Deducting interest and other expenses related to the acquisition / construction / renovation of an unoccupied building

Taxpayers who own a building that is in the process of being constructed, renovated or completed but is not yet occupied may deduct the full amount of the interest on a loan used to finance the property as an expense for the acquisition of income. Interest payments are fully tax deductible until the date that the taxpayer actually occupies the dwelling.

For purposes of direct taxes, a dwelling which is continuously available to a taxpayer is to be treated as a principal or secondary residence.

Who is concerned

The information on this page applies to:

  • any resident who owns a building in Luxembourg or abroad that is in the process of being constructed, renovated or completed, but is not yet occupied;
  • any non-resident who owns a building in Luxembourg that is in the process of being constructed, renovated or completed, but is not yet occupied;
  • any non-resident who owns a building abroad that is in the process of being constructed, renovated or completed, but is not yet occupied, and who opts to be treated as a resident for tax purposes when filing an income tax return.

In all of the scenarios mentioned above, the taxpayer must submit an income tax return (see, in this regard, "Conditions under which resident or non-resident taxpayers become subject to reporting requirements in Luxembourg") in order to claim a tax deduction for expenses for the acquisition of income.

How to proceed

Tax-deductible expenses for the acquisition of income

As regards the deduction of expenses for the acquisition of income for a building that is in the process of being constructed, renovated or completed, but is not yet occupied, a distinction is made between residents and non-residents.

When filing their income tax return (Form 100), the taxpayer must attach a certificate showing the amount of interest paid on the mortgage in the tax year in question.

However, the tax office may request other supporting documents, such as copies of the notarised deed establishing the loan arrangement, or invoices provided by contractors following the completion of the work.

Other tax-deductible expenses for the acquisition of income

In addition, other expenses for the acquisition of income that are economically related to the construction or renovation of a building are tax deductible, provided that such expenses are paid before the dwelling is occupied.

Consequently, in the case of a building that is in the process of being constructed, renovated or completed, but is not yet occupied, the financing expenses are considered to be tax-deductible expenses, such as business expenses (cost of income acquisition). These expenses include:

  • deed fees for the credit account opening;
  • other expenses in relation with the loan (namely interest payments);
  • property tax;
  • a one-off commission;
  • the deed for the mandatory mortgage;
  • administrative charges.

On the other hand, investment-related expenses are not tax-deductible as expenses for the acquisition of income. Investment-related expenses are expenses that are incurred for the purpose of changing the nature of the building (such as the division of a dwelling into smaller dwelling units, or the conversion of a dwelling into commercial premises) or improving it (by installing a central heating system or a lift, for example) or extending it (such as by adding a room or finishing the attic). These expenses are to be amortised by applying the amortisation rates provided for this purpose (see below).

For the sake of simplicity, the Luxembourg Inland Revenue considers that renovation costs of up to 20 % of the purchase price (excluding land) do not constitute a major improvement of the property, and therefore deems them maintenance and repair costs.

If the price of the land is not known, it can be assessed at 20 % of the total price of the land and the building, including deed fees.

The amortisation rate applied to the purchase price (excluding land), plus the notarial deed fees and investment-related expenses, is as follows:

  • 1.5 % for buildings that were completed fewer than 30 years previously;
  • 2 % for buildings that were completed between 30 and 60 years previously;
  • 3 % for buildings that were completed more than 60 years previously.

The above-mentioned expenses for the acquisition of income are tax deductible for the period preceding the occupancy of the building as their dwelling by the owner or tenant, provided that the period of vacancy is less than 2 years.

Expenses for the acquisition of income for a plot of land to be developed

Costs in connection with a plot of land to be developed (interest, municipal taxes and duties, insurance, etc.) are tax deductible as expenses for the acquisition of income if the taxpayer has a concrete project to build on the land, with works scheduled to begin no later than 2 years after the acquisition.

If construction works are not scheduled to begin within 2 years, the expenses for the acquisition of income are not tax deductible, unless the land generates rental income.

However, the interest paid in connection with the plot of land to be developed will be deductible from the taxpayer's income as special expenses.

Residents

Resident taxpayers who file an income tax return may claim the tax deduction for expenses for the acquisition of income in connection with a building located in Luxembourg or abroad that is in the process of being constructed, renovated or completed, but is not yet occupied.

The total amount of these expenses or interest is to be reported in boxes 1017 - 1018 (if the building is located in Luxembourg) or boxes 1019 - 1020 (if the building is located abroad) under "Determination of net income from property rentals" on page 10 of the 'Form 100' income tax return.

