Exceptional assistance for property purchases in 2024

The Luxembourg government has just announced new incentives for buyers and investors in 2024. These measures are...

• Limited in time: They are designed to boost purchasing, investment and construction in Luxembourg in 2024 only, with the exception of one measure.
• Retroactive : you can benefit from the scheme for all purchases made from 1 January 2024 onwards
• Global : they are aimed at both property buyers and investors

Here's a breakdown of the support you can receive for the purchase of a principal residence or as part of an inv

For buyers of a primary residence

• Bëllegen Akt increased to €40,000 per person (compared with €30,000 previously). As a reminder, it applies only to purchases for the purpose of principal residence.
• The limit on the amount of interest you can deduct from your tax bill has been raised to €4,000 a year for each person in the household, instead of €3,000. For a family of 4, this increases the potential tax deductible each year from €12,000 to €16,000. The ceiling after 6 years is increased to €3,000 (from €2,250), and after 10 years it is increased to €2,000 (from €1,500). This measure is not limited to 2024.
• There is no longer any tax on capital gains when you sell your property to the Housing Fund

Examples of recoverable amounts:

• A couple can expect to obtain :
  • Up to €80,000 tax credit Bëllegen Akt
  • Deduct up to €150,000 interest in tax over 30 years
  • A total of €230,000 recoverable over 30 years.
• A family of 4 is eligible for :
  • Up to €80,000 tax credit Bëllegen Akt
  • Deduct up to €300,000 interest in tax over 30 years
  • A total of €380,000 recoverable over 30 years.

To deduct the interest from your tax, remember to file a tax return every year using a tool such as taxx.lu.

For investors

• A new tax credit has been introduced: a "Bëllegen Akt investisseurs" of €20,000 per individual. It is intended for investors who buy off-plan to rent out their property. The property must be let for at least 2 years to qualify for this tax credit.
• The accelerated depreciation rate and the depreciation period are increased to 6% over 6 years. The condition is that the property must be bought off-plan and let. The ceiling is set at €250,000 per year.
• The rate of capital gains tax on property is reduced (at a quarter of the overall rate as opposed to half the rate previously). In simple terms, this tax rate will be 10% of the capital gain instead of 20%. The minimum holding period to benefit from this rate is 2 years.
• Exemption of 90% from taxation on net income earned if the property is managed as a social rental property.

Examples of recoverable amounts:

For a VEFA property intended for letting, an investor couple can expect to benefit from the following provisions:

• 40,000 (2 x €20,000) tax credit after 2 years of letting their property
• Very attractive accelerated depreciation at 6% over 6 years. The depreciation basis corresponds to the total purchase price, including the costs associated with the purchase (notary, agency), but excluding the value of the share of land (stipulated in the notarial deed). This varies from case to case. For this example, we assume that the "construction" portion represents 50% of the total price of the property. This means that
  • For a property costing €600,000, you can write off more than €115,000 over 6 years. Here's the calculation: the total purchase price would be €642,000 and the depreciable amount is €321,000. Depreciation could therefore be €19,260 per year, giving a total of €115,560 over 6 years.
  • For a property costing €1,000,000, you can write off almost €200,000 over 6 years. The total purchase price would be €1,070,000, so the depreciable base for 50% would be €535,000. In total, depreciation would be €32,100 per year, i.e. €192,600 deductible over 6 years.

To take advantage of accelerated depreciation, consider using an online platform that allows you to make your tax returns easy.

Conclusion

Many experts had predicted that 2025 would be the real year of recovery for the Luxembourg property market. With these new announcements, this recovery could well take place in 2024.

Whether you are a buyer-occupier or an investor, you can take advantage of a unique combination of opportunities:

• Strong tax incentives limited only to 2024
• From lower prices which are often negotiable
• These rates can be renegotiated, provided you optimise your mortgage with a broker such as atHomeFinance

To find out more about the tax incentives for 2024, consult this page document.