Luxembourg – Property Taxes

Which taxes and fees apply when purchasing property in Luxembourg?

When acquiring property in Luxembourg, the buyer bears responsibility for several transaction-related costs. The most substantial of these is the combined registration and transcription duty. For standard real estate acquisitions — encompassing houses, apartments, and building land — the prevailing rate is 7%: 6% for registration fees and 1% for transcription fees (as of 2025). These amounts are remitted to the Registration Duties, Estates and VAT Authority (AED).

A municipal surcharge is levied where the property lies within Luxembourg City, adding a further 3–3.6% on top of the standard rate. Buyers in the capital may therefore face total transfer-related charges of up to 10.6% before other costs are counted. Properties situated outside the capital attract a lower municipal surcharge — typically around 1.2% — so it is vital to establish the exact rate for the relevant commune.

A notable temporary measure has been introduced to stimulate the property market. Between 1 October 2024 and 30 June 2025, registration fees were provisionally reduced from 7% to 3.5%, delivering considerable savings for both homebuyers and investors alike. Once this window closes, the standard 7% rate is expected to resume — always verify the current position with the AED before exchanging contracts.

Beyond transfer duties, buyers must pay notary fees for the compulsory notarial deed, which is a legal prerequisite for completing any property transaction in Luxembourg. Notary fees are regulated and generally fall within the range of 1–2% of the purchase price, depending on the complexity of the transaction. Fixed administrative costs of between €500 and €1,500 are also payable on every property deal, covering stamp duties, land registry extracts, cadastral documentation, and the various filing fees required to finalise the legal transfer.

For new-build properties acquired off-plan (VEFA — vente en état futur d’achèvement), VAT at Luxembourg’s standard rate of 17% applies to the construction element of the price. Luxembourg’s standard VAT rate of 17% is the lowest such rate within the European Union. The land portion of a VEFA transaction, however, remains subject to registration duties rather than VAT. Buyers of new-builds should clarify with their notary precisely which components of the price are liable to VAT and which fall under transfer duty rules.

No distinction is drawn in transfer duty rates between residents and non-residents — the standard rates apply across the board. Rates do, however, differ according to intended use: buyers acquiring for resale purposes face a registration duty of 7.2%, and professional purchasers intending to resell may encounter rates as high as 10.8% in Luxembourg City.

Worked example — standard purchase: A buyer acquires a €600,000 apartment in Luxembourg City as a primary residence (standard 7% rate applies). Registration duty: €600,000 × 6% = €36,000. Transcription duty: €600,000 × 1% = €6,000. Municipal surcharge (3%): €600,000 × 3% = €18,000. Total transfer costs: approximately €60,000, before notary fees and administrative charges. A Bëllegen Akt tax credit (see the incentives section below) could substantially reduce or eliminate the registration and transcription portion of this liability.

Which taxes and fees apply when selling property in Luxembourg?

In Luxembourg, the seller’s direct tax exposure at the point of sale is comparatively modest when set against many other European countries. The principal financial consideration for sellers is capital gains tax on any profit realised, which is addressed in full in the section that follows. Registration duties are the buyer’s obligation — not the seller’s.

The most significant cost for sellers is typically estate agent commission. Luxembourg places no statutory cap on agency fees, and commission rates are generally negotiated directly between the seller and the agent. They typically range from around 2% to 4% of the sale price, plus VAT at 17%. Importantly, selling costs such as estate agent commissions are deductible when computing any taxable capital gain, thereby meaningfully reducing the taxable base.

Sellers are also obliged to provide mandatory property certificates, notably an energy performance certificate (EPC), which is a legal requirement for all property sales and lettings in Luxembourg. The cost varies according to property size and the service provider chosen, but is generally in the range of a few hundred euros.

Notary fees on the sale side tend to be limited for the seller, since it is ordinarily the buyer’s notary who manages the transaction, with the buyer absorbing the bulk of notarial costs. Where a seller engages their own notary for guidance, those fees represent an additional outlay.

If an outstanding mortgage is secured against the property, the seller will need to meet the cost of discharging it (mainlevée) by means of a notarial act, which attracts a further notary fee. Sellers should also note that all property disposals must be declared to the Luxembourg Inland Revenue (ACD) regardless of whether a taxable gain has arisen. The exchange or sale of a building must always be reported to the Luxembourg Inland Revenue (ACD).

