LUXEMBOURG Law and Practice Contributed by: Frédéric Feyten, Alejandro Dominguez Becerra, Gérard Maîtrejean and Pawel Hermeliński, CMS
mine the assets entering into the succession (liquida - tion of the matrimonial regime). Inheritance taxes do not apply, in principle, to property given or transferred by the deceased to one or more of his/her heirs. However, it may happen that certain deeds are reintegrated into the estate of the deceased for the calculation of inheritance taxes. At the time of death, it will therefore be necessary to take into account certain elements, such as for example manual donations that would have been made during the year preceding the death and life insurances for which the deceased is considered as head policyholder. The estate may then be distributed among the heirs and legatees. There are no inheritance taxes to be paid in Luxem - bourg concerning: • the assets acquired in a direct ascending or descending line (between parents, grandparents, children and grandchildren) on the legal share of the estate, that is to say the part collected by the heir based on the law; • assets transferred between spouses or partners bound by a registered partnership declaration for at least three years before the opening of the estate; • the estate not exceeding EUR1,250 (after deduc - tion of debts); • immovable property located abroad; and • in some cases, movable property located abroad. As for the donation, it may relate to movable property or immovable property, for the benefit of natural per - sons (spouses, parents, children, brothers and sisters, etc) or legal persons (associations, charities, etc). To be valid under Luxembourg civil law, they must take the form of a notarial deed (except for real estate assets located abroad) and will therefore be subject to registration fees. The registration fees applicable to donations of mov - able and immovable property vary depending on the family relationship between the donor and the recipi - ent of the donation. They apply to the market value on the day of the donation without possible deduction
of charges related to the property transferred and are generally borne by the beneficiary of the donation, unless otherwise stipulated in the notarial deed. As donations of real estate assets located abroad are not subject to the formality of a notarial deed in Luxembourg, they are not subject to registration fees. However, they are generally subject to the donation duties in the country where the real estate assets are situated. Finally, the registration fees are reduced by half for donations made by marriage contract or with a view to marriage. 2.2 International Planning Inheritance tax in Luxembourg is levied on the estate of all Luxembourg individuals domiciled or having their seat of fortune in Luxembourg. Movable assets owned by individuals domiciled abroad are taxed in the country of domicile. Inheritance tax rates vary depending on the value of assets and the relationship between deceased and beneficiary. Luxembourg has not signed any double tax treaty with respect to inher - itance tax and gift tax. However, since transfers to direct descendants/ascendants (children/parents), as well as between spouses and civil partners (see con - ditions previously listed), are not taxed or are taxed at relatively low rates, situations of double taxation should be limited. Also, gifts made during lifetime of the donor are sub - ject to registration duties if the gift is made by notarial deed in Luxembourg. The rates vary between 1.8% and 14.4% depending on the relationship between the donor and the donee and regardless of the donor’s or donee’s fiscal domicile. As mentioned in 1.1 Tax Regimes , gifts made without notarial deed (eg, “ don manuel ”) are generally not subject to gift tax unless voluntarily registered. Luxembourg also offers advantages in relation to transfer of bare ownership and usufruct. When a prop - erty is inherited in usufruct or bare ownership, the val - uation and taxation are handled differently compared to full ownership transfers. The law has established a system for determining the value of usufruct and bare ownership based on the age of the usufructuary or
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