Country overview

#21

Luxembourg

Country stats

Rating Points

380

This indicator describes the overall rating of a given jurisdiction on several parameters according to cryptocurrency operations - market volume, crypto regulation, business climate, taxation framework.

Crypto Penetration

5.3%

Estimated percentage of crypto users out of the country's total population based on public data.

Legal Entities

Number of crypto companies registered in the country based on regulator data if available or other types of public data.

Regulation Points

180

An overall assessment of the granularity of crypto regulation in a given country. A high score is also given to countries where cryptocurrency transactions are highly regulated.

Amount of crypto users

31 800

Total amount of crypto users out of the country's total population based on public data.

Taxation points

This figure, according to our analysts' calculations, indicates the overall level of tax burden for cryptocurrency transactions in a given country. The higher the indicator, the lower the burden.

Market volume points

A rough estimate of this jurisdiction's retail crypto market relative to the rest of the world. The higher the indicator, the higher the market potential.

Status of crypto

Legally allowed

General status of cryptocurrency regulation in this jurisdiction.

Crypto payments

Legally allowed

The legal status of cryptocurrency payments for goods and services in a given country based on information from regulators, public data and feedback from our community.

Security Level

Safe place

The overall level of security in a given country based on open data.

Crypto Salaries

No info

The legal status of cryptocurrency salaries to employers in a given country based on information from regulators, public data and feedback from our community.

Business Climate

Medium

Overall assessment of the friendliness of this country for crypto-business. This indicator takes into account the cost of obtaining a license and the attitude towards crypto entities in the country.

Stablecoin Regulation

Basic

This indicator is evaluating the regulation of stablecoins in a given country. Complex regulation means that it is possible to issue steiblcoins and obtain a license for this activity. Basic regulation means that the issuance of stablecoins is possible, but not all legal aspects are defined in the law. Standard regulation means that there is a legal practice of steylcoin circulation in a given country.

Bad Factors

This section describes the unfavorable economic factors for crypto-business in a given country. These are countries that are under sanctions or on the FATF grey list and other factors.

Types of licenses

Wallet/Custody

This country has a legal licensing procedure for companies that store cryptocurrency - - crypto wallet providers and custodians.

Crypto-to-crypto

This license type allows VASP to provide legal exchange from one cryptocurrency to another.

Crypto-to-fiat

This type of license regulates the exchange from cryptocurrency to fiat.

Good

Medium

Bad

intro

Luxembourg is a European jurisdiction open to innovations, including fintech. No wonder it was one the first countries inside the EU, where Blockchain.com and Bitstamp exchange started their operations.

Security level

Luxembourg has a safe place security level according to our rating. The jurisdiction has 66.0 points (from 100) for safety level in Numbeo crime rating (1). The homicide level (2) is 0.6 per 100,000 inhabitants a year. The story of firearm-related death (3) is 1.23 per 100,000 inhabitants a year.

Crypto Payments

Based on Jinfra (4), the Luxembourg tax authorities point out that cryptocurrencies such as Bitcoin do not represent legal currency; they are considered “intangible assets.” Consequently, the current taxation regime for intangible assets will apply to cryptocurrency income. According to the official Luxembourg Tax Guide from 2018 (5), crypto payments are legal and taxable. According to local regulator CSSF (6), cryptocurrencies “may have different purposes or even multiple purposes (such as payment, investment or utility).”

Crypto Salaries

Currently, we need more information about crypto salaries in Luxembourg. Contact us if you know which legal acts/bylaws regulate this topic.

Legal

Commission de Surveillance du Secteur Financier (CSSF) (7) is the primary crypto regulator in the country. Its legal acts are the central crypto regulation here. Also, The law of March 25, 2020 (AML / CTF) (8) contains definitions for virtual asset service providers (VASPs).

In January 2020, CSSF published a VASP guide (9). and then issued a FAQ on virtual assets (10) and FAQ document on virtual assets for credit institutions (11), which allows “credit institutions may directly invest in virtual assets and open accounts that allow customers to invest in virtual assets.” At the same time, banks must get CSSF’s approval to provide such services.

Based on the PWC overview (12), some types of investment funds (UCITS and UCIs) that provide services for “non-professional customers and pension funds are forbidden to invest directly or indirectly in Virtual Assets.” More information can be found in FAQ Virtual Assets – Undertakings for collective investment(12¹). At the same time, Alternative Investment Funds (AIFs) may invest in crypto-assets.

Based on PWC assumption (13) “all VASPs established and providing services in Luxembourg are subject to the AML Law of 12 November 2004”. PWC also quotes a list of VASPs operating in the country:

exchange between virtual assets and fiat currencies, including the exchange between virtual currencies and fiat currencies;

exchange between one or more forms of virtual assets;

transfer of virtual assets;

safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets, including custodian wallet services and

participation in and provision of financial services related to an issuer’s offer and/or sale of virtual assets.

The list of licensed VASPs (13¹)(PASV in French) currently contains nine companies, including Bitstamp, Signym Bank, and Bitflyer. About 20 companies applied for the license in 2021.

PWC has provided a detailed overview (14) of local regulations.