How does capital gains tax on property work in Luxembourg?

Luxembourg’s capital gains tax regime for property is fundamentally linked to how long the asset has been held. The system draws a clear distinction between short-term “speculative” profits and long-term capital gains, treating each very differently. The disposal of a taxpayer’s main residence is fully exempt from income tax, regardless of how long it has been owned. This exemption represents a major advantage for owner-occupiers and is broadly comparable to principal private residence relief available in a number of other tax systems.

Short-term (speculative) gains: Capital gains from the sale of real estate are taxable at progressive income tax rates if the gain is realised within five years of the date of acquisition (as of 2025; the threshold stood at two years prior to 2024). This means gains on properties disposed of within five years of purchase are treated as ordinary income and charged at the full progressive rates, which peak at 45.78% including the solidarity surtax.

Long-term gains: Since 1 January 2025, capital gains arising from the disposal of property forming part of an individual’s private assets are taxed at half the overall rate — effectively a maximum of approximately 21% — provided the property has been held for more than five years. A temporary additional reduction has also been available: where income was generated between 1 January 2024 and 30 June 2025, the maximum rate falls to 10.5% (one quarter of the overall rate). Always confirm which rate applies to your particular sale with the ACD.

Indexation allowance: For long-term capital gains (where immovable property has been held for more than five years), the acquisition cost is adjusted by reference to official inflation coefficients. This indexation ensures that only the “real” gain — the appreciation beyond inflation — is subject to tax, which can considerably reduce the taxable figure for properties held over extended periods.

Personal allowance: The taxable gain may be reduced by a rolling ten-year exemption of €50,000 (€100,000 for spouses or partners assessed jointly). The available exemption is reduced by any amounts already claimed over the preceding ten years. This allowance refreshes every decade and can entirely eliminate tax liability on modest gains.

An additional deduction of up to €75,000 may be available in certain situations. A deduction of up to €50,000 (doubled for married taxpayers and civil partners filing together), valid every ten years, may be claimed against the capital gain. Furthermore, a deduction of up to €75,000 may apply where the property was inherited through the direct line of descent.

Dependency contribution: Individuals who are subject to the Luxembourg social security system must pay a dependency contribution of 1.4% on the taxable portion of their gains, adding a modest additional charge on top of the income tax liability.

Reinvestment relief: Luxembourg legislation provides for rollover relief on capital gains where proceeds are reinvested in a qualifying property — specifically a social rental property or one achieving energy performance class A+. This relief is subject to conditions and is not available where the gain qualifies as speculative income. Consulting the ACD or a qualified tax adviser is recommended for anyone considering this route.

Worked example — long-term gain: A single individual disposes of an investment property (held for 7 years) for €750,000. Inflation-adjusted acquisition cost: €550,000. Agency commission deduction (3% + VAT): approximately €26,475. Adjusted taxable gain: €750,000 − €550,000 − €26,475 = €173,525. After deducting the €50,000 personal allowance: €123,525 taxable. Applying half the marginal rate (assuming a marginal rate of approximately 42%), the effective rate is around 21%. Estimated tax liability: approximately €25,940. Actual figures will vary significantly with total income — always use the ACD’s official forms or engage a tax adviser for precise calculations.

Non-residents: Taxpayers disposing of real estate must declare this to the ACD whether they are Luxembourg residents selling property located in Luxembourg or abroad, or non-residents selling property situated in Luxembourg. Capital gains realised by a non-resident individual on the direct disposal of a Luxembourg real estate asset are subject to personal income tax at progressive rates. The same rates and reliefs broadly apply as for residents, but non-residents should also examine their home country’s tax rules and any applicable double taxation treaty. Visit the ACD website for current rates and the relevant return forms.

Are there recurring annual property taxes in Luxembourg?

Luxembourg imposes an annual land and property tax known as the impôt foncier, administered at municipal level. Property taxes are levied by the municipalities; the amount payable depends on the value, classification, and location of the property. This is conceptually similar to council tax in the United Kingdom or local property levies found in other European countries, but is generally regarded as very modest by international standards.