Details regarding debt and interest payments are to be entered in boxes 1051 to 1070.

As soon as the property is occupied by the owner, they can deduct the interest paid on a loan used to finance their principal residence.

Expenses and interest in connection with a loan to finance a rental building are tax deductible.

Non-residents

Non-resident taxpayers may claim the tax deduction for expenses for the acquisition of income in connection with a building located in Luxembourg that is in the process of being constructed, renovated or completed, but is not yet occupied, by filing an income tax return. This option is not of no interest to non-resident taxpayers unless they receive other taxable income in Luxembourg.

Non-resident taxpayers may claim the tax deduction for expenses for the acquisition of income in connection with a building located abroad that is in the process of being constructed, renovated or completed, but is not yet occupied, if they opt to be treated as a resident for tax purposes by filing an income tax return.

The total amount of these expenses or interest is to be reported in boxes 1017 - 1018 (if the building is located in Luxembourg) or boxes 1019 - 1020 (if the building is located abroad) under "Determination of net income from rental property" on page 10 of the 'Form 100' income tax return.

Details regarding debt and interest payments are to be entered in boxes 1051 to 1070.

As soon as the property is occupied by the owner, they can deduct, under certain conditions, the interest paid on a loan used to finance their principal residence.

Expenses and interest in connection with a loan to finance a rental building are tax deductible.

Forms / Online services

Income tax return for resident and non-resident natural persons (form 100)

To complete your application, the information about you collected from this form needs to be processed by the public administration concerned.

That information is kept by the administration in question for as long as it is required to achieve the purpose of the processing operation(s).

Your data will be shared with other public administrations that are necessary for the processing of your application. For details on which departments will have access to the data on this form, please contact the public administration you are filing your application with.

Under the terms of Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, you have the right to access, rectify or, where applicable, remove any information relating to you. You are also entitled to withdraw your consent at any time.

Additionally, unless the processing of your personal data is compulsory, you may, with legitimate reasons, oppose the processing of such data.

If you wish to exercise these rights and/or obtain a record of the information held about you, please contact the administration in question using the contact details provided on the form. You are also entitled to file a claim with the National Commission for Data Protection (Commission nationale pour la protection des données), headquartered at 1, Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette.

By submitting your application, you agree that your personal data may be processed as part of the application process.

Déclaration pour l'impôt sur le revenu pour personnes physiques résidentes et non résidentes (modèle 100)

Les informations qui vous concernent recueillies sur ce formulaire font l’objet d’un traitement par l’administration concernée afin de mener à bien votre demande.

Ces informations sont conservées pour la durée nécessaire par l’administration à la réalisation de la finalité du traitement

Les destinataires de vos données sont les administrations compétentes dans le cadre du traitement de votre demande. Veuillez-vous adresser à l’administration concernée par votre demande pour connaître les destinataires des données figurant sur ce formulaire. Conformément au règlement (UE) 2016/679 relatif à la protection des personnes physiques à l'égard du traitement des données à caractère personnel et à la libre circulation de ces données, vous bénéficiez d’un droit d’accès, de rectification et le cas échéant d’effacement des informations vous concernant. Vous disposez également du droit de retirer votre consentement à tout moment.

En outre et excepté le cas où le traitement de vos données présente un caractère obligatoire, vous pouvez, pour des motifs légitimes, vous y opposer.

Si vous souhaitez exercer ces droits et/ou obtenir communication de vos informations, veuillez-vous adresser à l’administration concernée suivant les coordonnées indiquées dans le formulaire. Vous avez également la possibilité d’introduire une réclamation auprès de la Commission nationale pour la protection des données ayant son siège à 1 Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette.

En poursuivant votre démarche, vous acceptez que vos données personnelles soient traitées dans le cadre de votre demande.

Einkommensteuererklärung für ansässige und nicht ansässige Personen (Vordruck 100)

Ihre in diesem Formular erfassten personenbezogenen Informationen werden von der zuständigen Verwaltungsbehörde verarbeitet, um Ihren Antrag erfolgreich abzuschließen.

Diese Informationen werden von der Behörde für den zur Verarbeitung erforderlichen Zeitraum gespeichert.

Die Empfänger Ihrer Daten sind die im Rahmen Ihres Antrags zuständigen Verwaltungsbehörden. Um die Empfänger der in diesem Formular erfassten Daten zu erfahren, wenden Sie sich bitte an die für Ihren Antrag zuständige Behörde.

