How to relocate your business to Luxembourg – a country with an expat mindset

My name is Alexey Pospekhov, and I am the founder of the start-up Mission Space. I moved to Luxembourg in 2021 after winning a start-up competition.

In May, we won the Fit 4 Start competition, received invitations, and by November I was already here. In addition to my main activities, I also help other businesses relocate to Europe.

About the approach to relocation and its reasons

A little background. In 2017, I was the first person to be granted a start-up visa in Latvia. Since then, I have moved more than 250 businesses from Russia to Europe, because it became clear that this was exactly the route that tech entrepreneurs needed.

I have been doing this for three years, but after the 24th, everything changed. I am inundated with requests from people who do not really understand:

why they want to leave;
how the entire migration process works;
what difficulties they may encounter.

An important point is to answer the question: "What are the goals and objectives?" The task of "moving somewhere" is not a task, it is a stage of action. But an approach such as "I want my children to live in such-and-such a country" or "I want to obtain an EU passport" is something you can work with.

Migration legislation has changed significantly over the past six months. As it happens, Luxembourg has become interested in talent from Russia.

If I previously said that there are areas where it is better to stay and work in Russia because it is more effective, then after the start of mobilisation, I am sure that there are no longer any such areas.

Why?

There's no way to get money onto the global market.
It is not entirely clear what to do next with the business when you or your employees may simply be taken to the front and no stories about armour will work.
And most importantly, all sectors are declining, people and companies are switching to economy mode, and investments are stalling. This is a chain reaction that has already begun, and it is unclear when it will end.

About the Fit 4 Start programme

It takes place twice a year. The Luxembourg government selects technology start-ups in order to, essentially, take them under its wing. These projects can be at completely different stages of readiness and development. Each start-up finalist will receive €150,000. The areas in which Luxembourg selects projects are always different.

At one time, space was very much in demand. The previous set was already devoted to HPC, High Performance Computing (high-performance computing, — Editor's note). This year, it's innovative technologies and Big Data. The next set will have some other direction. To enter the competition, you need to prepare a pitch and answer questions about your business that will be asked by the organisers. That's it — other documents will be needed much later, if you are selected.

Actually, we won this competition. Out of 650 applications, five were selected, including ours. But I must say that the conditions there are quite strict.

Luxembourg is a fairly wealthy country that can afford to give start-ups £150,000 under certain conditions. As a venture capitalist, the Grand Duchy hopes that at least a few projects will "take off".

Out of 10 start-ups, 8 die, 2 develop steadily, and one of these two becomes successful and brings ten or a hundred times the profit.

And there is also a unique programme here that allows the company to receive a million or two, I don't remember the exact amount, exclusively for marketing. That is, for the area where money is usually never given. In essence, you are allocated a budget to advertise yourself, attract customers, and so on.

In general, this approach to business and start-ups in Luxembourg did not emerge immediately. But after 24 February, everything changed in the world. Latvia, for example, closed its entire start-up programme in response to the political situation. The Grand Duchy, on the other hand, is currently doing what Latvia did several years ago.

Luxembourg is now striving to transform itself from a country of boring bankers into a state of active tech entrepreneurs.

But don't be fooled. There are difficulties too. To begin with, a grant is a grant: it takes a long time, it's complicated, and it doesn't always happen on time.

About competing for a grant and the conditions for participating in the competition

Fit 4 Start is a government competition with a very low acceptance rate. On average, 600-700 applications are submitted, and 5 to 20 projects are selected. Simply put, you need to be prepared for fierce competition.

When I participated in the competition, out of 650 applications submitted, four space companies won, including our team.

We deal with infrastructure, satellites and software for measuring solar radiation. Essentially, we study space weather, the understanding of which contributes to the industrial development of space.

The point is that solar flares occur constantly on the Sun. In space, they affect satellites, space stations, and astronauts working there. But the effects are also felt on Earth.

For example, in the mid-19th century, there was a flare that caused telegraph cables to burn. Without going too far back in time, just this spring, SpaceX launched Starlink satellites into orbit. But because they did not have data on solar flares, they lost satellites worth $100 million.

Why am I going into such detail about this? To clearly explain that a start-up's business profile must be in demand and practically applicable.

We clearly presented our idea at the competition and conveyed two important points:

Due to solar flares, the Earth's atmosphere and stratosphere heat up and "swell." Satellites fly at a certain altitude and along their orbit. If the trajectory is calculated incorrectly, i.e. the data on the flare is not taken into account, the satellites simply will not be able to leave the atmosphere and will burn up, resulting in huge losses.
We are directly involved in the production of hardware and infrastructure for launches to prevent this from happening.

To reach the final, you need to impress the jury. The theme changes every year. The jury has an internal scoring system and certain checkpoints that must be achieved based on the plan you have agreed with the jury.

In addition to the grant itself, our team received:

Assistance from specialists: solicitors, consultants, tax planning advisors, etc.
Eight months of acceleration, i.e. a single space with access to the necessary social contacts. This is an opportunity to establish a network, receive a wealth of useful advice, and communicate with more experienced mentors.

