58861 Luxembourg © 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-7960-8 E-ISBN: 978-0-8213-8630-9 DOI: 10.1596/978-0-8213-7960-8 ISSN: 1729-2638 Library of Congress Cataloging-in-Publication data has been applied for. Printed in the United States Current features News on the Doing Business project http://www.doingbusiness.org Rankings How economies rank-from 1 to 183 http://www.doingbusiness.org/rankings/ Contents Reformers Short summaries of DB2011 reforms, lists of reformers since DB2004 Introduction and a ranking simulation tool and Aggregate Rankings http://www.doingbusiness.org/reforms/ 5 - Year Measure of Historical data Cumulative Change Customized data sets since DB2004 http://www.doingbusiness.org/custom-query/ Starting a Business Methodology and research Dealing with The methodologies and research papers underlying Doing Business Construction Permits http://www.doingbusiness.org/Methodology/ Registering Property Download reports Access to Doing Business reports as well as subnational and regional Getting Credit reports, reform case studies and customized country and regional profiles Protecting Investors http://www.doingbusiness.org/reports/ Paying Taxes Subnational and regional projects Differences in business regulations at the subnational and regional Trading Across Borders level http://www.doingbusiness.org/subnational-reports/ Enforcing Contracts Law Library Closing a Business Online collection of business laws and regulations relating to business and gender issues Doing Business 2011 http://www.doingbusiness.org/law-library/ Business Reforms http://wbl.worldbank.org/ Local partners More than 8,200 specialists in 183 economies who participate in Doing Business http://www.doingbusiness.org/Local-Partners/Doing-Business/ Business Planet Interactive map on the ease of doing business http://rru.worldbank.org/businessplanet Doing Business 2011 : Making a Difference for Entrepreneurs is the eighth in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 9 stages of a business's life are measured: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2011 are current as of June 1, 2010*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy 's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and the Caribbean, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 18 in the Middle East and North Africa and 8 in South Asia, as well as 30 OECD high-income economies. The following pages present the summary Doing Business indicators for Luxembourg. The data used for this economy profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good -practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2011 : Making a Difference for Entrepreneurs presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2009. Note: 2008-2010 Doing Business data and rankings have been recalculated to reflect changes to the methodology and the addition of new economies (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Luxembourg is ranked 45 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Luxembourg - Compared to global good practice economy as well as selected economies: Luxembourg's ranking in Doing Business 2011 Rank Doing Business 2011 Ease of Doing Business 45 Starting a Business 77 Dealing with Construction Permits 42 Registering Property 129 Getting Credit 116 Protecting Investors 120 Paying Taxes 15 Trading Across Borders 32 Enforcing Contracts 1 Closing a Business 45 2 Summary of Indicators - Luxembourg Starting a Business Procedures (number) 6 Time (days) 19 Cost (% of income per capita) 2.1 Min. capital (% of income per capita) 23.8 Dealing with Construction Permits Procedures (number) 13 Time (days) 217 Cost (% of income per capita) 23.8 Registering Property Procedures (number) 8 Time (days) 29 Cost (% of property value) 10.2 Getting Credit Strength of legal rights index (0-10) 7 Depth of credit information index (0-6) 0 Public registry coverage (% of adults) 0.0 Private bureau coverage (% of adults) 0.0 Protecting Investors Extent of disclosure index (0-10) 6 Extent of director liability index (0-10) 4 Ease of shareholder suits index (0-10) 3 Strength of investor protection index (0-10) 4.3 Paying Taxes Payments (number per year) 22 Time (hours per year) 59 Profit tax (%) 4.1 Labor tax and contributions (%) 15.3 Other taxes (%) 1.6 Total tax rate (% profit) 21.1 Trading Across Borders Documents to export (number) 5 Time to export (days) 6 Cost to export (US$ per container) 1420 Documents to import (number) 4 Time to import (days) 6 Cost to import (US$ per container) 1420 3 Enforcing Contracts Procedures (number) 26 Time (days) 321 Cost (% of claim) 9.7 Closing a Business Recovery rate (cents on the dollar) 43.7 Time (years) 2.0 Cost (% of estate) 15 The 5 year measure of cumulative change illustrates how the business regulatory environment has changed in 174 economies from Doing Business 2006 to Doing Business 2011. Instead of highlighting which countries currently have the most business friendly environment, this new approach shows the extent to which an economy's regulatory environment for business has changed compared with 5 years ago. This snapshot reflects all cumulative changes in an economy's business regulation as measured by the Doing Business indicators-such as a reduction in the time to start a business thanks to a one-stop shop or an increase in the strength of investor protection index thanks to new stock exchange rules that tighten disclosure requirements for related -party transactions. This figure shows the distribution of cumulative change across the 9 indicators and time between Doing Business 2006 and Doing Business 2011 0.14 0.12 0.10 Doing business has 0.08 become easier (DB 0.06 change score) 0.04 0.02 0.00 Doing business has -0.02 become more difficult or more -0.04 France Denmark Belgium Germany Finland Iceland costly 6 1. Benchmarking Starting a Business Regulations: Luxembourg is ranked 77 overall for Starting a Business. Ranking of Luxembourg in Starting a Business - Compared