LUXEMBOURG Trends and Developments Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
• Bëllegen Akt Tax Credit for Rental Housing – a tax credit of EUR20,000 per individual acquirer is granted for investments in rental housing acquired through a sale in future state of completion ( vente en état futur d’achèvement – VEFA). The notarial deed must be executed between 1 January 2024 and 30 June 2025, or by 30 September 2025 if a reservation contract is registered with the tax authorities by 30 June 2025. • Reduced capital gains tax rate for private individu - als – capital gains realised by individuals on the sale of real estate held as private assets are taxed at one-quarter of the standard rate, provided the notarial deed is signed by 30 June 2025 or, alter - natively, by 30 September 2025 if a preliminary agreement is registered with the tax authorities by 30 June 2025. In principle, under Luxembourg tax law, capital gains realised by individual taxpayers on real estate assets are taxed either at the marginal rate if the gain is spec - ulative (ie, if the assets are sold within a certain period following their acquisition) or at a rate corresponding to half of the marginal rate if the gain is non-specu - lative (ie, if the assets are sold after that period). The marginal rate is the average rate resulting from the taxation of all the taxpayer’s income. These provisions do not apply to the extent that the property sold is the taxpayer’s principal residence. To accelerate the incentive effects of the planned quarter rate measure and to curb speculation, the law also amends the deadline within which a real estate alienation is considered as speculative and extends it to five years, instead of two currently, as from 1 July 2025, except where a preliminary agreement is registered by 30 June 2025 and the notarial deed is executed by 30 September 2025. For the latter, the speculative period remains at two years. • Accelerated depreciation (6% over six years) for rental housing investments – the law re-introduces, in terms of the amount and duration of applica - tion, a deduction ‒ subject to a ceiling ‒ in the depreciation rate of 6% for a period of six years, and for eligible buildings or parts of buildings. The properties within scope are those which are built for rental purposes and for which the taxpayer has
signed a notarial deed of sale in the future state of completion ( vente en l’état future d’achèvement - VEFA) between 1 January 2024 and 30 June 2025. Alternatively, the special construction allowance remains available for buildings or units acquired under a deed of sale in future state of completion provided the preliminary contract was registered with the tax authorities by 30 June 2025 and the notarial deed is executed by 30 September 2025. The maximum annual amount that can be deduct - ed in this respect is capped at EUR250,000. This amount is reached when the allowance is calcu - lated on depreciable values of EUR6,250,000. • Continued tax neutrality for reinvested capital gains in social or energy-efficient housing – non- speculative capital gains realised on real estate and reinvested in one or more properties used for social rental management purposes ( gestion loca- tive sociale ), or in accommodation with a class A+ energy performance, are eligible for the tax-neutral regime. The tax-neutral regime is applicable to non-speculative capital gains reinvested in social rental housing or assets with energy performance class A+ by 30 June 2025 or alternatively by 30 September 2025, contingent upon registration of a preliminary sale agreement with the tax authorities by 30 June 2025. In addition, the EUR40,000“ Bëllegen Akt ” tax credit per individual, temporarily increased in 2024 from the initial amount of EUR30,000, for purchase of real estate intended for residential use, is set to become permanent. These measures are particularly relevant for private investors and family offices seeking to diversify into real estate while optimising tax exposure. Start-Up Tax Credit: a new opportunity for private investors The Luxembourg government has proposed a new tax credit, starting in 2026, to encourage individuals to invest in young, innovative companies. This initiative, known as the “Start-Up Tax Credit”, aims to boost the country’s appeal as a hub for innovation by improving early stage financing for start-ups. To qualify for the tax credit, the investor must:
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