Taxation

Tax name	Index
PIT tax Max	45,78
PIT tax Min	0
Corporate tax (CIT)	25
Max Individual CGT (for crypto)	45,78
Min Individual CGT (for crypto)	0
Wealth tax Min	0
Wealth tax Max	0

According to Luxembourg’s Finance Minister Yuriko Backes (15), “In addition to income tax, profit generated by cryptocurrency may be subject to business tax and wealth tax. Tax authorities are awaiting the introduction of further EU directives to guide on the issue.”

This section is based on Taxx.lu guide (16) and PWC tax summaries.

Also, there is a tax guide from local tax authorities (17) from 2018, which claims that general taxation rules are implemented for crypto: “With regard to income tax, business tax and wealth tax, virtual currencies, such as bitcoin, constitute intangible assets” and “The use of a virtual currency as a means of payment has no effect on the tax nature of the income. As far as taxation is concerned, all the provisions of tax law apply, taking into account the tax status of the income”.

PIT

Based on information from the sources above, if mining/crypto purchases aren’t a business activity, they will be taxed as miscellaneous net income with a progressive PIT tax rate of up to 45.78%.

CGT

The official guide says, “If the cryptocurrency was held for more than 6 months before resale, the income from this sale is not subject to taxation.”

Based on PWC (18), “capital gains derived from the disposal of movable properties are subject to Luxembourg progressive income tax rates (0% to 45.78%), provided the holding period is less than six months and to the extent that the total capital gains exceed EUR 500”.

However, in some cases (large share), “Capital gains derived from the disposal of material interest after the six months are taxed as extraordinary income at half the average combined tax rate (maximum 22.89%)”.

CIT

Luxtoday (19) states that companies pay CGT from 15% to 17%. Basic CIT has a 24.94% combined tax rate, according to PWC (20). According to Dantons (21), local companies also pay WT - 0,5% for wealth net value above 500,000,000 and 0,05% - for less.

Links

1)Crime Index by Country 2023 Mid-Year

2)List of countries by intentional homicide rate

3)List of countries by firearm-related death rate

4)NEW TAX CIRCULAR ON CRYPTOCURRENCIES IN LUXEMBOURG. Article

5)Tax guide from 2018

6)CSSF guidance on virtual assets. Article

7)Commission de Surveillance du Secteur Financier (CSSF). Article

8)The law of March 25, 2020 (AML / CTF). PDF-file

9)Registration of a virtual asset service provider (VASP). Article

10)Questions/Réponses – Actifs virtuels (OPC) (uniquement en anglais)

11)FAQ document on virtual assets for credit institutions

12 and 14)CSSF's FAQ on virtual assets – Credit institutions. Article

12¹) FAQ Virtual Assets – Undertakings for collective investment. PDF file

13)New registration and compliance requirements for Virtual Assets and Virtual Asset Service Providers ("VASPs") in the scope of the AML/CTF Law

13¹)Registration of a virtual asset service provider (VASP)

15)Finance Minister Yuriko Backes

16)How do you report your Crypto/Virtual currencies? Article

17)Tax guide from local tax authorities. PDF-file

18)Luxembourg. Individual - Income determination. PWC

19)Luxembourg capital gains tax. Article

20)Luxembourg. Overview. PWC

Articles

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intro

Security level

Crypto Payments

Crypto Salaries

Currently, we need more information about crypto salaries in Luxembourg. Contact us if you know which legal acts/bylaws regulate this topic.

Legal

Based on PWC assumption (13) “all VASPs established and providing services in Luxembourg are subject to the AML Law of 12 November 2004”. PWC also quotes a list of VASPs operating in the country:

exchange between virtual assets and fiat currencies, including the exchange between virtual currencies and fiat currencies;

exchange between one or more forms of virtual assets;

transfer of virtual assets;

safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets, including custodian wallet services and

participation in and provision of financial services related to an issuer’s offer and/or sale of virtual assets.

The list of licensed VASPs (13¹)(PASV in French) currently contains nine companies, including Bitstamp, Signym Bank, and Bitflyer. About 20 companies applied for the license in 2021.

PWC has provided a detailed overview (14) of local regulations.

Taxation

Tax name	Index
PIT tax Max	45,78
PIT tax Min	0
Corporate tax (CIT)	25
Max Individual CGT (for crypto)	45,78
Min Individual CGT (for crypto)	0
Wealth tax Min	0
Wealth tax Max	0

This section is based on Taxx.lu guide (16) and PWC tax summaries.

PIT

Based on information from the sources above, if mining/crypto purchases aren’t a business activity, they will be taxed as miscellaneous net income with a progressive PIT tax rate of up to 45.78%.

CGT

The official guide says, “If the cryptocurrency was held for more than 6 months before resale, the income from this sale is not subject to taxation.”

CIT

Links

1)Crime Index by Country 2023 Mid-Year

2)List of countries by intentional homicide rate

3)List of countries by firearm-related death rate

4)NEW TAX CIRCULAR ON CRYPTOCURRENCIES IN LUXEMBOURG. Article

5)Tax guide from 2018

6)CSSF guidance on virtual assets. Article

7)Commission de Surveillance du Secteur Financier (CSSF). Article

8)The law of March 25, 2020 (AML / CTF). PDF-file