to good practice and selected economies: 7 The following table shows Starting a Business data for Luxembourg compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of Min. capital (number) income per (% of income Economies capita) per capita) Denmark* 0.0 New Zealand* 1 1 0.0 Selected Economy Luxembourg 6 19 2.1 23.8 Comparator Economies Belgium 3 4 5.4 19.6 Denmark 4 6 0.0 26.0 Finland 3 14 1.1 7.9 France 5 7 0.9 0.0 Germany 9 15 4.8 0.0 Iceland 5 5 2.3 12.0 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 8 2. Historical data: Starting a Business in Luxembourg Starting a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 73 77 Procedures (number) 6 6 6 6 Time (days) 26 26 24 19 Cost (% of income per capita) 10.8 6.5 1.8 2.1 Min. capital (% of income per capita) 20.5 21.3 19.9 23.8 3. The following graphs illustrate the Starting a Business sub indicators in Luxembourg over the past 4 years: 9 Starting a Business Summary - Luxembourg This table summarizes the procedures and costs associated with setting up a business in Luxembourg. STANDARDIZED COMPANY Legal Form: Socièté a Responsabilité Limitée (SARL) City: Luxembourg Registration Requirements: No: Procedure Time to complete Cost to complete 1 Deposit the minimum capital requirement 1 no charge 2 Verify uniqueness of company name and reserve name 1 EUR 7 3 Notary drafts and notarizes the company deed 2 EUR 1,075 4 * Apply for business license 15 EUR 24 5 * Register at the one-stop shop 4 no charge 6 Unblock the authorized capital 1 no charge * Takes place simultaneously with another procedure. 10 Starting a Business Details - Luxembourg Procedure 1 Deposit the minimum capital requirement Time to complete: 1 Cost to complete: no charge Comment: The promoters must open an escrow account in the name of the company in formation before formalizing the company statutes and must transfer statutory capital to this account before signature of the notarial deed. For notarial purposes, the bank will remit an escrow certificate (certificate de blocage). The bank account is automatically unblocked on delivery of a certified copy of the notarial deed of incorporation. Procedure 2 Verify uniqueness of company name and reserve name Time to complete: 1 Cost to complete: EUR 7 Comment: Shareholders are free to choose the company's name but must ensure that it is unique. Uniqueness can be verified with the Trade and Companies Register. The Register rejects the registration of a company if the name already exists. However, company names cannot be reserved with the Trade and Companies Register. The company name may include the name of the shareholders or may assume a corporate name. In practice, the notary public checks and reserves the proposed company name with the Commercial Registry. Due to reform at the registry, its possible to obtain an electronic certificate in a PDF form certifying that the company's name is available within 24 hours. Procedure 3 Notary drafts and notarizes the company deed Time to complete: 2 Cost to complete: EUR 1,075 Comment: A private limited liability company must be incorporated before a notary public. The notary draws up a deed based on model articles of incorporation found on the Internet. (The national Chamber of Commerce's Espace Enterprises information center can help incorporators complete model documents.) The notary is held by law to pay all the costs relating to the incorporation and registration of the company: Notary costs EUR 450 (fee EUR 150 + sundry expenses EUR 200 + certified copies EUR 100); Company Register EUR 250; Publication in Official Gazette EUR 250; Sundries EUR 50. The company founders have to provide the notary with advance payment of the estimated costs, i.e. EUR 1000. The notary must provide a detailed account after the newly created corporation is announced. Procedure 4 Apply for business license Time to complete: 15 Cost to complete: EUR 24 Comment: Commercial activities require an establishment permit. Pursuant to domestic law or the provisions of European directives, this permit is issued by the Ministry of Middle Classes upon request and on 11 proof of knowledge of business management. All commercial (i.e. trade and services not linked to professions) and industrial activities, skilled (craft) trade and some regulated (liberal) professions require a business licence (autorisation d'établissement / establishment permit). The licence is issued by a ministry on application, most generally by the Ministry of Middle Classes. To apply for a business license, promoters must submit the following documents: - Application form (completed and signed) for an establishment permit. - Tax stamp for 24 EUR. The amount can be transferred to the national Giro account (CCP) of the Registration and Domains Administration (Administration de l'Enregistrement et des Domaines): LU47 1111 0087 9262 0000, with the reference: "Office Fee for Establishment Permit [ENTER APPLICANT'S NAME]." In this case, proof of payment must be presented. The tax stamp can also be obtained from the Espace Entreprises information center. - For nonresidents and persons residing in Luxembourg for fewer than 5 years, a recent notarized certificate of nonbankruptcy. - Articles of association (executed or draft) for a commercial company. - School certificates or professional diplomas (certified by the institution) required for the intended activity. Otherwise, proof of relevant professional experience such as an EU certificate or certificate of registration with a social security authority. - An affidavit on the exercise of any management posts previously held in Luxembourg, for verification of nonbankruptcy. - The applicant's identity card (copy). - The applicant's police record or affidavit. Note: This applies to nonresidents and persons residing in Luxembourg for less than 5 years. The business permit application can be submitted before executing the notary deed because the Ministry of the Middle Classes checks the draft articles of