Why Luxembourg Attracts FinTech Companies
Luxembourg has established itself as a premier European financial center for electronic money institutions and payment service providers. The Commission de Surveillance du Secteur Financier (CSSF) oversees EMI and payment institution licensing, applying rigorous standards within a regulatory environment known for stability and international recognition.
As a founding EU member and eurozone participant, Luxembourg offers licensed institutions direct access to European markets while its central location and multilingual workforce support international operations.
Key Advantages of Luxembourg EMI Licensing
EU Market Access
Licensed institutions can operate across all EU member states without additional authorization through passporting arrangements, providing access to over 450 million consumers.
Financial Hub Status
Luxembourg ranks among the world's leading financial centers, attracting international investors and financial services companies due to its economic stability and regulatory sophistication.
Global Connectivity
The central European location bridges EU and international markets, supporting cross-border transactions and global payment operations.
Regulatory Stability
Compliance with international financial standards and consistent regulatory approach creates investor confidence and operational certainty.
Regulatory Framework
Luxembourg's payment services and electronic money regulation rests on comprehensive legislative foundations:
Law of November 10, 2009 on Payment Services (PSL): The primary Luxembourg legislation governing payment institutions and electronic money institutions.
PSD1 (2007): Initial EU payment services framework, implemented in Luxembourg law.
PSD2 (2015): Updated Payment Services Directive introducing requirements for third-party payment service providers (TPPs), payment initiation services providers (PISPs), and account information service providers (AISPs).
EU Directive 2009/110/EC: The Electronic Money Directive governing EMI authorization and operations.
Anti-Money Laundering Legislation: Luxembourg AML requirements implementing EU directives.
License Categories
Payment Institutions
Licensed to provide:
- •Payment infrastructure development
- •Credit and debit card processing
- •Currency conversion services
- •Electronic voucher services
- •Prepaid card operations
Electronic Money Institutions
Licensed to provide all payment institution services plus:
- •Electronic money issuance
- •Payment-related credit (under specific conditions)
- •Operations supporting e-money and payment services
Capital Requirements
Payment Institutions
€20,000–€125,000 depending on the scope and type of payment services authorized.
Electronic Money Institutions
Minimum €350,000 for EMI authorization.
Ongoing Capital
Licensed institutions must maintain own funds calculated according to prescribed methods based on payment volumes and outstanding e-money.
Legal Structure Requirements
Corporate Form
Must be incorporated as a Société Anonyme (SA) — public limited company under Luxembourg law.
Local Presence
- •Primary office and central administration must be Luxembourg-based
- •Adequate local staffing required for authorized activities
- •Key management functions performed in Luxembourg
Outsourcing
Outsourcing permitted under strict CSSF conditions, provided it does not:
- •Significantly impair internal control quality
- •Prevent CSSF supervision
- •Transfer critical functions without appropriate oversight
Cloud data storage must comply with specific regulatory guidelines.
Application Fees and Costs
Application Fee
€30,000 payable to CSSF upon application submission.
Annual Supervision Fees
€30,000–€40,000 annually, varying based on prior-year transaction volumes and activity scope.
Operating Costs
Additional costs for:
- •Office premises and facilities
- •Personnel
- •IT infrastructure
- •Professional advisory services
- •Compliance and audit functions
Authorization Process
Stage 1: Initial Consultation
Meet with CSSF to discuss proposed business model and authorization requirements. This preliminary engagement helps identify potential issues before formal application.
Stage 2: Application Submission
File detailed application with supporting documentation and €30,000 application fee.
Stage 3: Project Presentation
Introductory meeting with CSSF and key personnel to present the business plan and demonstrate management capability.
Stage 4: Review and Verification
CSSF evaluates application against all authorization criteria:
- •Business plan viability
- •Capital adequacy
- •Management fitness and propriety
- •Governance and compliance frameworks
- •Operational readiness
Stage 5: Licensing Decision
Authorization granted (with or without conditions) upon satisfactory verification, or refusal with stated reasons.
Stage 6: Post-Authorization
Ongoing reporting and compliance obligations:
- •Periodic regulatory returns
- •Annual audited accounts
- •Notification of material changes
Tax Environment
Corporate Tax Rate
24.94% combined corporate tax rate (corporate income tax plus municipal business tax plus solidarity surcharge).
International Tax Features
- •Extensive network of double taxation treaties
- •Tax deductions and credits available for qualifying international transactions
- •Participation exemption regime for qualifying shareholdings
Services Under Luxembourg Authorization
Electronic Money Services
- •Issuance of electronic money against receipt of funds
- •Redemption at par value
- •Distribution through agents and partners
Payment Services
- •Operation of payment accounts
- •Credit transfers and standing orders
- •Direct debit collections
- •Card issuance and processing
- •Money remittance services
- •Payment initiation services
- •Account information services
EU Passporting
Licensed Luxembourg institutions can expand throughout the EEA through:
Freedom of Services
Cross-border provision of services without establishing local presence in host member states.
Freedom of Establishment
Establishing branches or appointing agents in other EU/EEA member states.
Notification Process
Passporting requires notification to CSSF, which coordinates with host state regulators.
Compliance Obligations
Prudential Requirements
- •Capital adequacy maintenance
- •Customer fund safeguarding
- •Liquidity management
AML/CFT Compliance
- •Customer due diligence
- •Transaction monitoring
- •Suspicious activity reporting to Luxembourg Financial Intelligence Unit (CRF)
Regulatory Reporting
- •Periodic financial returns
- •Annual audited accounts
- •Ad hoc notifications for material changes
Conduct Standards
- •Fair treatment of customers
- •Transparent pricing
- •Effective complaint handling
Practical Considerations
Professional Support
Luxembourg's sophisticated professional services sector provides:
- •Legal counsel specializing in CSSF requirements
- •Compliance specialists
- •Accounting and audit firms
- •Corporate services providers
Language
Multilingual environment (French, German, Luxembourgish, English). Regulatory submissions typically accepted in French or English.
Timeline
CSSF processing times depend on application quality and complexity. Pre-application consultation and thorough preparation typically facilitate more efficient processing.
Banking Relationships
Luxembourg hosts major international banks and financial institutions, providing options for corporate banking and correspondent relationships.
Conclusion
Luxembourg EMI licensing provides access to European markets through one of the continent's most respected financial regulatory frameworks. The CSSF's rigorous standards ensure licensed institutions carry credibility throughout international markets.
While application fees and operating costs exceed some alternatives, Luxembourg offers substantial advantages in regulatory reputation, market access, and international connectivity. Success requires significant investment in preparation, compliance infrastructure, and genuine Luxembourg operational substance.
Companies considering Luxembourg licensing should engage appropriate professional support early in the process and ensure their business models align with CSSF expectations for licensed financial institutions.