Electronic Money Institution License in Luxembourg under CSSF Regulation

Known for its strong financial sector and economic stability, Luxembourg is a compact country in Europe. Looking at this country, one can see a favorable environment for businesses, which is especially true for the fintech industry. The granting of EMI (electronic money institution) and PI (payment institution) licenses is one of the key factors that contributes to the attractiveness of Luxembourg as a place to do business. In the following, it will be important to consider the benefits of the processes, tax considerations, costs, and services available for obtaining an EMI license Luxembourg.

Benefits of Acquiring an EMI License in Luxembourg

Several advantages for payment license in Luxembourg holders and EMI institutions make this country an ideal center for fintech organizations.

Access to the EU market

• Seamlessly conduct business in all EU member states without the need for additional licensing, as Luxembourg is a member of the European Union, providing Luxembourg E Money Institution License holders with many opportunities.
• Facilitate expansion and operational flexibility in the EU market.

Financial center

Attracting international investors and businesses, as Luxembourg is known as an outstanding financial center with its economic stability and security.

Connectivity to the rest of the world

• A vital channel between European markets and the international financial landscape, as the country is centrally located in Europe.
• Strengthening global business ties by supporting international transactions, payments, and sales.

Regulatory stability

• Compliance with international financial standards, as the country prides itself on a stable and consistent regulatory environment.
• Creating a safe investment climate, inspiring confidence among investors and companies.

Advantages of working with Prifinance:

Regulatory Structure for EMI License in Luxembourg

Since November 10, 2009, the regulatory environment in Luxembourg for payment institutions and electronic money institutions has been thoroughly defined by a law commonly referred to as the “PSL”. The law outlines a comprehensive framework for licensed institutions in Luxembourg, with amendments to consider European directives.

Foundation of the Legal Framework

The law of 10th November 2009 (“the PSL”) serves as the cornerstone of the regulatory framework, incorporating amendments to align with EU directives.

EU Directives Transposed into the PSL

PSD1 (EU Directive 2007/64) of 13 November 2007

Focuses on payment services within the internal market.

PSD2 (EU Directive 2015/2366) of 25 November 2015

Updates the regulatory framework to include fintech advancements and cybersecurity.

Directive 2009/110/EC of 16 September 2009

Governs the authorization, operation, and supervision of electronic money institutions.

Objectives and Innovations Introduced by PSD2

Modernization and Security

• Aims to update regulations to match financial technology developments.
• Ensures enhanced cybersecurity across the EU internal market.

Regulatory Expansion

• Broadens the scope of regulated payment services within the EU.
• Includes third-party payment service providers (TPPs) under EU harmonized regulation for the first time.

Changes for Business Conduct and Technical Standards

Consumer Protection and Market Competitiveness

Introduces modifications to improve consumer rights and encourage competition.

Security and Transparency Requirements

Implements adjustments to ensure greater security and clarity in payment services.

Technical Standards for TPPs

Establishes guidelines for TPP access to payment accounts and related data (ASPSPs).

Introduction of New Payment Service Providers

Payment Initiation Services Providers (PISP)

Facilitates the transfer of payment instructions without holding client funds.

Account Information Service Providers (AISP)

Authorized to access and utilize client account information for services.

Payment and Electronic Money Services in Luxembourg

Payment Institutions (PI)

In Luxembourg, Payment Institutions provide a broad spectrum of services, from developing customer-focused payment infrastructures to facilitating personal transactions. Key offerings include:

• Payment Infrastructure Development — creation and maintenance of payment systems for various sectors.
• Transaction Processing — secure processing of credit and debit card payments, both domestically and internationally.
• Additional Services: Currency conversion, electronic vouchers, and prepaid mobile card recharging.

Electronic Money Institutions (EMI License Luxembourg)

Electronic Money Institutions, under the e money license Luxembourg, issue “e-money,” digital currency stored electronically for payment purposes. Their services extend beyond e-money issuance to include:

• Offering the full range of Payment Institution services.
• Providing loans related to payment services, subject to conditions.
• Supporting operations closely linked to e-money issuance and payment services.