It is important to note that the state provides €50,000 as the first tranche. It may provide another €80,000 if, in addition to the first subsidy, you are able to attract and spend another €50,000 of your own funds.

Total: support amounts to between €130,000 and €150,000, but only on condition that you also invest your own funds.

About taxes

Contrary to popular belief, the tax system here is excellent. I personally call the Grand Duchy a country for those who understand.

In Luxembourg, individuals pay 0% tax on royalties. This means that if you own a patent, write books or develop educational courses, you can "park" all your income at a rate of 0%. And that's just the beginning.
0% on capital gains if you held the asset for more than six months and owned less than 10% of the company's shares. To put it more simply: if you owned a block of shares for six months or more, and the block itself did not exceed 10% of the total number of securities, then you will not pay tax on your investment when you sell it. As you can see, it is very profitable to be a business angel in Luxembourg (an investor who supports a company in its early stages of development. — Ed.).
For technology companies in Luxembourg, there is an effective income tax rate of 5%. If what you do is intellectual property, you can pay at a favourable rate.
For married people with children, i.e. those in the second tax bracket, Luxembourg has the lowest payroll taxes in the European Union!
And then there are just a bunch of tax deductions: for this, for that, for transport...

You need to sit down, figure it out and do the maths. At first glance, the tax system looks scary. But if you look at the details, everything becomes clear, convenient and pleasant.

On the expat mindset of the state

Problems with taxes and grants, since we are talking about them, arise most often because it is very difficult for officials to explain things to people. They have communication problems. It is no coincidence that New Zealand has banned officials from using complex and subordinate clauses in spoken and written language. Speak more simply!

In fact, it is quite simple for start-ups to find out whether they can receive support for certain purposes. To do this, they just need to talk to officials, who are extremely easy to access.

I am not joking when I say that you can arrange a meeting with the Minister of Economy on Twitter.

He really enjoys attending all kinds of business-related events. There, you can meet him, complain, suggest an idea or share your opinion. This helps him stay informed about what is going on and make more balanced and rational decisions, in my opinion.

Luxembourg is a unique place. It is a country where the government has an expat mindset. The entire state apparatus clearly understands the needs of business and how to get from point A to point B in the most efficient way.

On the labour shortage in the job market

Low unemployment coupled with a huge number of open positions in companies means one thing: it greatly simplifies the migration process for specialists who want to work here.

Of course, there are difficulties in the form of the mandatory search for labour within the EU first. You must first look for personnel in your "own labour market" before you can obtain permission to recruit employees from third countries. But all of this can be resolved.

When you are a technology company, you understand that people and talent are your main expense. This means attracting really cool specialists, of course.

So for companies like ours and others like it, the problem of finding employees is not particularly acute. And in general, the situation on the labour market is not at all frightening.

About the main problem for all relocating persons

As someone who has lived in more than one country, I can say that this is overly optimistic. It doesn't matter whether we're talking about business or a specific person.

When I talk to a company, look at their business plan, I often say, "Guys, look at what needs to be done now. We're currently dividing all income by 3 and multiplying expenses by 4. Then we'll have something closer to a realistic plan." They all get sad and say, "How can that be?" But that's life.

When you move, you do everything differently: from choosing a place to live to choosing a mobile phone provider. And that's not even mentioning getting the children settled into school...

Having lived in Moscow for, say, 20-30 years, you simply don't think about the fact that some processes could be structured differently. Sometimes so differently that they would be much more expensive in terms of time, resources and everything else.

2 tips to help you save a lot of money, time and effort:

Sit down and write down in a table what your daily and business processes are. For example, I go to the gym, I drive a car, I want to live there, I only eat meat or, conversely, only vegetables, I am a fan of expensive brands, where can I buy them. It's surprising how little people think about this.
Constantly communicate with locals, ask questions. Where do they live, why, why don't they live there, where is the office, what is nearby, and so on. It is impossible to understand how to avoid mistakes on your own.

The pros and cons from an entrepreneur's perspective

I'll start with the positives:

A country where everyone knows everyone else. This means that you can reach anyone through four handshakes. This is very important because it creates a high level of trust and makes many things easier.
A flexible tax system, which is actually quite convenient if you know how to use it properly.
In Luxembourg, it's all about business, absolutely. All they talk about is what they do, and let's do something together, let's make money. You can feel that drive.
The technological ecosystem is still developing. The entry threshold is not too high at the moment, and there are many opportunities to find your place.

On the downside:

Inadequate operating costs. Well, a square metre of residential property cannot cost €10,000 in a village. I understand that this village is posh, but come on. I don't understand how this works.
Strange working hours. Luxembourg is a very early country. It is normal to schedule a meeting at 7 a.m. And the last Auchan closes at 8 p.m., which is not very normal. And when it closes, that's it. Everything. There are no 24-hour shops. If you haven't bought food, you're free! See you tomorrow on a diet.
Rail transport is underdeveloped. If I were in the government's shoes, I would be very concerned about this issue. Why is it possible to get to Paris in two hours, but not to Frankfurt? I don't understand what is preventing this from happening.

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