The Law of 22 May 2024 provided for both short term tax measures (applicable for fiscal year 2024) in favour of the Luxembourg real estate market and long term tax measures applicable as from 2025 (please refer to our previous newsflash).
To support the ongoing recovery of the real estate sector, the Law of 4 April 2025 extended the temporary tax measures until 30 June 2025 (please refer to our previous newsletter). In order to take into account situations in which a notarial deed cannot be signed before 30 June 2025, the Law of 27 June 2025 amending: 1° the amended income tax Law of 4 December 1967; 2° the amended Law of 22 May 2024 introducing a package of measures to enhance real estate investments (the “Law”) applies the benefit of the temporary tax measures to reservation contracts (contrats de réservation) or sales agreements (compromis de vente) registered no later than 30 June 2025 with the Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA) (“AEDT”), provided that the acquisition is formalised by a notarial deed signed between 1 July 2025 and 30 September 2025.
Temporary tax measures concerned
Allowance for registration and transcription duties for investment in rental properties by individuals: this allowance is dedicated to investments in rental properties sold in future state of completion (VEFA) and amounts to EUR 20,000 per individual. The Law extends this benefit to purchasers who have registered the reservation contract referred to in Article 1601-13 of the Luxembourg Civil Code with the AEDT by 30 June 2025 at the latest. However, to benefit from the reduction of the taxable basis and the rental tax credit, the notarial deed relating to the reservation contract must be signed no later than 30 September 2025.
Reduced tax rate for capital gains on Luxembourg real estate realised until 30 September 2025, provided that a sale agreement has been registered by 30 June 2025 at the latest: capital gains realized by individuals in the context of the management of their private assets on Luxembourg real estate held for more than two years will be subject to a quarter of the global rate applicable to the taxpayer instead of half the global rate.
Neutralisation of real estate capital gains: individuals realising real estate capital gains at least 2 years after the asset’s acquisition will be granted a rollover relief if proceeds are reinvested in real estate rented under the condition of Article 49 of the Law of 7 August 2023 (i.e., social rental) or in real estate falling within the A+ class for energy performance, thermal insulation and environmental performance as defined in the Grand-Ducal decree of 9 June 2021. The Law extends the duration of the regime until 30 September 2025, provided that a sale agreement has been registered by 30 June 2025 at the latest.
The special deduction for rental income derived from real estate acquired in future state of completion (VEFA) consisting in special deduction corresponding to a 4% deemed amortisation of the real estate asset on the same basis as the existing 2% amortisation for rented buildings is extended until 30 September 2025, provided that the preliminary contract referred to in Article 1601-13 of the Civil Code has been registered by 30 June 2025 at the latest.
Adjustment to long term tax measures
The Law of 22 May 2024 provided for an increase of the holding period to determine the tax regime applicable to real estate capital gains from 2 to 5 years as from 1 January 2025. The Law of 4 April 2025 postponed its application date to 1 July 2025.
This 5-year period applies to buildings constructed between 1 July 2025 and 30 September 2025, provided that a sale agreement has been registered no later than 30 June 2025 with the AEDT.
Perpetuation of the allowance for registration and transcription duties for the acquisition of the main residence (“Bëllegen Akt”)
As mentioned above, the regime established by the Law applies to all temporary tax measures covered by the Law of 22 May 2024 providing a first package of measures to enhance real estate investments, with the exception of the allowance for registration and transcription duties for the acquisition of the main residence (“Bëllegen Akt”), which is maintained at EUR 40,000 in accordance with the provisions of Law of 3 July 2025 amending the amended Law of 30 July 2002 setting out various tax measures designed to encourage the marketing and acquisition of building land and residential property.
Purchasers will benefit from the provisions of the Law as of 1 July 2025, the date on which the temporary measure to increase the tax credit expires.
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