Luxembourg

New tax measures as from 2024

The Luxembourg real estate market suffers from continuous tension notably due to the high long-term interest rates that affect the borrowing capacity of households. Within this context, the new Government has published on 22 May 2024 a Law introducing new measures to boost the housing market.

Main measures are sumarsised below:

1) Temporary tax measures for the year 2024 only (with retroactive effect from January 1, 2024)

• Creation of a temporary tax credit ("crédit d'impôt location") on registration and transcription fees of EUR 20,000 maximum per individual investor (EUR 40,000 per couple investor) under specific conditions for all property acquisitions intended for rent;
• The current tax credit "Bëllegen Akt" providing an allowance on registration and transcription fees of EUR 30,000 per individual purchaser (EUR 60,000 per couple purchaser) is increased to EUR 40,000 per individual purchaser (EUR 80,000 per couple purchaser) for the acquisition of a main residence in Luxembourg;
• "Abattement construction special": individual taxpayers who signed a deed "VEFA" (i.e. off-plan purchase) between January 1 and December 31 2024, for buildings intended for rent can benefit from an accelerated depreciation rate of 6% per year for the first six years following the building completion;
• Capital gains resulting from the sale of immovable property making part of the private wealth of the individual taxpayer will be subject to taxation at 1/4 of the marginal tax rate;
• Capital gains realised in 2024 by individual taxpayer on the sale of building making part of the private wealth, more than 2 years after their acquisition could be tax immunised upon request in case of total or partial reinvestment of the sale price.

2) Other measures applicable on a long-term basis:

• From tax year 2025, the period of speculation for immovable property is set to 5 years instead of 2 years. Capital gain resulting from the sale of immovable property being part of the private wealth will be taxable at progressive income tax rate if the gain is realised within 5 years following the acquisition of the property;
• Introduction of a rental premium ("Prime locative") granted by the employer in relation to the rental of main residence. Under conditions, 25% of the premium paid is tax exempt. This premium has been introduced in order to ease the entry into the labour market of young markets;
• The maximum ceiling for debt interests paid in relation to the main residence s set as follow (these amounts are increased by the same amount for each person in the household):
  • EUR 4,000  for the first six years of occupation;
  • EUR 3,000 for the five subsequent years;
  • EUR 2,000 for the following years.

Adjustments to personal income tax (PIT) brackets

For employees, the PIT brackets have been adjusted by an equivalent of 4 index tranches as from 2024, leading to a reduction of PIT as of 1 January 2024 (see the Taxes on personal income section).

Other measures

To increase Luxembourg’s attractiveness and to favour the recruitment and retention of talents, the new government also plans to review the profit-sharing premium remuneration mechanism and the impatriate tax regime. It will make any adjustments that may be considered necessary. In addition, the new government may review the tax treatment of benefits in kind to clarify and simplify it.