Luxembourg’s housing market tax and legislative changes 2024
November 28, 2024
The Law of May 22, 2024, on Housing Market Recovery aims to revitalise Luxembourg’s real estate market, which has slowed due to rising interest rates and construction costs. It introduces tax and legislative measures set to take effect in 2024. Read the full article from OmniTrust here, or read the summary of its key provisions below.
Capital gains from real estate sales
- Reduced taxation in 2024: From 1 January to 31 December 2024, capital gains on properties held for over two years will be taxed at 25% of the overall rate (maximum 10.5%) without affecting Employment Fund allowances.
- Changes from 2025: From 1 January 2025, only properties held for over five years will qualify for long-term capital gains benefits. Property gains held for five years or less will be taxed under the short-term regime.
Rental income and exemptions
Starting 1 January 2024, organisations managing social rentals will receive a 90% exemption on rental income, up from 75% in 2023. Additionally, a 4% support allowance for construction costs is available for depreciation up to €250,000 on rental housing acquired in a future state of completion between 1 January and 31 December 2024.
Financing the main residence
From the year the rental value is calculated, interest deductions on debt for acquiring a primary residence are capped at €4,000 per person for the first five years, reduced to €3,000 for the next five years, and €2,000 thereafter.
New rental premium
Employers can grant a tax-exempt rental bonus to employees under 30, covering 25% of the bonus, up to the monthly rent (excluding charges) or €1,000, whichever is lower.
Tax credit on rental income
Investors can claim a tax credit of up to €20,000 on registration and transcription fees for rental property purchased via notarial deed between 1 January and 31 December 2024.
Relaunch of deferred capital gains
The regime allowing the deferral of long-term capital gains tax when reinvesting in a new building for social rental management is reactivated from 1 January 2024.
Exemptions for transfers to public entities and new beneficiaries
The exemption on capital gains from transfers of buildings to the State, municipalities, municipal unions, and now the Housing Fund, is expanded. These measures aim to boost the real estate market by making housing investment more attractive, supporting new housing construction, improving access for young people, and promoting social housing.
For more information on taking advantage of these new legislative provisions, contact OmniTrust here.
