The emergence of internet platforms which facilitate the rental of residential property for a short period of time tends to lead to an increase in this activity.
From the owners point of view, this means they can rent their property during their absence, or they can make property more profitable instead of resorting to traditional long-term rental. For others it may be part of their business strategy.
These different approaches to the same phenomenon may have different legal implications depending on the way in which the activity is carried out by the lessor, as much in terms of the contractual relationship as in terms of the administrative formalities and the tax treatment.
In Luxembourg, there are no specific regulations on this subject. However, certain obligations arise under the existing regulations.
Taxpayers who make available furnished residential property in return for payment are generally subject to tax obligations.
Who is concerned
This applies to each resident or non-resident person who owns furnished residential property in Luxembourg which they made available in return for payment.
How to proceed
Renting of furnished rooms
The landlord of a furnished dwelling or collective dwelling must declare any renting of furnished rooms in advance to the mayor of the commune, indicating the maximum number of persons accommodated, the amount of rent, and attaching to the declaration a detailed inventory of the premises.
The tenant of the dwelling is required to register at the commune in which the dwelling is located if they make it their main residence.
Furnished dwellings intended for rental must meet the sanitary requirements defined by regulation.
Example: the floor area of a dwelling for rent or made available for habitation may not be less than 9 m² for the first occupant, 18 m² for 2 persons, 24 m² for 3 persons and 30 m² for 4 persons.
In matters of urban planning, when renting out to multiple tenants by subdividing a dwelling into several separate residential units, it may be necessary to verify with the commune whether this represents a change of use of the building which may then be subject to authorisation.
The legislation on condominium ownership or the condominium regulations may be an obstacle to changing the use of a building.
Compliance with urban planning rules, which are generally specified in the communal regulation, may impact the type of rental if there is a change in the use of a dwelling.
Example: the number of parking spaces per housing unit.
Some Internet rental platforms which connect the lessor of furnished residential property with a customer only act as an intermediary. They generally specify in their contractual conditions that the obligation to comply with the regulations are the lessor's responsibility.
The regulation regarding tourist accommodation is aimed at collective accommodation (e.g. campsites) and private accommodation establishments, such as hotels (or their equivalent) and holiday homes. The lessor of a private (or collective) tourist establishment is required to check the accommodation forms of the persons accommodated and to communicate these forms to the Grand Ducal Police.
The accommodation provider must present the National Institute of Statistics and Economic Studies (STATEC) with data concerning the tourist accommodation service and with anonymised data concerning the traveller and the persons accompanying him or her.
Failure to comply with these requirements may result in criminal penalties.
Hotel regulations apply to private individuals who provide accommodation services. They may not regularly accommodate travellers in return for payment if they have not registered the rooms with the commune in which the rooms are located.
If there are signs of an epidemic or contagious disease in their establishment, the accommodation provider must immediately call a doctor and comply with the latter's instructions. The accommodation provider will have to advance any costs incurred by this situation but they can claim back the cost from the traveller who caused the situation.
In the event of a traveller's death, the accommodation provider must notify the civil registrar of the commune within 24 hours.
The income of resident taxpayers from the rental of property located in Luxembourg is taxed at the ordinary progressive rates.
The income of non-resident taxpayers (with the exception of income from paid employment, or from a pension or annuity) is taxed at a minimum rate which varies depending on their level of income, unless said taxpayers have opted to be treated as resident taxpayers.
In all of the above scenarios, the taxpayer must file an income tax return.
Value Added Tax (VAT)
The rental of existing buildings is in principle exempt from VAT.
However, certain types of property rentals are excluded from this exemption and are therefore taxable: short-term accommodation of persons, rental of holiday camps/campgrounds, rental of certain sites equipped for the temporary parking of vehicles, etc.
Taxable persons whose total annual turnover does not exceed EUR 30,000 are exempted. They must, however, register for VAT and declare their turnover.
The communal tax regulations in the commune where the residential property is located may provide for an accommodation tax and require the lessor to meet certain obligations.