LUXEMBOURG Law and Practice Contributed by: Claire-Marie Darnand, Victorien Hémery, Johan Léonard and Benjamin Marthoz, Stibbe
2.10 Taxes Applicable to a Transaction In the disposal of a real estate asset located in Luxembourg (ie, an asset deal), a transfer tax of 6% and a transcription tax of 1% are to be paid. If the asset is an office or commercial prop - erty located in Luxembourg City, a municipal surcharge of 50% on the transfer tax is levied (leading to an aggregate rate of 10%). The transfer taxes are usually payable by the purchaser (unless otherwise agreed upon). The taxable base corresponds to either the purchase price or the fair market value of the property, whichever is higher. A 50% reduction in the taxable base for real estate registration and transcription duties has been introduced for property acquisitions made between 1 October 2024 and 30 June 2025. This reduction applies to properties that will serve either as a main residence or as rental housing, provided that the intended use begins within two years from acquisition (or within four years if the property is under construction) and continues for at least two consecutive years. No Luxembourg transfer taxes should apply to the disposal of shares in an opaque company holding a Luxembourg property. 2.11 Legal Restrictions on Foreign Investors There are no specific legal restrictions on foreign investors.
nation of equity, quasi-equity and senior debt in the form of a loan, which may be completed with junior (subordinated) debt, depending on the risk profile of the transaction, the size of the portfolio and the required loan-to-value ratio. The debt portion of the financing may take the following forms: • a mortgage debt for the financing of the acquisition of real estate assets; • an acquisition debt for the financing of the acquisition of the shares of the entities hold - ing real estate assets; or • a combination of both for the financing of the acquisition of the shares of entities holding real estate assets and the refinancing of the existing indebtedness of such entities. 3.2 Typical Security Created by Commercial Investors The financing of acquisitions and development projects is generally secured by securities cre - ated over the assets and the shares of the bor- rower; lenders usually accept non-recourse financing for the acquisition of commercial real estate assets, whereas investor and/or bank guarantees will usually be required in addition to the standard security package for develop - ment projects. Typically, the lenders will require securities that allow them to recover the financed asset directly or indirectly. Such security may take the form of a contractual mortgage ( hypothèque ) over the real estate asset and/or a pledge over the shares of the entity holding such asset. The security package will also include a security interest over cash flow related to the real estate asset or resulting from the financing transaction, usually in the form of an assignment of rights
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Acquisitions of commercial real estate in Luxem - bourg are commonly financed through a combi -
618 CHAMBERS.COM
Powered by FlippingBook