Luxembourg: Overview

RENTAL YIELDS

Luxembourg yields poor at 4.7%

Average yield on Luxembourg City apartments is 4.66%, with 40-sq. m apartments generating highest gross rental income at 5.07%.

Apartment prices average around €5,105 per sq. m. Units with 40 or 140 sq. m are the most expensive at €5,445 and €5,341 per sq. m, respectively.

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TAXES AND COSTS

High taxes despite tax-haven reputation

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000
Tax Rate	7.8%	12.1%
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Source: Disclaimer

Rental Income: Rental income is taxed at progressive income tax rates ranging from 8% for net annual income above €10,335, to 38% on income above €36,570.

Capital Gains: If the property is held for more than two years, capital gains tax rates are reduced to a maximum of 19.475%.

Inheritance: Inheritance tax is payable only if the property is obtained from a non-resident, at rates between 2% and 15%.

Residents: Residents of Luxembourg are taxed on their worldwide income.

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BUYING GUIDE

Buying costs are moderate in Luxembourg

Total roundtrip transaction cost, i.e., the cost of buying and selling, is between 11.15% and 15.65% inclusive of registration fees (6% - 10.2%) and estate agent's commission (3% plus 15% VAT).

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LANDLORD AND TENANT

Luxembourg has strong tenant protection laws

Luxemourg's rental market is strongly pro-tenant.

Rent: Rent control limits the amount of returns a landlord can receive. Rent can only be increased every three years.

Tenant Security: If evicted, the tenant is usually awarded generous compensation and more than sufficient time to look for an alternative dwelling.

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ECONOMIC GROWTH

Small is bountiful in the Grand Duchy

The Grand Duchy of Luxembourg does justice to the saying “small is bountiful.” Landlocked by France, Germany and Belgium, it is the world’s second smallest country with an area of 2,586 sq. km. and a population of 465,000.

Economic prosperity was originally attributable to the steel industry, but since its decline Luxembourg has flourished as a financial center.
Luxembourg is home to several key EU offices, such as the commission itself, the Court of Justice, the Secretariat of the Parliament and the EIB.

Luxembourg is also a key banking and financial center for Europe. It enjoys the highest GDP per capita in the world at US$76,224.

With rising real wages and stable economic growth, Luxembourg is a magnet for migrants. More than a third of its population is foreign-born. Most foreigners working in Luxembourg actually commute daily from Belgium, Germany and France where costs are usually lower.

Real compensation per employee rose by an average of 3.6% annually from 2000 to 2005. GDP per capita, already the highest in the world at US$76,224, rose by an average of 3% annually over the same period.

Growth is being boosted by the historic low interest rates implemented within the European Union.

With 83% of new lending in 2003 and 2004 at variable rates, the number of loans intended for home purchases rose remarkably. In 2003 the number of such loans rose 20%, in 2004 11.4%, and in 2005 11.3%.

Luxembourg's strong economy is supported by a stable parliamentary democracy and constitutional monarchy. Owing to its location, the country is a mix of German, Belgian, and French influences.

The government has promoted Luxembourg as an audiovisual and communications centre, and Radio-Television-Luxembourg attracts pan-European audiences.