2025 Luxembourg Finance Bill

On 9 October 2024, the Luxembourg Minister of Finance presented the 2025 draft budget law (the “Draft Budget Law”) to Parliament. This Draft Budget Law provides in particular for housing tax incentive measures in addition to the ones introduced earlier this year to boost the housing market. Please refer to our article of February for more insight on the previous measures.

Housing measures

The most relevant tax measure proposed by the Draft Budget Law is the tax base reduction for registration duties on acquisition of an immovable property. Please find outlined below the main takeaways of this tax incentive:

• According to the Draft Budget Law, the taxable base for the application of the registration and transcription duties of 7% would be reduced by half. For instance, for a property acquired at EUR 800,000, the registration and transcription duties would amount to EUR 28,000 instead of EUR 56,000 (being applicable on a tax base of EUR 400,000 and not EUR 800,000).
• Properties concerned are those acquired between 1 October 2024 and 30 June 2025 (as documented by notarial deed).
• The property must be acquired for residential purposes, whether as the owner’s main residence or to be subsequently rented out. However, in the latter case, the property must have been acquired through an off-plan sale (“vente en l’état futur d’achèvement”).
• If the property is used as a main residence, the occupation must take place within 2 years after the acquisition for at least 5 uninterrupted years. This period can nevertheless be extended to 4 years if the construction of the property has not been completed by the time of the acquisition. If the property is acquired for rental purposes, the occupation must, in principle, take place within 4 years after the acquisition for at least 2 uninterrupted years.
• It should be noted that the tax allowance “Bëllegen Akt” of EUR 20,000 for investors and EUR 40,000 would remain applicable until 31 December 2024 (the latter would then decrease to EUR 30,000 as from 1 January 2025). Please refer to our article of February for more information in this respect.

Other measures

The Draft Budget Law also proposes to increase the maximum amount of the CO₂ tax credit from EUR 168 to EUR 192 through an amendment of Article 152ter of the LITL (Luxembourg Income Tax Law).