LUXEMBOURG Law and Practice Contributed by: Frédéric Feyten, Alejandro Dominguez Becerra, Gérard Maîtrejean and Pawel Hermeliński, CMS
• Short term gains – gains realised on properties sold within five years are fully taxable as speculative gains. • Long-term gains – gains realised on real estate assets sold after five years are taxed at half tax rate. A law enacted on 22 May 2024, established a tempo - rary regime under which capital gains from immovable property held for more than two years and realised in 2024 are taxed at one fourth of the average tax rate applicable to the taxpayer’s total income, rather than at half of the average rate. A law dated 4 April 2025, extended the measure until 30 June 2025. Non-resident shareholders who have neither a perma - nent establishment nor a permanent representative in Luxembourg to which the shares of a Luxembourg company are attributable, are only taxed on gains derived from Luxembourg real estate or from the dis - posal within six months of its acquisition of a substan - tial participation (more than 10%) in a Luxembourg company, subject to an applicable DTT. Inheritance Tax and Transfer Tax Luxembourg inheritance tax ( droit de succession ) only applies when the deceased person was domiciled or had established the seat of his/her fortune in Luxem - bourg. In such situation, inheritance tax will be due on the total value of the assets bequeathed by the deceased person irrespective of whether the heirs or legatees are resident in Luxembourg. The progres - sive rates will depend on the relationship between the deceased and the heir as well as the value of the net portion received by each. Generally speaking, the basic tax rates vary between 0% and 15% and are increased according to the net share received by the heir in question. The assets collected or acquired are exempt from inheritance tax if the total value of the estate, exclud - ing debts, does not exceed EUR1,250. No inheritance tax is levied on immovable property located abroad, even if it forms part of the estate of a Luxembourg resident individual.
Transfer tax ( droit de mutation ) only applies upon the death of a non-resident of Luxembourg that holds immovable property located in Luxembourg. Transfer tax is levied on the fair market value ( valeur venale ) of all the immovable properties located in Luxembourg on the day of the death minus certain debts in relation with the building. Gift Tax Gift tax ( droit d’enregistrement ) applies if the gift is made by notarial deed in Luxembourg. The domicile of the donor and the beneficiary is irrelevant for the purpose of the application of the gift tax. The rates vary between 1.8% and 14.4% and depend on the relationship between the donor and the donee. Gifts between spouses or partners and between direct descendants are generally taxed at lower rates, while gifts to unrelated persons are subject to higher rates. Trusts and Foundations Charitable foundations, charitable associations and societal impact companies can be set up and gov - erned by law in Luxembourg. Luxembourg trusts cannot be set up in Luxembourg, but Luxembourg allows the recognition of foreign trusts that are governed by the law of another juris - diction under the Hague Convention dated 1985 on the law applicable to trusts and on their recognition. Luxembourg fiduciary agreements ( contrat fiduci - aire ) can be entered into but are not commonly used in practice; partnership or corporate solutions for income tax planning are generally preferred. Impatriation Regime Luxembourg tax law provides, under certain condi - tions, a specific tax regime for qualifying highly skilled employees hired directly from abroad or seconded from group companies. This regime has been amend - ed by the law dated 20 December 2024. While the former regime was used to provide for a full exemp - tion of certain costs incurred by the employee (some - times capped) and a partial exemption of an impatri - ate premium, the new regime now provides for a 50% exemption of the total gross annual remuneration of the employee. The amount of annual gross remunera - tion benefitting from this partial exemption is capped
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