Aurore Calvi
Managing Director, OmniTrust, Luxembourg
Aurore Calvi is the Managing Director of OmniTrust. With a distinguished career spanning over 25 years in a Big Four accounting firm and various fiduciary organisations, she has held the position of CFO at Capita Assets Services/Link starting in 2009 and became a CSSF-authorised director in 2015, a role she fulfilled until her departure in late 2018. In 2019, she founded OmniGroup. Since 2022, she has been a board member of the Order of Chartered Accountants of Luxembourg, representing small and medium-sized firms within the profession at the board level.
New Luxembourg property law aims to revitalise housing market
June 17, 2024
A new Luxembourg property law enacted in May 2024, aims to invigorate the housing market, which has recently faced challenges due to rising interest rates and construction costs. This legislation introduces several measures designed to encourage property transactions, stimulate investment, and support social housing. Here’s a closer look at the main provisions of this new law:
Changes under the new Luxembourg property law
Capital Gains on property sales
For the year 2024, capital gains from property sales will benefit from a reduced tax rate of 10.5% for properties held for more than two years. This is a significant reduction compared to the standard rate and aims to boost property transactions. However, starting from January 1, 2025, this favourable tax treatment will only apply to properties held for over five years. Properties sold within five years of purchase will be subject to the standard progressive tax rates.
Rental income from real estate
To incentivise the rental market, the law increases the tax exemption on rental income from social rental management organisations to 90%, up from 75% in 2023. Additionally, for properties purchased in a future state of completion intended for rental housing between January 1 and December 31, 2024, a special construction deduction of 4% is introduced. This deduction is capped at 250,000 euros.
Financing the principal residence
The deduction ceiling for mortgage interest related to financing a principal residence is increased. For the first five years, the ceiling is set at 4,000 euros per person. This decreases to 3,000 euros for the subsequent five years and to 2,000 euros thereafter, making home financing more affordable.
New rental allowance
To support young employees, a new rental allowance has been introduced. Effective from June 1, 2024, employers can offer a rental allowance to employees under 30 years old with a 25% tax exemption, capped at 1,000 euros per month. This measure aims to alleviate housing costs for young workers.
Rental Tax Credit
Investors purchasing rental properties will benefit from a tax credit of up to 20,000 euros, documented by a notarised deed between January 1 and December 31, 2024. This credit is intended to reduce acquisition costs and stimulate investment in rental properties.
Reactivation of Deferred Capital Gains
The law reactivates the scheme allowing deferral of capital gains tax when reinvesting in new property intended for social rental management or achieving an A+ energy performance rating. Investors can defer capital gains tax until the new property is sold, provided the reinvestment occurs by the end of 2026.
Exemptions for Sales to Public Entities
The exemption on capital gains from the sale of properties to the state, municipalities, and municipal syndicates has been extended to include sales to the Housing Fund. This measure aims to encourage transactions with public entities, promoting social housing projects.
Conclusion
These fiscal and legislative reforms present substantial opportunities for both investors and residents, fostering the revitalisation of Luxembourg’s real estate market. For further details or assistance regarding these measures and their application to your real estate projects, our team is ready to assist you.
If you would like to talk to an expert about buying property in Luxembourg, please get in touch.
