Property Taxes in Luxembourg

Non-resident individuals are generally subject to Luxembourg income tax on income derived from Luxembourg sources, including rental income and taxable gains arising from real estate situated in Luxembourg.

Luxembourg's individual income tax liability depends on the taxpayer's level of income, family situation and applicable tax class.

Income Tax

Luxembourg recognizes several categories of taxable income, including business income, employment income, investment income, rental income and miscellaneous income.

Taxable income is generally determined after deducting qualifying expenses associated with generating the income.

For 2026, Luxembourg continues to use three principal individual tax classes:

• Class 1: generally applies to single taxpayers and married non-residents who do not qualify for or elect another treatment;

• Class 1a: generally applies to single parents and qualifying taxpayers aged at least 65; and

• Class 2: generally applies to qualifying married couples and civil partners taxed jointly.

Non-resident married taxpayers are generally placed in Class 1, although qualifying taxpayers may, subject to the applicable conditions, elect treatment equivalent to Luxembourg residents and potentially benefit from joint taxation.

For Class 1 taxpayers, Luxembourg applies progressive income tax rates ranging from 0% to 42%. No income tax is imposed on the initial taxable-income band up to €13,230, after which marginal rates progressively increase from 8% to the maximum 42% rate on taxable income exceeding €234,870.

A contribution to the Employment Fund, commonly referred to as the solidarity tax, is imposed as a percentage of the calculated income tax. The standard rate is 7% of income tax, increasing to 9% for Class 1 and Class 1a taxpayers with taxable income exceeding €150,000 and Class 2 taxpayers with taxable income exceeding €300,000.

Rental Income Tax

Rental income derived from Luxembourg real estate by a non-resident is taxable in Luxembourg.

Tax is generally imposed on net rental income, determined after deducting qualifying expenses associated with the property.

Under the itemized-expense method, deductible costs can generally include expenses such as:

• maintenance and repairs;

• property management costs;

• insurance;

• qualifying financing interest;

• certain property-related taxes and charges; and

• depreciation of the building.

Land itself is not depreciable.

Alternatively, qualifying older privately held rental buildings may use a standard expense deduction equal to 35% of gross rent, capped at €2,700 per year and per property. This option generally applies where the building was completed at least 15 years before the beginning of the relevant tax year.

The standard deduction covers most ordinary property expenses, but qualifying financing interest and certain other specifically excluded expenses may remain separately deductible.

Net rental income is subject to Luxembourg's applicable progressive income tax rates. Rental income is also generally subject to the 1.4% long-term care insurance contribution.

For comparison purposes, assuming a single non-resident landlord with no other Luxembourg income and using the €2,700 maximum standard rental deduction, annual gross rental income of €18,000, €72,000 and €144,000 results in estimated total tax and contributions of approximately €391, €16,797 and €48,106, respectively. This represents effective tax burdens of approximately 2.2%, 23.3% and 33.4% of gross rental income, reflecting Luxembourg's progressive income tax system together with the applicable solidarity and long-term care contributions.

Capital Gains Tax

The taxation of gains from privately held Luxembourg real estate depends principally on the property's holding period.

For disposals under the ordinary rules applicable in 2026, a property sold within five years of acquisition generally produces a speculative gain. The taxable gain is subject to the taxpayer's ordinary progressive income tax rates, with a maximum marginal national rate of 42%, before applicable additional charges.

Where the property has been owned for more than five years, the gain is generally treated as a long-term real estate capital gain and benefits from taxation at half of the taxpayer's overall income tax rate. The maximum ordinary rate applicable to such a gain is therefore generally 21%, before applicable additional contributions.

The taxable gain is broadly determined by deducting the adjusted acquisition price and qualifying acquisition, improvement and disposal costs from the sale proceeds. For qualifying long-term gains, the acquisition cost may be adjusted according to the applicable revaluation rules.

A taxpayer may also benefit from a €50,000 allowance against qualifying long-term capital gains, increased to €100,000 for spouses or partners taxed jointly. This allowance is available over a ten-year period and is reduced by qualifying allowances already used during the preceding ten years.

The sale of a qualifying principal residence is generally exempt from income tax, irrespective of the period for which the property was owned.

Special rules may also apply to inherited property and certain reinvestment transactions.

Corporate Tax

Companies owning and renting real estate in Luxembourg are generally subject to corporate income tax on their net taxable profits, including rental income and taxable gains from the disposal of property.

For 2026, the standard corporate income tax rate is 16% for companies with taxable income exceeding €200,000. Companies with taxable income up to €175,000 are subject to a reduced 14% rate, while transitional rules apply to taxable income between €175,000 and €200,000.

Corporate income tax is increased by a 7% contribution to the Employment Fund, resulting in an effective national corporate income tax rate of 17.12% for companies subject to the standard 16% rate.

Companies are also subject to Municipal Business Tax, the rate of which depends on the municipality. In Luxembourg City, the Municipal Business Tax rate is 6.75%, producing a combined corporate income tax burden of approximately 23.87% for a company located in Luxembourg City.

Rental income is generally calculated on a net-profit basis. Qualifying expenses incurred in generating rental income, including financing costs, maintenance, management expenses and depreciation of buildings, may generally be deducted subject to Luxembourg tax rules. Land itself is not depreciable.

Capital gains realized by a company from the disposal of Luxembourg real estate are generally included in ordinary taxable corporate income and taxed at the applicable corporate rates. The preferential capital-gains treatment available to individuals holding private real estate does not generally apply to companies.

Companies owning Luxembourg real estate may also be subject to Net Wealth Tax, which is separate from corporate income tax and is calculated according to the company's taxable net wealth, subject to the applicable exemptions, valuation rules and minimum net wealth tax provisions.

Property Buying and Selling Taxes/Costs

Property Tax

Real estate situated in Luxembourg is generally subject to an annual municipal property tax known as land tax (impôt foncier).

Under the current system, the tax is based on the property's officially determined unit value (valeur unitaire), rather than its current market or purchase price. These unit values are generally based on historic valuation principles and can therefore be substantially lower than the property's present market value.

The annual tax is calculated by applying a basic assessment rate, generally ranging from approximately 0.7% to 1% depending on the property's classification, to the unit value. The resulting basic tax amount is then multiplied by a municipal coefficient, which varies according to the municipality and type of property.

Accordingly, the calculation can broadly be expressed as:

Unit value × basic assessment rate × municipal coefficient = annual property tax

The municipal coefficient can vary considerably between municipalities, meaning that otherwise similar properties may face different annual tax liabilities depending on their location.

The property's classification and taxable value may take into account factors such as its nature, use, location and other characteristics.