On 8 February 2023, a draft law No. 8149 (the “Draft Law”) with the purposes of reviving the Luxembourg real estate market has been submitted to the Luxembourg Parliament (Chambre des Députés). The Draft Law proposes the creation of an advantageous and time-limited tax climate, with the objective of supporting private investment in real estate.
The following measures are foreseen:
Value added tax (“VAT”) at the super-reduced rate of 3%
The Draft Law proposes to re-introduce the super-reduced VAT rate of 3% for the creation of rental housing.
Furthermore, the Draft Law aims to increase the current threshold for the application of the super-reduced VAT rate from EUR 50,000 to EUR 100.000 per created and/or renovated home.
Tax credit on notarial acts
The Draft Law proposes to increase the tax credit on registration and transcription fees applicable to any person willing to acquire a property for personal use from the current amount of EUR 20.000 for a single person and EUR 40.000 for a couple to EUR 50.000 for a single person and EUR 100.000 for a couple.
Accelerated amortization
The Draft Law proposes to introduce an accelerated depreciation of 6% per annum for rental housing in the year of completion of the building, and the following six years.
Increase of the deductible passive interest threshold
The Draft Law proposes to double the annual ceiling for tax-deductible passive interest in relation to owner-occupied accommodation. The threshold would be increased to EUR 4,000 for the six first years of occupation, to EUR 3,000 for the next five years, and to EUR 2,000 for the years beyond.
Period of application
According to the Draft Law, the aforementioned measures are temporary and will only apply to the 2023 and 2024 fiscal years.
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