association--the company name, business purpose, and identity of directors and officers for compliance with the provisions of the Law of Establishment. Generally, the business permit application and notary deed processes start more or less at the same time and are pursued simultaneously. Although the company incorporation process requires a notary, the founder may directly register the company with different administrations and obtain identification numbers and the business license. t and e-Government systems have cut by half the procedure time. The procedure itself rests unchanged. The application procedure may be launched even before executing the notarial deed. Control of professional qualifications (e.g. managerial quaifications for trade activities) lies at the heart of the administrative procedure. Procedure 5 Register at the one-stop shop Time to complete: 4 Cost to complete: no charge Comment: The notary public must levy an initial payment for all applicable company incorporation fees and taxes, including registration costs. Within 4 weeks, the notary must register (a) the statutes with the tax administration (Administration de l'Enregistrement) at the Registry one-stop shop; and (b) the company with the Commercial Registry, within 4 weeks of company incorporation. The Commercial Register arranges for publication in the Official Gazette, according to the Companies Act, within 2 months of company registration. Upon 24 hours of registration, the Commercial Registry generates an administrative or official (register) number that accompanies the company during its corporate life (matricule). This number forms the basis for all other identification numbers to be issued by the administration for direct taxes (tax number), the administration for indirect taxes (VAT number), or the social security service (pay-as-you-earn number and employer number). Applications can be filed for both VAT and social security at the one-stop, which distributes the forms to the relevant administrations. Company registration with the Chamber of Commerce is done automatically. Procedure 6 Unblock the authorized capital Time to complete: 1 12 Cost to complete: no charge Comment: On incorporating the company, the notary public immediately issues a release certificate (certificate de déblocage), indicating that the company has come into existence and listing the corporate officers' identities. This certificate will be sent to the bank for the release of the capital. 13 14 1. Benchmarking Dealing with Construction Permits Regulations: Luxembourg is ranked 42 overall for Dealing with Construction Permits. Ranking of Luxembourg in Dealing with Construction Permits - Compared to good practice and selected economies: 15 The following table shows Dealing with Construction Permits data for Luxembourg compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) income per Economies capita) Denmark 6 Qatar 0.8 Singapore 25 Selected Economy Luxembourg 13 217 23.8 Comparator Economies Belgium 14 169 64.1 Denmark 6 69 61.7 Finland 18 66 134.2 France 13 137 23.6 Germany 12 100 61.8 Iceland 18 75 19.6 16 2. Historical data: Dealing with Construction Permits in Luxembourg Dealing with Construction Permits data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 41 42 Procedures (number) 13 13 13 13 Time (days) 217 217 217 217 Cost (% of income per capita) 19.4 20.0 19.9 23.8 3. The following graphs illustrate the Dealing with Construction Permits sub indicators in Luxembourg over the past 4 years: 17 Dealing with Construction Permits in Luxembourg The table below summarizes the procedures, time, and costs to build a warehouse in Luxembourg. BUILDING A WAREHOUSE City: Luxembourg Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain a recent copy of the cadastre plans from the Cadastre 1 day EUR 10 Administration 2 Obtain approval in principle (accord de principe) 60 days EUR 60 3 * Obtain Commodo/Incommodo Classe 3 approval from the Environmental 120 days no charge Administration 4 * Obtain a building permit from the Urban Department (service de 90 days EUR 960 l'urbanisme) of the municipality 5 * Obtain an excavation permit from the Ministry of Works 60 days EUR 10 6 * Hire an independent inspection company to carry out inspections of 1 day EUR 5,200 construction works 7 Request and receive an inspection of completed works from the 1 day no charge Environmental Administration 18 8 Request and receive sewerage (canalization) inspection 1 day no charge 9 Obtain a feasibility study for the sewerage (canalization) connection 30 days EUR 1,950 10 * Obtain sewerage (canalization) connection 30 days no charge 11 * Obtain water connection 5 days EUR 3,000 12 * Obtain electricity connection 30 days EUR 1,000 13 * Obtain telephone connection 30 days EUR 200 * Takes place simultaneously with another procedure. 19 Dealing with Construction Permits Details - Luxembourg Procedure 1 Obtain a recent copy of the cadastre plans from the Cadastre Administration Time to complete: 1 day Cost to complete: EUR 10 Agency: Cadastre Administration Comment: Procedure 2 Obtain approval in principle (accord de principe) Time to complete: 60 days Cost to complete: EUR 60 Agency: Urban Department Commune Comment: Although not required, obtaining an "approval in principle" of the architectural plans facilitates the process for obtaining the environmental, road (excavation), and building permits. Procedure 3 Obtain Commodo/Incommodo Classe 3 approval from the Environmental Administration Time to complete: 120 days Cost to complete: no charge Agency: Environment Department Comment: An environmental clearance is required if the warehouse is to be used for storing more than 100 metric tons of paper products. Procedure 4 Obtain a building permit from the Urban Department (service de l'urbanisme) of the municipality Time to complete: 90 days Cost to complete: EUR 960 Agency: Urban Department, Commune Comment: The building permit is valid for a year. The building plans must be conform