Luxembourg

Tax Credit

In Luxembourg, the standard rate to acquisitions for value (i.e., for a fee) of a real estate (house, apartment, land) is 7%, where 6% are registration fees and 1% are transcription fees.

To reduce costs related to the purchase of a home, the government of the Grand Duchy of Luxembourg introduced a tax relief named “tax credit” on the registration and transcription for all persons wishing to purchase a building (and certain built outbuildings) for use as principal dwelling.

This tax credit is limited to 20,000 euros per buyer. For a couple, this amount is doubled as the tax credit applies to each buyer individually. The tax credit may be used gradually, for other acquisitions, until fully used.

The Land Registration and Estates Department receives in all cases a minimum of 100 euros as a registration fee.

This approach concerns any person who wishes to acquire a real estate for personal residential purposes and who, at the time of the signing of the notarial deed, is:

• resident in the Grand Duchy de Luxembourg and registered with the bureau population of one of its municipalities;
• not yet resident, but who undertakes to become resident in Luxembourg in the property, which he purchased.

In all cases mentioned above, the buyer must occupy personally and effectively the acquired property within two years from the date of the notarial deed of acquisition. This period is 4 years for the acquisition of a construction lot or a building under construction.

In addition, the buyer undertakes to occupy the property personally and effectively for an uninterrupted period of at least 2 years except for cases of force majeure (divorce, forced sale of the property, etc.).

In the case of non-residents, the tax credit is granted only if the applicant submits a certificate of residence.

No condition of fortune, value of the building, cadastral income or purchaser’s income are considered.

As to the nature of the building for residential use, the law grants the tax reduction to:

• construction lots located in residential areas where the residence may, under regulations on buildings, be built immediately;
• housing used as a primary, personal and effective home by its owner. Buildings under construction are also included;
• built outbuildings (garages, sheds, barns) and others (gardens) contiguous or separated from the primary residence, but located next to it.

VAT – Rate reduced to 3%

The standard rate of VAT in Luxembourg is 17%. To stimulate the development of housing, the government applies reduced VAT rate of 3% to the construction and renovation of a home provided that it is intended for purposes of principal dwelling:

• either by direct application of the super-reduced rate. In this case, the eligible works performed by trades are directly charged at the rate of 3%;
• or by the reimbursement of the difference between the standard rate of VAT and the reduced rate. In this case, the person who performed or ordered the eligible works may claim back the VAT from the Land Registration and Estates Department

The total amount of tax benefit resulting from the application of the super-reduced rate of 3% may not exceed 50,000 euros per new and/or refurbished home.

The threshold of 60.000 euro continues to apply to:

• works for which the application was made before 1 November 2012;
• works for which the application was made between 1 November 2012 and 1 January 2013 provided that the actual date of start of works is not later than 31 March 2013.

The right to VAT reimbursement is granted for a period of five years from December 31 of the calendar year related to the tax to be reimbursed. 

Our team remains at your disposal for any further information.