Property Taxes in Luxembourg
Tax Rate on Rental Income* |
|||
| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | 2.94% | 24.66% | 33.44% |
| *Class 1, solitary tax included | |||
Nonresidents are liable to tax on income originating from Luxembourg. Married couples can file jointly or separately. Since Luxembourg has a complicated tax system, which is based on your marital status and other factors, we have shown a tax range instead of a calculated percentage. Please see below for more information.
Income Tax
There are several categories of income:
- Trade or business income
- Income from agriculture and forestry
- Income from self-employment
- Income from employment
- Income from pensions and annuities
- Income from movable property
- Rental income
- Miscellaneous income
Income is taxed at progressive rates. In computing the taxable income, income-generating expenses can be deducted from the gross income.
Taxpayers are classified into three main classes:
| Class | Description |
| Class 1 |
This includes single individuals, married taxpayers who have opted to be taxed separately, and certain married non-resident taxpayers. |
| Class 1a |
This includes single parents with a dependent child, and individuals aged 65 and older, and may also include people with specific personal situations. |
| Class 3 | This includes married taxpayers, widowed taxpayers (for the first three years after the death of their spouse), divorced or separated individuals (for the first three years after divorce), civil partners, and certain married non-resident taxpayers. |
| Source: Global Property Guide | |
Income Tax for Class 1
| Taxable Income (€) | Tax Rate (%) | Flat-Rate Subtraction (€) |
| 0 to 12,450 | 0% | 0.00€ |
| 12,450 to 14,550 | 8% | 995.04€ |
| 14,550 to 16,600 | 9% | 1,140.12€ |
| 16,600 to 18,650 | 10% | 1,305.90€ |
| 18,650 to 20,750 | 11% | 1,492.38€ |
| 20,750 to 22,800 | 12% | 1,699.56€ |
| 22,800 to 24,950 | 14% | 2,155.32€ |
| 24,950 to 27,100 | 16% | 2,654.10€ |
| 27,100 to 29,250 | 18% | 3,195.90€ |
| 29,250 to 31,400 | 20% | 3,780.72€ |
| 31,400 to 33,550 | 22% | 4,408.56€ |
| 33,550 to 35,700 | 24% | 5,079.42€ |
| 35,700 to 37,850 | 26% | 5,793.30€ |
| 37,850 to 40,000 | 28% | 6,550.20€ |
| 40,000 to 42,150 | 30% | 7,350.12€ |
| 42,150 to 44,300 | 32% | 8,193.06€ |
| 44,300 to 46,450 | 34% | 9,079.02€ |
| 46,450 to 48,650 | 36% | 10,008.00€ |
| 48,650 to 50,800 | 38% | 10,980.00€ |
| 50,800 to 110,450 | 39% | 11,487.51€ |
| 110,450 to 165,650 | 40% | 12,591.54€ |
| 165,650 to 220,800 | 41% | 14,247.54€ |
| Over 220,800 | 42% | 16,455.42€ |
| Source: Chambre de Salariés (CSL) | ||
A solidarity tax of 7% on taxes (9% for taxpayers earning over EUR 150,000 in tax class 1 and 1a, or over EUR 300,000 in tax class 2) must also be paid.
Rental Income Tax
Taxable rental income realized from leasing properties may be computed in either of the two ways:
- Itemized Deduction: All expenses related to property such as management agent’s commission, maintenance and repair costs, insurance, mortgage and interest payments, property tax, and insurance premiums are deducted from the gross rent. Straight-line depreciation is also deductible, though land is not depreciable. Rates of depreciation are between 2% to 6%.
- Standard Deduction: A standard deduction of 35% of the gross annual rental income with a maximum of €2,700 is available instead. This deduction includes maintenance and repair costs, insurance premiums, and depreciation (not including debt interest on loans used to finance the property).
Capital Gains Tax
Capital gains realized through selling the real property within two years of acquisition are considered speculative gains and taxed at the standard income tax rate or 45.78%. The taxable gain is computed by deducting the acquisition price and incidental costs (agents’ commissions, fees to notaries, surveyors, advisers, etc.) from the selling price. No other deductions are allowed.
If the property is held for more than two years, capital gains are taxed at 50% of the overall tax rate or 22.89%. The taxable gain is computed by deducting the acquisition price and incidental costs from the selling price. In this case, the purchase price is adjusted by official coefficients to account for inflation during the period of ownership.
Furthermore, a single taxpayer will be entitled to a deduction of €50,000 for non-speculative capital gains. The amount is doubled if the property is owned by a married couple filing jointly. This allowance is available every ten years.
If the property was obtained by inheritance (direct line), the tax deduction can be increased by €75,000. The taxpayers can also defer the payment of capital gains tax if they decide to re-invest the money in a new property that will be rented out.
Property Buying and Selling Taxes/Costs
| Cost | Amount |
| Property Transfer Tax | 7.00% - 10.00% |
| Agent Fee (Buyer) | - |
| Agent Fee (Seller) | 3.00% (+17% VAT) |
| Legal Fees | 1.00% - 1.50% |
| Notary Fees | 1.50% |
| Rountrip Costs | 12.50% - 16.00% |
Property Tax
A property in Luxembourg is subject to municipal ground tax which is levied annually at 0.7% to 1% of its assessed unit value (usually lower than its actual market value). The tax amount based on the preceding computation is further multiplied by a municipal coefficient that is between 120% and 900% depending on the municipality. The property’s unit value, basic tax rate, and the municipal coefficients depend on the property’s classification such as size, age, site, and economic use.