The tax is calculated using a specific formula: tax base × communal rate. The tax base corresponds to the unitary value assigned by the property assessment division of the tax authorities, multiplied by the applicable assessment rate. A key reason this tax remains low is that the unitary values used as the calculation base were last revised decades ago and remain substantially below current market values. As a result, annual property tax bills for a typical residential property are usually only a few hundred euros, rather than the thousands seen in many comparable countries.

The communal rate (taux communal) differs from one municipality to the next and is set each year by the relevant commune. Luxembourg City and other communes each determine their own multipliers, meaning the precise bill depends on where the property is located. Unlike the American property tax model — where assessments are periodically updated to reflect market values and bills can be considerable — Luxembourg’s annual property tax represents a minor expense for most homeowners.

A significant reform is currently in progress. Bill 8082 not only seeks to modernise property taxation but also proposes introducing two new taxes intended to encourage landowners to put building land and unoccupied dwellings into use, and would represent a fundamental overhaul of the Luxembourg property tax framework. The legislative process is currently underway before Parliament. Property owners and prospective buyers would be wise to monitor developments closely, as any reform could materially alter annual property tax obligations in the future. Track the progress of this legislation via the Luxembourg Government portal.

Property tax bills are issued by the relevant commune and are typically payable on an annual basis. Luxembourg does not levy a wealth tax on individuals, meaning there is no separate annual charge on property assets — a notable contrast with countries such as France, where an annual Impôt sur la Fortune Immobilière applies to real estate holdings above a specified threshold.

How does inheritance tax apply to property in Luxembourg?

Indirect taxes are levied on inheritances and gifts in Luxembourg. These are administered by the Administration de l’Enregistrement et des Domaines (AED). The applicable rules are governed by the residence of the deceased at the time of death, not by the residence of the heirs, and by the degree of family relationship between the deceased and each beneficiary.

Inheritance taxes apply to the entire estate left by a Luxembourg resident at the time of their death, with the exception of real estate located outside the Grand Duchy. A person is regarded as a Luxembourg resident for these purposes if they have their domicile and the centre of their life there. Crucially, the place of residence of the heirs has no bearing on inheritance tax obligations in Luxembourg — heirs living abroad may still face Luxembourg inheritance tax on a Luxembourg estate.

Transfers between spouses or civil partners (where the partnership has been formally registered for at least three years) and in the direct line — such as between parents and children — are generally exempt from inheritance tax. This relief is significant for family succession planning and means that, in most straightforward family property transfers, little or no inheritance tax arises.

For more distantly related heirs, the tax burden increases markedly. Rates ranging from 0% to 48% are calculated separately for each beneficiary based on their share of the inheritance and their degree of kinship with the deceased. As a general rule, basic tax rates range between 0% and 15% and are then further increased according to the net share received by the heir in question. For entirely unrelated beneficiaries, the effective rate can be very substantial — such heirs face a base rate of 15%, and for large estates the progressive surcharge mechanism can push effective rates close to 50%.

Inherited assets are exempt from inheritance tax where the total value of the estate, net of debts, does not exceed €1,250. This de minimis threshold is low, meaning most property inheritances will surpass it and be subject to full assessment.

Where a non-resident deceased person holds property in Luxembourg: transfer tax (droit de mutation) applies upon the death of a non-Luxembourg resident who owns immovable property located in the Grand Duchy. No inheritance tax is charged on real estate situated abroad, even where that property forms part of the estate of a Luxembourg resident. This distinction is important — Luxembourg property is always assessable in Luxembourg, whereas overseas assets held by a Luxembourg resident fall outside the scope of Luxembourg inheritance tax.

Verify the current rates and any available allowances with the AED or seek advice from a notary or qualified estate planning specialist in Luxembourg, particularly where the estate has cross-border dimensions.

How does gift tax apply to property transfers in Luxembourg?

Gift tax is charged on the transfer of assets during the donor’s lifetime. The tax treatment depends on how the gift is structured and the nature of the relationship between the donor and the recipient. Understanding the distinction between notarial and non-notarial gifts is essential, as the two are handled in entirely different ways.

Under Luxembourg law, a notarial deed is in principle required to formalise a gift. Gifts not required to be documented in writing — for instance, gifts of movable assets transferred by hand — are generally accepted without a notarial deed and therefore without registration. In such cases, no gift tax arises, unless the donor dies within the same calendar year, in which case the value of the gift is folded back into the transferred estate for the purposes of computing inheritance tax.