to the master plan of the city of Luxembourg. The application file comprises an application form, a cadastral extract, and the building design plans. Various departments within the Commune must approve the application, including all the utility and the fire safety departments. The Commune charges EUR 24 as an application processing fee and EUR 0.24 per cubic meter. Procedure 5 Obtain an excavation permit from the Ministry of Works Time to complete: 60 days 20 Cost to complete: EUR 10 Agency: Ministry of Public Works Comment: Assuming the warehouse is to be built near a main road, BuildCo must obtain an excavation permit to dig for utility connections. The Ministry of Public Works charges a stamp duty of EUR 10. Procedure 6 Hire an independent inspection company to carry out inspections of construction works Time to complete: 1 day Cost to complete: EUR 5,200 Agency: Independent Surveillance Company Comment: BuildCo must hire an independent inspection company to perform inspections during construction, which costs about 0.5% of construction value. Procedure 7 Request and receive an inspection of completed works from the Environmental Administration Time to complete: 1 day Cost to complete: no charge Agency: Environmental Administration Comment: The Environmental Administration inspects the completed building to ensure that it complies with the environmental clearance obtained prior to construction. Procedure 8 Request and receive sewerage (canalization) inspection Time to complete: 1 day Cost to complete: no charge Agency: Sewage Department, Commune Comment: Procedure 9 Obtain a feasibility study for the sewerage (canalization) connection Time to complete: 30 days Cost to complete: EUR 1,950 Agency: Sewage Department, Commune Comment: BuildCo applies for a water connection and requests water services from the Commune to prepare an estimate for all the costs associated with the water/sewerage connection. Procedure 10 Obtain sewerage (canalization) connection Time to complete: 30 days 21 Cost to complete: no charge Agency: Sewage Department, Commune Comment: BuildCo applies for a sewerage connection and requests water services from the Commune in order to prepare an estimate for all the costs associated with the sewerage connection. Procedure 11 Obtain water connection Time to complete: 5 days Cost to complete: EUR 3,000 Agency: Water Services Department, Commune Comment: Procedure 12 Obtain electricity connection Time to complete: 30 days Cost to complete: EUR 1,000 Agency: Electrical Services Department, Commune, or CEGEDEL Comment: The Commune or the Electrical Company of the Great Duchy of Luxemburg (Compagnie Grand-Ducale d'Electricite du Luxembourg, CEGEDEL) provides a cost estimate. The connection takes place after BuildCo has received the road approval. Procedure 13 Obtain telephone connection Time to complete: 30 days Cost to complete: EUR 200 Agency: P&T (Postes et Telecommunications) Comment: Post and Telecommunications (Poste et télécommunications, P&T) provides a cost estimate. The connection takes place after BuildCo has received the road approval. 22 23 1. Benchmarking Registering Property Regulations: Luxembourg is ranked 129 overall for Registering Property. Ranking of Luxembourg in Registering Property - Compared to good practice and selected economies: 24 The following table shows Registering Property data for Luxembourg compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) property Economies value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Luxembourg 8 29 10.2 Comparator Economies Belgium 8 79 12.7 Denmark 3 42 0.6 Finland 3 14 4.0 France 8 59 6.1 Germany 5 40 5.1 Iceland 3 4 2.4 * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 25 2. Historical data: Registering Property in Luxembourg Registering Property data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 132 129 Procedures (number) 8 8 8 8 Time (days) 29 29 29 29 Cost (% of property value) 10.2 10.3 10.3 10.2 3. The following graphs illustrate the Registering Property sub indicators in Luxembourg over the past 4 years: 26 Registering Property in Luxembourg This topic examines the steps, time, and cost involved in registering property in Luxembourg. STANDARDIZED PROPERTY Property Value: 2,601,522.54 City: Luxembourg Registration Requirements: No: Procedure Time to complete Cost to complete 1 Parties visit notary to draft and authenticate the sale 1 - 2 days 4 EUR stamp per page of agreement (Compromis de Vente) the deed (2-3 pages) 2 * Notary conducts full search at property registry 1 day in person EUR 2.48 for full search (simultaneous with procedure 3) 3 * Notary conducts search at the Administration du 1 day in person 3 EUR per page Cadastre (online) (simultaneous with procedure 2) 4 * Notary notifies tax administration of transfer and 1 day in person no cost obtains tax clearance 27 5 Buyer sends funds, fees, taxes and anti-money 2 days EUR 4,765.5 notary fees + laundering documents to notary 6% market value of property (registration fee) + 3% market value of property (municipal surcharge within city of Luxembourg) + 1% market value of property (transcription duty) 6 Parties return to notary to sign transfer deed in 1 - 2 days already paid in procedure 5 original 7 Notary registers transfer deed at the Administration 3 - 5 days to record + already paid in procedure 5 de l'Enregistrement et des Domaines 14 days to send a copy of the registered deed 8 Notary sends recorded transfer deed to the parties 1 - 2 days already paid in procedure 5 * Takes place simultaneously with another procedure. 