Get a helping hand from the taxman with your property project costs


While buying a residential property is a long-term commitment, we know that it's often the chance of a lifetime that we mustn't let pass by. Have you found your dream house or apartment, but rising mortgage rates are making you think twice? Now's the time to get your calculator out, because there are some handy tax incentives, and more to come, that could make your plans more affordable than you thought.

An improved tax credit on notarial deeds

New for 2023: the tax credit for the reimbursement of a large part of property registration and transcription fees (Bellëgen Akt) goes up from €20,000 to €30,000 – that's €60,000 for joint buyers.

This tax advantage is, however, only for the purchase of a main residence and is subject to conditions: the buyer must move into their home within two years from the date of signing the notarial act of acquisition and must stay there for a minimum of two continuous years.

A very attractive VAT rate for construction and renovation work

To mitigate the housing crisis and enable households to access the property market, the State of Luxembourg has created a super-low VAT rate of 3%, rather than 17%. This is applicable to the cost of construction and renovation works on a property to be used as a primary residence.

To benefit from this VAT rate, the ideal thing is to entrust the work to accredited tradespeople who will deal with the formalities. Even so, if you pay VAT at the 17% rate to a non-accredited tradesperson, you have five years in which to apply to the administration for reimbursement of the difference.

Rental properties are covered too


Of course, the benefit from this tax incentive does have a cap, but it can go up to the substantial sum of €50,000. No insignificant margin to lighten your repayments, and possibly enough to unlock financing.

Or is it that you do not need to relocate immediately, but would like to invest in bricks and mortar to make your capital grow? While the super-reduced 3% VAT rate cannot be applied to the purchase of a property intended for letting, you can still benefit from it to carry out renovation work and, for example, improve its energy performance.

Accelerated depreciation rate increase

You say property income, I say charges...To expand the supply of rental properties, an accelerated 6% depreciation rate during the property's year of completion and following six years is being considered by the Housing Commission. For old housing, this rate will be applied to the cost of renovation work, provided that it is greater than 20% of the property's purchase price.

Other measures, such as raising the ceilings on deductible passive interest and the super-reduced VAT rate are planned. Consult your real-estate loan broker now! 


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