Making a gift or donation

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A gift or donation is an agreement in which one party, called the 'donor', transfers, during their lifetime, any number of their assets to another party, generally without anything in return. The recipient of the gift or donation is called the 'donee'.

Gifts or donations may be either movable or immovable assets. When they are made to natural persons (spouse, parents, children, siblings, etc.) or certain legal entities, the term 'gift' is used. When they are made to other types of legal entity, and in particular charitable or non-profit organisations, the term 'donation' is used.

Under Luxembourg civil law, in order to be valid, a gift or donation must satisfy the formal conditions of a written instrument authenticated by a notary. If these conditions are satisfied, the gift or donation cannot be contested by a third party. It is admitted nonetheless, in line with established precedents, that some gifts or donations, such as so-called 'hand-to-hand' gifts or disguised donations, need not satisfy the formal conditions of a written instrument authenticated by a notary in order to be valid.

Under Luxembourg tax law, gifts and donations are generally subject to stamp duty and registration fees.

Stamp duty and registration fees applicable to gifts and donations vary depending on the family relationship, if any, between the donor and the donee.

It should be noted that taxes on gifts or donations are generally payable by the donee. However, the deed or other written instrument may stipulate that the donor assumes liability, in part or in full, for the taxes on the gift or donation.

Who is concerned

The information on this page applies to:

  • any person who wishes to make a gift or donation (the donor);
  • any person receiving a gift or donation (the donee).

Costs
In addition to the stamp duty or registration fees applicable to gifts or donations made by deed or other written instrument, notary fees may also be incurred. These notary fees are set in relation to the value of the assets in the gift or donation and the complexity of the case.

How to proceed

Gifts or donations of movable assets

Principle

Gifts or donations of movable assets (e.g., cars, bank transfers, paintings, company shares, etc.) handled by a Luxembourg notary are subject to stamp duty and registration fees in Luxembourg. In this case, the notary completes all of the formalities on behalf of the client.

Stamp duty and registration fees applicable to gifts or donations of movable assets vary depending on the family relationship, if any, between the donor and the donee.

Stamp duty and registration fees are levied on the estimated market value of the asset on the date of the gift or donation, as mutually determined by the parties, without deducting any expenses relating to the transfer of the assets.

Gifts or donations – Stamp duty and registration fee rates
Relationship between the donor and the donee Applicable rates
Direct line (*) 1.8 % or 2.4 % (**)
Between spouses 4.8 %
Between civil partners bound for at least 3 years by a declaration of civil partnership 4.8 %
Between siblings 6 %
Between uncles or aunts and nephews or nieces 8.4 %
Between fathers- or mothers-in-law and sons- or daughters-in-law 8.4 %
Between great-uncles or great-aunts and great-nephews or great-nieces 9.6 %
Between relatives more distant than those mentioned above 14.4 %
Between unrelated individuals 14.4 %
Gifts or donations to communes, public institutions, nursing homes, social welfare offices, non-profit organisations, foundations and legal entities formed in connection with a religion recognised under an agreement with the government of the Grand Duchy of Luxembourg 4.8 %
Donations to university foundations or scholarships and to public educational institutions Exempt from stamp duty and registration fees

(*) By 'direct line' is meant a relationship between persons who descend from one another. The direct line of descent is that connecting a person with their descendants, whereas the direct line of ascent is that connecting a person to those from whom they descends, i.e., their forebears.

(**) Recoverable gifts to relatives in the direct line are subject to the rate of 1.8 % (the gift is recoverable to be shared between the heirs). This rate is 2.4 % for non-recoverable gifts in the direct line.

Stamp duty and registration fees are reduced by half for gifts made as part of a marriage contract or with a view to marriage.

It should be noted that taxes on gifts or donations are generally payable by the donee. However, the written instrument authenticated by a notary may stipulate that the donor assumes liability, in part or in full, for the taxes on the gift or donation.

Example:

Mr X wishes to give his wife a valuable painting as a gift through a notarised instrument.

Value of the asset at the time of the gift: EUR 1,000,000

Stamp duty and registration fees due: EUR 1,000,000 × 4.8 % = EUR 48,000

In practice

To make a gift or donation, the donor must engage the services of a notary and provide the following documents:

  • the original of their family record book, if married, or the original of their ID card, if single;
  • an estimate for the value of the movable asset(s), signed by the donor and the donee, which will be attached to the notarised gift agreement. The estimate must have been prepared by the donor and/or the donee.

Gifts or donations of immovable assets

Principle

Gifts or donations of immovable property situated in Luxembourg must be handled by a Luxembourg notary and are subject to stamp duty and registration fees in Luxembourg.

Gifts or donations of immovable property situated abroad do not require the formality of a deed or other written instrument in Luxembourg and consequently are not subject to stamp duty and registration fees in Luxembourg. However, gifts or donations of immovable property situated abroad are generally subject to 'gift taxes' in the country where the property is located, in accordance with the legal provisions in force in that country.

Stamp duty and registration fees applicable to gifts or donations of immovable assets vary depending on the family relationship, if any, between the donor and the donee.

Registration fees

Stamp duty and registration fees are levied on the current market value of the asset on the day of the gift or donation, without deducting any expenses relating to the transfer of the asset.