28 Registering Property Details - Luxembourg Procedure 1 Parties visit notary to draft and authenticate the sale agreement (Compromis de Vente) Time to complete: 1 - 2 days Cost to complete: 4 EUR stamp per page of the deed (2-3 pages) Comment: After signing a sale agreement ("compromis de vente") between each other, as per common practice, the parties will visit a notary so he can draft and authenticate the notarial deed. The sale is complete between the parties, and ownership is acquired as of right by the buyer with respect to the seller, as soon as the property and the price have been agreed upon, although the property has not yet been delivered or the price paid (Article 1583 of the Civil Code). As a sale of real estate must be registered (which triggers the payment of registration taxes) and recorded in the mortgage registry in order to be enforceable vis-à-vis third parties and as only duly certified deeds may be entered in the register, the sale must be recorded in a notarial deed ("acte de vente"). It is sometimes preferable for each party to appoint its own notary (in which case, the notaries' fee is split between the two notaries). Here we assume the case of only one notary. The notary is deemed a public official with powers delegated by the state to authenticate the deeds he drafts and provides complete security to the contracts he supervises. The authenticity of the deeds grants the parties an undisputable date and content in Court. The law imposes a personal liability on the notary for his professional acts which is more extensive than that of other branches of the legal profession. There are 36 notaries, 13 of those in Luxembourg canton, in the Grand-Duchy of Luxembourg and the sale may be drawn up in front of anyone of them. The time period which is necessary to obtain an appointment with the notary public depends on the availability of such notary (holiday season, etc.). This study assumes that parties would call on day one and receive an appointment for the same or following day. Procedure 2 Notary conducts full search at property registry Time to complete: 1 day in person (simultaneous with procedure 3) Cost to complete: EUR 2.48 for full search Agency: Property registry (Bureau des Hypotheques) Comment: The notary may go in person to the Bureau des Hypotheques to request and receive either a 'releve des inscriptions hypothecaires' (containing a list of mortgages), or a 'recherche par case hypothecaire' (containing a list of all land transactions effected by the landowner together with that of every mortgage or charge burdening the property). For each excerpt of the registry EUR 1.24 is payable per property owner and EUR 0.50 per each registered property. If the excerpt includes photocopies, EUR 0.50 is payable per each photocopy. For a closing certificate which confirms that the excerpts are the only existing ones EUR 1.24 per property-owner is payable. For a negative excerpt ( no properties registered) EUR 2.48 is payable per person. Procedure 3 Notary conducts search at the Administration du Cadastre (online) Time to complete: 1 day in person (simultaneous with procedure 2) 29 Cost to complete: 3 EUR per page Agency: Administration du Cadastre Comment: The notary should also check the status of the property at the cadastre. The notary can equally obtain this information through the cadaste's webpage where all this information is online but access to it is limited to notaries and administrations. Procedure 4 Notary notifies tax administration of transfer and obtains tax clearance Time to complete: 1 day in person Cost to complete: no cost Agency: Tax Administration office Comment: The notary visits the tax administration office to notify them that the property will be sold. The tax administration office confirms that the property has no claims or unpaid taxes on it. If there are outstanding claims or taxes, the tax administration may register a judicial mortgage on the property. Procedure 5 Buyer sends funds, fees, taxes and anti-money laundering documents to notary Time to complete: 2 days Cost to complete: EUR 4,765.5 notary fees + 6% market value of property (registration fee) + 3% market value of property (municipal surcharge within city of Luxembourg) + 1% market value of property (transcription duty) Comment: The buyer will pay the taxes, fees and funds for the property by wire transfer to the notary, in addition to notarial fees. Notarial fees are determined by the Regulation of 24 July, 1971 on the revision of notary fees. The buyer must also send anti-money laundering documentation to the notary at this time, regarding the origin of the funds he is using. Procedure 6 Parties return to notary to sign transfer deed in original Time to complete: 1 - 2 days Cost to complete: already paid in procedure 5 Comment: Procedure 7 Notary registers transfer deed at the Administration de l'Enregistrement et des Domaines Time to complete: 3 - 5 days to record + 14 days to send a copy of the registered deed Cost to complete: already paid in procedure 5 Agency: Administration de l Enregistrement et des Domaines Comment: The notary registers the transfer deed at the Administration de l'Enregistrement et des Domaines, which charges the transfer duty to the notary. The Administration will record the transfer, making it opposable to third parties, after two to five days. The Administration will 30 also send the deed to the Administration du Cadastre for registration of the new owner there. It will take the Cadastre about two weeks to record the new owner. At the same time, the Administration will take about two weeks to send a copy of the registered deed, with the stamp of the Administration and a reference number on it, back to the notary. This document would be needed in practice to use the property to obtain a loan from a bank. The registration, municipal and inscription fees are paid by the parties to the notary, who pays the Administration. Procedure 8 Notary sends recorded transfer deed to the parties Time to complete: 1 - 2 days Cost to complete: already paid in procedure 5 Comment: Once he receives it, the notary will send the registered deed to the parties. 