Gemäß der Verordnung (EU) 2016/679 zum Schutz natürlicher Personen bei der Verarbeitung personenbezogener Daten und zum freien Datenverkehr haben Sie das Recht auf Zugang, Berichtigung und gegebenenfalls Löschung Ihrer personenbezogenen Informationen. Sie haben zudem das Recht, Ihre erteilte Einwilligung jederzeit zu widerrufen.

Weiterhin können Sie, außer in Fällen, in denen die Verarbeitung Ihrer Daten verpflichtend ist, Widerspruch einlegen, wenn dieser rechtmäßig begründet ist.

Wenn Sie diese Rechte ausüben und/oder Einsicht in Ihre Informationen nehmen möchten, können Sie sich unter den im Formular angegebenen Kontaktdaten an die zuständige Verwaltungsbehörde wenden. Sie haben außerdem die Möglichkeit, bei der Nationalen Kommission für den Datenschutz Beschwerde einzulegen (Commission nationale pour la protection des données, 1, Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette).

Wenn Sie Ihren Vorgang fortsetzen, akzeptieren Sie damit, dass Ihre personenbezogenen Daten im Rahmen Ihres Antrags verarbeitet werden.

Déclaration pour l'impôt sur le revenu 2017 pour personnes physiques résidentes et non résidentes (modèle 100)

Les informations qui vous concernent recueillies sur ce formulaire font l’objet d’un traitement par l’administration concernée afin de mener à bien votre demande.

Ces informations sont conservées pour la durée nécessaire par l’administration à la réalisation de la finalité du traitement

Les destinataires de vos données sont les administrations compétentes dans le cadre du traitement de votre demande. Veuillez-vous adresser à l’administration concernée par votre demande pour connaître les destinataires des données figurant sur ce formulaire. Conformément au règlement (UE) 2016/679 relatif à la protection des personnes physiques à l'égard du traitement des données à caractère personnel et à la libre circulation de ces données, vous bénéficiez d’un droit d’accès, de rectification et le cas échéant d’effacement des informations vous concernant. Vous disposez également du droit de retirer votre consentement à tout moment.

En outre et excepté le cas où le traitement de vos données présente un caractère obligatoire, vous pouvez, pour des motifs légitimes, vous y opposer.

Si vous souhaitez exercer ces droits et/ou obtenir communication de vos informations, veuillez-vous adresser à l’administration concernée suivant les coordonnées indiquées dans le formulaire. Vous avez également la possibilité d’introduire une réclamation auprès de la Commission nationale pour la protection des données ayant son siège à 1 Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette.

En poursuivant votre démarche, vous acceptez que vos données personnelles soient traitées dans le cadre de votre demande.

Einkommensteuererklärung 2017 für ansässige und nicht ansässige Personen (Vordruck 100)

Ihre in diesem Formular erfassten personenbezogenen Informationen werden von der zuständigen Verwaltungsbehörde verarbeitet, um Ihren Antrag erfolgreich abzuschließen.

Diese Informationen werden von der Behörde für den zur Verarbeitung erforderlichen Zeitraum gespeichert.

Die Empfänger Ihrer Daten sind die im Rahmen Ihres Antrags zuständigen Verwaltungsbehörden. Um die Empfänger der in diesem Formular erfassten Daten zu erfahren, wenden Sie sich bitte an die für Ihren Antrag zuständige Behörde.

Gemäß der Verordnung (EU) 2016/679 zum Schutz natürlicher Personen bei der Verarbeitung personenbezogener Daten und zum freien Datenverkehr haben Sie das Recht auf Zugang, Berichtigung und gegebenenfalls Löschung Ihrer personenbezogenen Informationen. Sie haben zudem das Recht, Ihre erteilte Einwilligung jederzeit zu widerrufen.

Weiterhin können Sie, außer in Fällen, in denen die Verarbeitung Ihrer Daten verpflichtend ist, Widerspruch einlegen, wenn dieser rechtmäßig begründet ist.

Wenn Sie diese Rechte ausüben und/oder Einsicht in Ihre Informationen nehmen möchten, können Sie sich unter den im Formular angegebenen Kontaktdaten an die zuständige Verwaltungsbehörde wenden. Sie haben außerdem die Möglichkeit, bei der Nationalen Kommission für den Datenschutz Beschwerde einzulegen (Commission nationale pour la protection des données, 1, Avenue du Rock'n'Roll, L-4361 Esch-sur-Alzette).

Wenn Sie Ihren Vorgang fortsetzen, akzeptieren Sie damit, dass Ihre personenbezogenen Daten im Rahmen Ihres Antrags verarbeitet werden.

Who to contact

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