Luxembourg: Proposed tax incentives to encourage land, residential housing supplies

Luxembourg: Proposed tax incentives

The Luxembourg government previously announced measures relating to the 2017 tax reform—including one that would be intended to encourage the supply of land and homes in Luxembourg, by providing reduced tax rates for gains realized on the disposition of qualifying real estate (other than a taxpayer’s principal residence which would continue to be exempt from tax).

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Draft legislation

The government on 3 May 2016 published a draft tax bill that includes provisions to implement the incentives for land and housing supplies. The new law would provide tax incentives, and would provide tax incentives for gains realized during the period between 1 July 2016 and 31 December 2017. 

  • The scope of the new measures would be limited to transactions relating to developed and undeveloped properties that are part of the private assets of taxpayers.
  • When the land or property has been held by the taxpayer for more than two years prior to the disposition, the tax rate on the amount of capital gains realized would be reduced to a rate equal to ¼ of the  taxpayer’s global tax rate (from the current rate equal to ½ of the taxpayer’s global tax rate).
  • There would continue to be a tax-free allowance of €50,000 (€100,000 for couples filing jointly) available over an 11-year period, and this allowance would be applied to reduce taxable gain and even possibly provide a taxable loss. Also, the tax-free allowance would will be €75,000 for properties held and received through “direct inheritance,” but no loss would be allowed on dispositions of such inherited property.
  • The gain would be taxable in the year when the property disposition is completed, regardless of the date when payment is made in relation to the sale. The date of completion of the property would be the date shown on the notary deed, the date of judgment, or the date of the administrative act taking place.

For land and properties held for less than or up to two years, the capital gains would be determined and subject to tax under the current rules.

It is anticipated that the bill would be considered by the Luxembourg parliament and possibly enacted before 1 July 2016.


Read a May 2016 report [PDF 57 KB] prepared by the KPMG member firm in Luxembourg: New draft tax bill encouraging the disposal of land and properties in Luxembourg

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