31 32 1. Benchmarking Getting Credit Regulations: Luxembourg is ranked 116 overall for Getting Credit. Ranking of Luxembourg in Getting Credit - Compared to good practice and selected economies: 33 The following table shows Getting Credit data for Luxembourg compared to good practice and comparator economies: Good Practice Strength of Depth of Public Private legal rights credit registry bureau Economies index (0-10) information coverage (% coverage (% index (0-6) of adults) of adults) New Zealand* 100.0 Portugal 67.1 Singapore* 10 United Kingdom 6 Selected Economy Luxembourg 7 0 0.0 0.0 Comparator Economies Belgium 7 4 57.2 0.0 Denmark 9 4 0.0 5.4 Finland 7 5 0.0 14.9 France 7 4 33.3 0.0 Germany 7 6 1.0 98.4 Iceland 7 5 0.0 100.0 * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 34 2. Historical data: Getting Credit in Luxembourg Getting Credit data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 109 116 Strength of legal rights index (0-10) 7 7 7 7 Depth of credit information index (0-6) 0 0 0 0 Private bureau coverage (% of adults) 0.0 0.0 0.0 0.0 Public registry coverage (% of adults) 0.0 0.0 0.0 0.0 3. The following graphs illustrate the Getting Credit sub indicators in Luxembourg over the past 4 years: 35 Getting Credit in Luxembourg The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Luxembourg. Getting Credit Indicators (2010) Indicator Private credit Public credit Private bureau coverage (% of adults) 0 bureau registry Are data on both firms and individuals distributed? No No 0 Are both positive and negative data distributed? No No 0 Does the registry distribute credit information from retailers, trade No No 0 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? No No 0 Is data on all loans below 1% of income per capita distributed? No No 0 Is it guaranteed by law that borrowers can inspect their data in the No No 0 largest credit registry? Coverage 0.0 0.0 Number of individuals 0 0 Number of firms 0 0 36 Strength of legal rights index (0-10) 7 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, No without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without Yes requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, No proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations Yes and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the No grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? Yes Do secured creditors have absolute priority to their collateral in bankruptcy procedures? Yes During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? Yes Does the law authorize parties to agree on out of court enforcement? Yes 37 38 1. Benchmarking Protecting Investors Regulations: Luxembourg is ranked 120 overall for Protecting Investors. Ranking of Luxembourg in Protecting Investors - Compared to good practice and selected economies: 39 The following table shows Protecting Investors data for Luxembourg compared to good practice and comparator economies: Good Practice Strength of investor Economies protection index (0-10) New Zealand 9.7 Selected Economy Luxembourg 4.3 Comparator Economies Belgium 7.0 Denmark 6.3 Finland 5.7 France 5.3 Germany 5.0 Iceland 5.3 40 2. Historical data: Protecting Investors in Luxembourg Protecting Investors data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 119 120 Strength of investor protection index (0-10) 4.3 4.3 4.3 4.3 3. The following graph illustrates the Protecting Investors index in Luxembourg compared to best practice and selected Economies: 9.7 7.0 6.3 5.7 5.3 5.3 5.0 4.3 k d m ar y nd ce d g an an iu ur an m an a nl lg en bo m al el Fi Fr Be Ic Ze er D m G xe ew Lu N Note: The higher the score, the greater the investor protection. 41 Protecting Investors in Luxembourg The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Luxembourg. Protecting Investors Data (2010) Indicator Extent of disclosure index (0-10) 6 2 What corporate body provides legally sufficient approval for the transaction? 2 Whether immediate disclosure of the transaction to the public and/or shareholders is required? 1 Whether disclosure of the transaction in published periodic filings (annual reports) is required? 1 Whether disclosure of the conflict of interest by Mr. James to the board of directors is required? 0 Whether an external body must review the terms of the transaction before it takes place? Extent of director liability index (0-10) 4 1 Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes to the company? 1 Whether shareholders can hold the approving body (the CEO or board of directors) liable for the damage that the Buyer-Seller transaction causes to the company? 0 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff? 42 0 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff? 1 Whether fines and imprisonment can be applied against Mr. James? 0 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company? Ease of shareholder suits index (0-10) 3 3 Whether the plaintiff can obtain any documents from the defendant and witnesses during trial? 0 Whether the plaintiff can directly question the defendant and witnesses during trial? 0 Whether the plaintiff can request categories of documents from the defendant without identifying specific ones? 0 Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the transaction? 0 Whether the level of proof required for civil suits is lower than that of criminal cases? 