EMI License Luxembourg and SPI License Singapore

If you want to become a holder of an EMI or payment institution license in Luxembourg, you need to consult with the CSSF, submit an application, and pay a fee of EUR 30,000. In addition, there is a review process that includes a project presentation. Operational and staffing requirements require a Luxembourg base, with outsourcing under strict conditions. Post-licensing, firms face reporting duties and variable annual fees.

In the case of licensing payment institutions in Singapore, there must be a local business registration, a physical office with a minimum capital of S$100,000 or more. Key personnel should include local or permanent residents in management positions, following strict IT and security regulations. The process of obtaining a permit includes registering a company, opening a bank account, and preparing regulatory compliance documentation. It all culminates in submitting an application for an MAS license with a decision period of about ten weeks.

Authorization Steps for EMI and PI in Luxembourg

Initial Engagement

Prospective Electronic Money Institutions (EMI) or Payment Institutions (PI) in Luxembourg typically start by consulting with the Commission de Surveillance du Secteur Financier (CSSF) to understand regulatory requirements clearly.

Application Process

1. The journey to obtaining a financial license in Luxembourg involves:
2. A detailed application, along with a EUR 30,000 fee, must be filed with the CSSF.
3. An introductory session with the CSSF to present the project and meet key personnel.
4. The CSSF reviews the application, potentially requesting more information.
5. Upon verifying compliance with legal standards, the CSSF endorses the applicant for licensing.

Operational Compliance

• The company’s main office and operations must be based in Luxembourg, with adequate local staffing.
• While outsourcing is allowed, it must not significantly impair internal control or hinder CSSF oversight, adhering to specific guidelines for cloud data storage.

Post-Authorization Requirements

• Licensees are informed about periodic reporting duties to the CSSF.
• Based on the volume of the previous year’s transactions, fees range from EUR 30,000 to EUR 40,000.

International Expansion

Licensed institutions can operate in other EEA states via passporting or establishing branches.

Legal and Financial Prerequisites

Only public limited companies (société anonyme – SA) incorporated in Luxembourg are eligible.

Capital Requirements

• For PIs: Between EUR 20,000 and EUR 125,000, depending on the services offered.
• For EMIs: A minimum of EUR 350,000.
• Continuous adherence to legal capital requirements is mandatory.

Tax Regulations for EMI License

Navigating the tax landscape for Luxembourg Electronic Money Institution License holders in Luxembourg is crucial for effective financial management. With a corporate tax rate of 24.94%, the country provides a favorable tax environment for EMI companies. It is worth adding that double taxation treaties have been concluded with many countries. This was an important step to eliminate the risk of double taxation of profits and facilitate tax deductions or credits for international transactions, payments, and sales.

FAQ

What types of services do Payment Institutions offer in Luxembourg?

In Luxembourg, Payment Institutions are authorized to offer services ranging from establishing payment infrastructures for various industries, enabling secure transactions with credit and debit cards both domestically and internationally, to providing automatic currency conversion, processing electronic vouchers, and recharging prepaid mobile cards.

What is the role of Electronic Money Institutions (EMIs) under the EMI license Luxembourg?

EMIs in Luxembourg specialize in issuing “e-money,” which is an electronic monetary value for making payments stored electronically. Beyond issuing e-money, EMIs can offer Payment Institution services, grant loans linked to payment activities under specific conditions, and provide operational and related services.

What legal frameworks regulate EMIs and PIs in Luxembourg?

Since November 10, 2009, the PSL law has regulated EMI and PI activities in Luxembourg, incorporating EU directives such as PSD1, PSD2, and the Electronic Money Institutions Directive. Defining standards of operational performance, security, and transparency of financial services, including the introduction of third-party payment service providers, is what this regulatory framework is for.

What are the steps to obtain an EMI or PI license in Luxembourg?

The requirements for obtaining an EMI or Luxembourg Pi License include an initial consultation with the CSSF, submission of a detailed application and payment of a fee, and a review process that consists of a compliance check and an introductory meeting. In addition, it is required to have a head office in Luxembourg, comply with operational and staffing requirements, and fulfill ongoing reporting and regulatory obligations to the CSSF.