The law of 22 May 2024 provided for several short term tax measures (applicable for fiscal year 2024) in favour of the Luxembourg real estate market as well as long term tax measures applicable as from 2025 (see our previous newsflash). To support the ongoing recovery of the real estate sector, the law of 4 April 2025 extends the temporary tax measures until 30 June 2025.
Temporary tax measures extended until 30 June 2025
The following measures initially applicable only for fiscal year 2024 are extended until 30 June 2025:
- The allowance for registration and transcription duties for the acquisition of the main residence (“Bëllegen Akt”) is increased from EUR 30,000 allowance to EUR 40,000 for each individual and applicable to transactions taking place between 1st January 2024 and 30 June 2025.
- Allowance for registration and transcription duties for investment in rental properties by individuals: this allowance is dedicated to investments in rental properties sold in future state of completion (VEFA) and amounts to EUR 20,000 per individual. Taxpayers having entered into an eligible transaction between 1st January 2025 and the law’s publication in the Luxembourg Official Gazette (7 April 2025), must address a written request to the tax collector and sign a commitment to comply with relevant conditions.
- Reduced tax rate for capital gains on Luxembourg real estate realised until 30 June 2025: capital gains realized by individuals in the context of the management of their private assets on Luxembourg real estate held for more than two years will be subject to a quarter of the global rate applicable to the taxpayer instead of half the global rate.
- Roll-over of real estate capital gains: individuals realizing real estate capital gains at least 2 years after the asset’s acquisition will be granted a rollover relief if proceeds are reinvested in real estate rented under the condition of Article 49 of the law of 7 August 2023 (i.e., social rental) or in real estate falling within the A+ class for energy performance, thermal insulation and environmental performance as defined in the Grand-Ducal Decree of 9 June 2021. For capital gains realized between 1 January 2024 and 31 December 2024, the reinvestment must take place during fiscal year 2026 at the latest and for capital gains realized between 1 January 2025 and 30 June 2025, the reinvestment must take place during fiscal year 2027 at the latest.
- The special deduction for rental income derived from real estate acquired in future state of completion (VEFA) consisting in special deduction corresponding to a 4% deemed amortisation of the real estate asset on the same basis as the existing 2% amortisation for rented buildings is extended to VEFAs signed between 1 January 2024 and 30 June 2025. The measure is relevant for taxpayers realizing rental income under Article 10 (7) of the Luxembourg income tax law. In addition, the Luxembourg tax authorities issued circular 129f/1 on 20 January 2025 clarifying the functioning of the mechanism.
As a result of these amendments, the application period of the above measures ends on 30 June 2025 together with the 50% reduction of the taxable basis for registration and transcription duties applicable to real estate acquisitions voted in the 2025 budget law (see our previous newsflash).
Adjustment to long term tax measures
The law of 22 May 2024 provided for an increase of the holding period to determine the tax regime applicable to real estate capital gains from 2 to 5 years as from 1 January 2025. The law of 4 April 2025 postponed the application date of this change to 1st July 2025. This measure is relevant for individual taxpayers acting within the management of their private wealth (i.e., acting outside of an enterprise).
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