0 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit? Strength of investor protection index (0-10) 4.3 43 44 1. Benchmarking Paying Taxes Regulations: Luxembourg is ranked 15 overall for Paying Taxes. Ranking of Luxembourg in Paying Taxes - Compared to good practice and selected economies: 45 The following table shows Paying Taxes data for Luxembourg compared to good practice and comparator economies: Good Practice Payments Time (hours Total tax rate (number per per year) (% profit) Economies year) Maldives* 3 0 Timor-Leste 0.2 Selected Economy Luxembourg 22 59 21.1 Comparator Economies Belgium 11 156 57.0 Denmark 9 135 29.2 Finland 8 243 44.6 France 7 132 65.8 Germany 16 215 48.2 Iceland 31 140 26.8 * The following economies are also good practice economies for : Payments (number per year): Qatar 46 2. Historical data: Paying Taxes in Luxembourg Paying Taxes data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 14 15 Total tax rate (% profit) 21.3 21.0 20.9 21.1 Payments (number per year) 22 22 22 22 Time (hours per year) 58 59 59 59 3. The following graphs illustrate the Paying Taxes sub indicators in Luxembourg over the past 4 years: 47 Paying Taxes in Luxembourg The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Luxembourg, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR VAT 1 online 24 15.0% value added filing Stamp duty 1 Euro paper size 1.86-9.92 Vehicle tax 1 varies vehicle 0.00 weight Corporate income tax 1 online 21 21.8% taxable profit 0.00 filing Waste disposal 1 varies waste weight 0.10 Net wealth tax 1 online 0.5% equity 0.10 filing Tax on insurance 1 4.0% insurance 0.10 contracts premium Property tax 1 online 750.0% 0.9% to 1% 0.30 filing of unitary value Fuel tax 1 included in 1.00 fuel price 48 Municipal tax 1 online 6.8% taxable 4.10 filing profits with an allowance of Euro 17,500 Social security 12 14 12.31% gross salaries 15.30 -14.56% Totals 22 59 21.1 49 50 1. Benchmarking Trading Across Borders Regulations: Luxembourg is ranked 32 overall for Trading Across Borders. Ranking of Luxembourg in Trading Across Borders - Compared to good practice and selected economies: 51 The following table shows Trading Across Borders data for Luxembourg compared to good practice and comparator economies: Good Practice Documents to Time to Cost to Documents to Time to Cost to export export (days) export (US$ import import (days) import (US$ Economies (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 4 439 Selected Economy Luxembourg 5 6 1420 4 6 1420 Comparator Economies Belgium 4 8 1619 5 9 1600 Denmark 4 5 744 3 5 744 Finland 4 8 540 5 8 620 France 2 9 1078 2 11 1248 Germany 4 7 872 5 7 937 Iceland 5 19 1532 5 14 1674 * The following economies are also good practice economies for : Time to export (days): Estonia 52 2. Historical data: Trading Across Borders in Luxembourg Trading Across Borders data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 33 32 Cost to export (US$ per container) 1250 1420 1420 1420 Cost to import (US$ per container) 1250 1420 1420 1420 Documents to export (number) 5 5 5 5 Documents to import (number) 4 4 4 4 Time to export (days) 6 6 6 6 Time to import (days) 6 6 6 6 3. The following graphs illustrate the Trading Across Borders sub indicators in Luxembourg over the past 4 years: 53 54 Trading Across Borders in Luxembourg These tables list the procedures necessary to import and export a standardized cargo of goods in Luxembourg. The documents required to export and import the goods are also shown. Nature of Export Procedures (2010) Duration (days) US$ Cost Documents preparation 2 300 Customs clearance and technical control 2 120 Ports and terminal handling 1 350 Inland transportation and handling 1 650 Totals 6 1420 Nature of Import Procedures (2010) Duration (days) US$ Cost Documents preparation 2 300 Customs clearance and technical control 2 120 Ports and terminal handling 1 350 Inland transportation and handling 1 650 Totals 6 1420 55 Documents for Export and Import Export Bill of lading Commercial invoice Packing list Single Administrative Document (Customs export declaration) Transit document Import Bill of lading Commercial invoice Packing list Single Administrative Document (Customs export declaration) 56 57 1. Benchmarking Enforcing Contracts Regulations: Luxembourg is ranked 1 overall for Enforcing Contracts. Ranking of Luxembourg in Enforcing Contracts - Compared to good practice and selected economies: 58 The following table shows Enforcing Contracts data for Luxembourg compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) claim) Economies Bhutan 0.1 Ireland 20 Singapore 150 Selected Economy Luxembourg 26 321 9.7 Comparator Economies Belgium 26 505 16.6 Denmark 35 410 23.3 Finland 32 375 13.3 France 29 331 17.4 Germany 30 394 14.4 Iceland 27 417 8.2 59 2. Historical data: Enforcing Contracts in Luxembourg Enforcing Contracts data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 1 1 Procedures (number) 26 26 26 26 Time (days) 321 321 321 321 Cost (% of claim) 8.8 8.8 9.7 9.7 3. The following graphs illustrate the Enforcing Contracts sub indicators in Luxembourg over the past 4 years: 60 Enforcing Contracts in Luxembourg This topic looks at the efficiency of contract enforcement in Luxembourg. Nature of Procedure (2010) Indicator Procedures (number) 26 Time (days) 321 Filing and service 21.0 Trial and judgment 240.0 Enforcement of judgment 60.0 Cost (% of claim)* 9.70 Attorney cost (% of claim) 6.9 Court cost (% of claim) 1.9 Enforcement Cost (% of claim) 0.9 61 Court information: Luxembourg District Court, ("Tribunal d'arrondissement siégeant en matière Commercial Section commerciale") * Claim assumed to be equivalent to 200% of income per capita. 62 63 1. Benchmarking Closing Business Regulations: Luxembourg is ranked 45 overall for Closing a Business. Ranking of Luxembourg in Closing Business - Compared to good practice and selected economies: 64 The following table shows Closing Business data for Luxembourg compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of (cents on the estate) Economies dollar) Ireland 0.4 Japan 92.7 Singapore* 1 Selected Economy Luxembourg 43.7 2.0 15 Comparator Economies Belgium 87.6 0.9 4 Denmark 89.4 1.1 4 Finland 89.4 0.9 4 France 45.2 1.9 9 Germany 53.1 1.2 8 Iceland 78.5 1.0 4 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 65 2. Historical data: Closing Business in Luxembourg Closing a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 50 45 Time (years) 2.0 2.0 2.0 2.0 Cost (% of estate) 15 15 15 15 Recovery rate (cents on the dollar) 41.6 41.7 41.7 43.7 3. The following graphs illustrate the Closing Business sub indicators in Luxembourg over the past 4 years: 66 Since 2004 Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening access to credit and enforcing contracts by measuring their impact on 10 indicator sets . * Nearly 1,000 reforms have had an impact on these indicators. Doing Business 2011, covering June 2009 to June 2010, reports that 117 economies implemented 216 reforms to make it easier to start a business. 