Gifts of real estate, however, always require a notarial deed. Notarially documented gifts are subject to immediate taxation at registration, with rates running from 1.8% to 14.4% depending on the relationship between the parties (as of 2025). Gifts of immovable property may additionally attract a transfer duty of 1% (droit de transcription).

Inter vivos gifts to direct-line heirs that qualify as an ancestors’ partition (partage d’ascendants) are exempt from transfer duty. This means parents who gift property directly to children as part of a structured estate distribution may benefit from a meaningful exemption. For more distant relationships, the gift tax rate rises in line with the degree of separation between donor and recipient.

Gift tax applies to all assets received where the donor is a Luxembourg resident. Gifts from a non-resident are subject to Luxembourg gift tax only to the extent that they concern real estate located in Luxembourg. This means that wherever the donor is based, the gift of a Luxembourg property will attract Luxembourg gift tax.

Timing considerations are important for planning purposes. Gifts of movable assets made within one year of death, or gifts of real estate made within three months of death, may be aggregated with the taxable estate and subjected to inheritance tax rates. Anyone contemplating the gift of Luxembourg property — particularly where the estate has an international dimension — should seek careful guidance from a notary or tax adviser. The AED is the relevant authority for gift tax assessments.

How is rental income from Luxembourg property taxed?

Income derived from real estate situated in Luxembourg is subject to progressive income tax, with a maximum rate of 45.78% including the solidarity surtax. Rental income is treated as ordinary income and added to other income streams for the purpose of determining the applicable marginal rate. This applies to both Luxembourg residents and non-residents who hold property in the Grand Duchy.

Non-residents who own real estate in Luxembourg are subject to Luxembourg personal income tax (PIT) at progressive rates on rental income generated there. The same fundamental rules regarding allowable deductions and tax rates that apply to residents apply broadly to non-residents as well, though non-residents should also review any applicable double taxation treaty between Luxembourg and their country of residence. Since rental income is taxed in the jurisdiction where the property is located, Luxembourg-source rental income will always be subject to Luxembourg tax irrespective of where the owner resides.

Allowable deductions: Luxembourg permits a broad range of deductions against rental income, which can substantially reduce the taxable base. These include:

• Mortgage interest (subject to conditions — see the incentives section for details concerning primary residence rules)
• Property maintenance, repair, and renovation expenditure
• Building depreciation — ordinarily 2% per year for residential properties, temporarily increased to 6% for qualifying new rental properties acquired in 2024
• Estate agent and property management fees
• Property insurance premiums
• Municipal land and property taxes
• Accountancy and legal costs directly attributable to the rental activity

Rental properties purchased in 2024 benefit from an accelerated depreciation rate of 6% for six years, up to a maximum annual eligible amount of €250,000 (as of 2025). This enhanced depreciation provision for new-build investment properties substantially reduces net taxable rental income during the initial years of ownership, making Luxembourg rental investment comparatively tax-efficient for properties that qualify.

Worked example: An investor receives €24,000 in annual rent on a property with mortgage interest of €8,000, management fees of €1,200, maintenance expenditure of €800, and depreciation of €5,000. Net taxable rental income: €24,000 − €8,000 − €1,200 − €800 − €5,000 = €9,000. At a marginal rate of 35%, the estimated income tax liability is €3,150. The actual rate will depend on total income — consult the ACD or a qualified tax adviser for precise calculations.

Short-term holiday lettings (for example, via platforms such as Airbnb) are generally treated as ordinary rental income for tax purposes, although landlords should also check local planning rules and commune regulations governing short-term letting. There is no special flat withholding rate for rental income received by private individuals in Luxembourg — all rental income flows through the standard progressive income tax return. Landlords must declare rental income on their annual tax return (form 100) and retain all supporting documentation.

What tax advantages and incentives exist for Luxembourg property buyers?

Luxembourg has put in place a number of notable incentives for property buyers and owners, several of which have been substantially enhanced as temporary measures since 2024 to help revive the housing market. Buyers should confirm which measures are currently active at the time of their transaction.

Bëllegen Akt tax credit: The most valuable incentive for primary residence buyers is the Bëllegen Akt, a tax credit applied directly against registration and transcription duties. The enhanced Bëllegen Akt credit of €40,000 per person (€80,000 per couple) is available for primary residence purchases in Luxembourg concluded between 1 January 2025 and 30 June 2025 (as of 2025). The standard credit outside the temporary enhanced window was €30,000 per person — verify the amount currently in force with the AED at the time of purchase.

