Businesses wishing to make an initial investment in the communes of Dudelange or Differdange may be entitled to regional investment aid.
To be entitled to this aid, the investment project must:
- be of specific regional interest; or
- have a positive impact on the economic development of the region; or
- contribute to enhancing the geographic distribution of business activities.
The aid is granted in the form of a capital grant.
Aid applications must be sent to the Industry Directorate at the Ministry of the Economy before works commence.
Who is concerned
These aid packages are intended for any and all businesses trading in Luxembourg, and making an initial investment in the communes of Differdange or Dudelange.
Large businesses may only apply for financial aid for regional investments for an initial investment aimed at developing a new economic activity in the region in question.
These aid packages are not available to businesses:
- operating in the following sectors:
- iron and steel industry;
- coal industry;
- synthetic fibres;
- transportation and the corresponding infrastructure;
- energy production and distribution and energy-related infrastructure;
- fishing and aquaculture;
- agriculture; or
- in difficulty; or
- which have unjustifiably received financial aid from the European Commission and have not yet refunded such aid; or
- which have, in the 2 years prior to their application, delocalised from another EEA country to the establishment in which the initial investment for which the aid being sought is planned, or which are planning to make such a move within 2 years of completing the initial investment for which the aid is being sought.
An employer who, within a 4-year period, has been convicted twice for illegal labour or for employing non-EU illegal residents, may not apply for aid for a period of 3 years following the second conviction.
Costs are eligible to be covered by a financial subsidy if they correspond to:
- investments in tangible and intangible assets; or
- payroll costs in connection with job creation; or
- a combination of these 2.
Financial aid for regional investments can only be paid for an initial investment project, that is to say:
- any investment in tangible and intangible assets for the purpose of:
- opening a new establishment; or
- increasing the capacity of an existing establishment; or
- diversifying an establishment’s production to include products it did not produce previously; or
- effectuating a fundamental change in the entire production process in an existing establishment; and/or
- acquiring the assets of an establishment which has stopped operating, or which would have gone out of business had such acquisition not taken place, and which is bought by an investor not connected to the seller. The mere acquisition of shares in a business is not considered an initial investment.
Eligible investments for large businesses
Large businesses may only apply for financial aid for regional investments for an initial investment project aimed at developing a new economic activity, i.e.:
- any investment in tangible or intangible assets in connection with opening a new establishment or diversifying the activity of an existing establishment, on condition that the new activity is not identical or similar to the establishment’s previous activity; and/or
- the acquisition of the assets of an establishment which has gone out of business, or which would have gone out of business had such acquisition not taken place, and which is bought by an investor not connected to the seller, provided that the new activity made possible as a result of the acquired assets is not the same as or similar to the establishment’s activity prior to that acquisition.
Investment in tangible and intangible assets in connection with the investment project
The acquired assets must be new, unless the acquisition is made by a small or medium-sized enterprise, or unless the assets belong to an existing business.
In the event of the acquisition of the assets of an existing business, the only asset-acquisition costs which can be covered by the aid are:
- those for which no financial aid has previously been granted; and
- those incurred in normal market conditions for an acquisition from a third party not connected to the buyer.
The costs in connection with the acquisition of tangible assets in the form of a lease are eligible, provided that the lease contract includes an obligation for the beneficiary of the aid to purchase the assets outright at the end of the lease.
Intangible assets must meet the following conditions:
- be used solely in the business which is receiving the financial aid;
- be subject to depreciation;
- be acquired at market value from a third party not connected to the buyer;
- be included in the beneficiary’s assets, and remain associated with the project for which the aid was granted, for at least 5 years, or 3 years in the case of SMEs;
- be unequivocally technological in nature. Intangible assets such as trademarks, designs or "goodwill" that are not unequivocally technological in nature do not qualify as eligible costs.
For large enterprises, the costs of intangible assets are covered only up to 50 % of the total eligible investment costs for the initial investment.
To be eligible for investment aid for the purpose of effectuating a fundamental change in production processes, the costs of the assets in connection with the activity being modernised must exceed the cumulative depreciation of the assets over the previous 3 financial years.
To be eligible for investment aid for the purpose of diversifying the activities of an existing business, the costs must exceed, by at least 200 %, the book value of the reused assets, as recorded during the financial year preceding the start of the works.
Payroll costs in connection with job creation in the wake of the initial investment
The estimated gross payroll costs (excluding bonuses and benefits in kind, 13th-month payments, etc.) are eligible if they meet the following conditions:
- the initial investment project must produce a clear increase in the number of employees in the business compared to the average over a 12-month period. All jobs that were discontinued during that period must be deducted, and the number of people employed full time, part time and on seasonal contracts is to be taken into account as fractions of units of annual work;
- every position is filled within 3 years of the completion of the works;
- each job created as a result of the investment is kept in the same region for at least 5 years from the date when the position was first filled, or for 3 years in the case of small and medium-sized enterprises.
Such payroll costs are calculated over a 2-year period.
Combination of investments in assets and payroll costs
Capital grants may be given for investments in tangible and intangible assets combined with payroll costs for the creation of jobs in connection with the initial investment.
However, the aggregate cost must not exceed the higher of the 2 cost items.
A business applies for EUR 1 million in aid for investment in assets, and EUR 500,000 for payroll costs in connection with the creation of jobs. The aggregate cost could, on the face of it, entitle the business to EUR 1.5 million in aid. However, the aid would be capped at EUR 1 million, which is the higher of the 2 cost items.
How to proceed
Filing an application
The completed application file and accompanying documents must be dated and signed by a person authorised to sign on behalf of the company and must be submitted to the Ministry of the Economy before work starts on the project. In the event of a submission by post, the following must be indicated on the envelope:
Ministère de l'Economie
Demande d'aides d'Etat
Applications for aid must include the following information and documents:
- the name and size of the company;
- a description of the investment, including a schedule for the planned works;
- a description of the economic and financial impact that the investment project will have on the business, and on employment;
- the exact place where the investment will be made;
- a list of the costs in connection with investment and related operations;
- the amount of aid sought;
- any other relevant information which would help the ministers in charge to understand the qualities or the specific aspects of the investment project.
Businesses which have been trading for less than 3 years must submit a business plan.
Amount and degree (percentage) of aid for regional investments
The amount of aid is calculated on the basis of the eligible costs of the investment project, and may not exceed 10 % of the allowable costs. The degree (percentage) of aid is based, notably, on criteria including:
- the project’s impact on the region;
- its complexity;
- the company’s cofinancing capacity, etc.
The percentage of financial aid may be increased by 10 % for medium-sized enterprises and by 20 % for small businesses. Thus, a medium-sized business may receive a maximum of 20 % aid, and a small business 30 %.
These increases do not apply to large-scale investment projects whose allowable costs exceed EUR 50 million.
For investment projects whose allowable costs exceed EUR 50 million, the financial aid for regional investments may not exceed an adjusted maximum amount, calculated in conformity with European regulations.
However, the amount of financial aid for regional investments granted for an investment project may not exceed EUR 7.5 million.
Payment of financial aid
At the business' request, the aid may be paid in one lump sum or in several instalments, based on intermediary or final reports submitted by the business.