inside the European Union or the Schengen area is fine, if you are an employee who doesn't need to work at the office, this would be the main thing. One of the main conditions we used previously was for people who had properties that they were renting, so rental income was used a lot. Now it is automatically excluded from the conditions.

Salman Siddiqui: Okay. And for example, you talked about somebody who was within the EU. Yes. But I'm also interested to know about American investors' options in the country. So, let's also now talk about what are the options that the other people have. Then somebody who's listening to our show in the US or other parts of the world, what kind of residence permit for an investor or high-net-worth individual sitting there has in Luxembourg right now?

Cora Maglo: So, you have the investor residence permit which was introduced in 2017. With this one, you have four investment options in Luxembourg. First, the applicant can invest at least €500,000 into an existing company with its registered office in Luxembourg and undertake to maintain this investment for at least five years. This is the first option. The second option is that the applicant will invest at least €500,000 in a business to be created with a registered office in Luxembourg and again undertake to maintain the investment for at least three years. The third option is for the applicant to invest at least €3 million into an existing or future investment and management structure. Having a registered office in Luxembourg and again maintaining an appropriate substance there. And the final option (fourth) is for the applicant to invest at least €20 million in the form of a deposit with a financial institution established in Luxembourg and undertake to maintain this investment for a period of at least five years. So, among these four options, the last two have never been used, and have never been granted. Yes. You have to invest at least €3 million or €20 million. The two other options have been used where you have to invest 500,000 into an existing or creating a business in Luxembourg. And six permits have been granted so far in Luxembourg based on these two options.

Salman Siddiqui: Right? So, six have been granted so far since 2017.

Cora Maglo: We have also looked at the numbers and talked to the Ministry of Foreign Affairs. And as far as we understand, there was no renewal of those residence permits. So, either people have transferred this residence permit to another residence permit. Either they have left Luxembourg and not asked for a renewal of this residence permit. So, we had granted like in 2018 and to, I believe, in 2019 and that was it. None have been granted ever since. So it's not an extremely popular scheme that they have put in place.

Salman Siddiqui: And why do you think that's the case? Why is it not popular or why has it lost its popularity? Is it because the conditions are too strict? What needs to change?

Cora Maglo: Well, the conditions are very strict also. The government wants to apply the law rigorously. What we want in Luxembourg is to attract quality investors who want to invest or manage their assets from Luxembourg. And so, they thoroughly check the quality and the substance of the projects they are provided with. The government is also being very cautious with the anti-money laundering requirements that are now stricter than ever. And banks also are very cautious about accepting money from investors coming from certain countries. So, the ministry, I think in line probably with the EU wants to make sure that when people use these residence permits for investors, they truly want to bring something worthwhile to Luxembourg and really work and live in Luxembourg and not just create empty shells, companies that really don't bring any added value to Luxembourg.

Salman Siddiqui: Right. So, let's talk about the kind of applicants who are successful to get this investor visa. So, the six that you mentioned were successful over the years. Can we talk a little bit more about what the government is looking for in terms of the applicants, why they were successful, and what we can learn from those successful applicants?

Cora Maglo: Yeah, we don't have much information. We know that one was granted to a Chinese national and one to an Australian national. They were probably in the sectors that the Government is interested in. There are several sectors that are eligible for this residence permit, primarily information and communication technologies, and space technologies. Luxembourg is trying to be more focused on environmental technologies, health technologies, logistics, the industrial sector, and the tourism sector. The sectors that are eligible for this residence permit. So, the permits granted were amongst those sectors.

Salman Siddiqui: I see. Now let's talk about a hypothetical situation. For example, there's an entrepreneur in the US, and they want to establish a startup in Luxembourg through this investor visa. Would that be possible?