To be eligible, the property must serve as the buyer’s principal residence and must be occupied for at least two years following purchase. For many buyers — particularly those purchasing properties valued below €600,000 — the credit can completely wipe out registration duty liability. Where the credit exceeds the duties owed, a minimum €100 registration fee remains payable.

Investor tax credit: A temporary Bëllegen Akt Investisseurs rental tax credit of €20,000 per individual (€40,000 per couple) against registration and transcription duties was made available to buyer-investors for preliminary sales agreements signed between 1 January 2025 and 30 June 2025 (as of 2025). Verify whether this measure or a successor provision remains in effect at the time of any investment purchase.

Mortgage interest deductibility for the primary residence: Since 1 January 2024, passive interest connected to the main residence has been fully deductible within the Luxembourg individual income tax return for the year in which the rental value is determined and for the following year. This represents a meaningful improvement over the previously capped limits and provides significant relief for owner-occupiers carrying a mortgage.

Accelerated depreciation for rental investors: A special construction allowance provides an additional 4% depreciation (added to the standard 2%, giving a combined rate of 6%), applicable in the year of completion and the six years thereafter. This allowance is available on the purchase of a VEFA (off-plan) property and is subject to a cap of €250,000.

Capital gains reinvestment relief: The legislation provides for the fiscal neutralisation of non-speculative capital gains where they are reinvested in accommodation designated for social rental management, or in properties achieving energy performance class A or A+. This rollover relief is particularly relevant for investors who wish to restructure or upgrade their portfolio while deferring their tax liability.

These incentives are available to all buyers regardless of nationality, provided the specific conditions are met. Non-residents may access the Bëllegen Akt credit on the same basis as residents, subject to satisfying the primary residence requirements. Consult the Guichet.lu official portal and the AED for the most up-to-date conditions and eligibility criteria.

What are the tax implications for foreign nationals purchasing property in Luxembourg?

Luxembourg does not impose supplementary transfer taxes or surcharges specifically targeting foreign purchasers, nor does it place restrictions on foreign ownership of property. The rules relating to capital gains apply equally to Luxembourg residents and non-residents who sell property in the Grand Duchy. This makes Luxembourg comparatively open to international property investment, in contrast to certain other jurisdictions that have recently introduced foreign buyer surcharges.

Non-residents who hold property in Luxembourg remain liable to Luxembourg tax on income and gains arising in Luxembourg. Individuals domiciled in Luxembourg are taxed on their worldwide income unless an applicable treaty provides otherwise. Non-residents, by contrast, are taxed by Luxembourg solely on Luxembourg-source income — including rental income and capital gains from Luxembourg property.

Luxembourg maintains an extensive network of double taxation treaties (DTTs). Income from real estate situated abroad is generally not subject to Luxembourg tax by virtue of these treaty arrangements. If you are resident in a country that has concluded a DTT with Luxembourg, that treaty will typically determine which jurisdiction holds the primary right to tax rental income and capital gains, and whether relief from double taxation is afforded by way of a credit or exemption. Non-residents are strongly advised to consult a tax professional with expertise in both Luxembourg and their country of residence before proceeding with a purchase.

Non-residents disposing of property located in Luxembourg must declare the transaction to the ACD. This reporting requirement applies even where no taxable gain results — for example, on the sale of a principal residence that is fully exempt. Failure to file can attract penalties, so it is important to instruct a Luxembourg tax adviser or notary to manage the necessary returns.

For inheritance and estate planning purposes, transfer tax (droit de mutation) is levied on the death of a non-Luxembourg resident who holds immovable property within the Grand Duchy. Even if you reside abroad, Luxembourg property forming part of your estate may be subject to Luxembourg succession tax — the rate that applies will depend on the relationship between the deceased and the heirs.

Foreign nationals who become Luxembourg tax residents through employment or self-employment may be eligible for the impatriate tax regime. Under certain conditions, individuals recruited from abroad or seconded to Luxembourg who thereby become Luxembourg tax residents may qualify for this regime. Since 1 January 2025, it allows for a 50% tax exemption on remuneration capped at €400,000 per year. While primarily directed at employment income, the regime can influence the overall tax rates applicable to property income. Taking independent advice from a qualified Luxembourg tax specialist is always recommended, especially where property is held across more than one country.

