E-commerce and Internet industry in Luxembourg

Today we’d like to scrutinize a miniature country in the heart of Western Europe that is in a very close neighborhood with Belgium, France and Germany and have population of just 486,006 people in an area of approximately 2,586 square kilometers…guessed? Yes, Luxembourg – one of the smallest countries in the world.

In spite of the country’s diminutive size Luxembourg has a small but an advanced telecom market. Mobile penetration is the highest in Europe, while the broadband is at the same stage as the majority of the EU countries. The market was liberalized in 1998, although the implementation of regulatory reform was slow. P&T Luxembourg and Societe Europeenne de Communication SA (SEC) have traditionally been the two main telecommunications companies. The growth in the mobile and fixed line environment continued during 2005, though it was slow enough. In 2003 3G was implemented. But the first appreciable broadband take-up occurred only with the DSL services growth and the launch of the first digitised cable modem services. The Internet country code top-level domain, or ccTLD, is .lu. Two years contract allowing registration in the zone of .lu domain costs $270. Luxembourg ISPs include Global Media Systems, Luxline Internet Services, Visual Online and Focus Internet Services.

Well, let’s take a look of some statistic data. As internetworldstats.com shows, in this miniature country the progress is obvious. Thus, in 2000 Internet penetration in Luxembourg made up a volume of 22.7 % (around 100,000). In 2006 more than the half of the citizens had an access to Internet (58.9 %). And as for the year 2008 almost three fourth of people populating the country (or, to be exact 73.2 %) could use Internet actively. These figures are drawing a vivid picture of almost 264% increase. It’s important to know that Luxembourg's economic policy encourages information technology operations. Luxembourg authorities have carried out a lot of projects to improve and advance Internet and an e-commerce technology as the information society is a priority for the Luxembourg government. 

Today there is a great number of Internet Service Providers in Luxembourg today, but the development of interest in e-commerce is heterogeneous. Luxembourg is considered to be an ideal place in the world for distribution of digital audiovisual content like music downloads, video on-demand, Pay TV and digital radio and television transmissions. An appropriate legal framework reflects Luxembourg advanced Internet infrastructure, telecommunication network level, trust culture and security degree. As a result Luxembourg has already been chosen by many global players as a place of their business establishment: AOL, Amazon, Apple, iTunes, eBay, PayPal and Skype and many other companies. They selected Luxembourg as platform for the European market estimating it as a well-sophisticated business environment. 

It is known that Luxembourg was the first country to transpose the European directive on commerce and electronic signatures.

Thus, according to moscou.mae.lu, in 2000 the Government adopted e-commerce law. In 2001 the country introduced a law on electronic signatures. The same year Luxembourg presented eLuxembourg following the action plan eEurope. In 2002 it worked out a law to protect consumers in a field based on virtual relations. In 2003 Luxembourg launched the e-commerce Value Added Tax (VAT) Directive. If non-EU suppliers need to make some B2C electronic transactions they are required to register and account for EU VAT. Thereby establishment of B2C e-business in Luxembourg enables with some significant advantages: such as geographical location (heart of Europe); multilingual and highly-educated workforce; competitive wages; political, economic, and social stability, proactive and open government towards e-commerce players; lowest VAT rates in the European Union – standard rate of 15 % and super-reduced rate of 3 % applicable to certain items, e-invoicing and electronic VAT returns, low corporate tax rates (30,38 %), large financial centre, holding, finance and headquarter location; extremely high security degree of servers. 

E-business has become a part of the society in this small country. It’s well known that one third of European companies now use e-commerce in businesses, logistics, advertisement, finance and product development. The persistent further growing inclusion of the Internet and e-commerce technology into the business and administrative operations creates a necessity to adopt the processes of this technological evolution. Luxembourg is aware of these changes so it has been expanding its e-commerce infrastructure by leaps and bounds. The country is to establish strong e-commerce market with its high Internet penetration level and great-developed telecommunication infrastructure so more than 100 projects financed and coordinated by the national Commission for the information society are targeting to enhance e-commerce, improve public electronic services and develop the telecommunications and IT infrastructure. Today Luxembourg provides global companies with many strategic conveniences and profits allowing them to conduct business in financial and other spheres in Europe successfully. With its advanced infrastructure, enhanced telecommunications network, high level of trust culture and security degree Luxembourg provides companies that are active in ICT and e-commerce and need a central European base with unique series of assets. 

Regarding payment processing in Luxembourg, here three options exist. Some ISPs can accept an e-commerce company's payments through their own accounts; the others can set up accounts with WorldPay for an e-commerce company. And the third way is to choose a DIY option for e-commerce businesses. Luxembourg-registered companies can use the online processing system that was launched in June 2000 by the Centre de Transferts Electroniques (Cetrel).

Well, today the volume of citizen’s getting internet access claims to be the highest in the world e-commerce, spending per-capita shows that Luxembourg’s population is wealthy and very active, especially since ecommerce technologies are well developed there. Luxembourg provides global companies with many strategic conveniences and benefits that enable them to conduct business in different fields. The Luxembourg government desires to transform the country into an international high-technology center. And it has great chances to succeed, isn’t it?