Why become a homeowner in Luxembourg?

Today, more than 70% of residents in Luxembourg own their own homes. This rate is higher than the European average. Why is there such enthusiasm for home ownership when real estate prices are high? Here we explain why.

When moving to a new country, renting your new home is initially the most obvious choice. However, if you are planning to live in Luxembourg for two years or more, there are a number of factors that should encourage you to become a homeowner.

To find out why expatriates enjoy living in Luxembourg, explore the many advantages of buying a home in this dynamic and welcoming country.

Advantageous real estate taxation in Luxembourg

Taxation is one of the main reasons for buying a home in Luxembourg. The tax system relating to ownership of a primary residence is quite favorable.

Bëllegen Akt, reduction in notary fees on a real estate purchase

When purchasing real estate, buyers must pay fees when signing the deed of sale at the notary's office. In general , these registration fees amount to 7% of the price of the property. They consist of 6% registration fees and 1% transcription fees.

Reduction in notary fees on the main residence

However, when purchasing their primary residence, new buyers benefit from reduced notary fees. The "Bëllegen Akt" reduces these registration fees for all first-time buyers of their primary residence in Luxembourg.

Today, the "Bëllegen Akt" establishes a tax credit of €40,000 per purchaser of their primary residence for real estate purchases made in 2024.Previously €20 ,000, then €30,000, this new tax break demonstrates the government's desire to revive the real estate sector, which has been struggling since 2023. A couple can thus benefit from up to €80,000 in tax breaks on notary fees.

How can you benefit from reduced notary fees on your primary residence?

To benefit from this tax break on your purchase, you must personally live in your new home for at least two years. If you leave your home before the required two years, you will be required to repay the amounts granted. However, you can rent out the property after the two years without this tax break being called into question.

Notary fees are also relatively limited on the transfer of ownership. See the costs of purchasing real estate.

Reduced VAT on primary residences

The main residence also benefits from a super-reduced VAT rate. In the case of the purchase of a new off-plan property or construction or renovation work, the Luxembourg government offers a VAT rate of 3% instead of 17% on the cost of the work.

However, this tax benefit cannot exceed €50,000 per home as a primary residence. In the case of work on their primary residence, owners must submit a prior request to the municipality where the home is located.

Anyone purchasing a new off-plan property may also benefit from this reduced VAT rate, provided that the property is their future main residence.

Lower property tax on a primary residence

Property tax is a tax calculated on built and unbuilt real estate. It is payable annually to the municipality where the property is located.

The tax rate is determined by each municipality. It is applied to the unit value of the property. The unit value is specified to the owner by the Real Estate Valuation Division. To date, the amount of property tax is very low, amounting to a few dozen euros for a house with a garden.

From 2026, a new law will reassess the amount of property tax. Owners will benefit from a reduction in property tax on their main residence. On the other hand, there are plans to tax empty dwellings and undeveloped serviced land more heavily. The aim is to encourage owners to build or rent out their properties.

See the government's property tax calculator here.

Capital gains exemption on primary residences

In Luxembourg, the potential capital gains realized on the resale of one's primary residence are, in principle, non-taxable. To qualify, the property must:

• have been occupied since acquisition
• or have been occupied during the five years preceding the sale
• or have been sold for compelling family or professional reasons.

In all cases, the sale must take place no later than December 31 following the year of the move.

If the property sold is unoccupied at the time of sale, the following three conditions must be met in order to benefit from the capital gains exemption:

• the property must have been occupied immediately after purchase
• and not own another property such as a second home or pied-à-terre
• and the sale must be carried out for compelling professional or family reasons.

It should be noted that the main residence in Luxembourg may be different from a tax domicile abroad.

In 2024, the sale of the main residence will be tax-exempt in the event of capital gains if the property is sold to the Housing Fund.

Reduction in the tax rate on rental property

Are you looking to invest in rental property? You can also benefit from tax advantages.

When selling an investment property that has been owned for more than two years, the capital gains tax rate is now 10%, down from 20% previously.

Deduction of property acquisition costs

The costs of acquiring a building can be deducted in your property income tax return. To do so, the building must be under construction, undergoing renovation, or completed. The building may be located in Luxembourg or abroad.

These acquisition costs include the costs of taking out a mortgage, property tax, and interest on the mortgage taken out to purchase the property.

From 2024 onwards, the ceiling for tax-deductible interest will be €4,000 per year per person for the same household. After six years, this ceiling will be €3,000, and after ten years, €2,000.

Depreciation of a rental investment property

When purchasing a rental property off-plan, investors can benefit from a depreciation rate of 6% over 6 years, with a ceiling of up to €250,000 per year.