Cora Maglo: That would be possible. There are two options either investing the €500,000 and it's important to state that 75% of the investment must be equity and only a maximum of 25% can be borrowed over a period of three years. Now, it is also possible to use the independent residence permit, which is another option specifically, more specifically for entrepreneurs who want to open a company in Luxembourg without having to go through the threshold of €500,000. Now we're talking about simply setting up a company in Luxembourg, which is accessible to anyone from anywhere in the world because you do not need to be a Luxembourg resident to open a company in Luxembourg. You can be a shareholder and reside outside of Luxembourg, no problem. So first of all, you would decide on the type of company you want to open in Luxembourg. Most probably it's going to be a limited liability, private, limited liability company. You can open these ones from starting from €1. There is a €1 limited liability company in Luxembourg. There is the €12,000 company and the €30,000 company in Luxembourg. The €1 is not going to be accessible to you if you do not already reside in Luxembourg. Or you have to understand is that in Luxembourg we also have a requirement if you want to not only set up a company, but then pursue commercial activity, you need to get a business license. Business license is going to be given to you if you are residing in Luxembourg. So, it's a bit the snake biting its own tail. You can set up the company. You can apply for the business license, but you won't be granted this one unless the Ministry of Foreign Affairs has decided that you indeed meet the criteria for the investor, self, investor or independent residence permit.

Salman Siddiqui: So, for the independent or the self-employed visa category, for example, how does the government assess that you've met the criteria? What are they looking for? Something specific there.

Cora Maglo: They need you to provide a business plan, and they want to make sure that the activity that is going to be carried out serves the interest of the country in terms of social or cultural interests or economic benefit. And that is extremely important. We have seen clients who came to us after being denied this independent residence permit because they were told that the activity that they want to carry out does not serve the interests of the country. They have in mind, for instance, one shareholder, one investor who opened an e-business company, and they stated that, well, for an e-business company, you do not actually need to reside in Luxembourg. You have to ensure that you are going to create employment in Luxembourg. You have to be able to show that in your business license, there is a special committee that is going to. So, the Ministry of Foreign Affairs is going to receive your application. But there is a special committee, an economic committee that will look at your business plan and ensure that this is indeed something that is doable and will serve the interest of our country. You also have to prove that you have sufficient resources to carry out this activity, desired activity in Luxembourg and of course, that you have the requirements, the professional requirements or diplomas, qualifications for the pursuance of this activity, because you will have to get a business license when you arrive and have been allowed to reside in Luxembourg. So first creating your company, getting the independent residence permit and finalizing with the business license.

Salman Siddiqui: And all this process is a three-step process. Then the time that it would take would be, I'm guessing, at least a year.

Cora Maglo: Yeah, about six months at least. I mean, setting up a company can be done pretty quickly. Well, it used to be done pretty quickly. Now the issues are with the bank opening of the bank account, because when you want to set up a company first, you have to open a bank account. You have to put on the bank account, the share capital, the minimum share capital. The bank is going to block the account and sign the blocking certificate to a notary. A notary is going to open your company and send back the unblocking certificate to the bank. Now, the biggest issue is how are you going to open a bank account when you are a third-country national. Of course, that is taking more and more time with the compliance teams that they have now. So that is the first hurdle you have to go through. Once this is done, setting up your company can be done pretty quickly.

Salman Siddiqui: Okay. Thank you so much for sharing all of that. Also, I'm interested in knowing and I'm sure many of our listeners are interested in knowing about the options to buy real estate in Luxembourg. Is that on the table at all?

Cora Maglo: Unfortunately, not at all. Buying real estate in Luxembourg is not going to grant you any residence permit, unfortunately. I know it's something very popular in other countries, Portugal, for instance, but well, it used to be the case because there are now their golden visa scheme. But no, it's not the case in Luxembourg. Buying doesn't help.

Salman Siddiqui: And for example, is that I want to know if other kind of commercial activities are possible. So, if somebody wants to acquire if they can't acquire a hotel, they can operate a hotel by buying stakes in a company which runs a hotel. Do you think that sort of things are possible?

Cora Maglo: Well, buying stakes in a company does not grant you any residence permit. You're just a shareholder. By being a shareholder, you can live anywhere in the world. If you want a residence permit, you would have to get a business license. You have to show that you are actually really running the business. So you come to live in Luxembourg. But to do that, you would then have to either get this independent residence permit, which shows that you are the person managing the business day to day business of the company or maybe go through this investment residence permit. If the activity that you're trying to the hotel or your the company you're investing in, you're investing at €500,000, maybe that would be an option. But just buying shares is not going to get you any residence permit in Luxembourg. I see before people who are shareholders used to use the private prisons.

