LUXEMBOURG: Luxembourg set to scrap golden visa scheme for wealthy investors

Luxembourg is preparing to shut down a scheme which grants non-EU nationals a residence permit in exchange for investing €500,000 in a business in the country.

A draft law, submitted to parliament by Home Affairs Minister Léon Gloden just before the summer recess, intends to repeal the programme.

There is no rapporteur appointed for the bill, which is still in its infancy and is expected to be discussed in a closed-doors committee session in the coming weeks, as deputies return after their break.

At the start of this year, the Luxembourg Times revealed that the government was considering closing the scheme amid low interest. At the time, a spokesperson for the home affairs ministry said it was “in the process of examining the utility of the investor residence permit scheme.”

In the draft bill, the government said that the scheme had attracted little interest since it was launched in 2017.

“Given the very low added value of the ‘investor’ scheme since its creation and the disproportionate administrative burdens expected to maintain it under the new EU regulations, notwithstanding the low number of related applications submitted, it is proposed to repeal the ‘investor’ residence permit,” the text states.

Scheme has ‘not had the desired positive effect’
“It is clear that these provisions have not had the desired positive effect, since only nine third-country nationals have been issued an ‘investor’ residence permit since 2017,” the draft bill notes. “Moreover, in practice, it has proven difficult to carry out the controls required by law.”

In the first year of the scheme in Luxembourg, one Australian and five Chinese investors were granted residency permits, according to a report published by the European Commission in September 2018. Only three followed in the period up until 2023.

There were six applications for a so-called golden visa during 2023 and 2024, four of which were refused. The applications came from Russia, Israel, India and China, the home affairs ministry told the Luxembourg Times in January, although it declined to state from which countries the unsuccessful applications had originated nor the reasons why they had been rejected.

A new approach is required to attract so-called high-net worth individuals to Luxembourg, CSV deputy Laurent Mosar told investigative news website Reporter, which first reported on the draft law.

“Foreigners and their companies must be able to access the banking system more quickly and easily and open accounts. Furthermore, the creation of public limited companies in Luxembourg must be simplified,” Mosar said.

The draft law marks a U-turn from the previous coalition government’s position, which said two years ago it had no plans to end the scheme despite opposition from the EU in the wake of Russia’s invasion of Ukraine.

While a majority of EU countries offer some form of golden visa to attract investment, several have terminated their programmes in recent years, such as Portugal and the Republic of Ireland.

Impact of Ukraine war
The European Commission had warned that such golden visa schemes were open to exploitation by Russians and Belarusians seeking to escape sanctions imposed following Russian President Vladimir Putin’s full-scale invasion of Ukraine in 2022

Following Russia’s invasion of Ukraine in 2022, the European Commission renewed an earlier call to member states to end such programmes.

Offering visas to wealthy foreign nationals was open to potential abuse by sanctioned Russians or Belarusians trying to escape travel bans, the commission said in 2022, adding that the schemes “raise inherent security, money laundering, tax evasion and corruption risks.”

However, in the draft legislation, the government said that non-EU nationals who wish to invest in Luxembourg would still be welcome to apply through the traditional route of a “self-employed” residence permit.

“A third-country national who wishes to invest in Luxembourg, either in an existing structure or in a structure to be created, still retains this option, provided they manage the structure in question,” the bill states.

Under the “golden visa” scheme which is set to be axed, investments in real estate are not permitted. Intermediaries which make payments – such as private equity funds – are allowed but must be owned by the applicant.

A prospective investor can only apply for a residence permit once the respective ministry has approved the project.

Route to citizenship
The economy ministry handles smaller projects of at least €500,000, while the finance ministry is responsible for overseeing larger investments, set at a minimum of €3 million for an investment fund, or at least €20 million for a deposit with a financial institution.

Valid for three years and renewable, the “golden” residence permit is subject to review after 12 months and can be withdrawn, according to the government’s immigration website. After five years in the country, foreigners can apply for Luxembourg citizenship provided they have mastered a basic understanding of the national language and taken a citizenship course.

Although Luxembourg carries out controls to ensure compliance with anti-money laundering laws, the 2018 EU report noted that there are major gaps in the transparency and oversight of the scheme.

There is no limit on the number of applications, nor legal requirement to publish the names of successful applicants, the report found, and no method to monitor the economic impact of the scheme, with no “system of scrutiny by parliament or other bodies.”