The normal rate for real estate purchases—houses, flats, building plots—is 7%, of which 6% is for registration fees and 1% is for recording fees.
To reduce the incidental expenses associated with the purchase of a dwelling, the Government has introduced a tax allowance—known as a tax credit—on registration and recording fees for anyone wishing to purchase a building (and certain outbuildings and attachments) for use as their personal residence.
This tax credit is limited to EUR 20,000 per buyer. For a couple, this amount is doubled since the tax credit applies to each buyer individually. The tax credit may be used successively for several purchases until it has been exhausted.
In all cases, the Registration Duties, Estates and VAT Authority (Administration de l'enregistrement et des domaines - AED) will collect a minimum amount of EUR 100 in registration fees.
Who is concerned
Anyone who wishes to purchase a piece of real property for use as as their personal residence, and who, at the time the notarial instrument is recorded, is:
- either a resident in the Grand-Duchy of Luxembourg and registered with a commune's population office;
- or not yet a resident, but who intends to reside in Luxembourg in the purchased building.
In all of the aforementioned cases, the buyer must effectively and personally occupy the purchased property within 2 years of the date of the notarial deed of purchase. This time limit is extended to 4 years if the purchased property is a building plot or a building under construction. Furthermore, the buyer must undertake to effectively and personally occupy the building for an uninterrupted period of at least 2 years except in a case of
Non-residents living in the European Economic Area are treated as residents in the sense that they will not be required to advance the registration and recording fees and to subsequently apply for reimbursement. They are automatically entitled to the tax credit, provided they have applied for it when the notarial instrument is recorded. For non-residents living in a country that is not part of the European Economic Area, the tax credit will only be granted when the applicant can present a certificate of residence in Luxembourg.
No conditions in terms of wealth, value of the building, cadastral income, or purchaser's income are taken into account.
This tax reduction may be granted if a building is acquired by:
- bidding (auction);
- exchange with returns or capital gains.
As regards the nature of the building to be used as a residence, the law provides for the granting of a tax reduction for:
- building plots in a residential area where a structure can immediately be built in accordance with building regulations;
- dwellings to be used by the owner as a primary, personal and effective residence. Buildings under construction are also included;
- outbuildings (garages, sheds, barns) or other additions (gardens) which adjoin or are separate from the primary residential building, but located close to it.
How to proceed
Signing of the notarial instrument
The application for a tax credit is filed by the notary when the notarial instrument is drawn up, provided that the latter includes:
- the buyer's corresponding request;
- an undertaking on the part of the buyer to a) personally occupy the building within the time limits and for the term provided for by law, b) refrain from using the building for any other purpose during this period, and c) repay the amount of the tax allowance if the legally prescribed conditions are not fulfilled;
- an undertaking on the part of the buyer to declare in writing, to the administrative authorities, within 3 months, any transfer or change in the intended use of the building in question.
Conditions of eligibility for the tax credit
The buyer must effectively and personally occupy the dwelling within 2 years of the date of the notarial deed of purchase. This time limit is extended to 4 years if the purchased property is a building plot or a building under construction. However, these time limits may be extended in certain cases where an exception is granted by the director of the Registration Duties, Estates and VAT Authority in response to a written and substantiated request on the part of the buyer.
For purchases of buildings documented by a notarial instrument dated on or after 1 January 2008, the buyer must also undertake to occupy the building for an uninterrupted period of at least 2 years.
Note that the signing of a preliminary sales agreement results in the immediate transfer of ownership of the building. Therefore, the 2-year occupancy period will not be observed if the building is transferred by signing a preliminary sales agreement before this term has expired. Nevertheless, it is possible to postpone the moment at which the ownership of the building is transferred to the day on which the notarial instrument is signed by inserting a special clause in the preliminary sales agreement, such as, for example: "ownership of the building will be transferred on the date on which the authentic instrument is signed". If there is such a clause, the 2-year period will be considered to have been observed even if the agreement is signed before the term expires, provided that the authenticated instrument is signed after the 2-year term;
It should be noted that the initial law provided for an occupancy period of at least 5 years. This occupancy period was set to at least 2 years (law of 22 October 2008) for purchases of buildings documented by a notarial instrument dated on or after 1 January 2008.
For purchases of buildings documented by notarial instrument dated before 1 January 2008, there are 2 possible scenarios:
- occupancy of the building started before 1 November 2008: the occupancy period remaining as of 1 November 2008 may not under any circumstance exceed 2 years. If the period to be observed in application of the former law (5-year occupancy period) was reached on a date prior to 1 November 2010, the duration-of-occupancy condition is satisfied at that date;
- occupancy of the building began after 1 November 2008: the occupancy period is 2 years from the effective date of occupancy.
However, the Director of the Registration Duties, Estates and VAT Authority may exempt the buyer from having to satisfy this duration-of-occupancy condition if the latter cannot be satisfied due to reasons of force majeure, or to a situation such as:
- an illness—attested by a medical certificate—preventing the buyer from occupying the building;
- the forced sale of the building;
- expropriation for reasons of public utility;
- the death of the buyer's spouse;
- divorce or dissolution of a legal partnership.
However, if occupancy is interrupted on account of an obligation on the part of the buyer to transfer the location of their residence for professional reasons beyond their control, they may be exempted—by the Director of the Registration Duties, Estates and VAT Authority—from having to reimburse the allowance, provided that occupancy is resumed once the buyer returns and until a total occupancy period of 2 years has been completed.
Consulting the balance on the remaining tax credit.
The remaining balance of the tax credit for any subsequent notarial instruments may be viewed online via MyGuichet.
Forms / Online services
Who to contact
Registration Duties, Estates and VAT Authority1-3, Avenue Guillaume
B.P. 31 L-2010
Phone : (+352) 247 80800Fax : (+352) 247 90400