On 30 June 2025, the government issued a Grand Ducal Regulation aiming at amending the existing Grand Ducal Regulation of 19 November 1999 implementing Article 106, paragraphs 3 and 4 of the Luxembourg income tax law (“LITL”), which provides the depreciation regime and rates applicable to rental real estate (“Grand Ducal Regulation”).
The Grand Ducal Regulation, which entered into force on 1 July 2025, foresees a temporary extension of the 2% depreciation regime to rental real estate acquired under a sale in future state of completion agreement (vente en l’état futur d’achèvement – “VEFA”) under specific conditions and within a defined time frame.
The key highlight of the regulation is that the 2% depreciation rate would apply to buildings or parts of buildings allocated to rental housing and acquired under a VEFA, subject to:
- A preliminary agreement (e.g., compromis de vente) signed and registered with the Luxembourg Registration Administration by 30 June 2025; and
- A final notarial deed executed between 1 July and 30 September 2025.
This measure ensures that taxpayers who commit to a VEFA agreement before the deadline retain the benefit of the 2% depreciation regime, even if the final acquisition cannot be notarised on time due to procedural or administrative delay.
To note that the draft version of the regulation to the Chamber of Commerce has been particularly welcomed by the Chamber of Commerce as a pragmatic step to support the real estate sector and they further encouraged the government to consider extending other housing related tax benefits, including reduced registration duties. The Conseil d’Etat also issued a favourable opinion.
See also our article on tax measures for real estate sector.
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