Taxpayers may deduct certain expenses from their taxable income. These expenses include contributions paid under a home purchase savings plan which are tax deductible under certain conditions.
The purpose of a home purchase savings plan is to enable a subscriber to receive a loan on favourable terms for the financing of their personal home, in exchange for the payment of contributions.
The contract must be taken out to finance the construction, acquisition or transformation of an apartment or house used for personal housing needs, including the acquisition price of the land.
Home purchase savings contributions are considered to be special expenses (dépenses spéciales - DS).
Both resident and non-resident taxpayers treated as resident taxpayers can deduct the home purchase savings contributions as a special expense, including the interest income for the home purchase savings contract.
Contributions paid under a home purchase savings plan are deductible only if:
The highly specific scheme for home ownership savings institutions differs from that of banking and financial institutions. The latter cannot claim the benefit of the legal provisions concerning home savings (111 LIR) for their products.
Savings accounts called "plans d'épargne-logement" (PEL), for example, are not eligible for tax deductions. The terms of this type of savings plans do not fall under the specific conditions referred to in Luxembourg law.
Non-resident taxpayers, provided they are eligible, must choose to be taxed as resident taxpayers in order to be able to deduct the savings contributions paid into a home savings-plan from their tax.
As of the 2017 tax year, regardless of the date of subscription of the contract, the funds resulting from a cancellation of a home-savings plan or from the granting of the savings at the end of the plan must be used to finance a building used for the taxpayer's personal housing needs (construction, acquisition, transformation of a building or acquisition of land to build a building).
If the duration of the home-purchase savings contract has exceeded 10 years, previously deducted contributions remain deductible.
Failing to use the capital received to finance a building used for the taxpayer's personal housing needs (construction, acquisition, transformation of a building or acquisition of land for the purpose of constructing a building), a deduction for special expenses of contributions paid to a home-purchase savings institution is no longer permitted from the tax year following receipt of the capital.
The taxpayer who cancels the home savings plan before the 10 years have elapsed (date of the allocation of the funds) cancels the deductible nature of the contributions paid, meaning that the contributions already deducted are considered to be non-deductible.
The taxpayer therefore becomes subject to a corrective taxation, which will be to his disadvantage.
This corrective taxation is applied to all the contributions which have been wrongly deducted.
Moreover, failure to use the capital received to finance a building used for the taxpayer's personal housing needs (construction, acquisition, transformation of a building or acquisition of land for the purpose of constructing a building), a deduction as special expenses of the contributions paid to the home-purchase savings institution is no longer permitted from the tax year following receipt of the capital.
There are, however, certain circumstances which prevent a corrective taxation from taking place and which maintain the right to deduction, such as:
Contributions remain deductible and the taxpayer retains the right to deduction if the savings are used for:
If the duration of the contract has not exceeded 10 years and the saver uses the money received to finance a car or a kitchen:
As of 2017, the maximum deductible amount is set according to the age of the youngest of the adult subscribers:
The higher deductible amount also applies in the calendar year in which the subscriber turns 41.
This amount can be increased by its own amount for:
"A" and "B" are subject to joint taxation. "A" turns 41 during the tax year. "B" is 50 years old. "A" has a home purchase savings plan. They have 3 children for whom they are entitled to a tax reduction.
They can deduct: 5 x 1,344 = EUR 6,720.
"A" and "B" are subject to joint taxation. "A" turns 41 during the tax year. "B" is 50 years old. "B" has a home purchase savings plan. "A" does not. They have 3 children for whom they are entitled to a tax reduction.
They can deduct: 5 x 672 = EUR 3,360.
To deduct home purchase savings contributions as special expenses (DS):
The taxpayer can justify the annual amount of deductible contributions paid during the fiscal year concerned as special expenses (SD) by providing a copy of the annual statement produced by the home purchase savings institution.
The Luxembourg Inland Revenue reserves the right to request additional supporting documents as part of the process of verifying any information, statements, applications, declarations, claims or appeals submitted to its offices.
Income tax return for resident and non-resident natural persons (form 100)
Déclaration pour l'impôt sur le revenu pour personnes physiques résidentes et non résidentes (modèle 100)
Einkommensteuererklärung für ansässige und nicht ansässige Personen (Vordruck 100)
Demande en établissement, rectification, inscription d'une modération ou établissement d'un duplicata d'une fiche de retenue pour contribuables résidents (Modèle 164 R F)
Antrag auf Ausstellung, Berichtigung, Eintragung einer Ermäßigung oder Ausstellung eines Duplikates einer Steuerkarte für ansässige Steuerpflichtige (Vordruck 164 R D)
Décompte annuel de l'année 2018 (personnes physiques résidentes salariées ou pensionnées non soumises à une imposition par voie d'assiette - 163 R)
Lohnsteuerjahresausgleich für das Jahr 2018 (ansässige steuerpflichtige Arbeitnehmer und Rentner die nicht einer Besteuerung durch Veranlagung unterliegen - 163 R)