64% of economies measured by Doing Business have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export regulations and improving credit information systems. The top 10 most-improved in Doing Business 2011 Dealing with Construction Trading Across Borders Positive Change Registering Property Enforcing Contracts Protecting Investors Starting a Business Closing a Business Negative Change Getting Credit Paying Taxes Permits Economy Kazakhstan Rwanda Peru Vietnam Cape Verde Tajikistan Zambia Hungary Grenada Brunei Darussalam * For Doing Business 2011 the Employing Workers indicator is not included in the aggregate ease of doing business ranking. 67 Summary of changes to business regulation in top 10 most improved economies in Doing Business 2011 and selected comparator economies. Belgium Belgium's capital city, Brussels, made it more difficult to transfer property by requiring a clean-soil certificate. Belgium introduced a new law that will promote and facilitate the survival of viable businesses experiencing financial difficulties. Brunei Darussalam Brunei Darussalam made starting a business easier by improving efficiency at the company registrar and implementing an electronic system for name searches. Brunei Darussalam reduced the corporate income tax rate from 23.5% to 22% while also introducing a lower tax rate for small businesses, ranging from 5.5% to 11%. The introduction of an electronic customs system in Brunei Darussalam made trading easier. Cape Verde Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business begins operations and computerizing the system for delivering the municipal license. Cape Verde eased property registration by switching from fees based on a percentage of the property value to lower fixed rates. Cape Verde abolished the stamp duties on sales and checks. Denmark Denmark eased business start-up by reducing the minimum capital requirement for limited liability companies from 125,000 Danish kroner ($22,850) to 80,000 Danish kroner ($14,620). Computerization of Denmark's land registry cut the number of procedures required to register property by half. Germany Germany eased business start-up by increasing the efficiency of communications between the notary and the commercial registry and eliminating the need to publish an announcement in a newspaper. Grenada Grenada eased business start-up by transferring responsibility for the commercial registry from the courts to the civil administration. The appointment of a registrar focusing only on property cut the time needed to transfer property in Grenada by almost half. Grenada's customs administration made trading faster by simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Hungary Hungary implemented a time limit for the issuance of building permits. Hungary reduced the property registration fee by 6% of the property value. Hungary simplified taxes and tax bases. Amendments to Hungary's bankruptcy law encourage insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. Iceland Iceland made dealing with construction permits more costly by increasing the fees to obtain the design approval and receive inspections. Iceland increased the corporate income tax rate from 15% to 18% and raised social security and pension contribution rates. Kazakhstan Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarized. Kazakhstan made dealing with construction permits easier by implementing a one-stop shop related to technical conditions for utilities. Kazakhstan strengthened investor protections by requiring greater corporate disclosure in company annual reports. Kazakhstan speeded up trade through efforts to modernize customs, including implementation of a risk management system and improvements in customs automation. Luxembourg Luxembourg eased business start-up by speeding up the delivery of the business license. Peru Peru eased business start-up by simplifying the requirements for operating licenses and creating an online one-stop shop for business registration. Peru streamlined construction permitting by implementing administrative reforms. Peru introduced fast-track procedures at the land registry, cutting by half the time needed to register property. Peru made trading easier by implementing a new web-based electronic data interchange system, risk-based inspections and payment deferrals. Rwanda Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and implementing new time limits for the issuance of various permits. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that loans of all sizes be reported to the central bank's public credit registry. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with Uganda and other neighbors, leading to an improvement in the trade logistics environment. 68 Tajikistan Tajikistan made starting a business easier by creating a one-stop shop that consolidates registration with the state and the tax authority. Tajikistan strengthened investor protections by requiring greater corporate disclosure in the annual report and greater access to corporate information for minority investors. Tajikistan lowered its corporate income tax rate. Vietnam Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business license and tax license and by eliminating the need for a seal for company licensing. Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. Zambia Zambia eased business start-up by eliminating the minimum capital requirement. Zambia eased trade by implementing a one-stop border post with Zimbabwe, launching web-based submission of customs declarations and introducing scanning machines at border posts. Zambia improved contract enforcement by introducing an electronic case management system in the courts that provides electronic referencing of cases, a database of laws, real-time court reporting and public access to court records. 69 70