Gifts or donations – Stamp duty and registration fee rates
Relationship between the donor and the donee Applicable rates
Direct line (*) 1.8 % or 2.4 % (**)
Between spouses 4.8 %
Between civil partners bound for at least 3 years by a declaration of civil partnership 4.8 %
Between siblings 6 %
Between uncles or aunts and nephews or nieces 8.4 %
Between fathers- or mothers-in-law and sons- or daughters-in-law 8.4 %
Between great-uncles or great-aunts and great-nephews or great-nieces 9.6 %
Between relatives more distant than those mentioned above 14.4 %
Between unrelated individuals 14.4 %
Gifts or donations to communes, public institutions, nursing homes, social welfare offices, non-profit organisations, foundations and legal entities formed in connection with a religion recognised under an agreement with the government of the Grand Duchy of Luxembourg 4.8 %
Donations to university foundations or scholarships and to public educational institutions Exempt from stamp duty and registration fees

(*) By 'direct line' is meant a relationship between persons who descend from one another. The direct line of descent is that connecting a person with their descendants, whereas the direct line of ascent is that connecting a person to those from whom they descends, i.e., their forebears.

(**) Recoverable gifts to relatives in the direct line are subject to the rate of 1.8 % (the gift is recoverable to be shared between the heirs). This rate is 2.4 % for non-recoverable gifts in the direct line.

Stamp duty and registration fees are reduced by half for gifts made as part of a marriage contract or with a view to marriage.

Public register registration fee

Gift or donations of immovable property located in Luxembourg are generally subject to a 1 % public register registration fee, based on the market value of the immovable property.

Communal surtax

The communal administration of Luxembourg City levies a tax equal to 50 % of the stamp duty and registration fees due on inter vivos transfers of immovable property located in Luxembourg City by sale, exchange, gift or donation, or any equivalent transaction. This surtax is not levied by in any other Luxembourg commune.

Exceptions:

No communal surtax is due for transfers of immovable property involving single-family homes or houses divided into flats and classified as such by Luxembourg Inland Revenue (Administration des contributions directes - ACD). Similarly, no communal surtax is due for transfers of building plots located in a residential area and on which an edifice covered by building regulations may be erected immediately, provided that the acquirer undertakes to build, within 5 years, a single-family home or a house divided into flats, and classified as such by the ACD, on the site.

It should be noted that taxes on gifts or donations are generally payable by the donee. However, the deed or other written instrument may stipulate that the donor assumes liability, in part or in full, for the taxes on the gift or donation.

Example:

Mr X wishes to donate a property located in Luxembourg City to a foundation.

Value of the asset at the time of the donation: EUR 2,000,000

Stamp duty and registration fees due: EUR 2,000,000 × 4.8 % = EUR 96,000

Fee to have the property registered in the public register: EUR 2,000,000 × 1 % = EUR 20,000

50 % surtax—the property is located in Luxembourg City and is not a single-family home or a house divided into flats): EUR 48,000

Total fees due: EUR 164,000

In practice

To make a gift or donation, the donor must engage the services of a notary and provide the following documents:

  • the original of their family record book, if married, or the original of their ID card, if single;
  • the deed or other written instrument documenting the acquisition by the donor of the property in question.

If the donor wishes to donate the property to a legal entity, a copy of the latest articles of association of the legal entity will be required, and possibly the tax identification number (11 digits). The articles of association are used to determine which of the legal entity’s representatives will sign the deed or other written instrument in acceptance of the gift or donation.

Exceptions: usufruct / bare ownership

The donor may also make a gift or donation only of the bare ownership (or the usufruct) of the property.

Bare ownership refers to the possession of an asset without the right to use and derive profit from the asset, but with the right to modify or destroy it.

Usufruct refers to the right to use an asset and derive profit from it. For example, in the case of real estate, usufruct is the right to receive rent payments or the right to occupy the property.

The advantage of a gift or donation of bare ownership is that the transfer of the asset can be arranged at a lower cost, while still being able to receive income from the asset. The basis for calculating the stamp duty and registration fees corresponds to a fraction of the property’s market value, which varies depending on the usufructuary’s age at the time of the gift or donation.

The tax authorities value the right to occupy and use the property at 60 % of the value of the usufruct over its entire duration.

Usufruct / bare ownership
Age of the usufructuary Value of usufruct as a percentage of the value of full ownership Value of bare ownership
Under 20 90 % 10 %
20 to 29 80 % 20 %
30 to 39 70 % 30 %
40 to 49 60 % 40 %
50 to 59 50 % 50 %
60 to 69 40 % 60 %
70 to 79 30 % 70 %
80 to 89 20 % 80 %
90 and over 10 % 90 %

At the death of the usufructuary or bare owner, the separation of the ownership attributes is terminated without incurring any additional charges.

Example:

Mr X, aged 57 at the date of the gift, decides to give his flat in Luxembourg as a gift to his 28-year-old son. Mr X chooses to retain the usufruct of the flat in question. He may therefore continue to use the property (or receive income from the rental of the property).

Value of the property at the time of the gift: EUR 1,000,000

Basis of assessment for stamp duty and registration fees: 50 % × EUR 1,000,000 = EUR 500,000

Stamp duty and registration fees due: EUR 500,000 × 1.8 % = EUR 9,000

Fee for registration of the property in the public register: EUR 500,000 × 1 % = EUR 5,000

If Mr X dies after the gift has been made, his son will receive the usufruct of the asset without paying any additional fees.

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