Frequently asked questions about property taxes in Luxembourg

Do I pay capital gains tax if I sell my Luxembourg property as a non-resident?

Capital gains realised by a non-resident individual upon the direct disposal of a Luxembourg real estate asset are subject to personal income tax at progressive rates. The same rates, allowances, and holding period rules that apply to residents broadly apply to non-residents. However, your home country may also seek to tax the gain, so it is essential to check the relevant double taxation treaty and take advice from a tax specialist in both jurisdictions before completing the sale. Report the sale to the ACD using form 100 and form 700.

Can I deduct mortgage interest on rental income in Luxembourg?

Yes. Mortgage interest is an allowable deduction against rental income in Luxembourg, reducing the net amount subject to progressive income tax. Since 1 January 2024, passive interest in connection with the main residence is also fully tax deductible within the income tax return for the applicable period. The rules differ slightly depending on whether the property is your primary residence or a rental investment — consult the ACD or a tax adviser for your specific situation and verify current deduction limits.

Is there a wealth tax on property in Luxembourg?

Luxembourg does not levy a wealth tax on individuals. This distinguishes it from countries such as France, which imposes an annual real estate wealth tax (Impôt sur la Fortune Immobilière) on property assets above €1.3 million. The only recurring annual tax on property in Luxembourg is the municipal impôt foncier, which is typically very low. Note, however, that a property tax reform is currently before the Luxembourg Parliament — monitor official sources for any changes.

What is the Bëllegen Akt and who qualifies for it?

The Bëllegen Akt is a tax credit that reduces or eliminates the registration and transcription duties payable when buying a property in Luxembourg. Eligible buyers can offset these duties by up to €40,000 per person, or €80,000 for a couple purchasing together (as of the 2025 temporary enhanced period). To qualify for the primary residence credit, the property must be occupied as the buyer’s principal home for at least two years. Verify the current applicable credit amount and eligibility conditions with the AED, as the thresholds have changed several times since 2024 and may revert to lower levels.

Are transfers of property between family members taxed in Luxembourg?

Transfers between spouses or civil partners (where the partnership has been formally registered for at least three years) and in the direct line — for example, between parents and children — are generally exempt from inheritance tax. Gift tax at rates of 1.8%–14.4% may apply to inter vivos transfers depending on the family relationship and the form of the gift. Direct-line gifts that qualify as an ancestors’ partition may also be exempt from transfer duty. Always involve a Luxembourg notary in family property transfers to ensure correct tax treatment.

How does Luxembourg tax rental income from a property I own there if I live abroad?

Rental income in Luxembourg is taxed at progressive income tax rates as regular income. Since rental income is taxed in the country where the property is located, non-residents are subject to Luxembourg progressive income tax on Luxembourg rental income, with allowable deductions for mortgage interest, depreciation, maintenance, and management fees. Your country of residence may also seek to tax this income, but a double taxation treaty — if one applies — will typically prevent full double taxation. File the appropriate returns with the ACD annually.

Is there any capital gains exemption if I reinvest the proceeds from selling a Luxembourg property?

Luxembourg offers rollover relief from capital gains where proceeds are reinvested in a social rental property or a property achieving energy performance class A+. The replacement property must be acquired by 2027 under the applicable provisions. This relief is subject to strict conditions and is not available where the gain is classified as a speculative profit (i.e., where the property is sold within the holding period threshold). Seek detailed advice from a Luxembourg tax adviser to confirm eligibility, as the conditions and deadlines for this relief have been subject to change.

Do new-build properties in Luxembourg attract VAT as well as registration duties?

Yes. For new-build properties purchased off-plan (VEFA), the construction portion of the price is subject to Luxembourg VAT at the standard rate of 17% — the lowest standard VAT rate in the EU. Registration duties (at the standard 6% plus 1% transcription rate, or at reduced rates during temporary promotional periods) apply to the land element. Buyers of new builds should ask their notary to break down which elements of the purchase price attract VAT and which attract registration duties, as the split significantly affects total acquisition costs. Check with the AED and your notary for the rates applicable to your specific transaction.