Financial aid for regional investments

This page was last modified on 01-02-2018

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.

Forms / Online services

Carry out your procedure:

  • By downloading a form

    • Demande d'intervention publique en faveur d'un projet d'investissement à finalité régionale

Who is concerned

Eligible businesses

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.

The business applying for the aid must disclose whether it is in a business partnership or has a business connection with one or more other businesses. Together, these companies form a "single economic undertaking".

These aid packages are only available to businesses:

  • operating in the following sectors:
    • iron and steel industry;
    • coal industry;
    • synthetic fibres;
    • shipbuilding;
    • 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.

Example:

An employer was first convicted for illegal labour on 3 October 2014. They were convicted for the same offence a second time on 6 December 2017. The employer cannot apply for aid for 3 years as of the date of the 2nd conviction, i.e. they may not apply for aid before 7 December 2020.

Eligible costs

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.
Investments for simple replacements and operating expenditure are not eligible costs.

Prerequisites

Initial investment

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 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. 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.

Example:

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.

Duration and deadlines

Subsidies must be applied for prior to the start of the project.

How to proceed

Filing an application

The complete application file, dated and signed, together with its annexes, must be submitted before the start of the project-related works:

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.

The business may not commence the project before filing the aid application.

Amount and degree (percentage) of aid for regional investments

The amount of aid is calculated on the basis of the eligible project-related costs, 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 accordance 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.

Aggregation rules

The cap for the granted aid applies to the sum total of all aid granted for the same initial investment project.

Two projects will be considered to form one and the same investment project if the same beneficiary, even within the group to which they belong:
  • is receiving financial aid in a region; and
  • files a new application for the same region within 3 years from the start of the works accomplished with the initially granted aid.

If the foreseeable costs are eligible to be covered by a different financial aid scheme, the costs falling under both schemes – the initial investment scheme and the other aid regime – cannot be cofunded beyond the highest rate provided for in the terms of the applicable aid schemes.

Example:

A company is entitled to EUR 1 million in aid for a EUR 10 million investment. However, that investment is also eligible for aid under an R&D aid scheme in which the maximum amount of financial aid is 25 %, i.e., aid in the amount of EUR 2.5 million. As such, the aggregate aid may not exceed EUR 2.5 million, which is the most favourable amount.

Investment aid cannot be combined with de minimis aid schemes for the same allowable costs. De minimis aid means financial aid conforming to Commission Regulation No. 1407/2013 of 18 December 2013 on the application of articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid.

Disclosure of the financial aid

Each individual aid grant that exceeds the EUR 500,000 threshold is disclosed on the European Commission Transparency website, mentioning the following details:  

  • name of the beneficiary;
  • ID (VAT/identification number) of the beneficiary;
  • size of the business (SMEs/large businesses); 
  • the beneficiary’s region under NUTS II
  • NACE group activity sector;
  • amount of aid;
  • source of aid (mechanism);
  • date granted;
  • purpose of the aid;
  • granting authority;
  • financial aid measure number.

Repayment, sanctions and criminal law provisions

The business shall be required to repay the financial aid if:

  • the initial investment is not kept in the region in question for at least 5 years (3 years for SMEs) after its completion (the replacement of an installation or equipment which has become obsolete or suffered damage during that period is allowed, so long as the economic activity remains in the region in question for the minimum applicable period); or
  • each of the jobs created as a result of the investment is not kept in the region in question for at least 5 years from the date when the position was first filled (3 years for SMEs);
  • the beneficiary manages the project in an unsuitable or inappropriate manner;
  • the beneficiary drastically changes the nature of the project;
  • the beneficiary is convicted at least twice for illegal labour or employing non-EU illegal residents.

Aid will not be forfeited if:

  • the investment is not pursued because the beneficiary has obtained prior approval; and
  • the discontinuance is due to force majeure or to circumstances beyond the beneficiary's control.

In all other cases, the beneficiary must repay the amount of financial aid they received, plus interest, within 3 months of the repayment decision.

Persons who have received financial aid on the basis of incomplete or inaccurate information risk:

  • between 4 months and 5 years in prison;
  • a fine of between EUR 251 and EUR 30,000.

Who to contact

Ministry of the Economy
19-21, boulevard Royal
L-2449 - Luxembourg
Postal box L-2914
Luxembourg
Phone: (+352) 2478-84183
Email industrie@eco.etat.lu