Salman Siddiqui: Right. Thank you for sharing that. And also, if you could explain how whether one applies to the independent residence permit or the investment residence permit, how can one bring their family members to the country? And if you could talk about whether are there restrictions to that, to what considers the country considers as family, or is it somebody who are immediate or like distant relatives or something?

Cora Maglo: So, a family member is primarily your spouse or the person you are in a civil partnership with. In countries where it does exist in Luxembourg, we have a civil partnership. So, spouse or civil partner. And you have to prove, of course, with the documents that you are married or in a civil partnership, your children's direct descendants, they have to be less than 21 years old. And you have to prove if they are more than 20 than 18 that they are still going to school, you are still paying for them or they are not working something like this. And these are the immediate family members that can regroup as family members. Now, the ministry can won't necessarily because when it comes to spouses, civil partners, or children, it will grant them the residence permit. As a regrouping, as family members, it can give it to parents, and that's about it. Other extended family members, brothers, uncles, aunts, cousins, whatever do not meet the criteria for regrouping as family members in Luxembourg.

Salman Siddiqui: I see. Thank you for clarifying those points. And also, now I want to talk about more about the investment visa category, because I know a lot of people are interested in this. So what happens in the case that an investor decides to divest from their investments after obtaining residency? Are there any restrictions to that on selling their shares or ownership interest? Do they have to keep it for a certain number of years or is it easy to divest?

Cora Maglo: No, it's not easy. The residence permit is valid for an initial period of three years from the date of declaration of arrival in Luxembourg. Now, to prevent abuse, the residence permit for investors is linked to a monitoring mechanism that was put in place by the government. So at the latest 12 months after the issuance of the first residence permit, you have to prove that you are still complying with the commitments made in relation to the investment so that you are still maintaining or creating jobs, that you have the appropriate substance or the investment over a certain period of time. All of this is going to be checked. These checks are carried out annually to ensure that what you put in place at the beginning is still the case. So you cannot easily divest from there. What you could do is if at some point you realize that you are meeting the criteria for another residence permit, then of course you can always ask for a transfer from a residence permit to another category. That is an option. Otherwise, you have to stick to that one.

Salman Siddiqui: And finally, before. Before I let you go, are any specific services or resources available to assist foreign investors and applicants wanting to establish business businesses in Luxembourg? Where do they go? If you could refer to them to the official websites so they don't get scammed and other tips that you want to share with our listeners. So please go ahead.

Cora Maglo: Well, first of all, you have the Chamber of Commerce. They have the House of Entrepreneurship and the House of Startups, which offer a wide range of services to support entrepreneurs at every stage of their business throughout their entrepreneurial journey. So, you have their people, they have the resources, they have the team that are going to explain to you step by step everything how it works in Luxembourg, where to go, whom to talk to, etcetera. There is also the Business Mentoring Luxembourg BML Aisbl. It's an association, and they offer a mentoring program to facilitate and secure the activity of companies, help the managers increase their managerial skills, for instance, encourage the decision-making process, transfer of experience between company managers, these kinds of things. We also have Luxinnovation, which is the National Agency for the Promotion of Research, Development and Innovation. They have very strong skills, and they are official. They are going to be able to provide a lot of information as well. They encourage and support companies in their development efforts, innovation, facilitating, also collaboration with public research. And they offer a wide range of services to companies as well. Then you have also free groups coaching workshops that are organized by the House of Training as well. We've talked about them, and you have a wide range of public aid available in the Grand Duchy to companies and investors, and the House of Entrepreneurship, and House of Startups of Innovations are going to point you in the direction where to go. What kind of public aid you can receive for your company? Because really there are lots of subsidies that you can receive in Luxembourg. That is something that is really great here.

Salman Siddiqui: All right. Thank you so much for sharing all of that. And a lot of our listeners got to hear so much information about Luxembourg and the options that they have. I'm sure a lot of people will be looking keenly at the investment visa, and I'm sure more applicants will come your way and to Luxembourg. So, thank you so much for sharing this. We've come to the end of our episode, and I really hope you also enjoyed being part of this episode I look to hearing more from you in the future.

Cora Maglo: Thank you so much. Salman. Thank you very much.

Salman Siddiqui: You've been listening to the Investment Immigration podcast by  Uglobal.com. Join us again soon for more in-depth conversations exploring investment immigration opportunities from around the world.

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